On December 10, 2025, following the National Assembly’s approval of the Personal Income Tax 2026 Law, several significant changes were introduced regarding the progressive tax schedule, personal and dependent deductions, and the scope of taxable income. These revisions may directly affect the personal income tax obligations of employees and foreign experts working in Vietnam.
The article below highlights the key updates and provides guidance on how to calculate personal income tax in accordance with the regulations applicable from 2026.
1. When does the Personal Income Tax Law 2026 take effect?
The amended Personal Income Tax Law 2025 (Law No. 109/2025/QH15), passed by the National Assembly, will officially take effect from July 1, 2026, replacing the 2007 Personal Income Tax Law.
However, for income derived from salaries and wages, important provisions such as the progressive tax schedule and personal deduction levels will apply to the 2026 tax year (from January 1, 2026). This means they will apply to the entire income generated during the year when conducting tax filing and finalization.
2. Key changes under Personal Income Tax 2026
2.1. Reduction of the progressive tax brackets from 7 to 5 levels
The reduction of tax brackets simplifies the calculation of personal income tax and makes it more transparent and easier to apply. This is one of the most notable reforms under Personal Income Tax 2026, aiming to streamline the tax system.
New progressive tax schedule (applicable from the 2026 tax year – from January 1, 2026):
|
Tax Bracket |
Monthly Taxable Income (VND million) | Tax Rate (%) |
|
1 |
Up to 10 |
5% |
|
2 |
Over 10 – 30 |
10% |
|
3 |
Over 30 – 60 |
20% |
| 4 |
Over 60 – 100 |
30% |
| 5 | Over 100 |
35% |
The highest tax rate remains 35%, applied to the portion of taxable income exceeding VND 100 million per month. This adjustment maintains the progressive nature of personal income tax without placing excessive pressure on middle-income earners.
2.2. Significant increase in personal and dependent deductions
Another major change under Personal Income Tax 2026 is the increase in deduction levels for taxpayers and their dependents. According to Article 29(2) of the 2025 amended law, the new deduction levels apply from the 2026 tax year (January 1, 2026):
- Personal deduction: increased to VND 15.5 million/month (VND 186 million/year), compared to the previous VND 11 million/month.
- Dependent deduction: increased to VND 6.2 million/month per dependent.
The increase significantly reduces the payable personal income tax for employees with families. When conducting tax filing (kê khai thuế), taxpayers must register their dependents within the prescribed timeline to benefit from these deductions.
2.3. Updated scope of taxable income in the digital economy
The amended law clarifies the scope of taxable and non-taxable income, particularly in the context of the digital economy, freelance work, and multiple income streams. Income generated from digital platforms and online business activities remains subject to personal income tax under general principles.
Taxable income includes:
- Salaries and wages and wage-related income
- Remuneration, bonuses, and benefits in cash or in kind
- Allowances, subsidies, and other income, except for those exempted under regulations
Non-taxable income includes:
- Allowances for war veterans and national defense/security
- Hazardous and remote-area allowances
- Social insurance benefits, occupational accident and disease allowances
- Severance pay, maternity benefits, adoption allowances
- Social protection allowances and other government-regulated exemptions
3. Increased revenue threshold for household and individual businesses to 500.000.000 VND per year
Under Article 7(1) of the 2025 amended law, resident individuals engaged in business activities with annual revenue of 500.000.000 VND or less are not subject to personal income tax.
Accordingly, from the 2026 tax year, the revenue threshold for personal income tax applicable to household and individual businesses increases to 500.000.000 VND per year, five times higher than the previous VND 100 million threshold applied in 2025.
This adjustment reduces the tax burden on small businesses, increases disposable income, and encourages transparent business operations. It also reflects a broader tax reform trend aimed at supporting sustainable development of the household business sector.
4. How to calculate Personal Income Tax 2026 under the new tax schedule
4.1. Formula for calculating personal income tax in 2026
| Personal income tax payable = Taxable income × Applicable progressive tax rate |
Where:
| Taxable income = Total taxable income − Deductions − Mandatory insurance contributions |
Deductions include:
- Personal deduction: VND 15.500.000 VND/month
- Dependent deduction: VND 6.200.000 VND/month per dependent
- Mandatory insurance contributions (social insurance, health insurance, unemployment insurance) and other allowable deductions
The remaining taxable income is then subject to the 5-tier progressive tax schedule. Each portion of income falling within a bracket is taxed at the corresponding rate rather than applying a single rate to the entire income.
4.2. Example of personal income tax calculation
Example: Mr. B earns VND 60.000.000 VND per month and contributes mandatory insurance as follows:
- Social insurance: 8%
- Health insurance: 1.5%
- Unemployment insurance: 1%
He has two dependents and no charitable contributions or additional deductions.
Step 1: Total taxable income
= 60.000.000 VND
Step 2: Total deductions
- Personal deduction: 15.500.000 VND
- Dependent deduction: 6.200.000 × 2 = 12.400.000 VND
- Mandatory insurance: 60.000.000 × (8% + 1.5% + 1%) = 5.757.000 VND
→ Total deductions = 15.500.000 + 12.400.000 + 5.757.000 = 33.657.000 VND
Step 3: Taxable income
= 60.000.000 − 33.657.000 = 26.343.000 VND
Step 4: Apply progressive tax rates
- First 10.000.000 × 5% = 500.000 VND
- Remaining 16.343.000 × 10% = 1.634.000 VND
→ Total monthly personal income tax payable: approximately 2.134.000 VND
To understand the calculation method and see a practical example, you can read our detailed guide on How to Calculate Personal Income Tax 2026 in Vietnam.
5. Important notes when applying personal income tax 2026
Employees must accurately determine the timing of income generation to apply the correct tax period and deduction levels. Income arising from 2026 onward will fully apply the revised provisions of Personal Income Tax 2026, including cases where salary payments are made late.
In addition, registering dependents in a timely and complete manner remains a mandatory condition to benefit from deduction policies. Failure to register on time may result in higher temporary withholding during the year, with adjustments or refunds processed during annual tax finalization and tax filing procedures.
To stay updated on the latest developments regarding personal income tax, tax policies, and HR-related regulations, please follow the Events & Insights section of Vina TPT.
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