This article summarises the new deduction amounts, who benefits, and what employers must prepare for before the 2026 tax year begins.

1. New PIT Deduction Levels Effective 2026

Vietnam will increase the taxable deduction thresholds as follows:

The increases are substantial:

• Standard deduction: +4.5 million VND/month
• Dependent deduction: +1.8 million VND/month

This is the first major PIT deduction adjustment since 2020.

2. Why the Government Raised the Deductions

Vietnam has experienced continuous increases in:

• Consumer prices
• Daily living costs
• Housing and transportation expenses
• Average wages and productivity

Raising deductions helps:

• Reduce tax pressure on salaried workers
• Support household spending
• Protect low- and middle-income groups
• Reflect inflation and cost-of-living changes since the previous update

The new levels will apply beginning with income earned from January 2026 onward.

3. New Tax-Free Income Thresholds (Approximate)

With the higher deductions, many employees will fall below the taxable income range.

Tax-free thresholds after applying new deductions

• No dependents: approx. 15.5 million VND/month
• One dependent: approx. 21.7 million VND/month
  (15.5 million + 6.2 million)

The final taxable amount will still depend on:

• Social insurance contributions
• Health insurance
• Unemployment insurance

But overall、a significantly larger portion of employees will pay reduced PIT or no PIT at all.

4. Impact on Employees

1. Higher take-home salary

More income becomes tax-free, increasing monthly net salary.

2. Families benefit the most

Each dependent adds 6.2 million VND of deduction per month, substantially lowering taxable income.

3. Middle-income earners may move into a lower PIT bracket

This reduces the effective tax rate on their income.

4. Workers with incomes slightly above the old thresholds may become non-taxable

Particularly those without dependents earning 15–17 million VND/month.

5. Impact on Employers and HR Departments

1. Payroll systems must be updated

Starting January 2026, all payroll software must apply the new deduction amounts.

2. Withholding tax calculations will change

Monthly PIT withholding must reflect the updated deductions.

3. Annual tax finalisation for 2026 will use the new rules

Incorrect calculations may lead to compliance issues.

4. Salary budgeting should be revised

Net salary increases may influence:

• Allowance structures
• Salary grade systems
• Employee expectations during recruitment

5. Expatriates qualifying as tax residents also benefit

Resident expatriates will apply the same deduction levels as Vietnamese employees.

6. Practical Example of the New PIT Impact

Example:

Employee salary: 20 million VND/month
Dependents: 1

Old deductions:

• Standard: 11.0 million
• Dependent: 4.4 million
  → Taxable income = 20 – (11 + 4.4) = 4.6 million VND

New deductions (2026):

• Standard: 15.5 million
• Dependent: 6.2 million
  → Taxable income = 20 – (15.5 + 6.2) = negative amount → non-taxable

Result:
This employee will no longer pay PIT in 2026.

7. Summary: Significant PIT Relief from 2026

Vietnam’s 2026 PIT revision includes:

• Standard deduction: 15.5 million VND/month
• Dependent deduction: 6.2 million VND/month
• Reduced tax burden for most workers
• Increased take-home pay for families
• Required payroll updates for all employers starting January 2026

This reform brings meaningful financial relief to workers while helping companies maintain competitive compensation structures in the face of rising living costs.

The post Vietnam Personal Income Tax Update 2026｜Higher Deductions to Reduce Tax Burden from January 1, 2026 first appeared on VIETGOHAN.

1. Overview of Thailand and Vietnam’s Tax Systems

Thailand’s Tax System

✔ Thailand has a straightforward tax system, making it favorable for foreign businesses.
✔ Corporate tax rate: 20% (with incentives for SMEs).
✔ Personal income tax is progressive (0%–35%).
✔ VAT (Value-Added Tax) is set at 7%.
✔ Investment incentives available through the Board of Investment (BOI).

Vietnam’s Tax System

✔ Vietnam offers tax incentives to attract foreign investment in specific industries and regions.
✔ Corporate tax rate: 20%, with special incentives in certain sectors.
✔ Personal income tax is progressive (5%–35%).
✔ VAT is generally 10%.
✔ Foreign enterprises must comply with strict registration and tax reporting requirements.

Conclusion: Both countries have similar base tax rates, but Thailand offers a more stable tax environment with clear corporate incentives.

2. Income Tax Comparison (Personal Income Tax)

✔ Thailand offers a tax-free threshold for individuals earning less than 150,000 THB ($4,500).
✔ Vietnam applies a 5% tax rate for earnings above 1.5 million VND ($60).
✔ Higher income brackets in both countries have similar tax rates.

Conclusion: Thailand is more favorable for lower-income earners due to its tax-free threshold.

3. Corporate Tax Comparison (Business Taxation)

✔ Thailand’s BOI incentives allow tax exemptions for high-priority industries.
✔ Vietnam offers long-term reduced corporate tax rates (10%) for specific industries.
✔ Vietnam has stricter compliance requirements compared to Thailand.

Conclusion: Thailand’s tax incentives through BOI provide strong advantages for foreign investors, while Vietnam offers lower tax rates for specific sectors.

4. Value-Added Tax (VAT) and Other Taxes

VAT (Value-Added Tax) Comparison

✔ Thailand’s VAT is set at 7%, lower than Vietnam’s 10%.
✔ Both countries offer VAT exemptions for healthcare and education.
✔ Vietnam has a VAT refund system, requiring businesses to manage complex compliance.

Conclusion: Thailand’s lower VAT rate benefits businesses, making it a more cost-effective market.

5. Conclusion: Which Country is More Advantageous for Business and Individuals?

After comparing Thailand and Vietnam’s tax systems, each country presents unique advantages.

✔ Thailand has a more favorable personal income tax system for lower earners.
✔ Both countries have a 20% corporate tax rate, but Thailand’s BOI incentives provide strong benefits.
✔ Thailand has a lower VAT rate (7%) than Vietnam (10%).
✔ Vietnam offers long-term corporate tax reductions for certain industries.
✔ Thailand’s tax system is more transparent and stable for foreign businesses.

Final Verdict:

• For individuals, Thailand offers a more tax-friendly system.
• For businesses, both Thailand and Vietnam offer opportunities, but Thailand provides a more stable and predictable tax environment.

Business owners and expatriates should consider their specific industry and financial situation when choosing the best country for investment or residency.

The post Thailand vs. Vietnam: Tax System, Income Tax, and Corporate Tax Comparison first appeared on VIETGOHAN.

1. Overview of Vietnam’s Tax System

Vietnam’s tax system is governed by nationwide laws, with some taxes managed at the local level. The main types of taxes are as follows:

1. Personal Income Tax (PIT)
   Applies to income earned by individuals, including salaries and investment earnings. For example, expats working for a local company or freelancers are subject to this tax.
2. Corporate Income Tax (CIT)
   A tax on business profits, with a standard rate of 20%. For instance, a restaurant owner in Ho Chi Minh City would need to pay CIT on their profits.
3. Value-Added Tax (VAT)
   A consumption tax applied to goods and services. VAT exemptions exist for sectors like education and healthcare.
4. Import and Export Tax
   Applies to certain imported and exported goods. For example, exporting electronics from Japan to Vietnam might incur this tax.

These taxes may directly or indirectly impact travelers and expats, making it important to understand the basics beforehand.

2. Taxes for Travelers in Vietnam

VAT Refund System

One of the most relevant tax policies for travelers is the VAT refund system. Visitors to Vietnam can claim back a portion of the VAT paid on specific goods purchased in the country.

Conditions and Process

1. Purchase Conditions
   Individual items must cost at least 200,000 VND, with a total purchase of 2,000,000 VND or more. For example, buying a handbag from a luxury department store in Ho Chi Minh City qualifies if the total meets these criteria.
2. Refund Procedure
   Refund counters are available at major international airports, such as those in Ho Chi Minh City and Hanoi. Travelers need to provide their receipts, passport, and flight ticket.
3. Refund Amount
   About 85% of the VAT paid is refunded (15% is deducted as a processing fee). For instance, if you purchase goods worth 10,000,000 VND, you can get approximately 8,500,000 VND back.

Using the VAT refund system is an excellent way to save money while shopping in Vietnam.

3. Personal Income Tax for Expats

Tax Obligations for Expats

Expats who stay in Vietnam for 183 days or more are considered “residents” and are taxed on their worldwide income. Those staying less than 183 days are classified as “non-residents” and taxed only on their Vietnam-sourced income.

Tax Rates for Residents

Income tax is progressive, with the following brackets:

1. Annual income up to 60,000,000 VND (approx. $2,500): 5%
2. Annual income up to 300,000,000 VND (approx. $12,500): 10%
3. Annual income exceeding 960,000,000 VND (approx. $40,000): 35%

For instance, an expat earning a monthly salary of 40,000,000 VND (approx. $1,600) would pay around 15% in taxes due to the progressive rates.

Tax Rates for Non-Residents

Non-residents are subject to a flat tax rate of 20%. For example, a freelancer working on a short-term project earning 100,000,000 VND (approx. $4,000) would pay 20% (approx. $800) in taxes.

4. VAT (Value-Added Tax) for Foreigners

Vietnam’s VAT is typically 10%, though certain goods and services are subject to a 5% rate or are exempt altogether.

Examples of VAT Application

1. 10% VAT
   • Restaurant meals
   • Clothing and accessories from shopping malls
   • Spa and beauty services
2. 5% VAT
   • Medical equipment and pharmaceuticals
   • Educational books and materials
3. Exemptions
   • Educational services (e.g., tuition at international schools)
   • Public transportation (e.g., buses, trains)

While VAT is generally included in prices, travelers can reduce costs by shopping at VAT refund-eligible stores.

5. Important Tax Considerations in Vietnam

Tax Filing Obligations

Both resident and non-resident foreigners must file taxes on any income earned. Companies typically file on behalf of their employees, but freelancers and self-employed individuals must handle their own tax filings.

Example: Tax Filing Process

1. Submit Forms
   Complete and submit the required forms at your local tax office.
2. Make Payments
   Pay taxes through bank transfers or online payment systems.

Penalties for Non-Compliance

Failure to declare or pay taxes on time can result in hefty penalties, such as fines exceeding 10% of the unpaid tax amount. In severe cases, non-compliance can impact visa renewals, with authorities potentially rejecting your application.

Conclusion

Understanding Vietnam’s tax system is crucial for travelers, expats, and business professionals. Travelers can benefit from the VAT refund system to save on shopping, while expats and business owners must ensure compliance with income and corporate tax obligations. By staying informed and consulting professionals when needed, you can avoid tax-related issues and make your time in Vietnam more enjoyable and productive.

Use this guide to navigate Vietnam’s tax system and make the most of your travel, work, or business endeavors in this vibrant country!

（Photo by Unsplash.com）

The post All You Need to Know About Vietnam’s Tax System: A Guide for Travelers and Expats first appeared on VIETGOHAN.