Currently, the personal income tax schedule in Vietnam is a seven-tier progressive system, with rates ranging from 5% to 35%. Under the new Draft Law on Personal Income Tax (2026) the drafting authority proposes to reduce the number of tiers to five, widen the income bands between brackets, and increase the standard deduction for dependants—aimed at affording greater relief to low- and middle-income earners. The key question is: ‘How much relief will there be?
This article, with specialist advice from DNP Viet Nam Law Firm, will provide a detailed analysis and comparison of the two tax schedules (the current regime and the draft law). By selecting illustrative cases you will gain a clear understanding of whether your finances might feel less isolated if the new tax schedule is enacted.
1. Current Personal Income Tax (PIT) Schedule
1.1. Legal Basis and Scope of Application.
- Before discussing the new draft, we need to understand the tax schedule currently in force — it serves as the benchmark for comparison and is also the root cause of many of the shortcomings that the draft aims to address.
- The current schedule for personal income tax on individual resident’s income from wages and salaries is governed under the Law on Personal Income Tax 2007, as amended, and is further detailed in Decree 65/2013/NĐ‑CP guiding the Law and in Circular 111/2013/TT‑BTC (amended by Circular 92/2015/TT‑BTC).
1.2. Table of Current Tax Rates
Pursuant to Clause 2, Article 14 of Decree 65/2013/NĐ‑CP guiding the Law on Personal Income Tax 2007, the current tax schedule features 7 tax brackets, with the lowest rate at 5% and the highest at 35%. This schedule applies only to income from wages and salaries. Other types of income (such as real estate transfers, capital investment income, royalties, winnings, etc.) are subject to separate tax rates.
1.3. Calculation Method & Adjustment Factors
- Taxable income = (Total income paid to the individual) – (Exempt amounts + Deductions + Mandatory social, health and unemployment insurance contributions) under the current law.
- Current family-circumstance deductions: VND 11 million per month for the taxpayer and VND 4.4 million per month for each dependent.
Example: If individual A has income of VND 30 million, contributes to mandatory insurance, and has one dependent, then after deducting the relevant personal deduction, dependent deduction and social insurance contributions, the taxable income will fall into either the 2nd or the 3rd tax bracket depending on the amount after deduction.
Furthermore, the top tax rate of 35% applies to income-portions that are very high (above VND 80 million/month). This rate is typically applicable only to a small number of very high-income individuals (based on statistics from 2020-2023).
2. Proposed New Tax Rate Schedule
The Ministry of Finance issued the draft Draft Law on Personal Income Tax (published 29 August 2025) containing numerous reform proposals aimed at promoting fairness, simplifying the system and reducing the tax burden on workers in the context of rising average incomes and higher living costs. The entire draft is part of the 2025 legislative programme and is scheduled to take effect from 1 July 2026.
- One of the central changes is the reduction of the progressive tax schedule from seven brackets to five, while retaining the top tax rate of 35%. The intervals between each new bracket are also being widened compared to the old schedule to reduce the incidence of “bracket creep” when incomes increase slightly.
- Along with this, the draft proposes an increase in family-circumstance deductions, presenting two options — the higher one being VND 15.5 million per month for the taxpayer and VND 6.2 million per month for each dependent. The adjustment of these deductions serves as a key mechanism to ensure that low- and middle-income earners genuinely benefit from the tax reform. In addition, the draft also contemplates allowing medical and educational expenses to be deducted from taxable income, provided that the statutory conditions are satisfied.
3. Conclusion
A comparison between the current tax schedule and the proposed amendments under the Draft Law on Personal Income Tax shows that most employees — particularly those in the low- and middle-income groups — are expected to benefit significantly if the proposed changes are retained upon the Law’s promulgation.
If desired, DNP Viet Nam Law Firm can provide personalized consultations for individual taxpayers, assisting in the calculation of tax obligations under both the existing and proposed schedules, forecasting payable tax amounts, and developing a tailored tax optimization plan in preparation for the implementation of the new law.
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