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People Advisory Services Tax Alert | July 2026 | Decree 253/2026/ND-CP providing guidance on the implementation of Personal Income Tax Law 109/2025/QH15
This Alert highlights key developments under Decree 253/2026/ND-CP, guiding implementation of the Personal Income Tax Law 2025.
On 30 June 2026, the Government issued Decree 253/2026/ND-CP (1) (Decree), providing guidance on the implementation of Personal Income Tax Law 109/2025/QH15 (2) (PIT Law 2025). This Alert highlights certain notable developments arising from the implementation of the new regulations.
A. Employment income
1. Tax-exempt income and deductions
1.1 Changes to general tax-exempt income provisions
The table below summarises the key changes relating to tax-exempt employment income and compares them with the previous regulations for ease of reference.
|
Policy |
New regulation |
Previous regulation |
|---|---|---|
|
Meal allowance (mid-shift or lunch allowance) provided by the employer to employees |
Tax-exempt up to VND1.2 million per employee per month, effective from 1 July 2026 (Articles 8 and 69 of the Decree) |
From 1 January 2025 to 30 June 2026, the tax-exempt amount followed the internal regulations of the income-paying entity (under Circular No. 003/2025/TT-BNV3) |
|
Overtime and night shift pay |
The entire amount of overtime and night-shift pay made in accordance with labour regulations is exempt from PIT |
Only the incremental portion paid above normal daytime/regular hours wages is PIT exempt |
|
Payment for unused annual leave |
Salary and wages paid for unused statutory leave in accordance with labour regulations are excluded from taxable employment income |
Not tax exemption |
|
Severance and job loss allowances |
Severance and job-loss allowances received by employees in accordance with the employer’s policy are excluded from taxable income |
Excluded only up to the statutory limits prescribed by law |
|
Employer contributions to supplementary pension, voluntary pension, and life insurance |
The deductible cap is increased to VND3 million per person per month |
Deductible up to VND1 million/employee/month, including both employer and employee contributions (if any) |
1.2 Additional tax-exempt employment income
The Decree provides further clarification on the tax incentives available to certain priority groups, including highly qualified digital technology industry personnel, individuals earning income from science, technology and innovation activities and high-tech personnel. These provisions demonstrate the Government’s commitment to attracting and developing highly skilled talent to support Vietnam’s economic growth and digital transformation objectives.
|
Income from science, technology and innovation activities |
Income of highly qualified digital technology industry personnel |
Income of high-tech personnel |
|---|---|---|
|
The PIT exemption applicable to employment income under this category is determined based on the funding source of the relevant activity (Article 35 of the Decree), as follows:
|
Employment income of HQDT Personnel is exempt from PIT for five years in the following cases (Article 41 of the Decree):
|
Employment income of HT Personnel is exempt from PIT for five years in the following cases (Article 42 of the Decree):
|
2. Deductible amounts
2.1 Dependent deduction (Articles 47 and 48 of the Decree)
The Decree revises certain criteria for determining dependents with a view to standardising the eligibility conditions and narrowing the scope of application compared to the current regulations, as summarised below.
|
Policy |
New regulation |
Previous regulation |
|---|---|---|
|
Children aged 18 and above |
Expanded to include children aged 18 and above who have lost civil act capacity |
Limited to children aged 18 and above who are disabled and unable to work |
|
Other dependents |
Other dependents must reside with the taxpayer, and the taxpayer must have a legal maintenance obligation under the Law on Marriage and Family and other relevant regulations. |
No specific provision |
|
Income threshold for dependent qualification |
No income or average monthly income not exceeding a threshold to be prescribed by the Ministry of Finance. |
No income or average monthly income not exceeding VND1,000,000 |
|
Dependents incapable of working |
Individuals with a work capacity reduction rate of 81% or more as determined under applicable regulations. |
No specific provision |
|
Dependent registration deadline |
Dependents must be registered by 31 December of the reportingt tax year. |
Registration upon tax finalization; for “other dependents”, deadline is 31 December of the reporting tax year |
2.2 Additional deductions (Article 49 of the Decree)
The proposed inclusion of deductions for medical treatment and education – training expenses would not only reduce the financial burden on taxpayers but also demonstrate the government's intention to leverage tax policy as a tool to promote social welfare. Such measures are expected to incentivize investment in health and human capital development, contributing to the enhancement of workforce quality over the long term.
|
Policy |
Deduction |
|---|---|
|
Medical expenses incurred at eligible medical establishments in Vietnam |
Up to VND23 million per year |
|
Education and training expenses incurred at educational institutions in Vietnam |
Up to VND24 million per year |
|
Key conditions |
|---|
|
3. Key points regarding PIT withholding and compliance under the Decree
- For resident individuals, the tax year is generally determined on a calendar-year basis. However, where an individual is present in Vietnam for fewer than 183 days in a calendar year but is present in Vietnam for 183 days or more within 12 consecutive months from the date of first arrival, the tax year will be determined based on such 12-consecutive-month period.
- The Decree clarifies PIT withholding, declaration and payment obligations where a Vietnamese organisation or individual reimburses employment income costs to an overseas entity. Under such circumstances, the Vietnamese party is responsible for withholding, declaring and remitting PIT in accordance with Article 67 of the Decree.
- The principles for converting foreign-currency taxable income into VND are specified as follows:
- For income credited to an overseas bank account: the central exchange rate announced by the State Bank of Vietnam shall apply
- For income credited to a bank account in Vietnam: the buying exchange rate of the commercial bank where the employee or the income-paying organisation maintains the payroll account shall apply
- Awards arising from competitions or events organised by employers for employees are treated as employment income and are subject to PIT pursuant to Article 8 of the Decree.
- The threshold for 10% PIT withholding at source has been increased from VND2 million per payment to VND5 million per payment for individuals without labour contracts or with labour contracts of less than three months, including former employees who receive income after termination of employment.
- Individuals earning occasional income that has been subject to 10% PIT withholding at source are not required to finalise PIT in respect of such income, provided that their average monthly occasional income does not exceed VND15 million.
- Payments and benefits financed from trade union funds that are not employment-related under the Law on Trade Unions are exempt from PIT (Article 8 of the Decree).
- Amounts and benefits received from trade union financial resources that do not constitute employment income under the Law on Trade Unions are regarded as non-taxable income for PIT purposes under Article 8 of the Decree.
B. PIT treatment of non-employment income
Besides the key changes concerning income from salaries and wages, the Decree further supplements and clarifies the PIT treatment of several other types of taxable income. For ease of reference, we have summarized and compared the tax calculation methods under the new regulations and the previously applicable provisions in the table below.
|
Type of income |
New regulation |
Previous regulation |
|---|---|---|
|
Business income of business individuals |
|
|
|
Capital investment income |
No change |
PIT = taxable income × 5% tax rate |
|
Capital transfer income |
Applicable to both resident and non-resident individuals:
|
Different rules apply to resident and non-resident individuals:
|
|
Securities transfer income |
No change to the calculation method |
PIT = transfer price × 0.1% tax rate |
|
Real estate transfer income |
No change |
PIT = transfer price × 2% tax rate |
|
Royalties |
No change |
PIT = taxable income × 5% tax rate |
|
Franchise income |
PIT = taxable income × 10% tax rate |
PIT = taxable income × 5% tax rate |
|
Income from prizes, inheritances and gifts |
PIT = taxable income × 10% tax rate |
PIT = taxable income × 10% tax rate |
|
Other income |
Includes income derived from the transfer of: 1. Vietnam national domain names “.vn” 2. Greenhouse gas emission reduction results and carbon credits 3. Auctioned vehicle registration numbers 4. Digital assets, including virtual assets, crypto assets and other digital assets For items (1), (2) and (3): PIT = Taxable income (portion exceeding VND20 million) × 5% tax rate For item (4): PIT = Transfer price × 0.1% tax rate |
Not specifically regulated |
The Decree takes effect on 1 July 2026. The provisions relating to business income and employment income of resident individuals will apply from the 2026 tax year onwards, except for mid-shift meal allowances which will take effect from 1 July 2026.
In light of these developments, businesses should proactively assess the impact of the new regulations on their existing PIT policies and compliance procedures. Businesses should also closely monitor further guidance and implementation measures issued by the authorities to ensure timely updates and full compliance with the new requirements.