Shoppers at Winmart in Hai Bà Trưng Ward, Hà Nội. VNA/VNS Photo Trần Việt

HÀ NỘI — The revised Personal Income Tax Law, which will take effect in 2026, raises family deductions and streamlines the progressive tax schedule, helping labourers reduce their tax burden, increase disposable income and stimulate consumption.

Passed by the National Assembly on December 10, 2025, the amended law will officially come into force on July 1, 2026. It introduces two major reforms: an increase in family deductions and a reduction in the number of progressive tax brackets to five.

The revision is widely regarded as an important adjustment that brings tax policy closer to real-life conditions, sharing the burden with taxpayers, particularly salaried labourers.

One of the most closely watched changes following the law’s passage is the increase in family deductions. Under the new rules, individuals without dependents must pay personal income tax when their total income from salary or wages exceeds VNĐ15.5 million ($620) per month, while the deduction for each dependent will increase to VNĐ6.2 million ($248) per month.

These new thresholds will apply from the 2026 tax year, replacing the long-standing deductions of VNĐ11 million ($440) and VNĐ4.4 million ($176), respectively.

The determination of dependent deductions will continue to follow the principle that each dependent may be claimed only once by a single taxpayer.

Resident individuals may deduct family allowances from taxable income derived from salaries and wages before tax calculation. Other eligible deductions include charitable and humanitarian contributions, as well as medical and education-related expenses for taxpayers and their dependents, provided that valid invoices and supporting documents are available and that such expenses are not covered by other funding sources.

The Government will issue detailed regulations to guide the implementation of these provisions.

According to economic experts, the adjustments are appropriate given recent inflation trends and rising living costs.

As housing, education, healthcare and child-rearing expenses have continued to climb, the previous family deduction levels have increasingly shown their limitations. The latest increase is expected to significantly ease the tax burden for labourers, particularly middle-income earners and families with dependents such as young children, elderly parents, and senior citizens, thereby improving disposable income.

Many labourers expressed optimism immediately after the law was adopted. Nguyễn Thị Thu, an accounting staff member in Vĩnh Tuy Ward, Hà Nội, said her family has two young children and a combined household income at an average level.

“Previously, even though our income wasn’t high, we still had to set aside a considerable amount each month to pay taxes," she said.

"With the new deduction levels, our tax liability will certainly decrease, meaning more money for our children’s education and daily expenses.”

Similarly, Nguyễn Văn Nghĩa, a construction engineer working in HCM City, said the new policy “directly addresses the real difficulties faced by urban labourers”.

“Rent and food costs in the city are very high. Income doesn’t increase much, but prices keep rising. Raising family deductions helps salaried workers like me feel less pressure and makes the tax policy seem fairer,” he added.

Another significant change that has been well received by both experts and the public is the new mechanism for adjusting family deductions.

Instead of waiting for the consumer price index (CPI) to rise by 20 per cent or more, as under the previous law, the revised legislation authorises the Government to submit adjustment proposals to the National Assembly Standing Committee based on changes in prices and income levels, ensuring alignment with socio-economic conditions in each period.

Many labourers hope this mechanism will prevent tax policy from falling out of step with everyday life.

Estimates suggest that the new family deduction levels could reduce the overall tax burden on labourers by more than VNĐ8.7 trillion ($331 million). This reduction is expected not only to improve household spending capacity but also to help stimulate consumption and support economic growth.

Lê Khắc Quý, a technical employee at a manufacturing firm in Thanh Hoá Province, said: “For workers, even a few hundred thousand đồng a month makes a big difference. If many people receive tax reductions, purchasing power will definitely increase.”

Alongside higher family deductions, the revised Personal Income Tax Law also streamlines the progressive tax schedule from seven brackets to five, with tax rates set at 5 per cent, 10 per cent, 20 per cent, 30 per cent, and 35 per cent. The highest rate of 35 per cent applies to monthly income exceeding VNĐ100 million, maintaining the objective of regulating high incomes to support social welfare goals.

The new tax schedule is expected to reduce 'bracket jumping', minimise tax shocks during year-end settlements, and make tax calculations easier, allowing taxpayers to better plan their personal finances.

Commenting on the revision, Mạc Quốc Anh, Vice Chairman and Secretary General of the Hà Nội Small and Medium Enterprises Association (Hanoisme), said the amended law not only helps ease difficulties for labourers but also provides a boost to aggregate demand.

He described the changes as one of the most effective macroeconomic measures to directly improve disposable income, particularly for the middle class and low-income workers.

Phan Hoài Nam, General Director of W&A Consulting and an arbitrator at the Việt Nam International Arbitration Centre (VIAC), also said the adjustments are reasonable and better aligned with actual spending needs, especially for salaried workers in major urban areas.

According to Nam, the revised policy reflects a clear commitment to sharing the tax burden with the majority of taxpayers, particularly those in common income groups across urban centres. Higher deductions and lower taxable income give people more financial room to maintain living standards amid post-pandemic recovery and rising inflation.

While the adjustments may not resolve all challenges, they send a positive signal and demonstrate the State’s growing attention to salaried workers, especially those in major cities, where living costs remain exceptionally high. — VNS