What Is Personal Tax Relief? Meaning, Conditions, and How to Register

Vũ Khôi

Author at Wotech Electronics Blog

What Is Personal Tax Relief?

Personal tax relief (giảm trừ gia cảnh) is an amount deducted directly from taxable income — specifically, personal income tax before calculation — for income from business, salaries, and wages, as prescribed by law for resident individual taxpayers.

This deduction is defined quite fully in the Personal Income Tax Law. Aiming at people whose income is high relative to the general level of society, the State has provided for family-circumstance relief in certain specific cases.

Personal tax relief applies to the following two subjects:

• For the personal income taxpayer himself/herself.

• For dependents of the taxpayer.

The Meaning of Personal Tax Relief

Recognizing the right to personal income tax relief fully fits practical social requirements while ensuring fairness for taxpayers.

In practice, there are two meanings, belonging to two main aspects:

• The social-ethical aspect.

• The socio-economic aspect.

On the social-ethical side, personal tax relief is extremely meaningful. First, it enables personal income taxpayers to fulfill the moral material obligations they owe their family members. From there, it strengthens solidarity and fosters the spirit of mutual support.

Second, respecting material obligations toward family members and relatives is one of the widespread cultural traditions in Eastern countries. Therefore, the regulation on tax reduction for dependents contributes to achieving the State's social objectives.

On the economic side, personal tax relief for income taxpayers means removing amounts from taxable income. This is an effective measure to regenerate the taxpayer's labor capacity, while creating conditions for workers to raise their productivity — or at least keep it no lower than before.

Who Can Register Dependents for Personal Tax Relief?

Tax Relief for Children

Including: biological children, legally adopted children, stepchildren of either spouse, and children born out of wedlock, specifically as follows:

• Children under 18 years old (calculated in full by day and month). Example: if Ms. Minh has a child born on September 20, 2010, that child will be counted as a dependent from September 20, 2010.

• Children over 18 who are disabled, handicapped, and unable to work.

• Children studying at university, college, or intermediate level in Vietnam or abroad (including the period waiting for university entrance exam results, from June to the end of September of the 12th-grade year) who have no income or whose average monthly income for the year does not exceed 1,000,000 dong.

Tax Relief for a Spouse

The taxpayer's husband or wife must fully meet the conditions specified in Clause 1, Article 9 of Circular No. 111.

Tax Relief for Parents

Biological mother and father, including parents-in-law (wife's mother and father or husband's mother and father); stepmother and stepfather; and legal adoptive mother and father of the personal income taxpayer must fully meet the conditions specified in Clause 1, Article 9 of Circular No. 111.

Other cases of people with no one to rely on whom the taxpayer must directly support and who meet the conditions in Clause 1, Article 9 of Circular 111 include:

• The taxpayer's siblings.

• The taxpayer's paternal and maternal grandparents; aunts, uncles, and blood-related uncles and aunts.

• The taxpayer's grandchildren, including the children of the taxpayer's siblings.

• People required by law or a competent authority to directly support others.

Conditions for Personal Tax Relief for Dependents

The dependent subjects and individuals listed above must meet the following conditions:

For individuals of working age

They must fully meet the following conditions:

• Disabled, handicapped people unable to work: individuals covered by disability law, or people with diseases that leave them unable to work (such as AIDS, chronic kidney failure, cancer, etc.).

• People with no income, or with an average monthly income for the year not exceeding 1,000,000 dong.

For individuals beyond working age

No income, or an average monthly income for the year not exceeding 1,000,000 dong.

How to Register for Personal Tax Relief

Under Vietnamese law, registering for personal tax relief can be divided into two cases:

• The individual registers directly with the tax authority.

• The individual registers dependents through the income-paying organization (the enterprise).

Depending on the case, the relief dossier and documents will differ somewhat, as follows:

Case 1: The Individual Registers Directly with the Tax Authority

Step 1: Prepare the dossier.

Under Point a, Clause 10, Article 7 of Circular 95/2016/TT-BTC, individuals registering for personal tax relief need to prepare the following documents:

The dependent registration declaration for people with income from salaries and wages, using Form No. 20-ĐK-TCT (the declaration must have the "Tax registration" box checked and all information filled in).

If the dependent holds Vietnamese nationality:

Uncertified copies of the Citizen ID Card, a valid ID Card (for people aged 14 and over), or a valid Birth Certificate (for people under 14);

If the dependent holds foreign nationality or is a Vietnamese living abroad:

Uncertified copies of a valid Passport or Birth Certificate.

Step 2: Submit to the tax authority.

Case 2: The Individual Registers Dependents Through the Income-Paying Organization or Enterprise

Step 1: Prepare the documents, then send them to the enterprise.

Under Point b, Clause 10, Article 7 of Circular 95/2016/TT-BTC, individuals need to prepare the following documents:

The individual will send an authorization letter (Authorization Form).

If the dependent holds Vietnamese nationality:

The dependent's documents (uncertified copies of the Citizen ID Card, a valid ID Card (for people aged 14 and over), or a valid Birth Certificate (for people under 14);

If the dependent is a foreigner or a Vietnamese living abroad:

Uncertified copies of a valid Passport or Birth Certificate.

Step 2: The enterprise submits the dossier to the tax management authority.

The income-paying organization consolidates the dependents' tax registration dossiers;

Submits the consolidated tax registration declaration for dependents using Form No. 20-ĐKT-TH-TCT (the declaration must have the "Tax registration" box checked and all information filled in) on paper or through the General Department of Taxation's electronic information portal.

What Is the Personal Tax Relief Amount?

For residents who have both business income and income from salaries and wages, the personal tax relief is calculated once against the total income from both business and salary/wage sources.

Personal Tax Relief Levels in 2022

• For the personal income taxpayer: 9 million dong/month, equivalent to 108 million dong/year.

• For each dependent: 3.6 million dong/month.

Principles for Calculating Personal Tax Relief

Principle of relief for the taxpayer himself/herself

Taxpayers with multiple sources of income — from salaries and wages, or from business — may, at any given time (counted in full months), choose to calculate personal tax relief for themselves at one location.

For foreigners residing in Vietnam, personal tax relief is calculated for themselves from January, or from the month they arrive in Vietnam if it is their first time in the country, through to the month the contract ends and they leave Vietnam within the tax year (counted in full months).

If in the tax year the individual has not yet been granted personal tax relief, or has been granted it for fewer than 12 months, they will be granted the full 12 months when finalizing taxes as prescribed by the Tax Law.

Tax Relief for Dependents

A personal income taxpayer is granted tax relief for a dependent if that dependent has been registered for tax and issued a tax identification number.

When a personal income taxpayer registers a dependent for tax relief, the tax authority will issue a tax identification number for the dependent, and the taxpayer will be provisionally granted the tax relief during the year from the time of registration. For dependents registered before this Circular took effect, the personal income tax relief will continue until they are issued a tax identification number.

If the personal income taxpayer has not claimed relief for a dependent during the tax year, the dependent's tax relief will be calculated from the month the support obligation arises, when the taxpayer finalizes taxes and has registered the dependent for relief. For other dependent cases as guided at Point d.4, Clause d, Clause 1, the deadline for registering tax relief is December 31 of the tax year at the latest; past that deadline, relief will not be granted for that tax year.

Each dependent may only be counted once for personal tax relief, by one personal income taxpayer, in a tax year. Where multiple taxpayers share the same dependent to support, the taxpayers must agree among themselves to register the relief under one taxpayer.

Conclusion

We hope this article has answered your questions about personal tax relief when paying personal income tax. If you still have any questions, leave a comment below this article so SimERP can help you get a quick answer!

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