Following the adoption of new Personal Income Tax (PIT) Law No. 109/2025/QH15 on 10 December 2025, as amended by Law No. 09/2026/QH16 dated 24 April 2026 ("New PIT Law"), the Government and the Ministry of Finance issued Decree No. 253/2026/ND-CP ("Decree 253") and Circular No. 87/2026/TT-BTC ("Circular 87"), both dated 30 June 2026, to guide the implementation of the New PIT Law.

The new PIT regulations introduce several changes affecting employers and employees, including expanded PIT exemptions for certain employment benefits, updated deduction rules, codified tax treatment for bonus shares and employee stock ownership plan (ESOP) shares, and clarified PIT withholding and finalization obligations.

Decree 253 and Circular 87 take effect from 1 July 2026 but the provisions relating to business income and income from salaries and wages of resident individuals apply from the 2026 tax year.

Decree 253 and Circular 87 provide detailed guidance on the implementation of the New PIT Law, with key clarifications and guidance covering:Expanded PIT exemptions for certain employment benefits, including meal allowances, housing benefits, severance payments, and income of eligible high-quality digital technology industry personnel and high-tech personnel

• New deduction limits for medical and education expenses, together with an increase in income threshold for qualifying dependents
• Formal codification of the PIT treatment of bonus shares and ESOP shares
• Clarified PIT withholding and finalization rules
• Clarified PIT rules on share transfers and capital transfers.

Below is a summary of key changes introduced by Decree 253 and Circular 87.

1. Key expansion and clarification of PIT-exemptions for income from salaries and wages

• Meal allowances: Effective from 1 July 2026, cash mid-shift meal allowances of up to VND 1.2 million per month are exempt from PIT, with any excess subject to PIT. In cases where the employer directly provides mid-shift or lunch meals in kind (e.g., through in-house catering, purchased meal portions, or meal vouchers), the full value of such benefits is exempt from PIT.
• Payment for overtime work, night work, and unused annual leave days: These payments are exempt from PIT to the extent that they are paid in accordance with the Labor Code and relevant regulations and supported by the required documentation. Any excess amount remains subject to PIT.
• Severance and job-loss allowances: Decree 253 confirms that severance and job-loss allowances paid in excess of statutory requirements are also exempt from PIT, provided that such payments are clearly stipulated in the company's financial regulations, internal policies, labor contracts, or collective labor agreements.
• Housing benefits: Benefits from housing built by the employer for employees currently working at the entity, including related electricity, water, and other accompanying services (if any), are exempt from PIT.
• Trade union benefits: Cash and non-cash benefits received from trade union financial sources are not regarded as employment income and are therefore not subject to PIT.
• PIT exemption for high-quality digital technology industry personnel and high-tech personnel: Decree 253 provides further guidance on the eligibility criteria and conditions for the five-year PIT exemption applicable to qualifying high-quality digital technology personnel and high-tech personnel.

2. Changes to PIT deductions and dependent relief

i. Medical expenses and education and training expenses

Decree 253 clarifies the deduction caps applicable to certain expenses incurred by taxpayers and their qualified dependents, which may be deducted from taxable income from salaries and wages of resident individuals, subject to supporting documentation and valid invoices. In particular:

• Medical expenses: Medical expenses incurred at domestic healthcare facilities and falling within the scope of health insurance coverage are deductible from taxable income for PIT purposes, up to VND 23 million per year.
• Education and training expenses: Eligible education and training expenses incurred at domestic educational and training institutions are deductible up to VND 24 million per year, including tuition fees for preschool, general education, vocational education and higher education, as prescribed under the laws on education and training, as well as expenses for other professional skills training.

Taxpayers claiming eligible deductions (e.g., charitable or humanitarian contributions, medical expenses, and education and training expenses) are required to file their PIT finalization directly with the tax authority and cannot authorize their employer to conduct the PIT finalization on their behalf.

ii. Other deductions

• Contributions to supplementary pension insurance as prescribed under the Law on Social Insurance.
• Contributions to voluntary pension insurance and life insurance: the maximum deductible amount is VND 3 million per month, including both the portion contributed by the employer for the employee and the portion contributed by the employee themselves (if any).

iii. Increase in the income threshold for qualified dependents

Circular 87 increases the monthly average income threshold for determining qualifying dependents for certain family circumstance relief from VND 1 million to VND 3 million, with eligibility determined based on the dependent's total income from all sources during the relevant tax year.

3. Codification of the PIT treatment of bonus shares and ESOP shares

Decree 253 formally codifies the PIT treatment applicable to bonus shares and ESOP shares, including the timing of taxation, the determination of taxable income and withholding obligations, which were previously addressed primarily through tax ruling letters.

Specifically, PIT is triggered upon the transfer of the awarded shares, including both (i) PIT on salary and wage income and (ii) PIT on securities transfer.

i. PIT on income from salaries and wages:

• Bonus shares: taxable salary and wage income is determined based on the amount recorded in the accounting books of the income-paying entity at the time bonus shares are granted. If such amount cannot be determined, the taxable income is calculated based on the number of shares multiplied by the par value (where the transfer price is lower than the par value, the transfer price shall be used instead).
• ESOP shares: taxable salary and wage income is determined based on the amount recorded in the accounting books of the income-paying entity at the time the ESOP shares are issued. If such amount cannot be determined, taxable income is calculated as the number of shares multiplied by the par value, less the amount paid by employees to acquire the shares. No PIT is payable if the resulting amount is negative.

  Securities companies or custodian banks are responsible for withholding PIT at a rate of 10% on the taxable salary and wage income arising from the transfer of such shares and remitting the tax to tax authorities. Individuals must subsequently include the taxable income arising from the bonus shares and ESOP shares in their annual PIT finalization.

ii. PIT on securities transfer: Employees must declare and pay PIT on securities transfers at a rate of 0.1% of the transfer price for each transfer transaction.

4. PIT Withholding and finalization

• The withholding threshold has been increased from VND 2 million to VND 5 million per payment for the 10% PIT withholding applicable to payments made to individuals without a labor contract, or with a labor contract of less than three months, including payments to former employees after termination of employment.
• No PIT withholding is required for payments below VND 5 million per payment, unless requested by the individual.
• Individuals who only earn income subject to the 10% withholding may submit a prescribed commitment to an income payer to temporarily avoid PIT withholding if they expect their annual taxable income, after personal and eligible family circumstance deductions, to remain below the taxable threshold.
• Individuals whose average monthly income does not exceed VND 15 million and whose income has been subject to the 10% withholding are not required to finalize PIT in respect of such income. However, if they choose to conduct a PIT finalization, all salary and wage income from all sources must be consolidated for PIT finalization purposes.

5. PIT rules on share transfers and capital transfers

Decree 253 clarifies the scope of taxable income and compliance obligations applicable to share transfers and capital transfers. In particular:

• Share transfers: Income from securities transfers includes income derived from the transfer of shares by individuals in joint-stock companies (whether private or public), as well as income from the transfer of share purchase rights, bonds, treasury bills, fund certificates and other securities prescribed under the laws on securities.
• Capital transfers: Income from capital transfers includes income derived from the transfer of all or part of an individual's contributed capital in a limited liability company, partnership, business cooperation contract, cooperative, cooperative union, people's credit fund, or other organization. In addition, where an individual transfers an entire private enterprise or a single-member limited liability company owned by that individual and the transfer is associated with real estate, the resulting income is treated as income from a real estate transfer.
• Timing for determining taxable income: Decree 253 clarifies the timing for determining taxable income as follows:
  • Share transfers: the date on which the transfer transaction is completed in accordance with applicable law.
  • Capital transfers: The date on which the transfer transaction is completed in accordance with applicable law or the date on which procedures are carried out to amend the register of members in respect of the transferred capital.

    Decree 253 further provides that individuals must fulfil their PIT obligations in respect of the transferred shares or capital contribution before any amendment is made to the register of shareholders or members of the enterprise to reflect the transfer. If the enterprise proceeds with such amendment before the individual has fulfilled the applicable PIT obligations, the enterprise must declare and pay the relevant PIT on behalf of the individual.

Businesses should assess whether their payroll systems, employee benefit programs, equity incentive plans, and PIT compliance procedures require updates to reflect the new rules. Employers may also wish to review employment documentation and internal policies to determine whether certain benefits, allowances, and termination payments may now qualify for preferential PIT treatment.

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Thanh Vinh Nguyen, Partner, Thanh Hoa Dao, Special Counsel, and Thi Thu Van Tran, Senior Associate, have co-authored this legal update.

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