Article 1: Key changes to Personal Income Tax relating to salaries and wages applicable from 2026

1. Changes to family circumstance-based deduction levels

Applicable from 01/01/2026 (2026 tax period)

Decree 253 also expands the scope of dependents: in addition to children under 18, children aged 18 or older may now qualify for the deduction if they lack civil act capacity, have a disability, or are unable to work (previously, this applied only to children with disabilities who were unable to work).

The dependent's average monthly income in the year from all sources must not exceed VND 3 million (previously VND 1 million).

Legal basis: Resolution No. 110/2025/UBTVQH15; Law on Personal Income Tax 2025 (No. 109/2025/QH15). Guidance on dependents: Clause 2, Article 47 of Decree No. 253/2026/ND-CP and Clause 1, Article 3 of Circular No. 87/2026/TT-BTC

2. Reduction of the progressive tax schedule from 7 brackets to 5 brackets

Applicable from 01/01/2026 (2026 tax period)

Legal basis: Article 9 of the Law on Personal Income Tax 2025 (No. 109/2025/QH15).

3. Additional deductions for medical and education expenses

Applicable to resident individuals for the 2026 tax period

Resident individuals may deduct from taxable income medical, and education and training expenses incurred for themselves and their dependents:

Important notes:

• The requirement that expenses fall within the list covered by health insurance is a significant practical limitation; not every medical invoice is deductible.
• The expenses must not be reimbursed from any other source, including sponsorship, support or payment on behalf by an organization or individual, the State Budget, the Social Insurance Fund, the Health Insurance Fund, or any insurance payment in any form.
• Expenses are deductible in the year in which they are incurred and may not be carried forward to the following year.
• Valid invoices and supporting documents are required.
• To claim this deduction, employees must finalize PIT directly with the tax authority and may not authorize the employer to do so.

Legal basis: Clause 2, Article 49 of Decree No. 253/2026/ND-CP

4. PIT exemption for overtime and night-work pay

Resident individuals: from 01/01/2026; non-resident individuals: from 01/7/2026

This is a fundamental change, rather than merely supplementary guidance:

Conditions for application:

• Night work and overtime must comply with the conditions and working-hour limits prescribed by labor law.
• Night working hours are defined as 22:00 to 06:00 on the following day. Pay for night shifts outside this period that is not overtime pay is not eligible for the exemption.
• Income-paying organizations and enterprises must prepare a schedule clearly showing night-work and overtime hours and the corresponding payments. The schedule must be retained by the entity and presented at the tax authority's request.
• Where no separate schedule is prepared, the entity must substantiate the payments using payroll records, timesheets, employment contracts, and other lawful documents.

Amounts exceeding statutory limits are not exempt: where night-work pay, overtime pay, or payment for untaken leave exceeds the limits prescribed by law, the excess is included in taxable income.

Legal basis: Clause 8, Article 4 of the Law on Personal Income Tax 2025; Article 26 of Decree No. 253/2026/ND-CP. Overtime and night-work pay rates: Article 98 of the Labor Code 2019; payment for untaken annual leave: Clause 3, Article 113 of the Labor Code 2019. Further reference: Official Letter No. 7077/NBI-QLDN3 dated 26/5/2026 issued by Ninh Binh Provincial Tax Authority.

5. Increased non-taxable threshold for mid-shift meal and lunch allowances

Applicable from 01/7/2026

Only the portion exceeding the above threshold is included in taxable income.

Where the employer provides meals in kind (self-cooked meals, purchased meal portions, or meal vouchers), no monetary cap applies, and the benefit is not included in the individual's taxable income.

Legal basis: Point g, Clause 2, Article 8 of Decree No. 253/2026/ND-CP; the effective date is prescribed at Point b, Clause 1, Article 69 of Decree No. 253/2026/ND-CP.

6. Exclusion of statutory-excess severance allowances from taxable income

Resident individuals: applicable to the 2026 tax period

Where an enterprise specifically provides in its financial regulations, internal regulations, employment contracts, or collective labor agreement for severance or job-loss allowances above the statutory labor-law levels, the actual amount paid in excess of those levels is also excluded from taxable income.

Previously, severance and job-loss allowances were tax-exempt only up to the amounts prescribed by the Labor Code and the Law on Social Insurance; any excess remained subject to PIT.

Prerequisite: the enterprise must have a written legal basis. If an amount above the statutory level is paid without a corresponding internal provision, the excess remains taxable.

Legal basis: Point h, Clause 3, Article 8 of Decree No. 253/2026/ND-CP.

7. Increase in the 10% withholding threshold for non-regular income

Applicable from 01/7/2026

Applicable payers and recipients: organizations and individuals paying salaries, wages, remuneration, or other amounts to resident individuals who have no employment contract or an employment contract of less than 3 months (including payments made to employees after termination of employment).

Undertaking mechanism: where an individual only earns income subject to 10% withholding but estimates that total taxable income after family circumstance-based deductions will be below the tax payable threshold, the individual may submit an undertaking in the prescribed form to the income-paying organization so that tax is temporarily not withheld.

Cases not requiring tax finalization: individuals whose average non-regular income does not exceed VND 15 million per month and has been subject to 10% withholding at source are not required to finalize tax on such income.

Legal basis: Clause 2, Article 50 of Decree No. 253/2026/ND-CP (withholding threshold and undertaking mechanism); Article 51 of Decree No. 253/2026/ND-CP (cases not requiring tax finalization). Previous rule: Decree No. 65/2013/ND-CP.

8. No resubmission of monthly or quarterly tax returns filed before 01/7/2026

For PIT on salaries and wages declared and paid under the previous rules from 01/01/2026 to before 01/7/2026:

• Monthly or quarterly tax returns do not need to be resubmitted.
• Adjustments are made only in the 2026 annual tax finalization return.

In addition, the transitional provisions stipulate that the deadline for registering dependents and submitting supporting documents for dependents for the 2025 tax period and earlier periods shall continue to follow the regulations in effect before Decree 253 became effective.

Legal basis: Article 70 of Decree No. 253/2026/ND-CP (transitional provisions).

Note: From 1 July 2026, pursuant to Circular No. 89/2026/TT-BTC, monthly personal income tax filing for income from salaries and wages has been officially abolished. Accordingly, income-paying organizations and individuals shall file tax returns on a quarterly basis and conduct annual tax finalization, fully replacing the previous monthly filing method.

>>> Download Decree No. 253/2026/ND-CP