PIT Law to help under pressure workers

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The National Assembly last week approved the amended Personal Income Tax (PIT) Law which raised the taxable income threshold to VND9 million ($433) per month from the current VND4 million ($192).

Also,  the deduction from taxable income goes up to VND3.6 million ($173) for each dependant from the current VND1.6 million ($77). Dependents are those who earn less than VND500,000 ($24) a month.

The amended law also stipulates  that if the consumer price index (CPI) fluctuates more than 20 per cent, the government would propose the National Assembly’s Standing Committee to adjust the deduction level accordingly. The amended law will take effect from July 1, 2013 instead of January 1, 2013 as previously proposed.

Thomas McClelland, tax partner of Deloitte Vietnam, said: “The welcome change, which is for the benefit of all taxpayers and not only foreign, has been supported by the foreign business community as measures which encourage private social insurance and pensions.”

McClelland noted that it appeared, based on the new PIT Law, that contributions to a private pension scheme would be exempt from tax up to a cap and that the monthly pension paid out of the scheme would be exempt from tax.  “This change was designed to benefit employees by encouraging private provisions for their retirement, while also encouraging investment in the local securities and real estate markets in Vietnam.”
 
“The new private pension funds and related tax framework is more favourable for investments by the funds—and would be even better if the tax exemption is not only for monthly pensions but also for lump sums,” he said.

However, McClelland noted, it was a little disappointing that the tax levels had not been changed given the high level of inflation since the original law took effect in 2009, and that the top tax rate had not reduced from 35 per cent to 30 per cent as previously proposed.

Foreign investors, McClelland said, had a number of concerns regarding PIT, primarily implementation issues such as tax residency and, obtaining tax credits for tax paid overseas.  It is hoped that these issues will be addressed in the implementing regulations.