Business
Finance Ministry seeks to raise personal income tax threshold
  • | dtinews.vn | March 03, 2011 03:05 PM

>> MOF considers tax reform in light of inflation

The Ministry of Finance is seeking the prime minister’s approval for many changes in personal income tax laws.

The changes in the tax law should reflect the increases in the consumer price index, the ministry said.

The current law, which took effect in January, 2009, stipulates a personal income tax threshold of VND4 million (USD196), including deductions of VND1.6 million (USD78.49) for each dependent.

The ministry said that Vietnam has seen sharp annual increases in the consumer price index. Last year’s increase was 11.75%, and in 2009 it rose by 6.88%. The changes in the tax law should reflect these increases, the ministry said.

The proposed change is to raise the threshold to VND10 million (USD490.6). Since the minimum wage is expected to be raised to somewhere between VND830,000 (USD40.7) and VND1.35 million (USD66.23), the personal income tax threshold should be 8 to 10 times higher than the minimum wage, the ministry explained.

The ministry has also considered increasing deductions for dependents from the current VND1.6 million.

Additionally, the ministry has recommended a new method of personal income tax calculation based on the total income of an entire family. Each working member of a family would be considered one tax paying unit. Dependents would be considered half a tax paying unit. When the income of the entire family is divided by the number of tax paying units, if the sum is below the threshold, the family would be exempt from paying taxes.