A higher disposable income as a result from the adjustment would boost household spending and economic growth, said the Ministry of Finance.
Vietnam’s Ministry of Finance (MoF) is proposing increasing the family circumstance-based deduction for each dependent of taxpayers from VND3.6 million (US$155.42) per month to VND4.4 million (US$189.96) per month.
Additionally, the taxable personal income would be raised from VND9 million (US$388.55) per month to VND11 million (US$474.89) per month.
Under the law, a reduction based on family circumstances means a sum of money deductible from pre-tax income from businesses, salary or wage of resident taxpayers.
Once approved by the National Assembly in the upcoming session, the adjustment would take effect right in this fiscal year.
The MoF said such the move aims to better reflect Vietnam’s current socio-economic conditions and price fluctuations.
The Law on Personal Income Tax, which took effect in July 2013, stipulates that in case the consumer price index (CPI) rises more than 20% compared to the effective time of the law or the latest adjustment to the reduction based on family circumstances, the government would submit to the Standing Committee of the National Assembly for adjustment of the reduction based on family circumstances.
In fact, from July 2013 to the end of 2019, the CPI rose 23.2%. Under current legislation, an individual with income from VND9 million to VND15 million (US$388.55 – 647.58) would have to pay a tax amount of VND120,000 (US$5.18) for one dependent. However, with the new adjustment, the person would no longer have to pay tax.
With this adjustment, an individual with income less than VND20 million (US$863.44) and one dependent would have to pay tax of VND230,000 (US$9.93), 48% lower than the amount stipulated by the current law, while those with higher income would be subjected to a 7% reduction in tax amount.
In 2019, over 6.88 million people paid personal income tax of a combined VND79.2 trillion (US$3.41 billion). “The figure would be reduced to VND68.92 trillion (US$2.97 billion), down 13% year-on-year,” the ministry estimated.
The MoF expected a higher disposable income as a result of the adjustment would encourage household consumption and spur economic growth. Hanoitimes
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