[NEW 2026] Personal Income Tax Update
Decree No. 253/2026/ND-CP guiding the implementation of the Law on Personal Income Tax. Below is a summary of the key updates that directly affect monthly payroll processing:
1. TAX DEDUCTIONS
Key Changes / Impact | Effective Date | Legal Basis |
Voluntary Social Insurance (SI) and Health Insurance (HI) contributions made in accordance with applicable laws. | 01/01/2026 | Article 8 of the Law on Personal Income Tax No. 109/2025/QH15 Article 46 of Decree No. 253/2026/ND-CP |
Voluntary supplementary pension insurance and savings-linked life insurance premiums are deductible up to VND 3,000,000 per month (including contributions made by the employer on behalf of the employee). | 01/01/2026 | Article 46 of Decree No. 253/2026/ND-CP |
Conditions for applying medical expense deductions:
+ Valid invoices and supporting documents are available;
+ Medical expense statements are provided;
+ Medical examination and treatment are conducted at healthcare facilities in Vietnam;
+ The medical expenses fall within the scope of benefits covered by Health Insurance;
+ Expenses already reimbursed by another source are not eligible for deduction;
+ At the end of the tax year, employees claiming these deductions are responsible for conducting their own Personal Income Tax (PIT) finalization.
01/01/2026
Article 49 and Clause 3, Article 51 of Decree No. 253/2026/ND-CP
2. PERSONAL INCOME TAX (PIT)-EXEMPT INCOME
Key Changes / Impact | Effective Date | Legal Basis |
Overtime pay and night shift pay that comply with the conditions and working-hour requirements prescribed by the Labor Code. Payment for unused annual leave upon termination of employment (Clause 3, Article 113 of the Labor Code). Note: Any amount paid by the employer exceeding the statutory limits (more than 40 overtime hours per month or more than 200 overtime hours per year) will be treated as taxable income and may be disallowed as a deductible expense for Corporate Income Tax (CIT) purposes. Employers should maintain supporting schedules detailing working hours, workplace, and payment amounts for record-keeping purposes. | 01/01/2026 | Article 26 of Decree No. 253/2026/ND-CP Article 3 of the Law on Personal Income Tax No. 109/2025/QH15 |
Salary income of Vietnamese seafarers working for foreign shipping companies or Vietnamese international shipping companies (please also refer to the Vietnam Maritime Code). Income earned by sole proprietors and owners of single-member limited liability companies after the enterprise has fulfilled its Corporate Income Tax (CIT) obligations. | 01/01/2026 01/01/2026 | Article 32 of Decree No. 253/2026/ND-CP Article 39 of Decree No. 253/2026/ND-CP |
3. NON-TAXABLE INCOME
Key Changes / Impact | Effective Date | Legal Basis |
Severance allowance, job-loss allowance, and extraordinary hardship allowance: amounts paid in excess of the statutory limits are still not treated as taxable income, provided that such payments are stipulated in the company’s financial regulations, employment contract, or collective labor agreement. | 01/01/2026 | Clause 3(h), Article 8 of Decree No. 253/2026/ND-CP |
Financial assistance provided by employers to employees for the treatment of critical illnesses affecting employees or their family members (including children, spouse, biological parents, parents-in-law, adoptive parents, stepmother, and stepfather). + The list of critical illnesses shall comply with the regulations issued by the Ministry of Health. + The maximum non-taxable amount is equal to the actual medical expenses incurred after deducting any reimbursement from insurance (if any). | 01/01/2026 | Clause 4(b), Article 8 of Decree No. 253/2026/ND-CP |
Meal allowance (lunch or mid-shift meal allowance) paid by the employer to employees is non-taxable up to VND 1,200,000 per month. Effective from 01/07/2026. Clause 2(g), Article 8 of Decree No. 253/2026/ND-CP.
Housing benefits provided by the employer for employees’ use, including related utilities (such as electricity, water, internet, etc.), are not regarded as taxable income. Effective from 01/01/2026. Clause 2(h), Article 8 of Decree No. 253/2026/ND-CP.
4. OTHER KEY UPDATES
Key Changes / Impact | Effective Date | Legal Basis |
Individuals earning income from service contracts are required to have Personal Income Tax (PIT) withheld at a rate of 10% if the total payment reaches the prescribed withholding threshold. Organizations and individuals making such payments are responsible for withholding and declaring PIT in accordance with prevailing tax regulations. | 01/01/2026 | Decree No. 253/2026/ND-CP |
Dependent registration procedures are simplified. Taxpayers are responsible for the accuracy of the declared information and must retain supporting documents for inspection by the tax authorities when requested. | 01/01/2026 | Decree No. 253/2026/ND-CP |
Income received in foreign currencies must be converted into Vietnam Dong (VND) using the exchange rate prescribed by the tax regulations at the time the taxable income is received. | 01/01/2026 | Decree No. 253/2026/ND-CP |
Additional guidance is provided on Personal Income Tax (PIT) finalization, tax withholding responsibilities, and tax declaration procedures for organizations and individuals paying employment income. | 01/01/2026 | Decree No. 253/2026/ND-CP |
5. RECOMMENDATIONS FOR EMPLOYERS
- Review salary, bonus, and allowance policies: Review meal allowances, overtime pay, and night shift policies against the new tax exemption thresholds to avoid unexpected tax liabilities.
- Update internal policies: Revise and supplement financial regulations, salary and bonus policies, employment contracts, and collective labor agreements—particularly provisions relating to severance pay, job-loss allowances, and extraordinary hardship assistance—to ensure that payments exceeding the statutory limits remain eligible for non-taxable treatment where permitted by law.
- Prepare supporting documents and records:
Maintain sufficient supporting documentation, including timesheets, payroll records, and dependent registration files. Inform and guide employees to retain medical and education invoices and supporting documents for tax deduction claims and Personal Income Tax (PIT) finalization purposes.
- Review the list of registered dependents: Update and deregister dependents who no longer meet the eligibility requirements under the new regulations, particularly other eligible dependents.
- Review service contracts and independent contractors: Determine the correct 10% Personal Income Tax (PIT) withholding obligation based on the business registration status of each service provider or contractor.
- Strengthen internal communication: Communicate the regulatory changes to employees in a timely manner, especially those that may directly affect their net income and personal tax obligations.
- HOW HR2B SUPPORTS YOUR BUSINESS
- Timely regulatory updates: We continuously monitor and promptly update detailed implementation guidance, including new circulars and official letters, and share the latest information with our clients as soon as it becomes available.
- Professional advisory services: Our specialists provide practical consultation tailored to your organization’s specific payroll and tax situations.
- Payroll policy review & optimization: We review payroll structures and update payroll components based on each client’s business needs to ensure full compliance with applicable regulations, including taxable income, non-taxable income, tax-exempt income, allowable deductions, tax rates, and dependent registration.
The above highlights summarize the key changes introduced under Decree No. 253/2026/ND-CP. We sincerely appreciate your continued trust and partnership. The HR2B team is always ready to provide practical guidance and tailored consultation to support your organization’s compliance needs.
• This document is provided for reference purposes only and should not be considered a substitute for the official legal documents.
Kind regards,
HR2B
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