In the dossier for appraisal of the draft Law on Personal Income Tax sent to the Ministry of Justice, the Ministry of Finance said that it had proposed to calculate family deductions according to the regional minimum wage or according to the living area, such as in large cities with higher rates than rural and mountainous areas due to expensive costs. However, the drafting agency did not agree.
According to the Ministry of Finance, the family deduction for taxpayers and dependents is a unified level, regardless of high or low income, or place of residence. Countries, whether developed or developing, regulate the general family deduction level, applying it uniformly, regardless of the area or population, the Ministry of Finance cited.
For workers working in disadvantaged areas, the draft law stipulates that regional and transfer allowances are not included in taxable income. In case individuals encounter difficulties due to natural disasters, fires, accidents, or serious illnesses, the law also stipulates tax reduction.
Currently, the family deduction is 11 million VND/month for taxpayers and 4.4 million VND/month for each dependent. This regulation applies from July 2020. Individuals are entitled to deduct insurance, family deductions, allowances, and subsidies before calculating taxable income. When the consumer price index (CPI) increases by more than 20%, the competent authority will calculate an adjustment.
Regarding the family deduction, the Ministry of Finance proposes to apply a rate of 15.5 million VND/month, nearly 3 times higher than the average income per capita and higher than the average income of the highest income group of 20% of the population.
