Payroll and Personal Income Tax Updates Under Decree No. 253/2026/ND-CP
08/07/2026
On June 30, 2026, the Government issued Decree No. 253/2026/ND-CP, providing detailed regulations and implementation measures for several provisions of the Law on Personal Income Tax (PIT). These changes not only affect employees’ take-home income but also have a direct impact on payroll processes, human resource management, and employee benefits budgets across businesses.
Comparison of the New Personal Income Tax Regulations
Below are the key updates that businesses need to review and implement:
Item | Previous Rule | From July 1, 2026 | What Employers Should Do |
Dependent deduction (qualified dependents) | Available if the dependent’s average monthly income did not exceed 1,000,000 VND/ per monnth | Dependent’s average monthly income does not exceed 3,000,000 VND/ per month. | Employees remain responsible for accurate tax declarations. However, employers should review all registered dependent records. |
10% Personal Income Tax (PIT) withholding | Applied to payments of 2,000,000 VND/ per payment. | Applies only to payments of 5,000,000 VND/ per payment. It also covers payments made after an employee terminates the labor contract. | Review payments to probationary staff, labor contracts under three months, and Back Pay after resignation. |
Cash meal allowance | Tax-exempt up to 730,000 VND/ per employee per month. | Tax-exempt up to 1,200,000 VND/ per employee per month. Any excess amount is subject to PIT. | Consider providing meals instead of cash. You can also offer meal vouchers or coupons. This approach helps reduce tax costs. In addition, keep internal policies, Payroll records, invoices, and other documents. |
Overtime pay | Only the portion exceeding regular working-hour pay was tax-exempt. | Overtime pay is tax-free when it meets legal rules. However, any excess payment is still taxable. | Keep attendance records and Payroll records. Also save overtime logs and supporting documents. Prepare written agreements when the law requires them. |
Night shift pay | Only the portion exceeding regular daytime pay was tax-exempt. | Night shift pay is tax-exempt when paid under legal requirements. However, any extra payment is taxable. | Keep night shift attendance records. Save Payroll reports and work schedules. Also keep all related documents. |
Unused annual leave payment | Taxable income. | Payment for unused annual leave is tax-exempt if the employee cannot take leave under labor law. However, any extra payment is taxable. | Keep records of severance/termination decisions (if any), annual leave calculation sheets, and annual leave payment schedules. |
Voluntary retirement fund contributions | Maximum deductible amount: 1,000,000 VND/ per month. | Maximum deductible amount: 3,000,000 VND/ per month. | Keep all contribution records. Then update the deduction amount in your Payroll system. |
Severance allowance and job-loss allowance | Tax exemption applied only within the legal limit. | Any amount exceeding the legal requirement is also tax-exempt if stated in the collective labor agreement, collective agreement, financial regulations, or internal policies. | Review and update internal policies if company payments exceed the legal limit. |
Medical expense deduction | Not available. | Deduction available up to 23,000,000 VND/ per year. | Keep valid invoices and receipts. The expense must not be paid by health insurance or another organization. |
Education expense deduction | Not available. | Deduction available up to 24,000,000 VND/ per year. | Keep tuition invoices, payment receipts. Also keep proof that the school is legally recognized. The expense must not be paid by another organization. |
Payroll Challenges for In-House HR Teams
1. Calculation Errors
- Calculating tax on amounts above the legal limit is not simple. This applies to overtime pay and unused annual leave payments. HR teams must review detailed attendance data before processing Payroll. As a result, the workload for HR and accounting teams increases.
2. Risk of Incomplete Dependent Records
- The income limit for dependents has increased to 3,000,000 VND/ per month. Therefore, HR teams must review all existing records. Missing or outdated information may lead to incorrect tax filings. As a result, the company may face tax reassessment and penalties.
3. Heavy Document Management
- Employees can now claim deductions of up to 47,000,000 VND/ per year for medical and education expenses. However, this creates more work for HR.
- For temporary workers and freelancers, HR must collect and keep a written commitment under Clause 2, Article 50 of Decree No. 253/2026/ND-CP. This document supports temporary tax withholding exemptions.
- HR teams now play a key role in verifying invoices, reviewing medical expense records that meet Ministry of Health requirements. They also confirm the source of payment.
4. Limited Tax Compliance Capacity
- Many HR teams already manage recruitment, attendance, social insurance, and daily operations. Therefore, they often have little time to follow new tax rules. As a result, businesses may miss opportunities to improve employee benefits.
Optimize Payroll with NIC Global
Tax and labor regulations continue to change. Therefore, businesses need a trusted partner. NIC Global helps companies reduce administrative work and focus on business growth.
- Payroll Outsourcing: Our Payroll system updates automatically whenever regulations change. This helps your business stay compliant and reduce manual work.
- Compliance Management: Our experienced specialists handle administrative procedures on your behalf. As a result, your HR team can focus on strategic priorities.
Are you concerned about frequent policy changes? Contact NIC Global today. We will help you stay up to date with the latest regulations and optimize your HR processes with confidence.
For contact and support:
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