Amendments to the Personal Income Tax Law

Personal Income tax reform: Regionalized family deduction proposal paves the way for real estate tax adjustments.

Amid growing disparities in living costs across regions, the uniform application of family deduction (GTGC) levels nationwide has sparked considerable debate. Recently, Resolution No. 191/NQ-CP dated June 26, 2025, issued by the Government of Vietnam, emphasized the urgent need to develop a new Personal Income Tax Law, aiming to institutionalize the Party’s and State’s directives on tax policy reforms—including revisions to the GTGC and the scope of tax-exempt income.

Different Expenses, Different Tax Obligations

As outlined in Resolution 191, the Government assigned the Ministry of Finance to reassess GTGC thresholds based on current socio-economic conditions, particularly taking into account regional and local disparities. This signals a pivotal shift in tax policy: taxable income cannot be separated from the actual cost of living in each locality.

Dr. Nguyen Ngoc Tu (University of Business and Technology, Hanoi) argued: “It is unreasonable to apply the same family deduction across major cities like Hanoi and Ho Chi Minh City and remote provinces. Given the different living standards, deduction levels must also vary accordingly.” He proposed that GTGC should be calculated based on regional minimum wage levels, set at 4–5 times the local minimum. This would allow the GTGC to be automatically adjusted each year in line with wage changes, removing the need for manual legislative amendments.

Lawyer Nguyen Duc Nghia (HCMC Small and Medium Enterprises Support Center) also supported the approach of calculating GTGC as 4 times the regional minimum wage for taxpayers, and 2 times for each dependent—replacing the current fixed thresholds of VND 11 million for taxpayers and VND 4.4 million per dependent. This not only enhances fairness but also reduces the administrative burden of frequently revising the law.

Currently, regional minimum wages range from VND 3.45 million to VND 4.96 million. If implemented, this proposal would raise the GTGC for residents of major cities like HCMC and Hanoi to nearly VND 20 million/month, while provinces in lower-wage regions would apply deductions more aligned with their local conditions.

Towards a More Flexible Real Estate Tax Framework

In addition to salary-based income, Resolution 191 also calls for a comprehensive review of taxable income categories, including income from real estate transfers, small business revenues, and special income types such as non-refundable aid or diplomatic staff allowances.

Currently, real estate transfer taxes are rigidly calculated based on either contract values or official land price lists. However, this has led to market distortions such as understated prices to evade taxes, or excessively high tax burdens when actual prices exceed the official valuation.

Establishing a more market-aligned, region-specific tax framework would not only boost state revenue but also reduce informal transactions and tax evasion, both of which have plagued the real estate sector for years.

Urgency for Implementation in 2025

The Government has tasked the Ministry of Finance to promptly finalize policy content and submit it to the Government at a special legislative session in July 2025. The proposal is expected to be included in the 2025 Legislative Agenda, with a final draft submitted to the National Assembly at its 10th session (September–October 2025).

The new law would also grant the Government greater authority to dynamically regulate deduction levels and tax thresholds, rather than being restricted by rigid, fixed figures embedded in the law. This would enable faster and more flexible responses to economic fluctuations, inflation, and societal changes.

A "Reality-Based" Tax Approach in Line with Modern Policy Trends

Using regional minimum wage as the basis for GTGC is a progressive reform, aligning with global trends towards fair, data-driven, and adaptive tax systems—especially as Vietnam’s economy becomes more diversified, with increasing income inequality and cost of living gaps among provinces.

For the real estate sector, a synchronized reform of both personal income tax and real estate transfer taxes—tailored to regional realities—could not only enhance market transparency but also attract more foreign investors. Countries such as Taiwan, South Korea, and Singapore, which place high value on regulatory stability and clarity, are likely to view such changes favorably when considering investment in Vietnam.