Draft decree expands tax breaks

Draft decree expands tax breaks

Under a draft decree detailing a number of provisions of the Law on Personal Income Tax No.109/2025/QH15, the Ministry of Finance is proposing to reduce tax obligations in multiple cases while simplifying tax filing and payment procedures for individuals.

Earlier, on December 10, 2025, the National Assembly passed the Law on Personal Income Tax No. 109/2025/QH15, assigning the government to provide detailed regulations on a range of key issues, including taxable and non-taxable income, tax exemptions and reductions, applicable principles and conditions, tax periods, and calculation bases for different income groups.

To ensure these provisions are implemented in sync when the law takes effect on July 1, 2026, and to avoid legal gaps, the MoF has drafted the Decree in line with tax reform orientations, while maintaining consistency with the existing legal framework and national socioeconomic development strategies for the 2021-2030 and 2026-2030.

The draft comprises seven chapters and 70 articles, covering comprehensive regulations from taxpayers and taxable income scope to non-taxable income, tax exemptions and reductions, calculation methods, timing, as well as procedures for withholding, filing, finalisation, and refunds.

The draft adds deductions related to education expenses

One notable highlight is the expansion of tax-exempt and tax-reduced items in a direction more favourable to taxpayers.

The draft introduces additional deductions related to medical and education expenses, while expanding tax exemptions for income earned from night shifts, overtime work, and severance or job-loss allowances.

At the same time, the taxable threshold for certain income categories – such as inheritance, gifts, prizes, royalties, and franchise income – is proposed to increase from $400 to $800.

According to the draft, the total number of tax-exempt income categories would rise to 21, five more than under current regulations.

Notably, personal income tax would be exempted for wages and salaries derived from scientific research, technological development, and innovation activities.

A key proposal is a five-year tax exemption policy for income earned by high-quality personnel in high-tech sectors, innovation, and digital transformation, aimed at attracting and retaining strategic talent.

In the investment sector, the draft introduces incentives to encourage long-term capital flows. Specifically, personal income tax would be exempted on transfers of open-ended fund certificates if held for at least two years, while a 50 per cent tax reduction would apply to returns received by individual investors from securities investment funds and real estate investment funds over a five-year period.

For salaried workers, the draft adds several provisions clearly aimed at reducing tax burdens.

Accordingly, all income from overtime and night work would be excluded from taxable income, while all severance and job-loss allowances would be fully tax-exempt, including amounts exceeding statutory limits under labour law.

In addition, employer contributions to supplementary pension insurance, voluntary insurance, and life insurance for employees would be increased from a maximum of $40 to $120 per person, per year.

According to the MoF, these adjustments are expected to reduce tax obligations for multiple groups, with lower-income taxpayers benefiting relatively more, thereby contributing to greater equity in income distribution.

VIR