Vietnam: Personal Income Tax Reforms 2026

On 10 December 2025, Vietnam’s National Assembly enacted the new Law on Personal Income Tax No. 109/2025/QH15 (subsequently amended by Law No. 09/2026/QH16). It is implemented by Decree No. 253/2026/NĐ-CP and guided by Circular No. 87/2026/TT-BTC, both issued on 30 June 2026, together with Resolution No. 110/2025/UBTVQH15 on the family circumstance deduction. This framework replaces Law No. 04/2007/QH12 and Circular No. 111/2013/TT-BTC, which have governed personal income tax and benefit-in-kind treatment to date.

The Law and Decree take effect on 1 July 2026. However, the provisions governing employment (salary and wage) income of resident individuals apply from the 2026 tax year, that is, from 1 January 2026. Only two employment items are tied specifically to 1 July 2026: the cash meal-allowance cap and the casual-income withholding threshold. The consolidated changes affecting payroll are summarized below.

Family circumstance deductions

The monthly pre-tax family circumstance deduction (giảm trừ gia cảnh) increases as follows, applicable from the 2026 tax year. With these deductions and the revised schedule below, a resident taxpayer with one dependent has no PIT liability until monthly income exceeds approximately VND 28,600,000 (after compulsory insurance).

Progressive tax schedule

The partially-progressive schedule for resident employment income is simplified from seven brackets to five, with wider bands, applicable from the 2026 tax year:

Other changes to taxable income and deductions

* Where the employer provides meals directly (canteen, purchased meals, or meal vouchers) the benefit remains fully exempt with no cap. The meal-allowance cap and the casual-income threshold apply from 1 July 2026; the other items apply from the 2026 tax year.

**This obligation is not limited to non-employees: it also applies to payments the income-paying organisation makes to an individual after their employment contract has ended.

Newly tax-exempt employment income

The Law confirms the following as exempt from PIT for resident individuals:

• Overtime and night-shift pay: the premium element, the amount paid above the normal-hours rate, within lawful limits is exempt; any part above the statutory level remains taxable.
• Pay for untaken leave: salary paid in lieu of untaken statutory leave is exempt, in line with the Labour Code.
• Severance and redundancy: not treated as taxable income, including the portion above the statutory minimum, where provided for in the employer’s policy, internal rules, labour contract, or collective agreement.

Annual finalisation reliefs (from 2026)

Two new deductions are claimed at the year end through self finalisation only and not through the employer, against valid invoices in the name of the taxpayer or dependant and not reimbursed from other sources:

• Medical expenses: up to VND 23,000,000 per year (self and dependants).
• Education / tuition: up to VND 24,000,000 per year (self and dependants).

Five-year PIT exemption for high-tech and digital-technology personnel

Separately from the changes above, the Law introduces a five-year exemption from personal income tax on salary and wage income for qualifying high-quality digital-technology-industry and high-tech personnel, covering income from work in concentrated digital-technology zones, key digital-technology, semiconductor and AI research, development and manufacturing projects, and digital-technology training, and for high-tech personnel performing R&D in prioritised high-tech or strategic-technology fields.

The exemption applies from the 2026 tax year (1 January 2026) and runs for five years for each qualifying individual.

Eligibility is determined by the employer and the competent authorities against the relevant technology catalogues, supported by documentation; where an employee qualifies, their salary is exempt from PIT for the exemption period.

Impact

• Who is affected: all resident employees. The higher deductions and simplified schedule reduce PIT and increase net take-home pay from the 2026 tax year; lower earners benefit most.
• Non-residents: no change — employment income of non-resident individuals remains taxed at a flat 20% on Vietnam-source salary, and the exemptions above do not apply.
• Related change: the Social Insurance and Health Insurance contribution ceiling rises from VND 46,800,000 to VND 50,600,000 per month effective 1 July 2026 (covered in the separate Common Minimum Wage Update alert).

Implementation timeline

What employers should do

Ensure payroll applies the 2026 deductions and the five-bracket schedule for all resident employees from January 2026 and prepare for the changes effective from 1 July 2026 changes. Employees should be advised to retain medical and education invoices for the 2026 finalisation. Please contact your Mercans services delivery team for any additional information regarding the implications of these changes.

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.

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Vietnam: Personal Income Tax Reforms 2026

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