The new PIT Law expands exemptions for overtime, science and technology, innovative start-ups, green finance and post-CIT profits of certain business owners.
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The content is provided for information purposes and does not replace legal advice for any specific case.
The Law on Personal Income Tax No. 109/2025/QH15 (effective from 1 July 2026) significantly widens the list of tax-exempt income compared with the former law, in favour of science and technology, innovation, start-ups and green growth.
The exemption list in fact has 21 items. Article 4 of Law No. 109/2025/QH15 has 22 clauses, but clause 22 does not set out a category of income; it asks the Government to issue detailed guidance. Only 21 clauses therefore set out tax-exempt income. Article 3 on taxable income has the same structure: it has 11 clauses, and clause 11 delegates guidance to the Government.
Six entirely new exemptions
The six exemptions below are the most significant additions, and also the provisions whose benefits enterprises and individuals are most likely to miss:
1. Overtime and night work pay are exempt in full
This is the change with the broadest impact on the general workforce. Under the former law, only the differential between overtime pay and pay for normal working hours was exempt from tax. The new law exempts the entire amount of night work pay, overtime pay and salaries and wages paid for days of unused annual leave.
Manufacturing enterprises with a high share of overtime need to reconfigure this item in their payroll systems. Otherwise, they may withhold too much tax from their employees.
2. Income from science, technology and innovation tasks is exempt
Salaries and wages derived from the performance of science, technology and innovation tasks are exempt from tax.
3. Copyright income is exempt when the results of a task are commercialised
Where the results of a task are commercialised in accordance with the law on science, technology and innovation and the law on intellectual property, income from copyright is exempt from tax.
4. Income from innovative start-ups and venture capital funds is exempt
Three types of income are exempt: the income of individual investors and experts from innovative start-up projects; the income of founders of innovative start-up enterprises; and the income of individual investors who contribute capital to venture capital funds. The policy aims to unlock private capital for the start-up ecosystem.
5. Carbon credits and green bonds benefit from exemptions
The exempt items are income from the first transfer of greenhouse gas emission reduction results recognised for an individual and of carbon credits issued to an individual; interest on green bonds; and income from the first transfer of green bonds after issuance.
From the second transfer onwards, carbon credits are taxed at 5% on the portion of income above VND 20 million.
6. Profit already taxed for owners of private enterprises and single-member limited liability companies is not taxed again
This provision ends the double taxation of the same profit. When profit on which corporate income tax has already been paid is distributed to the owner of a private enterprise or of a single-member limited liability company, the owner does not pay personal income tax on it again.
The 21 categories of tax-exempt income under the new Law
| Clause | Content |
|---|---|
| 1 | Transfers, inheritances and gifts of real estate between husband and wife; between biological parents and biological children; between adoptive parents and adopted children; between a father-in-law or mother-in-law and a daughter-in-law; between a father-in-law or mother-in-law and a son-in-law; between paternal grandparents and paternal grandchildren; between maternal grandparents and maternal grandchildren; and between natural siblings |
| 2 | Transfers of residential houses, residential land use rights and assets attached to residential land where the individual has only one single residential house or residential land plot in Vietnam |
| 3 | The value of land use rights of individuals to whom the State allocates land |
| 4 | Income of households and individuals directly engaged in agricultural production, forestry, animal husbandry and aquaculture that is unprocessed or only subject to ordinary preliminary processing; salt production; dividends of members of agricultural cooperatives, farmers participating in the "Large Field" model, production forest planting and aquaculture |
| 5 | Conversion of agricultural land of households and individuals allocated by the State for production purposes |
| 6 | Interest on government bonds, interest on local government bonds (new), interest on deposits at credit institutions and interest from life insurance contracts |
| 7 | Income from overseas remittances |
| 8 | Night work pay, overtime pay and salaries paid for days of unused annual leave, exempt in full (new) |
| 9 | Pensions paid by the Social Insurance Fund; income paid by supplementary retirement insurance funds and voluntary pension funds |
| 10 | Scholarships from the state budget; scholarships from domestic and foreign organisations under education promotion support programmes |
| 11 | Indemnities under life and non-life insurance contracts; compensation for occupational accidents; state compensation and other compensation as prescribed |
| 12 | Income from charitable organisations and funds established or recognised by competent state authorities and operating on a not-for-profit basis |
| 13 | Income from foreign aid sources for charitable and humanitarian purposes approved by competent authorities |
| 14 | Salaries and wages of Vietnamese crew members working for foreign shipping lines or for Vietnamese shipping lines engaged in international transport |
| 15 | Income of ship owners, individuals holding the right to use ships and persons working on board ships from the supply of goods and services serving offshore fishing and catching activities |
| 16 | (New) First transfer of greenhouse gas emission reduction results and carbon credits; interest on green bonds; first transfer of green bonds after issuance |
| 17 | (New) Salaries and wages from the performance of science, technology and innovation tasks |
| 18 | (New) Income from copyright in science, technology and innovation tasks where the results are commercialised |
| 19 | (New) Income of individual investors and experts from innovative start-up projects; of founders of innovative start-up enterprises; and of individual investors contributing capital to venture capital funds |
| 20 | (Extended) Salaries and wages of foreign experts working on non-refundable ODA programmes and projects and on foreign non-governmental projects in Vietnam; of Vietnamese nationals working at representative offices of international organisations within the United Nations System in Vietnam; and of individuals participating in United Nations peacekeeping forces |
| 21 | (New) Income, after corporate income tax has been paid, of individuals who are owners of private enterprises or owners of single-member limited liability companies |
Two important incentives sit in Article 5, not in Article 4
The two policies below are set out in Article 5 of Law No. 109/2025/QH15 on tax exemption and reduction, not in the list of tax-exempt income in Article 4. When preparing files and explanations for the tax authority, an enterprise needs to cite the correct article:
Incentives for fund certificates and distributions from investment funds. Income from the transfer of fund certificates held for two years or more is exempt from tax; distributions from investment funds benefit from a 50% reduction in the tax payable (from 5% down to 2.5%).
Five-year tax exemption for high-quality personnel in the digital technology industry. Salaries and wages of these personnel are exempt from personal income tax for five years. Decree No. 354/2025/ND-CP guides this exemption.
Three steps enterprises should take now
- Reconfigure the payroll system for overtime. Exempting the full amount, rather than only the differential, changes the withholding formula for the whole 2026 tax period.
- Review which employees qualify for the new incentives. Enterprises with an R&D function, with staff who perform science and technology tasks, or with foreign experts on ODA projects need to re-check their withholding obligations.
- Owners of private enterprises and single-member limited liability companies should recalculate the actual tax cost of taking profit out, because the best ownership structure may have changed.