Decree No. 253/2026/ND-CP raises the threshold for personal income tax deduction at a rate of 10% to 5 million VND/income payment along with many changes in tax finalization authorization and tax self-finalization obligations.
Raising the tax deduction threshold to 5 million VND
For resident individuals who do not sign labor contracts or sign labor contracts for less than 3 months, previously the income payment organization must deduct personal income tax at a rate of 10% on the income payment level from 2 million VND/time or more.
According to Clause 2, Article 50 of Decree No. 253, the personal income tax deduction threshold at a rate of 10% is applied to income payments from 5 million VND/time and includes cases where organizations pay salaries and other income to employees who have terminated labor contracts.
However, the new regulation also expands the choice for individuals. In case the income payment is less than 5 million VND/time, if the individual requests tax deduction, the enterprise will still carry out tax deduction at a rate of 10%.
In case of termination of labor contract, Ms. Nguyen Thi Thanh Huyen - Deputy General Director - Tax and Personnel Consulting - EY Vietnam Consulting Joint Stock Company - explained that all payments made after the termination of the labor contract apply 10% tax deduction, including salaries, wages of the month the employee works and other incomes, benefits, and payments incurred when terminating the labor contract.
In other words, the basis for applying the tax deduction rate at a rate of 10% is the time of income payment (after the termination of the labor contract), not the time of income generation.
Another issue raised is on which income the 10% tax deduction rate will be calculated on, because Decree No. 253 only stipulates deductions on "income", while in reality there are both taxable and untaxable incomes.
In addition, many businesses are also wondering whether employees can apply deductions such as family deductions, compulsory insurance before applying the 10% deduction level or not.
According to a representative of EY Vietnam, the income used for personal income tax deduction should be taxable income, instead of total income. If calculated on total income, including non-taxable or tax-exempt items, it will be disadvantageous for employees when finalizing tax at the end of the year.
The reason is that the personal income tax deduction voucher issued by the enterprise will record the total income the income-paying organization has declared, including both untaxable or tax-exempt income. When tax finalization, if the tax system summarizes the declared data of the enterprise and does not allow individuals to adjust taxable income targets, employees will face difficulties and tax finalization information does not accurately reflect the taxable income of individuals in the finalization period.
Expanding conditions for authorizing settlement
Regarding the subjects authorized to finalize taxes, the basic principle does not change but there are adjustments to other income thresholds.
Accordingly, individuals are still authorized to finalize if they simultaneously meet the conditions:
1. Having only one source of income from salaries and wages signed labor contracts of 3 months or more at an organization and actually working there at the time of tax finalization;
2. Having income from other places where this income is not more than 15 million VND per month in the year has been deducted from tax by organizations and individuals paying income at a rate of 10% on income. Previously, the income threshold in other places was only 10 million VND per month in the year.
Ms. Ngo Thi Kim Anh - Deputy General Director - Tax and Personnel Consulting of EY Vietnam Consulting Joint Stock Company noted that the regulation allows people with income below 5 million VND/time to still deduct tax at the request of individuals related to the second condition mentioned above, helping employees to be eligible for authorized settlement if they meet the criteria of the law.
*The views in the article are those of the interviewer and do not necessarily reflect the views of the EY Global organization and its members.
