PROPOSAL ON INCREASING THE LEVEL OF REDUCTION BASED ON FAMILY CIRCUMSTANCES FROM PRE-TAX INCOME OF A PERSON UP TO 11 MILLION DONG

31 August, 2020

Under the provisions of the Law on personal income tax, family circumstance-based deduction consists of two parts:

  1. Reduction for the taxpayer (which is VND 9 million per month and VND 108 million per year);
  2. Reduction for each dependant of the taxpayer (which is VND 3.6 million per month).

Should Consumer Price Index (CPI) fluctuates by more than 20% from the time the Law takes effect or from the latest date on which family circumstance-based deduction is adjusted, the Government shall submit to the Standing Committee of the National Assembly for adjustment of the reduction based on family circumstances specified in this clause in conformity with changes of price in order to apply for the next tax term.

The Deputy Secretary General of the National Assembly revealed that the Standing Committee of the National Assembly had reviewed and decided to increase the level of reduction based on family circumstances as prescribed in the Government’s report. Accordingly, the reduction based on family circumstances increases from 9 million to 11 million VND a month, reduction for each dependant raises from 3.6 million to 4.4 million VND a month.

Under the new deduction, the tax payment still complies with the provisions of the Law on personal income tax, Circular 111/2013/TT-BTC and Circular 92/2015/TT-BTC of the Ministry of Finance. The new reduction based on family circumstances will apply for the tax period 2020, since according to the current regulations, the wages and salaries of enterprises are calculated annually, from January 1st. Cases of temporarily paying tax based on family circumstance reduction of VND 9 million per month and VND 3.6 million for each dependant will be redefined upon the finalization of personal income tax in 2020.

In the light of the proposal, millions of people who are currently subject to personal income tax will no longer have to pay and many will be subject to tax reduction.

Note: This proposal has just been reviewed and approved by the National Assembly Standing Committee according to the Government’s report and has not yet been issued as an official legal document. The deduction level is only applied when a legal document is promulgated providing for this.

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