Vietnam Increases Personal Income Tax Deduction for 2020
- Vietnam’s National Assembly approved increasing personal income tax deductions for individuals and dependents for 2020.
- The changes will be effective July 1, 2020, but are retroactive and will thus apply for the whole of 2020.
- The measures are the latest in a slew of incentives issued by the government to increase economic growth and consumption.
Vietnam’s National Assembly on June 2 approved new changes to personal income tax (PIT) increasing deductions for individuals and dependents in 2020.
The government issued Resolution 954/2020/UBTVQH14 (Resolution 954) which is effective July 1, 2020 however the increase is retroactive and thus effective from January 1, 2020.
Our HR and tax experts highlight the important points of the resolution.
What is the new resolution about?
According to Resolution 954, starting from July 1, 2020, the government will increase the minimum taxable income threshold by 22 percent, from US$386 (VND 9 million) to US$472 (VND 11 million) per month. This means that a person with an income of less than US$473 (VND 11 million) per month will be exempted from paying personal income tax.
In addition, the threshold will increase by US$189 (VND 4.4 million) for each dependent being claimed, meaning the standard for non-taxable income will be raised to US$660 (VND 15.4 million) per month (with one dependent) and US$849 (VND 19.8 million) per month (with two dependents).
Qualified dependents are children aged below 18 years old, or over 18 years of age joining vocational schools or universities and earning a low income, which does not exceed US$43 (VND 1 million) per month.
In addition, spouses or parents of taxpayers who are unable to work or have a low income or out of working age are also qualified dependents.
How will this affect taxpayers?
Taxpayers who have paid tax based on the previous standard deduction can recalculate their personal income tax payable and thus, would be refunded by the end of this year.