personal income tax is one of the important sources of revenue of the state budget. Playing a role as an effective tool in regulating income, ensuring social justice and overcoming limitations of other taxes, during the implementation process, the Law on personal income tax has basically achieved the goals when promulgating the Law and positively impacted many aspects of the country's socio-economy.
However, facing the rapid fluctuations in the world economy and politics in general and Vietnam in particular in the inevitable development process, the Law on personal income Tax has revealed a number of limitations that need to be studied and amended appropriately, ensuring fair goals, encouraging production, consumption, and international economic integration in conjunction with promoting sustainable development.
Some contents that can be considered for research in the process of amending the Law on personal income tax are as follows:
Expanding the basis for calculating personal income tax
The development of the socio-economy and new forms of business leading to diversification of individuals' income sources requires adding regulations on other income groups subject to personal income tax to cover the possibility of arising tax, prevent tax losses and ensure fairness. Some other personal income in addition to the 10 types of taxable income stipulated in the current Law on personal income tax such as digital asset investment, property rights such as Internet domain names, ... need to be studied and considered as personal income subject to personal income tax. In addition to supplementing regulations on taxable income, it is necessary to build an effective management mechanism for new sources of income such as doing business in the electronic environment, working freely, investing in digital assets, etc. to have a basis to determine tax obligations.
For example, for digital assets, in the world, although it has been or has not been recognized in legal documents, some countries still include personal income tax on income related to digital assets in the calculation of personal income tax. Vietnam is a country with a high number of people accessing, participating in transactions and investing in digital assets in the region, the development speed of this activity is increasing and bringing significant income to individuals. Therefore, adding regulations on taxable income for these assets is appropriate in the context of the increasingly developing digital economy.
Adjusting the personal income tax table to ensure fairness in both vertical and vertical directions
On January 22, 2025, the Ministry of Finance (the Department of Natural Resources and Environment will preside over the development) issued a Government Submission No. 18/TTr-BTC on the dossier proposing the development of a draft Law on Personal Income Tax (replacement law). At point 6.3, section IV, Submission No. 18/TTr-BTC, the Ministry of Finance has proposed a plan to adjust the progressive tax rate in part applicable to individuals residing with income from salaries and wages in the direction of reducing the number of tax rates in the current tax rate from 7 levels to an appropriate level, along with considering expanding the income gap in tax levels, ensuring higher regulation for those with income at high tax levels.
The proposal of specific plans for the corresponding tax rates and rates needs to be studied based on factors such as income and living standards of people, social context as well as referring to the experiences of countries with similar conditions, ensuring the number of tax rates needs to be considered to avoid too many levels to complicate the system, increase compliance costs or too few levels to reduce fairness and reduce the ability to adjust taxes in accordance with actual income levels. Experience of some countries shows the trend of cutting the number of tax rates in the Partial Progressive Tax Schedule, such as: Indonesia, Philippines currently apply a 5-level tax schedule, Malaysia also cuts from 11 tax rates (2021) to 9 tax rates (2024)...
personal income tax on real estate transfers
In order for the personal income tax collection policy to ensure compliance with the nature of economic transactions and in accordance with the function of above-income tax, it is necessary to study the plan to regulate personal income tax from real estate transfers, land use rights determined by: Tax rate (requested at 20% to correspond to the tax rate of the organization or enterprise paying corporate income tax on real estate transfers) multiplied by (x) taxable income (in the selling price minus the total cost related to real estate transfers).
However, the application of determining individuals' taxable income from real estate transfers using this method needs to be considered on the basis of a detailed survey of reality and an assessment of feasibility. To calculate tax according to the method of collecting the total interest collected from real estate transfer activities effectively, there must be 2 conditions: (1) The database on the transaction history of the land plot accurately reflects the transaction prices of transfers; (2) Clearly stipulate in legal documents the deductible expenses and conditions for invoices, documents, as well as capital prices of transferred real estate.
Regarding the database on the transaction history of the land plot: Currently, the tax authority's database has the function of looking up the transaction history of the land plot and looking up the transaction history of the taxpayer (since 2018). However, the transfer price stated on the contract is still not guaranteed to be consistent with the actual transaction price. The control of state agencies to ensure that buyers and sellers record transaction prices on contracts at the correct actual transaction prices is still inadequate, so income from the database on transaction prices on the market requires time and search engines.
Regarding the collection of documents and prove related to real estate transfer costs as well as capital prices of transferred real estate: With the current situation, determining and proving related costs that are covered except for determining taxable income also faces difficulties and obstacles in the implementation process due to many types of costs related to real estate transfer activities.
In addition to easily determined costs such as purchase costs, construction and repair costs, and procedures, there are also costs that are difficult to prove such as brokerage costs, interest costs, compensation costs for related parties, etc., leading to difficulties in determining the correct interest received in practice, especially in cases where taxpayers intentionally declare incorrectly to reduce the amount of tax payable. In some cases, real estate transferred has existed since ancient times or was inherited, donated... so the capital price cannot be determined.
This requires increasing tools to control actual income arising from real estate transfer activities of households and individuals through proper control of transaction value in practice. In case of lack of comparison information, monitoring to determine the correct transfer interest in practice will lead to many problems: tax losses, administrative burden for both tax authorities and taxpayers in proving transfer interest, long processing time for transfer documents, etc.
Accordingly, to implement the plan to collect the difference in tax rates for transactions, it is necessary to study and amend the provisions of the Law on personal income tax according to the plan to stipulate personal income tax from real estate transfer, land use rights determined by tax rate multiplied by (x) taxable income (in the form of selling price minus total costs related to real estate transfer) and perform procedures from real estate transactions, notarization, tax and land transaction registration in the electronic environment.
On family deduction for taxpayers
Currently, the family deduction for taxpayers is 11 million/month/person, the family deduction for dependents is 4.4 million/month/person. It is possible to consider increasing the deduction for taxpayers and dependents in accordance with the socio-economic development speed. Regarding factors to consider adjusting the family deduction level, in addition to using the consumer price index (CPI), it is possible to consider adding other factors as criteria for assessing the family deduction level such as economic growth rate, GDP per capita, regional average per capita income, household spending, inflation rate, etc. for more comprehensive assessment.
As for the group of dependents who are "other people without a dependent place but the taxpayer must directly nurture" as stipulated in Point b, Clause 3, Article 19 of the Law on personal income Tax, the concept of no dependent place has not been clearly regulated in relevant legal documents, creating loopholes that taxpayers can take advantage of to reduce family deductions for individuals who are not eligible to be dependents, leading to a reduction in the actual tax payable, causing unfairness among taxpayers. In addition, the Law does not limit the number of dependents of this group of subjects. Therefore, it is possible to consider including more specific regulations on family deduction in this case in the Law on personal income tax (such as the regulation on the maximum number of dependents...).
In addition, it is possible to consider raising the personal income tax threshold for income from: Winning prizes, inheritance, gifts. According to the current Law on personal income tax, individuals with income from winning bonuses, inheritance, and gifts pay personal income tax in excess of VND 10 million. However, the income threshold (10 million VND) stipulated in the Law on personal income tax has been implemented since 2009 and is a low income threshold compared to the increasingly high income increase of the population, therefore, the adjustment to increase the threshold for this income group is in line with the development speed of the socio-economy. At the same time, with increasing the threshold, it is possible to consider increasing the tax rate for this type of income.
