What should businesses do before the adjustments of the amended Personal Income Tax Law 2025

According to regulations, enterprises are responsible for declaring and paying personal income tax (PIT) on behalf of employees for income from salaries and wages paid by enterprises. Therefore, enterprises need to carefully prepare to comply with the amended PIT Law 2025 which was passed on December 10, 2025 and takes effect from July 1, 2026 (the amended PIT Law). Particularly, regulations related to income from business, salaries and wages of resident individuals will be applied from the tax period at the beginning of 2026. Within the scope of the article, we share some notable amendments to this Law that affect the operation of enterprises and some solutions that need to be implemented to comply with this adjusted legal framework.

New points of the amended PIT Law

Firstly, “allowances, subsidies, and living expenses paid by Vietnamese authorities abroad" are no longer considered income from salaries and wages of employees because they are excluded.[1] Therefore, this amount is no longer the basis for calculating PIT of the employee, regardless of whether this person resides in Vietnam or not.[2]

Secondly, resident employees are only subject to PIT on "disposable income". Specifically, Article 11 of the amended PIT Law allows enterprises to deduct expenses for health, education and training from the taxable income of resident employees before calculating PIT.

Thirdly,  the tax-free and reduced income of employees is adjusted in a more extensive direction than the old legal framework.

If previously, only the salary paid at night or overtime was higher than the salary for working during the day or during the hour was exempt from tax, the new regulation has exempted tax for the entire salary for night work and overtime; salaries and wages paid for non-leave days of employees.[3]

Article 4 of the Law on PIT (amended) also adds noteworthy tax-free incomes, including: (i) Income from salaries and wages from the performance of scientific, technological and innovation tasks; (ii) Incomes from salaries and wages of foreign experts working in programs or projects funded by non-refundable ODA or foreign non-governmental programs and projects in Vietnam; (iii) Income after payment of corporate income tax of individuals who are owners of sole proprietorships or individuals who are owners of single-member limited liability companies.

Fourth, employees who are human resources in the digital technology industry can be exempt from PIT for a definite period.[4]

Instead of only being able to reduce PIT by 50% under the PIT Law 2007,[5] human resources in the digital technology industry can now be exempt from PIT. Specifically, employees who are high-quality digital technology industry personnel will be exempt from PIT for 05 years for incomes from: (i) digital technology industry projects in concentrated digital technology parks, (ii) key research and development projects, production of digital technology products, etc  semiconductor chips, artificial intelligence systems, and (iii) digital technology industry human resource training activities.

In addition, Clause 3, Article 5 of the amended PIT Law stipulates tax exemption for income from salaries and wages when employees carry out high-tech research and development activities or strategic technologies in the List of high-tech priorities prioritized for development investment / List of strategic technologies and strategic technology products.

Fifth,  the partially progressive tariff is reduced from 7 levels to 5 levels. Article 9 of the amended PIT Law widens the gap between tiers and adjusts two intermediate tax rates. In which, the tax rate of 15% in tier 2 is reduced to 10%, the tax rate of 25% in tier 3 is reduced to 20%. At the same time, the Law adjusts the level of PIT calculation at each level in the direction of reducing compared to current regulations. For example, the income starting to calculate PIT at 5% is currently up to 5 million VND/month (i.e. up to 60 million VND/year). Meanwhile, the latest PIT calculation income is up to 10 million VND/month (up to 120 million VND/year).

The new partial progressive tariff applicable to employees residing in Vietnam is specifically adjusted as follows:

In addition,  the family circumstance deduction has been adjusted corresponding to the provisions of Resolution No. 110/2025/UBTVQH15 dated October 17, 2025 on adjusting the family circumstance deduction of PIT effective from January 1, 2026 and applied from the tax period of 2026. Specifically, Article 10 of the amended PIT Law stipulates that the deduction for employees is 15.5 million VND/month (186 million VND/year) and the deduction for each dependent is 6.2 million VND/month. With the new deduction, employees only have to pay PIT if their income exceeds 17,285 million VND/month. In case the employee has one dependent, the taxable threshold will increase to 24.22 million VND/month and for 02 dependents, the taxable threshold is 31.155 million VND/month.

Vice Chairman of the National Assembly Nguyen Duc Hai presides over the session adopting the amended Law on PIT. Source: The Congress Office

Differences of regulations applicable to resident and non-resident employees

The amended PIT Law takes effect from July 1, 2026, especially regulations related to income from salaries and wages of employees residing in Vietnam will apply from the tax period of 2026.[6] Thus, income from salaries and wages of employees not residing in Vietnam is only governed by the amended PIT Law from July 1, 2026. In other words, the income and tax payable in the first and second quarters of 2026 of non-resident employees are still calculated according to the old provisions of the PIT Law 2007. On the other hand, for resident employees, enterprises apply the provisions of the amended PIT Law to calculate, declare and pay taxes arising from income paid by enterprises to employees from January 1, 2026.

To determine the correct taxable income and tax amount payable on behalf of the employee

Before the changes in the PIT Law (amended), enterprises need to conduct a comprehensive review to update the taxable income of employees and deduct PIT accordingly. This includes excluding tax-exempt and tax-reduced incomes that employees are entitled to from taxable income; record the applicable tax rate; and determine the family circumstance deduction of employees according to the new regulations.

Based on the above bases, enterprises are recommended to make statistics on employees who are no longer required to pay PIT or are exempt from paying tax for a limited time to conveniently monitor and adjust/stop the deduction of PIT when paying salaries to employees. Through the review process, enterprises have only made an accurate salary payment table according to Form No. 01-LDTL issued together with Circular No. 99/2025/TT-BTC dated October 27, 2025 of the Ministry of Finance.[7]

In case an enterprise signs a labor contract stipulating that salaries and wages paid to employees do not include PIT, the enterprise must convert non-taxable income into taxable income according to Appendix 02/PL-TNCN issued together with Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance.[8] Accordingly, the income used as a basis for conversion must be deducted from the amounts that the employee is entitled to. Therefore, in order to convert accurately, enterprises also need to review and comply with the provisions of the amended PIT Law.

Thus, at the time the amended PIT Law was passed, enterprises needed to take steps to prepare for the declaration, payment and finalization of PIT of employees for the tax period of 2026. In addition to updating the adjustments of this Law, enterprises need to review the entire system of determining taxable income and the amount of tax that employees must pay in order to promptly calculate, declare and pay PIT in accordance with the regulations applied from time to time.