Vietnam’s National Assembly approved the new Personal Income Tax Law (No. 109/2025/QH15) on 10 December 2025, introducing one of the most significant updates to the country’s individual taxation framework in recent years.
The law takes effect from 1 July 2026, with salary-related provisions already applicable from 1 January 2026 (for the 2026 tax year).
For HR and payroll teams, this is not merely a regulatory announcement. It directly affects payroll calculations, withholding accuracy, system configuration and employee communication.
With the 2026 tax year now underway and full implementation approaching in July, this period is critical for alignment and review.
1. Simplified Progressive Tax Brackets
Vietnam’s previous seven-tier PIT system has been reduced to five tiers.
Under the new structure for resident individuals, monthly assessable income is taxed progressively as follows:
- 5% on income up to VND 10 million
- 10% on income above VND 10 million to VND 30 million
- 20% on income above VND 30 million to VND 60 million
- 30% on income above VND 60 million to VND 100 million
- 35% on income above VND 100 million
Each income band is taxed incrementally, meaning payroll systems must apply layered calculations correctly.
Payroll considerations:
- Confirm tax tables in payroll systems reflect the updated bracket structure
- Review automated calculation logic
- Conduct reconciliation checks for January and February payroll runs
- Validate withholding accuracy to reduce compliance risk
2. Higher Personal and Dependent Deductions
Personal and dependent relief levels have increased, aligned with inflation and economic conditions.
Payroll considerations:
- Ensure deduction parameters are updated in payroll configuration
- Verify employee tax registration data
- Review changes in net pay outcomes
- Align with finance teams on revised payroll cost projections
Incorrect deduction settings may result in under- or over-withholding.
3. Expanded Non-Taxable Income Categories
The number of non-taxable income categories has increased from 14 to 21 under the revised law. The expanded list includes:
- Night overtime wages
- Payment for unused leave
- Pensions
- Scholarships
- Certain compensation payments
- Income linked to green technology and digital sectors
This development is particularly important for payroll coding and reporting accuracy.
Payroll considerations:
- Review income code classification
- Update payroll item mapping
- Ensure exempt components are properly configured
- Assess audit exposure if income categories were previously treated differently
Allowance structures and system coding should be reviewed carefully during this transition period.
4. Targeted Incentives for Digital and High-Tech Talent
Eligible digital and high-tech professionals may qualify for up to five years of PIT exemption. In addition, certain investment-related income — including fund certificates and individual investment activities — may benefit from exemptions or reduced tax rates under the revised framework.
From a payroll administration perspective, this requires:
- Identification of eligible employees
- Accurate system configuration for temporary tax exemptions
- Tracking exemption periods
- Coordination with HR and tax advisors for documentation
This adds complexity to payroll monitoring and compliance tracking.
5. New 0.1% PIT on Gold Bar Transfers
From July 2026, transfers of gold bars will attract a 0.1% PIT.
While not part of monthly salary payroll, this reflects broader tightening of personal tax oversight under the revised framework.
6. Higher Threshold for Household Businesses
The annual tax-free turnover threshold for household businesses has increased from VND 100 million to VND 500 million.
For organisations engaging contractors or small business partners, this may influence structuring and reporting considerations.
Action Checklist for HR and Payroll Teams
As the 2026 tax year progresses and the July implementation approaches, HR and payroll teams should:
- Review payroll system configuration and tax tables
- Reconcile January and February payroll calculations
- Reassess income code classifications
- Validate deduction parameters
- Review expatriate and high-income employee calculations
- Align with finance on updated payroll forecasts
- Prepare clear employee communication regarding net pay changes
Proactive verification reduces compliance exposure, penalties and employee disputes.
The Bigger Picture
Vietnam’s 2026 PIT reform reflects broader policy objectives:
- Simplification of tax administration
- Targeted support for digital and high-tech sectors
- Greater transparency in personal taxation
For HR and payroll teams, the focus now shifts from preparation to execution and validation.
Organisations that review, reconcile and align their payroll processes early in 2026 will minimise operational disruption and maintain employee confidence during this transition.
How Link Compliance Can Support
As regulatory frameworks evolve, accurate implementation becomes just as important as understanding the law itself. At Link Compliance, we support organisations with payroll configuration reviews, withholding validation, compliance alignment and practical implementation guidance to ensure a smooth transition under Vietnam’s revised PIT framework. Structured execution today reduces risk tomorrow.
Email: info@linkcompliance.com | More information: www.linkcompliance.com
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Official Legal Source: Law No. 109/2025/QH15 on Personal Income Tax, approved by the National Assembly of the Socialist Republic of Vietnam on 10 December 2025, effective 1 July 2026 (with salary-related provisions applicable from 1 January 2026). Official publication available on the Government Legal Portal (Cổng Thông tin điện tử Chính phủ): https://vanban.chinhphu.vn
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Disclaimer: The information provided herein is based on publicly available sources and is intended for general guidance only. It should not be relied upon as a substitute for professional tax or legal advice. Readers are encouraged to seek independent advice specific to their circumstances.
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