Key Changes in the Law on Personal Income Tax 2025

The Law on Personal Income Tax 2025, which takes effect from 01 July 2026, introduces a number of important changes that directly affect employees, individual business operators and individuals earning income from investment and asset accumulation. The new regulations are designed to be simpler, easier to apply and more consistent with current income realities. Timely understanding of these new provisions will help taxpayers proactively determine their tax obligations, avoid errors and feel more secure in the process of compliance.

1.Resident individuals carrying out business activities are not required to pay personal income tax if annual revenue does not exceed VND 500 million

A resident individual is a person who is present in Vietnam for 183 days or more within one calendar year or within 12 consecutive months from the first day of arrival in Vietnam or who has a permanent residence in Vietnam, including a registered permanent address or a rented house for residential purposes in Vietnam under a fixed-term lease contract.

Under the Law on Personal Income Tax 2025, resident individuals engaged in business activities are only required to pay personal income tax when their annual revenue exceeds VND 500 million. Compared to the threshold of VND 200 million stipulated in the Law on Personal Income Tax 2007 (as adjusted in Article 17 of the Law on Value Added Tax 2024, effective from 01 July 2025), the new threshold is significantly higher. As a result, many small household businesses, online sellers and freelance service providers will no longer need to consider personal income tax obligations if their revenue does not reach this level.

In practice, individuals may rely on Clause 1 Article 10 of Circular No. 40/2021/TT-BTC to calculate annual revenue in order to determine personal income tax obligations. If annual revenue is below VND 500 million, the individual is not subject to personal income tax. If the threshold is exceeded, tax obligations will be determined in accordance with applicable regulations. Regular monitoring of revenue will help business individuals be more proactive and avoid unexpected tax liabilities.

At the same time, Clause 3 Article 7 of the Law on Personal Income Tax 2025 also provides that, in cases where an individual engaged in business has annual revenue exceeding VND 500 million up to VND 3 billion and chooses to calculate tax based on a percentage of revenue, the taxable revenue is determined as the portion exceeding the prescribed threshold (VND 500 million). Accordingly, in this case, taxable personal income tax revenue is calculated as actual revenue minus VND 500 million.

2.Adjustment of the progressive tax schedule

At present, there is no specific legal definition of progressive taxation. To understand this concept, it is first necessary to clarify the term “progressive” which means increasing gradually according to certain levels. In the field of taxation, progressivity is applied so that tax obligations increase as income levels rise. Personal income tax applies the partial progressive method, under which taxable income is divided into different brackets, each subject to a separate tax rate that increases from low to high. Income falling within a particular bracket is taxed only at the rate applicable to that bracket, rather than applying a single rate to the entire income. Under this mechanism, individuals with higher income pay a higher tax rate on the additional income portion, while lower-income portions are still taxed at lower rates, thereby ensuring fairness in tax obligations.

According to Article 9 of the Law on Personal Income Tax 2025, the partial progressive tax schedule is stipulated as follows:

From 01 January 2026, the partial progressive tax schedule is applied in a simpler and more reasonable manner by reducing the number of brackets from seven to five and widening the income ranges between brackets. The reduction of tax rates in the middle brackets (brackets 2 and 3) helps limit sudden increases in tax when income rises slightly, thereby reducing tax pressure on middle-income earners. The highest tax rate of 35% applies only to the portion of income exceeding VND 100 million per month, instead of VND 80 million per month as previously stipulated.

3.Increase in family-based deductions and change in the approach to adjusting deduction levels

The Law on Personal Income Tax 2025 formally incorporates the family-based deduction levels stipulated in Resolution No. 110/2025/UBTVQH15 of the Standing Committee of the National Assembly into the law, instead of regulating them only in sub-law documents. According to Clause 1 Article 10 of the Law on Personal Income Tax 2025, a family-based deduction is the amount deducted from taxable income before calculating tax on income from salaries and wages of resident individual taxpayers. The deduction level for the taxpayer is VND 15.5 million per month (VND 186 million per year) and the deduction level for each dependent is VND 6.2 million per month.

For individuals with dependents (such as young children, elderly parents or persons incapable of working), the family-based deduction plays a significant role in reducing payable tax. However, to apply this deduction, taxpayers must register dependents and prepare complete documentation in accordance with regulations. Late registration or incomplete documentation may result in the deduction not being recognized in a timely manner.

In practice, the legalization of deduction levels enables taxpayers to be more proactive in determining taxable income, especially for individuals with dependents. However, the key issue in application remains the timely registration, substantiation and updating of dependent information. Many tax disputes and tax arrears arise not from deduction levels themselves but from incomplete dependent documentation or improper registration timing. Therefore, individuals should register, update and manage personal tax records in parallel with utilizing deduction policies to avoid potential risks.

In addition, Clause 2 Article 10 of the Law on Personal Income Tax 2025 introduces an important new provision establishing a mechanism for periodic adjustment of family-based deduction levels based on the consumer price index and socio-economic factors, instead of waiting for legislative amendments. This mechanism enables tax policy to respond more flexibly to economic fluctuations, limits obsolescence of deduction levels relative to living standards and reduces reliance on ad hoc administrative adjustments.

4.Non-resident individuals transferring gold bullion are subject to personal income tax at a rate of 0.1%

Another notable new provision is that income from the transfer of gold bullion is classified as taxable personal income pursuant to Point d Clause 10 Article 3 of the Law on Personal Income Tax. Clause 2 Article 27 of the Law provides that non-resident individuals engaging in the transfer of gold bullion are subject to personal income tax at a rate of 0.1% of the transfer value. This tax applies to each transaction, regardless of whether the individual realizes a profit from the transfer.

In practice, this provision directly affects individuals who frequently buy and sell gold bullion for savings or investment purposes. When selling gold, individuals should be aware of the arising tax obligations and should conduct transactions through licensed business entities to ensure proper tax withholding and declaration. Distinguishing between gold bullion and jewelry or fine art gold is also important, as tax obligations may differ.

The Law on Personal Income Tax 2025 introduces many changes in a direction that is simpler, more transparent and more aligned with actual income conditions. By understanding key new provisions such as taxable revenue thresholds, the progressive tax schedule, family-based deductions and tax obligations on gold transactions, individuals can proactively apply the law to their own circumstances, comply with tax obligations correctly and feel more secure in making personal financial decisions.