Ministry of Finance: Family deduction level does not distinguish between high and low income or location

In the latest appraisal dossier of the draft Law on Personal Income Tax (amended) sent to the Ministry of Justice , the Ministry of Finance proposed amending a number of regulations on family deductions for individual taxpayers and dependents.

According to the current Personal Income Tax Law, individuals are entitled to deduct social insurance, health insurance, unemployment insurance, professional liability insurance for certain occupations that require compulsory insurance, minus family deductions, charitable and humanitarian contributions, allowances and subsidies as prescribed... the remaining amount is the income used as the basis for tax calculation.

Family deductions for taxpayers and dependents are applied uniformly across society (Illustration photo)

According to the Ministry of Finance , there is currently an opinion that it is necessary to regulate the family deduction level based on the regional minimum wage. Specifically, the family deduction level in urban areas and large cities should be higher than in rural and mountainous areas because the cost of living here is more expensive.

However, according to the Ministry of Finance, with the provisions of the law on personal income tax, the family deduction for taxpayers and dependents is determined by a specific number, applied uniformly on the general level of the whole society, regardless of whether people have high or low income, different consumption needs or live in different locations.

Personal income tax laws in many countries, including both developed and developing countries, also only provide for a general family deduction, applied uniformly, without distinction by area of residence or population group.

For individuals working in areas with difficult conditions, the Personal Income Tax Law stipulates that some allowances such as regional allowances, attraction allowances, transfer allowances, etc. will not be included in taxable income, in order to support employees as well as encourage individuals to work in these areas. In addition, the Personal Income Tax Law also stipulates tax reduction for individuals facing difficulties due to natural disasters, fires, accidents or serious illnesses.

The Ministry of Finance cited the experience of other countries, showing that most countries' personal income tax laws have provisions on family deductions in different forms and ways. In terms of classification, personal income tax deductions applied by countries are divided into 3 groups: general deductions for individual taxpayers; deductions for dependents, such as deductions for children, spouses, parents, etc.; and deductions of a specific nature (for example, deductions for medical expenses, education, etc.).

In addition, there are also opinions that it is necessary to study and allow taxpayers to deduct some expenses during the year at an appropriate level, such as medical and educational expenses before calculating taxes. Thereby, creating conditions for taxpayers to reduce part of the expenses for these activities.

The Ministry of Finance said that, through studying the experience of other countries, in order to promote the role and significance of personal income tax policy in regulating income but taking into account the conditions and circumstances of taxpayers, the Ministry of Finance proposed to add other specific deductions in addition to charitable and humanitarian contributions prescribed in the current Law before calculating tax for individual taxpayers, specifically: Taxpayers are allowed to deduct from their income before calculating tax the expenses for healthcare, education and training of the taxpayer and of the taxpayer's dependents.

The drafting agency proposes that the Government provide detailed regulations on this content to ensure flexibility and suitability to the socio-economic situation.

"The scope of deductible expenses and the level of deduction must be considered and calculated appropriately to achieve the set goals but also not reduce the role of personal income tax policy as a tool to regulate income and redistribute income in the economy," the Ministry of Finance emphasized.

The Ministry of Finance will submit to the Government and the National Assembly the draft Law on Personal Income Tax (amended) at the 10th session of the 15th National Assembly (October 2025).

vov.vn

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