Taxable income is an important concept but is easily confused with taxable income in the process of declaring and settling personal income tax. Understanding which income is subject to tax, how to distinguish it from non-taxable income, and the tax calculation formula for each level will help you avoid legal risks and optimize the amount of tax payable in a valid manner. This article will provide detailed instructions on how to determine taxable income, the latest personal income tax calculation formula in 2025, and notes when declaring online via the electronic tax system.
Overview of personal income tax (PIT)
Personal income tax (PIT) is a direct tax, levied on the income of individuals residing or not residing in Vietnam. This is a tool to regulate income, contributing to ensuring social equality, and at the same time being a stable source of revenue for the state budget.
According to 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, copyright, franchise, prize winnings... if exceeding the exemption level are subject to tax.
Distinguish between taxable income and taxable income
What is taxable income?
Taxable income is the total income of individuals subject to tax according to the law. Including receipts in cash, in kind, or other benefits that can be converted into cash from the following activities:
- Labor: salary, bonus, allowance
- Business, capital investment, copyright
- Winning prizes, transferring assets
What is taxable income?
Taxable income is the income after excluding:
- Family deduction (self 11 million/month, dependents 4.4 million/month)
- Compulsory insurance contributions, legal charity funds
Illustrative example:
- Total income: 30 million/month
- Deducting personal deductions, dependents, social insurance → taxable income is about 10-12 million VND.
Common income subject to personal income tax
Below is a summary table of common personal income taxable income, clearly presented by income group:
| Income group | Detailed content | Applicable tax rate |
|---|---|---|
| 1. Salary, wages | – Basic salary, allowances, monthly/quarterly/annual bonuses – Overtime, commission – Receive gifts and benefits that can be converted into money |
Progressive tax schedule from 5% to 35% |
| 2. Capital investment | – Dividends, income, interest on loans between individuals – Private business investment |
5% (excluding bank interest, insurance contracts) |
| 3. Copyright, franchise | – Transfer of rights to use intellectual property, trademarks, software – Franchise exploitation of copyright or proprietary software |
5% |
| 4. Transfer of assets | – Transfer of real estate, unlisted stocks, capital contributions – Does not include single residence registered with tax authorities |
2% on transfer value |
| 5. Win prizes and valuable gifts | – Win lottery, game show, promotion – Gifts such as real estate, cars, gold if value > 10 million VND/time |
10% part exceeding 10 million VND/time of occurrence |
Income not subject to personal income tax (updated 2025)
According to Circular 111/2013/TT-BTC and related documents, the following amounts are exempt from personal income tax:
- Scholarships (government, international, corporate for students)
- Sudden hardship allowance, social insurance allowance (maternity, unemployment, retirement...)
- Life insurance and health insurance compensation
- Overtime pay at night, overtime beyond legal regulations
- Lunch and mid-shift meals within the limit of 730,000 VND/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 income: Taxable income = Total income from all sources – Tax exemptions
How to calculate personal income tax according to the progressive tax table (applied to salary):
Taxable income = Taxable income – 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: Quick and easy guide to declaring at home
Instead of having to go directly to the tax office as before, individuals can now declare and settle personal income tax right at home through two main tools deployed by the General Department of Taxation:
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Personal electronic tax portal: https://canhan.gdt.gov.vn
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HTKK software combined with eTax system (applicable to people with digital certificates or who want to submit XML files)
The process involves just a few basic steps. First, you log in to the system using your personal tax identification number. Next, select the appropriate declaration form – usually 02/KK-TNCN for income settlement from salaries and wages. The system will require entering total income for the year, deductions such as compulsory insurance, family and dependent deductions, and recording the amount of tax temporarily withheld.
Once completed, you can choose to electronically sign and submit directly on the system or download the declaration file to submit via HTKK.
Note: If you have income from two or more places in the same year, such as working full-time and receiving freelance or commission income, you must consolidate all your income and make a tax settlement before April 30 of the following year. In these cases, you cannot authorize a payment unit to declare on your behalf.
Common mistakes when determining taxable income
Incorrectly determining taxable income not only causes individuals to be subject to additional taxes and penalties, but also affects their rights to tax deductions and refunds. Below are some common mistakes that many people still make when declaring personal income tax:
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Confusion between taxable and exempt income: Many people think that all income from work is subject to tax, while some amounts such as mid-shift meal allowance within the limit, overtime pay according to regulations... are exempt from tax according to Circular 111/2013/TT-BTC.
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Arbitrarily applying deductions without supporting documents: A typical example is deducting dependents without registering or without supporting documents, leading to exclusion upon settlement.
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Not declaring income from multiple sources: Individuals working overtime, freelance, teaching online, receiving commissions... if not fully declared, it is easy to be detected through checking bank data or from other income paying units.
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Choosing the wrong industry code or income group: Some cases of declaring the wrong type of income (for example, confusing capital investment with personal business) cause the system to calculate the wrong tax rate, leading to incorrect tax obligations.
Conclusion and recommendations
Understanding the concept of personal income tax and clearly distinguishing it from taxable income not only helps individuals declare accurately but also optimize tax obligations in a valid manner. Seemingly small errors such as applying unfounded deductions, under-declaring income from multiple sources or choosing the wrong tax schedule are becoming common in the era of electronic tax management.
In the context of data interconnection between tax authorities, banks and income-paying enterprises, dishonest or incomplete declarations can easily lead to additional collection, late payment penalties or loss of tax refund rights. Each individual should proactively review income by group, fully store documents and update the latest tax policies before the settlement date.
If you have income from multiple sources, complex exemptions, or need to review your entire year-end tax return, contact us. Master Accountant Network (MAN) for expert support, save time and avoid the risk of errors.
Contact a personal consultant at MAN
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile / Zalo: 0903 963 163 – 0903 428 622
- E-mail: man@man.net.vn
