Vietnam Personal Income Tax 2026: Key Changes Effective July 1, 2026

Vietnam’s amended Personal Income Tax Law is now in force. From July 1, 2026, foreign businesses and expat professionals in Vietnam operate under a new PIT framework that raises deductions, simplifies tax brackets, extends tax exemptions for high-tech workers, and brings several new asset classes into the tax net.

According to Vietnam Briefing, employment income and business income provisions apply from the 2026 tax year, meaning payroll adjustments effectively backdate to January 1, 2026. For employers, that makes early compliance action a priority, not a plan.

Here’s a practical breakdown of what’s changed, what it means for foreign hires, and what employers need to do.

What Is Vietnam’s New Personal Income Tax Law?

Vietnam’s revised PIT regime is set out in Law No. 109/2025/QH15, passed by the National Assembly on December 10, 2025. The law is implemented alongside Government Decree 253/2026/ND-CP and Ministry of Finance Circular 87/2026/TT-BTC (issued June 30, 2026).

The law replaces the previous PIT regime and introduces the most significant changes in more than a decade to how salaries, capital income, and digital assets are taxed for individuals in Vietnam.

What Are the New Personal Income Tax Brackets in Vietnam for 2026?

The number of progressive brackets has been reduced from seven to five. The top rate remains 35 percent, but the middle bands are widened, reducing effective tax for most middle-income earners.

Bracket	Monthly Taxable Income (VND)	Annual Taxable Income (VND)	Tax Rate
1	Up to 10 million	Up to 120 million	5%
2	Over 10 to 30 million	Over 120 to 360 million	10%
3	Over 30 to 60 million	Over 360 to 720 million	20%
4	Over 60 to 100 million	Over 720 to 1,200 million	30%
5	Over 100 million	Over 1,200 million	35%

Non-resident foreign workers continue to pay a flat 20% on Vietnam-source employment income.

How Much Are the New Deductions Under Law 109/2025?

Personal and dependant deductions have both increased materially, raising the PIT-free income threshold for most workers.

• Personal deduction: raised from VND 11 million to VND 15.5 million per month (VND 186 million per year)
• Dependant deduction: raised from VND 4.4 million to VND 6.2 million per month per eligible dependant
• Dependant income ceiling: raised from VND 1 million to VND 3 million per month (average across all sources)

The updated PIT-free income levels are now:

• No dependants: up to VND 17 million/month — no PIT payable
• One dependant: up to VND 24 million/month — no PIT payable
• Two dependants: up to VND 31 million/month — no PIT payable

Two new categories are now deductible before taxable income is calculated:

• Medical expenses at Vietnamese healthcare establishments covered by health insurance: up to VND 23 million per year
• Education and training expenses at Vietnamese institutions (early childhood through higher education): up to VND 24 million per year

Taxpayers must retain valid invoices and, for medical claims, the prescribed statement of examination and treatment expenses.

How Are Foreign Workers Taxed Under the New PIT Regime?

For residence status, a foreign national is a Vietnamese tax resident if they:

• Are present in Vietnam for at least 183 days in a calendar year or in 12 consecutive months from the first date of arrival, or
• Have a habitual residence in Vietnam, including a registered permanent residence or accommodation rented under a fixed-term lease

Resident individuals are taxed on worldwide income under the progressive schedule and can claim the deductions above.

Non-resident individuals are taxed at a flat 20% on Vietnam-source employment income, regardless of where the income is paid. Where a non-resident works both in Vietnam and abroad and the Vietnam-source portion cannot be separately determined, income is apportioned based on days worked in Vietnam.

For expat employees who arrive in or depart Vietnam mid-year, or who receive part of their pay from an overseas entity, correct residence classification is where most compliance risk sits.

What Are the Meal Allowance and Withholding Threshold Changes?

Meal allowances:

• Cash meal allowances are tax-exempt up to VND 1.2 million per month per employee. Any excess is included in taxable income
• Employer-provided meals, prepared meals, or meal vouchers remain fully non-taxable

Withholding threshold for short-term payments:

• Individuals with no employment contract or contracts shorter than 3 months are now subject to 10 percent withholding only when a single payment reaches VND 5 million or more (previously VND 2 million)
• For payments below VND 5 million, withholding applies only at the recipient’s request

Which New Asset Classes Are Now Taxable?

Law 109/2025 expressly brings several emerging asset classes into the PIT net, these include:

• Digital assets (crypto-assets, virtual assets, and other digital assets recognized under Vietnam’s digital technology laws)
• Carbon credits and greenhouse gas emission reductions — the first transfer of credits granted or officially recognized to an individual is tax-exempt; subsequent transfers may be taxable
• Auctioned vehicle registration plates
• Vietnamese national “.vn” domain name transfers
• Gold bullion transfers — the Government will set the taxable threshold, rate, and implementation timetable

Existing capital income treatment is largely retained:

• Loan interest, dividends, and other capital investment returns: 5%
• Securities transfers (including derivatives): 0.1% of transfer price per transaction
• Capital contribution transfers (LLC interests, unlisted shares): 20% of gains, or 2% of transfer price where acquisition cost cannot be established
• Bank deposit interest and government/municipal bond interest: exempt

What Are the New PIT Exemptions for High-Tech Workers?

Vietnam has introduced targeted PIT exemptions to attract and retain high-value talent:

• Night work and overtime income is now fully exempt from PIT (previously only the premium portion was exempt)
• Salary and wages of high-tech professionals and high-quality digital technology industry workers are exempt from PIT for five years
• Initial transfers of carbon credits and green bonds are tax-exempt

These are meaningful compensation planning levers for foreign businesses hiring engineering, semiconductor, and digital talent in Vietnam.

When Do the PIT Changes Take Effect?

Law 109/2025/QH15 takes effect on July 1, 2026, but the salary, wage, and business income provisions apply from the 2026 tax year (January 1, 2026).

Practically, this means:

• Payroll systems must reflect the new brackets, deductions, and thresholds for full-year 2026 calculations
• 2026 year-end tax finalization uses the new regime, not the old one
• Employers should reconcile any withholding done under the previous framework earlier in 2026 to match the enacted rules

ERA HR Expert Advice Before You Run Your First Payroll

From our experience supporting foreign employees in Vietnam, PIT residency status is one of the first things payroll teams need to get right.

Resident and non-resident employees are taxed differently, and mistakes often happen when someone arrives mid-year or works between Vietnam and another country.

That’s why we confirm each foreign employee’s residency status before running payroll. It is much easier to apply the correct tax treatment from the start than to fix months of payroll records at year-end.

Talk to our ERA HR experts for advices