On 30 June 2026, the Government issued Decree 253/2026/ND-CP detailing a number of articles and measures to organize the implementation of the Law on Personal Income Tax 2025. The Decree officially takes effect from 1 July 2026, replacing Decree 65/2013/ND-CP and introducing many important provisions on family circumstance deductions, tax-exempt income, withholding, and personal income tax (PIT) finalization.
This is the most detailed guiding document on the Law on Personal Income Tax 2026, directly affecting enterprises, accountants, HR teams, and employees. The article below summarizes the 7 most notable new points that income-paying organizations need to update immediately to ensure full compliance.
1. Family Circumstance Deductions under the Law on Personal Income Tax 2026
Pursuant to Resolution 110/2025/UBTVQH15 and the detailed guidance in Decree 253/2026/ND-CP, the family circumstance deduction levels for taxpayers have been significantly increased to raise disposable income for employees:
- Deduction for the taxpayer themselves: Raised to VND 15.5 million per month (equivalent to VND 186 million per year).
- Deduction for each dependent: Raised to VND 6.2 million per month.
In addition to the fixed deduction amounts, the new regulations under the Law on Personal Income Tax 2026 allow taxpayers to claim additional actual expenses:
- Medical expenses: For medical examination and treatment covered under the health insurance list, with a maximum deduction of VND 23 million per year.
- Education and training expenses: For the taxpayer or their dependents, with a maximum deduction of VND 24 million per year.
Practical calculation: An individual with one dependent will receive a total fixed deduction of up to VND 307.4 million per year (excluding mandatory insurance contributions and medical/education expenses). Therefore, after deducting mandatory insurance contributions, employees with an average monthly income of approximately VND 28.6 million or less will not yet be subject to personal income tax (PIT).
2. Expansion and Clarification of Dependents Eligible for Family Circumstance Deductions
Pursuant to Clause 2, Article 47 of Decree 253/2026/ND-CP, the scope of determining dependents has been expanded and clarified compared with the previous regulations under Decree 65/2013/ND-CP, ensuring greater humanity for vulnerable cases:
- Children: Children under 18 years of age (including biological children, legally adopted children, and stepchildren); children aged 18 years or older who have lost civil act capacity, are disabled, or have no working capacity; children currently studying at educational levels (general education, university, college, vocational training) with no income or average monthly income not exceeding the prescribed threshold.
- Family dependents: Spouses, biological parents, adoptive parents, and parents-in-law who have reached the end of working age or have no working capacity.
- Individuals without means of support: Biological siblings; paternal/maternal grandparents; biological aunts, uncles, and great-uncles/aunts; biological grandchildren whom the taxpayer is directly raising and supporting in accordance with the law.
3. Meal Allowance Exemption under the Law on Personal Income Tax 2026
To support enterprises in improving employee welfare, Point g, Clause 2, Article 8 of Decree 253/2026/ND-CP adjusts the preferential policy for mid-shift and lunch meal allowances:
- Cash payment: The mid-shift / lunch meal allowance is exempt from personal income tax (PIT) up to a maximum of VND 1.2 million per person per month (officially applicable from 1 July 2026). Any amount exceeding the VND 1.2 million threshold must be included in the employee’s taxable income for PIT purposes.
- In-kind payment: If the enterprise directly organizes meal preparation, purchases industrial meal portions, or issues meal vouchers to employees, the entire value of the meals is exempt from PIT, regardless of the payment limit.
4. Overtime and Night-Shift Tax Exemption under the Law on Personal Income Tax 2026
Article 26 of Decree 253/2026/ND-CP introduces a major advance in tax policy for income from overtime work, effective from 1 July 2026:
- Full tax exemption policy: Personal income tax (PIT) is fully exempted on the entire amount of overtime pay and night-shift pay, provided the conditions under the Labor Code are fully met. (Previously, the old policy only exempted the differential portion between overtime pay and standard working-hour pay.)
- Documentation requirements: The paying enterprise must maintain complete timesheets, overtime payroll calculations, and work assignment documents as the basis for explanation. Any overtime payments exceeding the hours prescribed by the Labor Code must still be included in taxable income.
5. Tax Exemption on Severance Allowance and Job-Loss Allowance (Including Amounts Exceeding the Statutory Level)
Pursuant to Point h, Clause 3, Article 8 of Decree 253/2026/ND-CP, the tax treatment of allowances paid upon termination of labor contracts has been clarified and many previous difficulties have been resolved:
- Statutory payments: Severance allowances and job-loss allowances paid in accordance with the Labor Code are completely excluded from taxable income for PIT purposes.
- Voluntary excess payments: Additional allowances paid to employees beyond the statutory level – based on the company’s internal Financial Regulations, Collective Labor Agreement, or Labor Contract – are also eligible for PIT exemption.
- Effective date: Generally applicable from 1 July 2026; specifically for salary and wage income of resident individuals, it applies according to the 2026 tax period.
6. Increase of the 10% PIT Withholding Threshold to VND 5 Million per Payment
According to Clause 2, Article 50 of Decree 253/2026/ND-CP, the minimum threshold for withholding personal income tax (PIT) on payments to workers without labor contracts or with short-term contracts has been increased:
- New withholding threshold: From 1 July 2026, income-paying organizations are required to withhold 10% PIT only when the payment reaches VND 5 million or more per time for individuals who have not signed a labor contract or have signed a labor contract of less than 3 months (the previous threshold was VND 2 million per payment).
- Payments below VND 5 million per time: The enterprise is not required to withhold the 10% tax, unless the individual specifically requests it.
- Commitment mechanism: Individuals who estimate that their total income after family circumstance deductions has not yet reached the taxable threshold may still submit a Commitment Letter to the paying organization to temporarily avoid the 10% withholding.
Explore Vina TPT’s Payroll Services
7. Additional Cases Exempt from PIT Finalization
Clause 1, Article 51 of Decree 253/2026/ND-CP simplifies administrative procedures related to tax finalization for individuals with simple income:
- Individuals whose additional PIT payable after finalization is smaller than the tax already provisionally paid or withheld during the year and who have no request for tax refund or offset against the following period.
- Individuals who have signed a labor contract of 3 months or longer at one place and simultaneously have additional casual income from other places averaging no more than VND 15 million per month during the year, and for which the paying units have already fully withheld 10% PIT at source.
View the Full Text of Decree No. 253/2026/ND-CP
To continuously receive in-depth analyses of the Law on Personal Income Tax 2026 and the latest changes in Vietnam’s tax and accounting policies, please follow the Insight & News section of Vina TPT.
