Vietnam’s National Assembly on 2 June 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 became effective 1 July 2020. However, the increase is retroactive and thus effective from 1 January 2020.
Here are just some of the highlights of the resolution.
What Is the New Resolution About?
According to Resolution 954, starting from 1 July, the government increased the minimum taxable income threshold by 22%, from US$386 (Vietnam dong (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 is exempted from paying personal income tax.
In addition, the threshold increased by US$189 (VND 4.4 million) for each dependent being claimed, meaning the standard for nontaxable income was 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 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 are 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.
The measures are the latest in a slew of incentives the government has issued to spur economic growth and consumption as Vietnam emerges from COVID-19.
This article was first published by Vietnam Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected] for more support.