Law Amending and Supplementing Several Articles of the Personal Income Tax Law No. 26/2012/QH13

This is Law 26/2012/QH13, passed by the National Assembly on 22 November 2012 to amend the Law on Personal Income Tax (Law 04/2007/QH12). It took effect on 1 July 2013. The change with the largest effect on take-home pay and personal income tax calculations is the increase in family-circumstance deductions. The law raised the deduction for the taxpayer to 9 million dong per month (108 million dong per year) and the deduction for each dependant to 3.6 million dong per month, both up from the earlier 4 million dong and 1.6 million dong levels. These deductions are subtracted from taxable income before applying the progressive tax brackets to income from business, salaries and wages of resident individuals. The law adds an automatic adjustment mechanism: when the Consumer Price Index moves by more than 20 percent against the level at the time the law took effect or against the most recent adjustment, the Government submits a revised deduction level to the Standing Committee of the National Assembly for the next tax period. The law also clarifies how taxable income is computed for salaries and wages. Taxable income equals total assessable income minus compulsory contributions to social insurance, health insurance, unemployment insurance, professional-liability insurance for certain occupations, voluntary pension fund contributions (capped at a maximum set by the Government), and the deductions described above. It revises the definition of income from salaries and wages, listing allowances and subsidies that are excluded from taxable income, including allowances for people with meritorious service, defence and security allowances, hazardous-work allowances, attraction and regional allowances, sudden-hardship aid, occupational-accident and disease benefits, one-time childbirth or adoption benefits, severance and job-loss benefits under the Labour Code, social-protection benefits, and one-time retirement allowances. Monthly pensions paid by the Social Insurance Fund and by voluntary pension funds are confirmed as tax-exempt. The law expands the definition of income from real-estate transfers to cover transfers of land-use rights and attached assets, ownership or use of housing, leasing rights for land and water surfaces, and other forms of real-estate transfer. For securities transfers, the tax period may be assessed per transaction or annually. The law restates the responsibilities of income payers and individual taxpayers for declaring, withholding, paying and finalising tax, with the Government setting withholding rates by income type. These provisions feed directly into personal-income-tax and take-home-pay calculations for the 2013 to 2020 period before later deduction increases.