Major Changes In Personal Income Tax: How Will Your Tax Payments Change If The New Family Circumstance Deduction Of Vnd 15.5 Million Is Applied?

In the context of ongoing personal income tax (PIT) reform, the proposed adjustments are raising hopes of significantly reducing the burden on workers, especially those in the middle-income group. If the new Family Circumstance Deduction (FCD) is applied, many individuals may not have to pay any tax at all. How will this affect you?

1. Key proposals on changes to the deduction: An opportunity to reduce tax burden

Currently, inflation and rising living costs have made the existing FCD outdated. Therefore, the Ministry of Finance has submitted to the Government and the Standing Committee of the National Assembly a plan to adjust the deduction, which would make a big difference in the amount of tax payable.

If approved, this proposal will directly reduce workers’ Taxable Income (TI).

• Workers with no dependents: Their tax-free income will increase by VND 4.5 million.
• Workers with 1 dependent: Their tax-free income will increase by VND 6.3 million (4.5 + 1.8).

This means that individuals earning below the new deduction threshold (plus mandatory insurance contributions) will no longer incur PIT obligations.

2. PIT tax brackets: Ongoing reform discussions

Besides the FCD, reforming the PIT tax brackets is also under consideration. Currently, PIT on salaries and wages follows a progressive 7-tier scale (5% to 35%).

Some reform proposals under discussion include:

• Reducing the number of tax brackets: From 7 to 5, to simplify tax calculation and management.
• Expanding income ranges: To prevent “bracket creep,” where small increases in income push taxpayers into significantly higher tax rates due to narrow thresholds.
• Expanding deductible expenses: Allowing deductions for essential costs such as healthcare and education before tax calculation, ensuring fairness for those with high essential expenses.

Note: These proposals are still under discussion and not yet officially approved.

3. Impact comparison: How much tax will you pay?

To better illustrate the impact of the new FCD, let’s look at two common income scenarios (assuming mandatory insurance already deducted).

Thus, under the new deduction, most low- and middle-income earners will enjoy meaningful tax relief.

4. Points to note

If the number of brackets is reduced from 7 to 5, but higher rates are applied to the top tiers to offset revenue losses from increased deductions, high-income earners could face higher taxes compared to the current 7-bracket system.

Most importantly, these proposals are not yet law. They may still change before official implementation. Workers should closely follow updates from the National Assembly and the Ministry of Finance.

5. Conclusion & recommendations for employees

If the proposed FCD and new tax brackets are approved, this will be positive news for the majority of Vietnamese workers, particularly those struggling with rising living costs.

What you should do now:

• Be proactive: Once the new law takes effect, use updated tax calculators to estimate your monthly liability.
• Register dependents: Ensure all eligible dependents are properly registered with tax codes and supporting documents to maximize deductions.
• Stay informed: Follow official tax authority updates to avoid misinformation about timelines and calculation methods.

PIT reform is not just about personal finances—it reflects the State’s effort to promote social equity and improve citizens’ living standards.

We hope this detailed overview helps you better understand the upcoming changes.
If you need expert advice on tax calculation under the new rules, reviewing your PIT records, or any other accounting matters, feel free to contact us for timely and accurate support!

Quyen Nguyen