Taxable income is an important concept, but it's easily confused with taxable income during the process of declaring and settling personal income tax. Understanding which income is taxable, how to distinguish it from non-taxable income, and the tax calculation formulas for each bracket will help you avoid legal risks and optimize your tax payments legally. This article will provide detailed guidance on determining taxable income, the latest personal income tax calculation formulas for 2025, and important notes when filing online through the electronic tax system.
Overview of personal income tax (PIT)
Personal income tax (PIT) is a direct tax levied on the income earned by individuals, whether residents or non-residents in Vietnam. It serves as a tool for regulating income, contributing to social equity, and is a stable source of revenue for the state budget.
According to the Personal Income Tax Law No. 04/2007/QH12, amended and supplemented by Law No. 26/2012/QH13, income from salaries, wages, capital investment, business, real estate transfer, copyrights, franchise fees, lottery winnings, etc., is subject to tax if it exceeds the exempted amount.
Distinguish between taxable income and income subject to tax.
What is taxable personal income?
Taxable income is the total income of an individual subject to taxation according to the law. This includes receipts in cash, in kind, or other benefits that can be converted into money from the following activities:
- Labor: salary, bonuses, allowances
- Business, investment capital, copyrights
- Winning a prize, transferring ownership of the property.
What is taxable income?
Taxable income is the portion of income remaining after deductions:
- Personal deductions (11 million VND/month for the individual, 4.4 million VND/month for dependents)
- Mandatory insurance contributions, legitimate charitable funds.
For example:
- Total income: 30 million/month
- After deducting personal allowances, dependents' allowances, and social insurance contributions, the taxable income is approximately 10–12 million VND.
Common types of income subject to personal income tax.
Below is a summary table of common income types subject to personal income tax, clearly presented by income group:
| Income group | Detailed content | Applicable tax rate |
|---|---|---|
| 1. Salaries and wages | – Basic salary, allowances, monthly/quarterly/annual bonuses – Overtime, extra shifts, commission – Receive physical items, which can be converted into cash. |
The progressive tariff schedule ranges from 5% to 35%. |
| 2. Capital investment | – Dividends, interest, and personal loans between individuals. – Contributing capital to private businesses |
5% (excluding interest on bank deposits and insurance contracts) |
| 3. Copyright and Franchising | – Transfer of intellectual property rights, trademarks, and software. – Licensing the exploitation of copyrights or proprietary software. |
5% |
| 4. Transfer of assets | – Transfer of real estate, unlisted shares, and capital contributions. – Excluding single residences registered with the tax authorities. |
2% on transfer value |
| 5. Winning prizes or gifts of great value. | – Winning the lottery, game show, or promotion – Gifts such as real estate, cars, or gold if the value exceeds 10 million VND per occasion. |
10% - amounts exceeding 10 million VND per instance. |
Income not subject to personal income tax (updated 2025)
According to Circular 111/2013/TT-BTC and related documents, the following items are exempt from personal income tax:
- Scholarships (funded by the government, international organizations, and businesses for students)
- Emergency hardship allowance, social insurance benefits (maternity, unemployment, retirement, etc.)
- Life insurance and health insurance payouts
- Overtime pay for night work and overtime exceeding legal limits.
- Lunch allowance (for meals during breaks) is limited to VND 730,000/month (if higher, the difference is subject to tax).
How to calculate taxable income and how to calculate personal income tax.
How to calculate taxable personal income: Taxable income = Total income from all sources – Tax-exempt amounts
How to calculate personal income tax using the progressive tax rate system (applicable to salaries):
Taxable income = Taxable revenue – deductions
Personal income tax payable = Taxable income × Corresponding tax rate
| Level | Taxable income/month | Tax rate |
|---|---|---|
| 1 | Up to 5 million | 5% |
| 2 | Over 5–10 million | 10% |
| 3 | Over 10–18 million | 15% |
| 4 | Over 18–32 million | 20% |
| 5 | Over 32–52 million | 25% |
| 6 | Over 52–80 million | 30% |
| 7 | Over 80 million | 35% |
Calculate personal income tax online: A quick and easy guide to filing at home.
Instead of having to go directly to the tax office as before, individuals can now completely declare and settle their personal income tax from home through two main tools implemented by the General Department of Taxation:
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Personal electronic tax portal: https://canhan.gdt.gov.vn
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The HTKK software is integrated with the eTax system (applicable to those with digital certificates or who wish to submit XML files).
The process involves only a few basic steps. First, you log into the system using your personal tax identification number. Next, select the appropriate tax return form – usually one of these. 02/KK-TNCN This is for settling income from salaries and wages. The system will require you to enter your total annual income, deductions such as mandatory insurance, family allowances, and dependent deductions, and will also record the amount of tax that has been provisionally withheld.
Once completed, you can choose to electronically sign and submit directly through the system, or download the declaration file to submit via HTKK.
Note: If you have income from two or more sources in the same year, for example, working full-time and also receiving freelance or commission income, you are required to compile all your income and file your tax return yourself before April 30th of the following year. In these cases, you cannot authorize a paying entity to file your tax return on your behalf.
Common mistakes when determining taxable income
Incorrectly determining taxable income not only leads to back taxes and penalties but also affects individuals' rights to tax deductions and refunds. Below are some common mistakes many people still make when filing personal income tax returns:
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Confusion between taxable and tax-exempt items: Many people believe that all income from work is subject to tax, while some items such as meal allowances within the permitted limits, overtime pay according to regulations, etc., are tax-exempt according to Circular 111/2013/TT-BTC.
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Arbitrary application of deductions without supporting documentation: A typical example is claiming deductions for dependents who are not registered or for whom there is no documentation proving their support, leading to their exclusion during tax settlement.
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Failure to declare income from multiple sources: Individuals working overtime, freelancing, teaching online, receiving commissions, etc., if not fully declared, can easily be detected through bank data checks or from other income-paying entities.
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Incorrectly selecting the industry code or income group: In some cases, incorrectly declaring the type of income (for example, confusing capital investment with personal business) causes the system to calculate the tax rate incorrectly, leading to incorrect tax obligations.
Conclusion and recommendations
Understanding the concept of taxable personal income and clearly distinguishing it from taxable income not only helps individuals declare their income accurately but also optimizes their tax obligations legally. Seemingly minor errors such as applying deductions without justification, understating income from multiple sources, or choosing the wrong tax bracket are becoming common in the era of electronic tax management.
In the context of interconnected data between tax authorities, banks, and income-paying businesses, dishonest or incomplete declarations can easily lead to tax arrears, late payment penalties, or loss of tax refund rights. Each individual should proactively review their income by category, keep complete records, and stay updated on the latest tax policies before the tax filing deadline.
If you have multiple sources of income, complex tax exemptions, or need a complete review of your year-end tax returns, please contact us. Master Accountant Network (MAN) To receive expert support, save time, and avoid the risk of errors.
Contact MAN for personalized consultation.
- Address: 19A, 43rd Street, Tan Thuan Ward, Ho Chi Minh City
- Mobile / Zalo: 0903 963 163 – 0903 428 622
- E-mail: man@man.net.vn
