Vietnam is preparing a major adjustment to its personal income tax (PIT) system, and the change is expected to provide noticeable financial relief for millions of workers starting March 2026. While minimum wage increases often make the headlines, this tax reform could have an even greater impact on real take-home income.

Key Changes to PIT Deductions

The National Assembly Standing Committee has approved new deduction levels for taxpayers and dependents. The updates are substantial:

1. Standard deduction for taxpayers

1. New deduction: VND 15.5 million per month (≈ US$589)
2. Current deduction: VND 11 million per month

An increase of more than 40 percent.

2. Deduction per dependent

1. New deduction: VND 6.2 million per month (≈ US$235.5)
2. Current deduction: VND 4.4 million per month

Also an increase of more than 40 percent.

These are the first changes since 2020, marking a significant shift in Vietnam’s approach to supporting personal income.

Why These Adjustments Are Being Made

Vietnam’s Ministry of Finance reports that average income and GDP per capita have risen by approximately 40–42 percent since 2020. Alongside this growth, living expenses and household consumption have expanded as well.

Because PIT deductions must align with actual living costs—not only inflation—the government is recalibrating the deduction levels to reflect the country’s current economic conditions.

How Employees Will Be Affected

Higher deductions mean a larger portion of income becomes non-taxable, which directly increases net pay. Under the new rules:

1. Employees earning around VND 17.285 million per month without dependents will fall into the lowest PIT bracket of 5 percent.
2. For individuals with one dependent, the taxable threshold rises to VND 24.22 million per month.
3. For those with two dependents, it increases to VND 31.155 million per month.

This change will significantly reduce the tax burden for many low- and middle-income earners. Some may no longer owe PIT after deductions and insurance contributions.

Implications for Employers

Although the policy does not change employer contributions directly, it may influence broader workforce planning. Key areas to consider include:

1. Net salary competitiveness
2. Compensation and benefits strategy
3. Employee financial well-being
4. Talent attraction and retention

With employees taking home more of their income, employers may find reduced pressure to adjust gross salaries solely due to rising living costs.

Impact on State Revenue

The Ministry of Finance estimates that the updated deductions will reduce annual state budget revenue by roughly VND 21 trillion (about US$797 million). Despite this, the adjustment is viewed as essential to maintaining household purchasing power and broader economic resilience.

Conclusion

Vietnam’s upcoming PIT deduction increases represent a meaningful step toward a more balanced and responsive tax system. Combined with the minimum wage adjustments scheduled for 2026, the changes reflect a clear effort to support workers, align policies with economic growth, and enhance the country’s overall labor environment.