MOF has just submitted to the Ministry of Justice the appraisal dossier for the amended PIT law. A notable point is that the draft law proposes amending regulations on the family circumstance-based deduction for taxpayers and their dependents.

Under current regulations, individuals can deduct social insurance, health insurance, unemployment insurance, professional liability insurance, family circumstance deductions, charitable and humanitarian contributions, and allowances as stipulated. The remaining amount is taxable income.

MOF states that with the current deduction levels of VND11 million/month for taxpayers and VND4.4 million/month per dependent, an individual earning VND17 million/month (with one dependent) or VND22 million/month (with two dependents) would not be subject to PIT after deductions.

Some opinions suggest that family circumstance deductions should be tied to regional minimum wages or differentiated by area due to higher living costs in urban areas and large cities compared to rural or mountainous regions.

However, MOF argues that family circumstance deductions should be applied uniformly for taxpayers and dependents based on the general societal standard, regardless of geographic area or income.

PIT tax laws in both developed and developing countries typically set a uniform deduction level applied nationwide, without differentiation by region or population group.

For individuals working in difficult areas, the PIT Law already exempts regional allowances, attraction allowances, and relocation allowances from taxable income to support workers and attract talent to these areas.

Additionally, individuals facing hardships due to natural disasters, fires, accidents, or serious illnesses are eligible for tax reductions under current regulations.

International experience shows that most countries categorize deductions into three groups: general deductions for taxpayers, deductions for dependents (children, spouse, parents, etc.), and specific deductions (medical expenses, education costs, etc.).

The scale of deductions mainly depends on each country’s perspective and is typically not based on a specific formula.

Most countries set taxpayer deductions at 0.5-1.5 times the average per capita income. When including deductions for dependents, family circumstance deductions generally range from 1-2 times the average per capita income.

According to MOF, PIT application should align with taxpayers’ living conditions within the socioeconomic context, living standards, and average worker income. Therefore, the draft proposes delegating the government to set family circumstance deduction levels to ensure flexibility and adaptability to different developmental stages.

Tam An