From July 1, 2026, Vietnam will introduce a new personal income tax structure. Under the latest law (Law No. 109/2025/QH15), the number of tax brackets will be reduced from seven to five.

On paper, this looks like a simple update. But in reality, the impact depends on how income falls within the new ranges, especially for those in the middle-income group.

What’s changing

This update is not just about removing two brackets. The structure itself has been adjusted.

1. Fewer brackets, with wider income ranges
2. Mid-level rates (15% and 25%) removed
3. Deduction thresholds adjusted
4. A simpler system overall, but with less gradual steps

New tax breakdown

All amounts are shown in million VND per month.

1. Up to 10 → 5%
2. 10–30 → 10%
3. 30–60 → 20%
4. 60–100 → 30%
5. Above 100 → 35%

These rates are applied progressively. In other words, income is taxed in parts, not at a single flat rate.

Where the difference is felt

For lower income levels, the overall impact is limited.

For middle income earners, the change is more noticeable. With fewer steps between brackets, income may move into higher rates more quickly than before.

For higher income levels, the top rate remains at 35%. The difference mainly comes from how income is spread across the new brackets.

Who this applies to

Resident individuals:

1. Those who stay in Vietnam for 183 days or more within a 12-month period
2. Those with long-term housing arrangements
3. Those earning taxable income such as salaries, wages, and bonuses

Non-resident individuals:

1. Taxed at a flat 20% rate on Vietnam-sourced income
2. Not eligible for personal or dependent deductions

A few points worth clarifying

There are a couple of things that are often misunderstood:

1. Tax is calculated based on taxable income, not total salary
2. Being in a higher bracket does not mean all income is taxed at that rate
3. A simpler system does not always mean paying less tax

These details become more important now, as the gaps between brackets are wider.

For companies to note

This change also matters for businesses, especially those managing payroll.

1. Tax calculations will need to be updated
2. Payroll systems may require some adjustments
3. The transition period could create confusion if not planned properly

For companies planning to hire in Vietnam, understanding these changes helps when estimating employee costs and take-home pay.