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      On 22 July 2025, Vietnam’s Ministry of Finance1 released a draft Personal Income Tax Law, which was followed by a brief public consultation period.  Key proposals in the draft law include expanding taxable income to cover digital platforms, e-commerce, and digital assets; introducing exemptions for innovation, green technology, and skilled labour; applying a separate tax rate for digital services; simplifying the progressive tax table; and allowing deductions for medical and educational expenses.

      It is expected to be submitted to the National Assembly in October 2025.

      WHY THIS MATTERS

      The draft Personal Income Tax Law aims to align with global standards, enhance equity and transparency, and adapt to economic changes.

      The measures, to some degree, are expected to enhance fairness within the tax system and may result in a lower effective tax rate for many individuals.  The decrease in the number of tax brackets from seven to five might yield benefits for middle- and high-income earners, lowering their tax burdens; a reduced burden would also be enhanced by new deductions for medical and educational expenses.  The changes pertaining to individuals, if/when they come into effect, may mean changes to international assignment cost projections, hypothetical tax calculations, and adjustments to withholding/payroll.

      As noted above, for employers, particularly those operating in the digital and high-tech sectors, the reforms would necessitate adjustments to payroll systems and tax planning strategies.  Organisations managing digital platforms and e-commerce trading floors would assume greater administrative responsibility for withholding and remitting taxes, thereby reinforcing compliance across the ecosystem. 

      Context

      Vietnam’s draft Personal Income Tax Law would introduce a series of targeted reforms intended to modernise the country’s tax framework and respond to the evolving dynamics of a digital economy.  By expanding the scope of taxable income to include digital platforms, e-commerce, and digital assets, the legislation is intended to align tax obligations with contemporary income sources and foster individuals’ compliance with updated reporting requirements.  In parallel, the proposed inclusion of medical and educational expenses as deductible items reflects a policy shift toward recognising actual financial burdens borne by taxpayers.

      The draft also recommends a change in method of adjusting the personal and dependent deduction amounts for taxpayers to align with current socio-economic conditions, instead of relying on the consumer price index as has been the case.

      Key Highlights

      Expansion of Taxable Income Sources

      The Personal Income Tax Law reform proposals include within the scope of taxable income: income from digital platforms, e-commerce, transfer of digital assets (virtual assets, tokens), auctioned license plate transfers, .vn domain names, green bonds, and carbon credits.

      Additional Tax-Exempt Income

      • Exemption for foreign experts working in Official Development Assistance (ODA)-funded programmes and foreign non-governmental projects.
      • Temporary exemptions and reductions for experts and scientists working in innovative start-ups and high-tech sectors.
      • Exemption for income from first-time transfers of emission reduction certificates and carbon credits.
      • Exemption for salaries and wages related to scientific, technological, and innovative tasks funded by the state budget.
      • Exemption for income from copyrights and intellectual property rights arising from commercialised scientific and innovative tasks.

      Separate Tax Rate for Digital Services

      A 5-percent personal income tax rate on income from digital services and products for both residents and non-residents.

      Reform of Progressive Tax Table

      Reduction of tax brackets from seven to five, aiming to lessen the tax burden on middle- and high-income earners and improve fairness.

      Clarification of Withholding Tax Requirements

      Clear guidelines for organisations responsible for tax withholding and identification of income types requiring direct declaration by taxpayers.

      Deductible Medical and Education Expenses

      Introduction of deductions for medical and educational expenses for taxpayers and their dependents, subject to government-prescribed limits.

       

      KPMG INSIGHTS

      While the open public consultation period has ended, with the government’s portal closing in early August, KPMG in Vietnam has gathered comments and ideas and is involved in discussions as a member of the official working group established by the Ministry of Finance, providing professional insights to help finalise the draft Personal Income Tax Law.

      Steps to Consider

      As the proposed law is still in draft form and subject to further changes, organisations and individuals falling within its scope may wish to consider the following:

      • Monitoring developments closely – Keep track of the progress and revisions of the draft law to stay informed and prepare for potential changes in a timely manner.
      • Evaluating potential opportunities for hiring – Companies, particularly in the digital, high-tech, and innovation sectors, may explore how the proposed exemptions and reduced rates could be leveraged to attract and retain talent.
      • Assessing personal impact – Individual taxpayers should review how the proposed amendments might affect their personal finances and consider seeking professional advice to better understand the implications for their tax positions ahead of any final enactment.

      What’s Next?

      Further refinements to the draft law may be expected as it is debated and implemented, and, at this stage, as ongoing consultation with and input from stakeholders occurs.

      Assignees and/or their programme managers may have questions or concerns about the scope of the draft law, its application, and the potential impacts of its measures, as well appropriate next steps; they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in Vietnam (see the Contacts section).

      FOOTNOTE:

      1  Dự thảo Luật Thuế thu nhập cá nhân (thay thế), “CỔNG THÔNG TIN ĐIỆN TỬ CHÍNH PHỦ”, 22-07-2025 (Official Gazette of Vietnam) (in Vietnamese)

      Contacts

      duong-thuy-nguyen
      Duong Nguyen

      Director

      KPMG in Vietnam

      minh-hang-le
      Minh Hang Le

      Director

      KPMG in Vietnam

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      The information contained in this newsletter was submitted by the KPMG International member firm in Vietnam.

      GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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