The Ministry of Finance is drafting a new law on personal income tax collection, in which it recommends that the tax threshold be lifted to VND6 million (US$288) a month from the current VND4 million, said deputy minister Vu Thi Mai at a press briefing yesterday.
The new tax law is exptected to take effect as of January 1, 2014.
The finance ministry will report the draft to the government this May, and submit it to the National Assembly this October.
Along with the increasing threshold for taxpayers, the deduction for dependents will also rise to VND2.4 million a month, from the current VND1.6 million.
“The tax law amendment is hoped to ease the financial pressures of local households,” said Nguyen Van Phung, deputy head of the Tax Policy Agency under the Ministry of Finance.
“The current income-tax threshold and the deduction rate for dependents have lagged far behind the recent violent economic upheavals.”
Phung said the proposed rate increases are based on the inflation rates over the last few years.
Meanwhile, Mai said that with the new tax law, around 70 percent of taxpayers who currently have to pay taxes at level 1 will be exempted from the personal income tax.
“And some 70 percent of level-2 taxpayers will clear their taxes at the first level.”
Under current tax law, level 1 for taxpayers includes tSTC wSTC average monthly income is between VND1 million and VND5 million. Tax rate for this level is 5 percent.
Meanwhile, tSTC with income from more than VND5 million to VND10 million will be subject to level 2, with a 10-percent tax rate.
Similarly, taxpayers in other higher levels will also switch to paying taxes at lower levels, she added.
“Total tax collection is expected to drop by VND8.15 trillion with this amendment.”
Regarding the question of why the new law cannot take effect until 2014, rather than next year, Phung explained that 2013 is expected to see the amendment of the corporate tax law.