New family circumstance-based deduction level, disposable income of the people to increase

VCN- The increase in the family circumstance-based deduction level has shown the prompt assistant of the State for taxpayers, especially asthe economy has been hit hard by Covid-19 pandemic. Thiswas stated by Truong Ba Tuan, Vice President of the National Institution for Vietnam Finance (under the Ministry of Finance) about raising family circumstance-based deduction levelwhen calculating Personal Income Tax.
new family circumstance based deduction level disposable income of the people to increase About 1 million people won’t have to pay personal income tax
new family circumstance based deduction level disposable income of the people to increase Raising family circumstances-based reduction level must comply with current law
new family circumstance based deduction level disposable income of the people to increase Increase family circumstance deduction level to VND 11 million

new family circumstance based deduction level disposable income of the people to increase
Truong Ba Tuan, Vice President of the National Institution for Vietnam Finance (under the Ministry of Finance

The Standing Committee of the National Assembly has approved the Government's proposal to raise the personal income tax threshold from VND9 million to VND11 million per month, for dependents from VND 3.6 million to VND 4.4 million per month.What is your opinion on this issue?

Firstly, it is necessary to affirm that the Standing Committee of the National Assembly’s approval on the Government's proposal adjusting family circumstance-based deduction level is to comply with the National Assembly’s Law No.26/2012/QH13 dated November 22, 2020 amending and supplementing articles of the Law on Personal Income Tax No. 04/2007/QH12, effective from July 1, 2013. If the consumer price index (CPI) fluctuates by more than 20% compared to the effective date of this law or the latest adjustment time of the family circumstance-based deduction level, the Government shall propose the National Assembly Standing Committee adjust this level in line with the fluctuation of the CPI to apply for the next tax term.

Since Law No. 26/2012/QH13 took effect until the end of December 2019, the CPI increased 23.2%. The adjustment of the family circumstance-based deduction level for taxpayers from VND9 million to VND11 million per month, for dependents from VND 3.6 million to VND 4.4 million per month is equivalent to the increase of CPI in this period, ensuring compliance with the provisions of Law No. 26/2012/QH13, promptly reflecting changes in living expenses of taxpayers from July 2013 up to now.

For the new family circumstance-based deduction level, the disposable income of people will increase, contributing to stimulating household spending, social consumption and improving the lives of people.

Is this adjustment consistent with the context of economic development and social life of people?

In the current context, I think this increase in family circumstance-based deduction level is appropriate, ensuring the interests of the State and taxpayers. For the new family circumstance-based deduction level, those with lower incomes will enjoy more benefits. Of which, a large proportion of personal income tax payers at level 1 (accounting for about 44% of personal income taxpayers) will be subject to non-taxpayers. Taxpayers with income of less than VND 15 million per month (VND 180 million/year) with dependents will not have to pay the tax.

Meanwhile, according to the General Statistics of Vietnam, the Vietnam’s GDP as of the end of 2019 was about VND 63 million/person/year, the average wage of laborers was 6-7 million per month. Thus, it can be seen that, after being adjusted, the family circumstance-based deduction level is not low compared with current living standard levels. In addition, it should be emphasized that with the family circumstance-based deduction level of VND 11 million/month, it does not mean taxpayers only spend about VND 11 million/month, this is only deductible before calculating PIT. For example, if taxpayers with an income of VND 20 million/month have two dependents, they only must pay VND 10,000 of personal income tax, equivalent to 0.05% of their income, 99.95% of the remaining income is the disposable income of taxpayers.

The increase in family circumstance-based deduction level will be applied for the tax term 2020. Amid the economy being affected by Covid-19, what is the meaning of this adjustment for taxpayers?

An important point in the decision to adjust the family circumstance-based deduction level is that the new level will be applied for the tax term 2020. In other words, all personal income taxpayers will have their tax obligations reduced this year. According to the law on tax administration, if taxpayers temporarily paid PIT according to the former family circumstance-based deduction level (VND 9 million/month for tax payers and VND 3.6 million for dependents), they shall be assessed the PIT payable according to the new level when implementing PIT finalisation in 2020, ensuring the rights oftaxpayers in accordance with the Law No. 26/2012 / QH13.

The impacts of Covid-19 have reduced the State revenue and increased State budget spending on disease prevention and control, supporting people and businesses hit by the pandemic. The increase in family circumstance-based deduction level showsthe prompt assistant of the State for taxpayers and businesses.

According to the Ministry of Finance’s estimation, with this adjustment of family circumstance-based deduction level, State budget revenue will reduce by about VND 10,300 billion /year, equivalent to about 13% of PIT revenue in 2019. This will be added to theincome of people and help them restore difficulties caused by Covid-19.

The PIT is one of the most important taxes in Vietnam's tax system. In the near future, how should the PIT policy be adjusted to fit the current context?

In recent years, the implementation of the PIT policy has made important contributions to restructuring the State budget revenue in a more sustainable manner, creating favourable conditions for the State to mobilise income of a part of taxpayers to supplement to the State budget to better meet the tasks of spending on economic development, social welfare and poverty reduction.

However, along with the development of the economy, science and technology as well as the impact of integration, many new economic activities and new business models have cropped up. Accordingly, in the near future , it is necessary to offer a plan to evaluate the implementation of the current Law on Personal Income Tax, reporting to the Government to submit to the National Assembly for consideration and amendment and supplement of this law, ensuring it is in line with the overall reform process of the tax policy system.

The Ministry of Finance is reviewing and evaluating the implementation results of the strategy on tax system reform for 2011-2020, thereby, studying and developing a new strategy for 2021-2030 in association with institutionalisation of major guidelines and orientations of the Party and the State related to the financial-budget field for the next fiveyears and 10 years. These will be important bases for researching and reviewing amendments to relevant tax laws, including the PIT policy.

By Thuy Linh/Ngoc Loan

Related News

Customs industry’s revenue increases in the first of 2024

Customs industry’s revenue increases in the first of 2024

VCN – Despite facing many difficulties, the positive results in revenue of the Customs industry in the first half of the year shows that export activity has restored gradually and the domestic economy has seen signs of prosperity.
Make good use of e-commerce data, create effective tax and customs management

Make good use of e-commerce data, create effective tax and customs management

VCN - According to Mr. Pham Tan Cong, Chairman of the Vietnam Confederation of Commerce and Industry (VCCI), making good use of e-commerce data can help manage import and export work very well, bringing high efficiency for tax and customs management.
Five-month budget revenue reached half of the whole year 2024 revenue estimate

Five-month budget revenue reached half of the whole year 2024 revenue estimate

VCN - According to the Ministry of Finance, in May 2024, total state budget revenue is estimated to reach VND150.9 trillion. In the first five months of 2024, total budget revenue is estimated to reach VND898.4 trillion, equal to 52.8 percent of the estimate.
HCMC Customs increase by more than VND36 billion from price ruling

HCMC Customs increase by more than VND36 billion from price ruling

VCN - Through price consultation for imported goods, Ho Chi Minh City (HCMC) Customs Department rejected the declared value for 2,711 declarations, increasing by over VND36 billion to the State budget.

Latest News

Vietnam needs comprehensive regulatory framework to attract green financing

Vietnam needs comprehensive regulatory framework to attract green financing

Vietnam needs a clear regulatory framework and solutions to promote the green finance market and encourage private capital flows into green fields, experts have said.
2025 budget estimation must be practical, accurate and efficient

2025 budget estimation must be practical, accurate and efficient

VCN - Directing the 2025 state budget estimation, Minister of Finance Ho Duc Phoc emphasized that units must ensure that the 2025 budget estimation must be practical, accurate, efficient, and meet the requirements for performing professional and political tasks assigned to central and local agencies.
The corporate bond market will be more vibrant in the second half of the year

The corporate bond market will be more vibrant in the second half of the year

VCN - In the first half of 2024, with bond maturity pressure continuing to increase, corporate bond issuance has shown many positive signs compared to the previous year. According to forecasts, businesses' need to borrow and issue corporate bonds will accelerate in the second half of 2024.
Prioritize resources and promptly supplement capital for policy credit

Prioritize resources and promptly supplement capital for policy credit

VCN- In the near future, to further promote the effectiveness of policy credit, the Ministry of Finance will continue to preside over and coordinate with relevant ministries, branches and the Vietnam Bank for Social Policies (VBSP) to implement many key solutions.

More News

Measures suggested to boost startups’ access to capital

Measures suggested to boost startups’ access to capital

The recent vigorous growth of startups in Vietnam has attracted domestic and foreign investors, but insiders recommended more efforts be made to facilitate startups’ access to funding from investors so that they can live up to potential.
Inflationary pressure seen from monetary policy

Inflationary pressure seen from monetary policy

VCN - The economy went through the first half of the year, inflation is still under control and forecast to reach the target set by the National Assembly and the Government. However, variables from the currency market such as exchange rates, interest rates, credit..., even gold prices, are issues that need to be paid attention.
Banks with the problem of promoting credit growth

Banks with the problem of promoting credit growth

VCN - It is estimated that by the end of June 2024, the economy's credit growth will reach nearly 4.5%. This number is still far from the yearly credit growth target of 14-15%.
Proposal to increase Special Consumption Tax on tobacco products

Proposal to increase Special Consumption Tax on tobacco products

VCN - At the workshop Special Consumption Tax on cigarettes held by Vietnam Tax Consulting Association and the Institute of Financial Strategy and Policy on July 16, experts and businesses clarified the goals and content of amended the special consumption tax policy on tobacco products. According to experts, there cannot be a solution that fully ensures the benefits of both consumers, the state and businesses, but it is necessary to choose the most optimal option to achieve the initially set goals.
Savings of individual customers at banks hit record high

Savings of individual customers at banks hit record high

In spite of low interest rates, figures from the State Bank of Vietnam (SBV) released this week show deposits of individual customers increased by more than VNĐ39.7 trillion in April, to reach more than VNĐ6.7 quadrillion.
Managing fiscal policy has achieved many positive and comprehensive results

Managing fiscal policy has achieved many positive and comprehensive results

VCN - On July 15, the Ministry of Finance held an online conference to summarize state budget financial work in the first 6 months of the year, implementing tasks in the last 6 months of 2024. Minister of Finance Ho Duc Phoc attended and directed the conference. Also attending the Conference were Deputy Ministers of Finance, leaders of units under the Ministry of Finance.
Determine tools, policy for inflation control

Determine tools, policy for inflation control

VCN - According to economic expert Associate Professor, PhD. Ngo Tri Long (photo), former Director of the Price Market Research Institute (Ministry of Finance), inflation is an issue that needs special attention, especially related to the management of monetary policy, interest rates, increasing prices of goods and services...
The impact of wage increases on inflation will not be too significant

The impact of wage increases on inflation will not be too significant

VCN - Addressing concerns related to wage and price increases, Dr. Nguyen Duc Do, Vice Director of the Institute of Economics - Finance (Finance Academy), believes there are not many factors causing sudden price surges in the last 6 months of 2024. Therefore, it can be expected that the rate of price increases in the last 6 months will be comparable to that in the first 6 months of 2024.
Imposing and raising special consumption tax contributing to change consumption behavior

Imposing and raising special consumption tax contributing to change consumption behavior

VCN - At the Workshop on Comments on Completing the Revised Law on Special Consumption Tax (SCT) organized by the Vietnam Confederation of Commerce and Industry (VCCI) on July 11, many experts and businesses contributed their opinions to clarify the importance and impact of the revised special consumption tax law, which emphasizes the addition of taxable areas or tax increases to change society's consumption behavior.
Read More

Your care

Latest Most read
Vietnam needs comprehensive regulatory framework to attract green financing

Vietnam needs comprehensive regulatory framework to attract green financing

Vietnam needs a clear regulatory framework and solutions to promote the green finance market and encourage private capital flows into green fields, experts have said.
2025 budget estimation must be practical, accurate and efficient

2025 budget estimation must be practical, accurate and efficient

VCN - Directing the 2025 state budget estimation, Minister of Finance Ho Duc Phoc emphasized that units must ensure that the 2025 budget estimation must be practical, accurate, efficient, and meet the requirements for performing professional and political
The corporate bond market will be more vibrant in the second half of the year

The corporate bond market will be more vibrant in the second half of the year

VCN - In the first half of 2024, with bond maturity pressure continuing to increase, corporate bond issuance has shown many positive signs compared to the previous year. According to forecasts, businesses' need to borrow and issue corporate bonds will acc
Prioritize resources and promptly supplement capital for policy credit

Prioritize resources and promptly supplement capital for policy credit

VCN - According to the VBSP, by the end of June, total policy credit capital rose 7.6% year-on-year to VND 372,723 billion, including entrusted capital from the local budget at VND46,929 billion, an increase of VND7,755 billion, accounting for 12.6%.
Measures suggested to boost startups’ access to capital

Measures suggested to boost startups’ access to capital

The recent vigorous growth of startups in Vietnam has attracted domestic and foreign investors, but insiders recommended more efforts be made to facilitate startups’ access to funding from investors so that they can live up to potential.
Mobile Version