Personal Income Tax: Government Aims to Retain Top Bracket at 35%

On December 2nd, the National Assembly’s Standing Committee provided feedback on the explanation, absorption, and refinement of the draft amendments to the Personal Income Tax Law. This project has been presented to the National Assembly for consideration and is expected to be approved by the end of the current session.

During the discussion, several delegates expressed concerns about the proposed adjustments to income thresholds and corresponding tax rates in the tax table.

Some delegates suggested applying a tax rate of up to 25% or 30%, while also raising the taxable income thresholds for each tax bracket.

In response to the feedback, the drafting agency revised the progressive tax table, adjusting two tax brackets: reducing the 15% tax rate (in bracket 2) to 10% and the 25% tax rate (in bracket 3) to 20%.

This new tax table aims to address sudden increases in certain brackets, ensuring a more reasonable tax structure. Notably, individuals currently paying taxes in these brackets will see a reduction in their tax obligations compared to the existing tax table.

Regarding the highest tax rate of 35% in bracket 5, the Government stated that this proposal is reasonable, as it aligns with average rates globally and within the ASEAN region, neither too high nor too low.

Reducing the tax rate from 35% to 30% would likely be perceived as a “tax cut for the wealthy.”

On family deductions, the Government explained that the deduction for taxpayers is essentially the taxable income threshold, based on the regular spending needs of those earning above the national average.

Internationally, deductions for dependents are typically lower than those for taxpayers and are capped per family to align with other related policies. Dependent deductions usually range from 10% to 50% of the taxpayer’s deduction.

Avoiding Excessive Tax Rate Increases in Certain Brackets

During the review, Phan Văn Mãi, Chairman of the Economic and Financial Committee, noted that most key aspects of the draft amended Personal Income Tax Law, as raised by delegates and the reviewing agency, have been addressed or partially accepted by the Government.

To ensure the smooth and effective implementation of these policies, the Government is urged to direct relevant agencies to promptly draft and issue guiding documents in time for the Law’s effective date.

Commenting on the partial progressive tax table, the National Assembly Chairman emphasized the need for logical consistency between tax brackets and their intervals, avoiding sharp tax rate increases in any bracket.

Regarding family deductions, the Chairman called for calculations based on price and income fluctuations, ensuring alignment with socioeconomic conditions.

The Chairman also highlighted the need for careful consideration of gold bar transfer taxation, taking into account market management conditions to determine the appropriate implementation timeline.