Effective from 1 July 2026

The Amended Law on Personal Income Tax (“Amended PIT Law”) represents a substantive reform of Vietnam’s personal income tax framework, responding to long-standing structural issues and emerging challenges arising from digitalisation, income growth, and rising living costs. Effective from 1 July 2026, with certain provisions applicable earlier from 1 January 2026, the amendments recalibrate tax brackets, expand taxable income categories, and revise deduction principles to enhance equity, transparency, and administrative efficiency.

For enterprises operating in Vietnam, including foreign-invested enterprises (FIEs), the amendments will have practical implications for payroll administration, withholding obligations, employee tax planning, and internal compliance systems. For individuals, particularly those earning income from digital platforms or multiple sources, the new rules signal a broader tax base and increased reporting expectations.

This article outlines the key changes under the Amended PIT Law, explains their policy rationale, and highlights tax implications and practical considerations for enterprises and individuals registered in Vietnam.

Policy Context and Legislative Rationale

Vietnam’s existing PIT framework has been under increasing strain in recent years. While nominal income levels have risen significantly, personal and dependent deductions have not kept pace with inflation or living costs. At the same time, the structure of the progressive tax brackets (with seven relatively narrow tiers) has contributed to complexity in payroll administration and taxpayer understanding.

In parallel, the rapid expansion of the digital economy has blurred traditional distinctions between employment income, business income, and investment income. Revenue generated through e-commerce platforms, social media, and digital assets has grown substantially, yet enforcement mechanisms under the existing PIT regime have remained limited.

Against this backdrop, the Amended PIT Law pursues three core objectives: simplifying the rate structure, broadening the tax base to include emerging income streams, and recalibrating deductions to better reflect economic realities. These changes align with Vietnam’s broader tax reform agenda and its efforts to modernise tax administration through data integration and digital oversight.

Simplification of the Progressive Tax Rate Structure

Transition from Seven to Five Tax Brackets

A central feature of the Amended PIT Law is the simplification of the progressive tax rate structure applicable to salary, wage, and business income. The number of tax brackets is reduced from seven to five, while maintaining the lowest marginal rate of 5 per cent and the highest marginal rate of 35 per cent.

This restructuring is intended to improve transparency and ease administration without fundamentally altering Vietnam’s progressive taxation principles. By widening the income bands within each bracket, the new structure reduces sharp marginal jumps and provides greater predictability for taxpayers.

Increase in the Highest-Bracket Threshold

In addition to reducing the number of brackets, the Amended PIT Law raises the income threshold at which the highest marginal rate applies. Under the revised regime, the 35 per cent rate applies only to monthly taxable income exceeding VND 100 million, compared to the current threshold of VND 80 million.

This adjustment reflects income growth over time and mitigates “bracket creep,” particularly for professionals and senior employees whose earnings have increased due to inflation rather than real income gains.

Illustrative Comparison of PIT Brackets

The table below illustrates the structural change under the Amended PIT Law:

Tier	Taxable income per year (VND million)	Taxable income per month (VND million)	Amended PIT Law (5 tiers)
1	Up to 120	Up to 10	5%
2	Over 120 to 360	Over 10 to 30	10%
3	Over 360 to 720	Over 30 to 60	20%
4	Over 720 to 1,200	Over 60 to 100	30%
5	Over 1,200	Over 100	35%

While the headline rates remain unchanged, the consolidation of brackets alters the effective tax burden for certain income groups and simplifies payroll calculations.

Expansion of Taxable Income to the Digital Economy

Digital Platform and E-Commerce Income

The Amended PIT Law explicitly extends PIT coverage to income derived from digital platforms and e-commerce activities. This includes income earned through online marketplaces, ride-hailing and delivery platforms, content creation, online advertising, and other forms of digital monetisation.

By formally recognising these income streams as taxable, the law seeks to ensure neutrality between traditional and digital economic activities. This expansion also signals the tax authority’s intention to strengthen oversight through data sharing with platforms and payment intermediaries.

For individuals, this change increases the likelihood that income earned online, whether as a primary occupation or supplementary source, will be subject to PIT. For enterprises operating digital platforms, further guidance may introduce reporting or withholding obligations that affect operational models.

Digital Assets and Cryptocurrency Transactions

The Amended PIT Law also extends PIT coverage to certain digital asset transactions, including cryptocurrency trading. Although detailed rules are expected to be issued in subsequent guidance, the inclusion of digital assets reflects global trends toward taxing virtual asset gains and addressing base erosion risks.

Individuals engaged in digital asset trading should anticipate increased scrutiny and potential reporting obligations. Enterprises involved in blockchain, fintech, or related services should assess whether employee compensation or incentive schemes involving digital assets may give rise to PIT exposure.

Revision of Personal and Dependent Deduction Principles

The Amended Personal Income Tax Law revises family circumstance deductions to better reflect current living costs and income levels, while also introducing a more responsive mechanism for future adjustments.

Key changes to deduction levels

• Personal deduction: increased from VND 11 million (US$418) to VND 15.5 million (US$589) per month
• Dependent deduction: increased from VND 4.4 million (US$167) to VND 6.2 million (US$236) per dependent per month

Resulting PIT exemption thresholds

Family status	Monthly income not subject to PIT
No dependents	Up to VND 17 million
One dependent	Up to VND 24 million
Two dependents	Up to VND 31 million

Updated adjustment mechanism

• Under the current law, deduction levels may only be revised when the CPI increases by more than 20%, a threshold that has proven inflexible in practice.

• The Amended Law requires the Government to proactively submit adjustment proposals to the Standing Committee of the National Assembly when changes in prices and income levels warrant revision.

• This approach is intended to ensure that family circumstance deductions remain timely, practical, and aligned with economic conditions, rather than being adjusted only after prolonged inflationary periods.

Effective Dates and Transitional Issues

Although the Amended PIT Law formally takes effect on 1 July 2026, provisions relating to salary, wages, and business income will apply from 1 January 2026. This staggered implementation requires careful planning, particularly for payroll cycles and annual tax finalisation.

Enterprises should ensure that payroll systems are capable of applying the new rules from the beginning of the 2026 calendar year, even though the law itself takes effect mid-year.

Implications for Enterprises and Employers

For enterprises registered in Vietnam, the Amended PIT Law necessitates a review of payroll systems, internal controls, and compliance processes. Employers with large workforces may need to update payroll software, revise withholding calculations, and retrain HR and payroll personnel.

Foreign-invested enterprises should also reassess tax equalisation and gross-up arrangements for expatriate employees, as changes in deductions and bracket thresholds may affect net-of-tax outcomes.

In addition, enterprises engaging freelancers, digital contractors, or platform-based service providers should monitor forthcoming guidance to determine whether new withholding or reporting obligations apply.

Practical Considerations and Recommended Actions

To prepare for the implementation of the Amended PIT Law, enterprises and individuals may consider the following steps:

• Review payroll and HR systems to ensure timely updates for new tax brackets and deduction levels.
• Assess exposure to PIT on digital and platform-based income, particularly for employees with multiple income streams.
• Update internal tax policies and employee communications to reflect the revised PIT framework.
• Monitor implementing regulations for detailed guidance on digital income and asset taxation.
• Seek professional tax advice to manage transitional risks and ensure compliance.

Conclusion – Tax Implications and Advisory Perspective

The Amended Law on Personal Income Tax will materially reshape PIT obligations in Vietnam, with implications extending beyond individual taxpayers to employers and enterprises operating in the country. While increased deductions and a simplified rate structure provide relief for many employees, the expanded scope of taxable income (particularly in the digital economy) signals a more comprehensive and data-driven approach to tax enforcement.

For enterprises registered in Vietnam, including existing foreign firms, the amendments require proactive planning. Payroll systems must be updated in advance of the effective date, withholding practices reviewed, and internal controls strengthened to manage compliance risks. Companies employing digital workers or expatriates should pay particular attention to income characterisation and reporting obligations.

Early preparation and clear internal communication will be essential to ensure smooth implementation, minimize tax exposure, and maintain compliance under Vietnam’s evolving personal income tax framework.