Personal income tax incentives: Creating a breakthrough in high-tech human resources

Difficulties in determining subjects exempt from and reduced from personal income tax

In the draft Resolution on the establishment and operation of financial centers, the Ministry of Planning and Investment (before the merger) proposed that managers, scientists, and experts with high professional qualifications in this area be exempt from personal income tax.

Other groups of subjects who also have TNCN arising at management agencies or financial center members are also exempt from tax until the end of 2035. In the following years, the ministry proposed to reduce personal income tax by 50%. This agency believes that the exemption of personal income tax is necessary to attract a force of highly qualified scientists to Vietnam, when the country needs to attract talents to the financial sector to build and operate financial centers.

However, according to the Ministry of Finance, the current Law on personal income tax does not stipulate tax incentives applied to specific subjects. The law only stipulates tax exemption for certain types of income with the aim of ensuring social security. The Ministry of Finance argues that "not all workers working at financial centers are attractive" and "Preferential policies (if any) need to be selectively applied, focusing on attracting highly qualified human resources in some areas of the economy".

The problem here is that the specific subjects for policy making have not been clarified. Currently, the concept of high-tech human resources according to Clause 10, Article 3 of the Law on High Technology No. 21/2008/QH12 stipulates: High-tech human resources are a team of people with qualifications and skills to meet the requirements of research, development, application of high technology, high-tech services, management of high-tech activities, operation of equipment and production lines of high-tech products. This concept is general, and the specific criteria for high-tech human resources are not clear. On the other hand, after nearly 20 years, technology has developed, attracting new industries and new human resources.

Remove "bottlenecks" to attract talent

Explaining the proposal for preferential personal income tax for high-quality human resources in the Draft Proposal to develop a draft Law on Personal Income Tax (replacement), the Ministry of Finance stated: According to the current Law on personal income tax, preferential treatment for personal income tax exemption and reduction does not apply to individuals who are high-tech human resources, while this is an important workforce that needs to have appropriate development incentive mechanisms. Developing science and technology and high-tech human resources are one of the important factors to increase productivity and promote economic growth.

To further develop the field of science and technology, it is necessary to have policies focusing on attracting highly qualified individuals to participate in fields such as information technology or priority development fields such as agriculture and agricultural processing. This is also a policy applied by some countries in the world.

Accordingly, it is necessary to study and supplement appropriate regulations in the Law on personal income Tax on individuals who are high-tech human resources working in enterprises such as: High-tech enterprises, high-tech agricultural enterprises, high-tech projects in the high-tech category that are prioritized for investment and development, high-tech product production projects in the high-tech product category that are encouraged for development".

Speaking with Lao Dong, Prof. Dr. Nguyen Dinh Duc, Chairman of the Council of the University of Technology, Vietnam National University, Hanoi, commented: "The issue of high-tech human resources is an urgent national issue, for Vietnam to grasp the opportunities of the 4.0 Industrial Park and develop high technologies, requiring vision and planning from the Government".

Mr. Do Thanh Binh, Director of International Cooperation of the Vietnam Software and Information Services Association, informed that in the period of 2025-2030, Vietnam needs about 1 million more IT human resources to meet today's demand for technology explosion; increase 74% of AI human resources, increase 20,000 experts/year related to the field of cybersecurity and increase 30%/year of personnel related to Blockchain technology.

Without incentives, including tax incentives, it will be difficult to attract personnel in this field. To remove policy bottlenecks, the Ministry of Finance proposed: "In case of supplementing regulations on reducing personal income tax for high-tech human resources, it is also necessary to study to have regulations on criteria for determining individuals as high-tech human resources as a basis for implementation in the direction of assigning the Prime Minister to specify".

The level of personal income tax reduction for this group of subjects needs to be studied, ensuring harmony between the goals of encouraging subjects to prioritize attracting, maintaining a reasonable level of state budget incentives and not distorting the role of personal income tax policies.

Policy breakthroughs, including tax policies, are conditions to attract talent in the high-tech sector, creating motivation to implement key national tasks in science and technology, innovation, digital transformation, development of artificial intelligence technology and human resource training.