NEW PERSONAL INCOME TAX POLICY: INCREASED DEDUCTIONS FOR TAXPAYERS AND DEPENDENTS FROM 2026

According to the Resolution recently adopted by the Standing Committee of the National Assembly on October 17, 2025, the family circumstance deduction applied in the calculation of personal income tax (PIT) will be officially increased, effective from the 2026 tax year. Specifically, the deduction for taxpayers will be raised from VND 11 million per month to VND 15.5 million per month, while the deduction for each dependent will increase from VND 4.4 million to VND 6.2 million per month. This marks a significant adjustment after more than five years, making the policy more consistent with current income levels and living costs.

1. Reasons for the adjustment of family circumstance deductions by the Standing Committee of the National Assembly

Since 2020, the existing deduction levels have no longer accurately reflected reality. In the context of rising prices, living costs, and average per capita income, maintaining the previous deduction thresholds has resulted in many middle-income earners being subject to personal income tax as if they were higher-income earners. The increase in deduction levels aims to ensure fairness, reduce the tax burden on individuals, improve living standards, stimulate consumption, and enhance household savings capacity.

2. Practical impact on taxpayers

According to current calculations, individuals earning VND 17 million per month are still subject to personal income tax. However, from 2026 onwards, with the application of the new deduction levels together with mandatory insurance deductions, workers at this income level may no longer be required to pay PIT.

Similarly, taxpayers with dependents will benefit significantly. With one dependent, the total monthly deduction will amount to VND 21.7 million; with two dependents, the deduction may reach nearly VND 28 million per month. This means that individuals with monthly income below these thresholds will not be subject to PIT. As a result, millions of workers will be exempted from or see a reduction in the amount of tax payable, thereby improving their actual monthly income.

According to estimates by the Ministry of Finance, the increase in family circumstance deductions will move millions of workers out of the taxable income threshold and reduce state budget revenue by approximately VND 21 trillion per year. This reduction is considered a form of the State’s “sharing” with citizens amid ongoing economic challenges.

3. Timing and application of the new deduction levels

The new deduction levels will apply from the 2026 tax year, meaning that income arising from January 1, 2026 onwards will be calculated in accordance with these regulations.

The tax authorities are expected to issue detailed guiding circulars in the near future, specifying procedures for dependent registration, declaration dossiers, and tax calculation methods under the new deduction levels.

4. Notes for taxpayers when calculating PIT from 2026

Taxpayers should update their dependent information, ensuring that dependents are properly registered, eligible, and declared within the prescribed timeframe in order to fully enjoy the deduction benefits. Each dependent may only be claimed by one taxpayer in the same tax period; therefore, careful review and consistent declarations are essential.

5. Perspective of Celigal Law Company Limited

Although the policy is estimated to reduce annual state budget revenue by approximately VND 21 trillion, this adjustment is considered a humane measure that reflects the State’s spirit of sharing with citizens in a challenging economic environment. Experts assess this as a reasonable step that contributes to macroeconomic stability and encourages domestic consumption.

According to the assessment of Celigal Law Company Limited, increasing the family circumstance deduction to VND 15.5 million per month for taxpayers and VND 6.2 million per month for dependents is a necessary and timely reform. This policy not only helps reduce financial pressure on individuals but also demonstrates the State’s attentiveness in adjusting tax policies to align with socio-economic realities. However, for the policy to be effective, competent authorities should promptly issue detailed guidance and further promote the application of digital technologies in tax and dependent management, in order to avoid delays or errors in implementation.

Celigal Law Company Limited will continue to update and analyze legal changes related to tax policies, assisting businesses and individuals in understanding their obligations and staying informed of new regulations to ensure full legal compliance.