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Vietnam Issues Individual Income Tax Law Changes

Vietnam's Government has issued a decree to provide the relevant regulations to implement the changes to the personal income tax code, which were agreed by the National Assembly late last year and came into effect on July 1, 2013.

Above all, the previous starting threshold for individual taxpayers of VND4m (USD188.50) per month, and deduction of VND1.6m per month for each dependent, has been increased to VND9m per month and VND3.6m per month, respectively.

At the beginning of the exercise to increase tax allowances, it had been suggested that the threshold should rise to only VND6m per month, with an additional VND2.4m for each dependent, but that view was overridden by the Government's recognition that, with thresholds not having been changed since 2009, they had been overtaken by the subsequent increase in commodity prices and inflationary pressures, reducing consumption in the current difficult economic conditions.

However, it is reported that there will now be only one million taxpayers, reduced from around 3.8m before this month's changes. The cost to the country's tax revenues is also estimated to be around VND5 trillion in the second half of this year and over VND13 trillion in 2014.

The decree also regulates the deduction of an employee's contribution to a voluntary pension scheme, in which the employee can claim an income tax deduction of up to VND1m per month, and increases the determining rule of the residence of an individual taxpayer in Vietnam from a housing lease contract of 90 days or more to one of 183 days or more.

 
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