Calculation formula personal income tax Progressive taxation is a crucial legal framework that accountants, auditors, and taxpayers need to understand when fulfilling their financial obligations in 2026. This is in accordance with the Personal Income Tax Law and its guidelines. Circular 111/2013/TT-BTC, The progressive tax rate applies to income from salaries and wages of resident individuals with employment contracts of 3 months or more. Incorrect application of this formula, especially in the context of increasingly digitized tax audits, can lead to back taxes, penalties for late payment, and negatively impact the level of tax compliance of businesses.
In 2026, as economic policies and personal deductions continue to evolve towards modernization, accurately determining taxable income becomes crucial for optimizing personnel costs. This article, written by the senior expert team of MAN – Master Accountant Network, focuses on an in-depth analysis of tax brackets and the personal income tax settlement process. Through practical examples and illustrative spreadsheets, MAN helps businesses and individuals understand, proactively manage, and effectively comply with tax accounting practices in 2026.
Legal basis for adjusting the progressive personal income tax calculation formula in 2026.
2026 marks a period of accelerated tax management using artificial intelligence; however, the legal foundations of the progressive personal income tax calculation formula still rely on core legal documents. Updating the General Department of Taxation's new guidance documents in the 2025-2026 period is a prerequisite to ensure compliance.
Key regulatory documents include:
- Personal Income Tax Law (which has been consolidated over time): Framework regulations on taxable income and taxpayers.
- Circular 111/2013/TT-BTCThis is the most detailed document providing guidance on the progressive tax system and exempted income categories.
- Resolution 954/2020/UBTVQH14This remains the basis for the personal allowance (11 million VND for the individual and 4.4 million VND for dependents), unless new resolutions adjusting for the consumer price index (CPI) are issued in 2026.
- Circular 80/2021/TT-BTCThis document provides guidance on the implementation of certain provisions of the Law on Tax Administration, particularly important for the tax return filing and settlement process.
Any policy changes in 2026 require professionals to have a comprehensive understanding in order to apply the progressive personal income tax calculation formula flexibly while remaining within the legal framework.
Subjects to whom the progressive personal income tax calculation formula applies
Correctly identifying the target group helps accountants avoid fatal errors in financial reporting. The progressive personal income tax calculation formula only applies to resident individuals with income from salaries and wages and who have signed employment contracts of 3 months or more. This includes personnel who are in the contract transition phase or whose contracts are continuously renewed.
It should be noted that in 2026, the management of electronic labor contracts will develop strongly, making it easier for tax authorities to verify. If businesses incorrectly apply the progressive personal income tax calculation formula for non-resident individuals (tax rate 20%) or individuals with short-term contracts of less than 3 months (tax rate 10%), the risk of having salary expenses disallowed during corporate tax settlement is very high.
Details of the progressive personal income tax calculation formula for 2026.
To calculate the actual amount of tax payable, we need to adhere to a multi-tiered calculation structure. The standardized progressive personal income tax calculation formula is as follows:
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Personal income tax payable = Tax rate (according to the 5-tier tax bracket) x Taxable income |
In there, Taxable income This is the most important variable, calculated as follows:
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Taxable income = Taxable revenue – Deductions |
| Ingredient | How to determine details | Legal basis 2026 |
| Taxable income | Total income received – Tax-exempt amounts | Article 3 of the Personal Income Tax Law |
| Deductions | (New family circumstances) + (Insurance) + (Retirement fund) | This resolution takes effect from January 1, 2026. |
| Taxable income | The remaining value after deducting all allowances. | Used for comparison with the 5-tier tax schedule. |
Determine taxable income in the 2026 formula.
In the structure of the progressive personal income tax calculation formula, taxable income excludes tax-exempt allowances according to prescribed limits. Note that in 2026, allowances for meals, clothing, and telephone must be clearly specified in the financial regulations to be excluded when calculating tax.
New personal allowance rates will be applied from January 1, 2026.
Family deduction level The most significant change, effective from January 1, 2026, is to ensure that employees can accurately apply the progressive personal income tax calculation formula.
- Personal deduction: 186 million VND/year (equivalent to 15.5 million VND/month).
- Deductions for dependents: 74.4 million VND/year (equivalent to 6.2 million VND/month).
Raising this deduction significantly improves workers' real income before considering progressive tax brackets.
New 5-tier progressive tariff system – Updated 2026
From 2026, progressive personal income tax rate This has been simplified to streamline calculations and reduce the burden on taxpayers. The progressive personal income tax calculation formula will be based on the following five main tax brackets:
| Level | Taxable income/month (Million VND) | Tax rate | Reduction method |
| 1 | Up to 10 | 5% | 5% TNTT |
| 2 | Between 10 and 30 | 10% | 10% TNTT – 0.5 |
| 3 | Between 30 and 60 | 20% | 20% TNTT – 3.5 |
| 4 | Between 60 and 100 | 28% | 28% TNTT – 8.3 |
| 5 | Over 100 | 35% | 35% TNTT – 15.3 |
Note: TNTT stands for Taxable Income. Unit of measurement: Million VND.
This simplification makes the progressive personal income tax calculation formula easier to understand, helping accountants to perform tax settlements quickly and reducing errors at intermediate levels.
Practical example of applying the progressive personal income tax calculation formula in 2026.
Let's examine the changes that occur when applying the 15.5 million VND deduction and the 5-tier tax system to an individual.
Situation: Mr. C's total monthly income in February 2026 was VND 55,000,000. He has one dependent. Insurance contributions are based on a salary of VND 20,000,000.
Step 1: Calculate deductions
- Personal deduction: VND 15,500,000.
- Deduction for one dependent: VND 6,200,000.
- Insurance (10.5%): 20,000,000 x 10.5% = 2,100,000 VND. Total deduction = 15,500,000 + 6,200,000 + 2,100,000 = 23,800,000 VND.
Step 2: Calculate taxable income
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Taxable income = 55,000,000 – 23,800,000 = 31,200,000 VND. |
Step 3: Apply the progressive personal income tax calculation formula (5-tier system).
With an income of 31.2 million VND, Mr. C belongs to Tier 3 (30 to 60 million VND). The personal income tax payable = (20% x 31,200,000) – 3,500,000 = 2,740,000 VND.
Compared to the old tax schedule, the new progressive personal income tax calculation formula helps Mr. C save a significant amount of tax thanks to a higher personal allowance and a wider tax bracket.
Common mistakes when applying the progressive personal income tax calculation formula.
In its consulting activities, MAN – Master Accountant Network frequently identifies the following common errors:
Error number oneThe old deduction amount (11 million VND) is still being applied because the software or new regulations effective from January 1, 2026, have not been updated. This distorts the entire progressive personal income tax calculation formula.
Second errorConfusion arises between the 7-tier and 5-tier tax brackets. Incorrect application of tax rates at intermediate brackets leads to inaccurate tax payments, causing difficulties during annual tax settlement.
Third errorNot all deductible insurance contributions are included. Accountants should note that social insurance, health insurance, and unemployment insurance are important safeguards in the progressive personal income tax calculation formula.
Optimizing taxes through a deep understanding of the progressive personal income tax calculation formula.
With a five-tier tax system, the wider gap between tax brackets allows businesses to optimize income. Understanding the structure of the progressive personal income tax calculation formula helps HR departments build a reasonable salary and bonus increase plan, avoiding wasteful allocation of additional income to higher tax brackets.
Annual tax settlement is the final step to summarize and correct monthly provisional calculation errors. In 2026, with the application of new deduction levels, tax settlement becomes even more important so that taxpayers can receive refunds for overpaid taxes or offset deductions that were not declared in time.
Tax settlement support and progressive personal income tax calculation formula consulting services from MAN.
MAN – Master Accountant Network is a trusted partner helping businesses quickly adapt to changes in personal income tax in 2026. We offer:
- Auditing servicesReview compliance with the new five-tier tax system and deductions.
- Tax accounting & Tax Consulting: Update the payroll system according to the progressive personal income tax calculation formula for 2026.
- Tax settlement servicesProcessing annual tax returns quickly and efficiently, optimizing tax refunds for employees.
- Tax reportingEnsure that all declarations are accurate and comply with the latest regulations.
Conclude
The progressive personal income tax calculation formula, with updates to the VND 15.5 million deduction and the 5-tier tax bracket system, represents a significant step forward in tax reform in 2026. Understanding these changes not only helps accountants fulfill their responsibilities correctly but also reassures employees about their financial rights. In a context where legal regulations are constantly evolving, regularly updating knowledge is a key factor in effective tax risk management.
Hopefully, this article has helped you fully understand the progressive personal income tax calculation formula for 2026. If your business requires in-depth support for auditing, tax accounting, or tax consulting and settlement services, please contact MAN – Master Accountant Network. We are committed to providing professional and accurate tax solutions to help you optimize your tax obligations and develop a sustainable business!
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about the Progressive Personal Income Tax Calculation Formula 2026
Reducing the number of tax brackets from seven to five aims to simplify the tax system, lessen the administrative burden, align with international practices, and make it easier for workers to calculate their own taxes.
Yes, this is the personal deduction applicable to all resident individuals with income from salaries and wages when applying the progressive personal income tax calculation formula from 2026.
Essentially, the application still complies with regulations regarding proof of blood or adoptive relationship, but the deduction per person has increased to 6.2 million VND/month. Why was the tax brackets reduced to five?
Does the 15.5 million VND discount apply to everyone?
Have there been any changes to the dependent's profile?
