Vietnam PIT 2026: Five Payroll Changes Employers Could Easily Get Wrong

A benefit that an employer continues to provide in the same way as last year may not receive the same tax treatment this year.

From 2026, new personal income tax (PIT) rules change the treatment of many familiar payroll items. These include meal allowances, housing, night work and overtime, payments for untaken annual leave, amounts paid after an employee leaves, the 10% withholding threshold, annual tax finalisation where an individual earns additional income elsewhere, and the income ceiling for dependants. Most of these changes apply to the 2026 tax year. The VND 1.2 million meal-allowance cap is different, as it applies only from 1 July 2026.

1. The VND 1.2 Million Meal-Allowance Cap Has Its Own Start Date

Where an employer pays a mid-shift meal or lunch allowance in cash, up to VND 1.2 million per employee per month is excluded from taxable income. Any excess is subject to PIT. By contrast, meals organised by the employer through an in-house kitchen, catered meals or meal vouchers are not included in taxable income.

The easy mistake is timing. Unlike most new salary and wage rules, which apply throughout the 2026 tax year, the VND 1.2 million cap applies only from 1 July 2026. Employers should therefore not automatically use the new cap to recalculate the period from January to June.

The operational issue is not only the amount. Payroll systems should distinguish a cash payment from a meal organised by the employer, because the two forms of support receive different tax treatment.

2. Employer-built Housing Is Not The Same As Rent Paid On An Employee's Behalf

A benefit arising from housing or worker accommodation built by an employer for its employees is not included in taxable income. This also covers electricity, water and related services associated with that housing.

The result is different where the employer rents accommodation from a third party or pays an employee's rent, electricity, water or related service costs. These amounts are taxable at the actual amount paid, subject to a cap of 15% of the employee's total taxable income arising at that employer, excluding the housing benefit itself.

An externally rented apartment does not become "employer-built housing" merely because the employer is named in the lease or makes the payment directly. The correct classification turns on the substance of the housing arrangement, not only how the employer accounts for or labels the benefit in payroll.

3. Night Work, Overtime and Untaken Leave Require A More Cautious Reading

Under the new wording, salary and wages for night work or overtime are exempt from PIT where the work is performed in accordance with the conditions and working-time requirements of labour law. Official Letter No. 2231/CST-TN presents this as a change from the previous rule, under which the exemption was limited to the amount paid above the normal daytime or normal-hours rate.

This is the most notable change, but also the one requiring the greatest caution in its first year. Employers should not assume that every payment labelled "overtime" is automatically exempt from PIT. Working hours, overtime conditions, payment levels and supporting records must comply with labour law. The income-paying organisation must also prepare and retain a schedule of the relevant hours and amounts paid, and produce it if requested by the tax authority.

The new framework also exempts wages paid for untaken annual leave, but only where the payment falls within the circumstances and amounts permitted by law. Under the Labour Code, the obligation to make such a payment arises where an employee leaves employment or loses their job without having taken all accrued annual leave. The exemption should not automatically be extended to every scheme that allows employees to exchange unused leave for cash while they remain employed.

4. VND 5 Million and VND 15 Million Are Different Tests

For an individual who does not sign a labour contract, or signs one for less than three months, the payer must withhold PIT at 10% where each payment is VND 5 million or more. The previous threshold was VND 2 million per payment. This rule also covers salary and wage payments made after the labour contract has ended.

The VND 5 million threshold is tested on a per-payment basis. It does not replace, and should not be confused with, the separate annual-finalisation rule. Additional income earned from another payer may not need to be included in the individual's annual finalisation where it does not exceed VND 15 million per month on average during the year and has already been subject to 10% withholding.

An employer making a post-termination payment must therefore determine the withholding obligation at the time of payment. Whether the individual must later include that amount in their annual finalisation is a separate question.

5. The Dependant Income Ceiling Is Higher, But The Paperwork Has Not Disappeared

A dependant is treated as having no or low income where average monthly income from all sources does not exceed VND 3 million. This is the income ceiling for qualifying as a dependant. It is not the monthly deduction available to the taxpayer.

Compared with the previous VND 1 million threshold, the change may bring more people within the rules. Examples may include parents with modest income or adult children who work part-time but earn little.

The tax authority is required first to use information available through the National Public Service Portal, tax administration systems, national databases and specialised databases. Only where those sources cannot be used must the taxpayer provide the prescribed supporting documents. The income-paying organisation nevertheless remains responsible for retaining and producing dependant records when requested.

Digitisation may reduce paperwork in some cases. It is not a reason for employers to abandon document controls.

What Should Employers Do Before The 2026 Annual Finalisation?

Employers should take five steps:

• review payroll codes for meal allowances, housing, overtime, untaken leave and post-termination payments;
• distinguish clearly between benefits in kind, cash allowances and amounts paid on an employee's behalf;
• strengthen time records, overtime approvals, payment schedules and the legal basis for payments for untaken leave;
• update payroll systems for the VND 5 million, VND 15 million and VND 3 million thresholds; and
• review returns filed during the first six months of 2026 and deal with any differences through the 2026 annual finalisation rather than automatically amending each periodic return.

The significance of this reform is not limited to tax rates or deduction amounts. The greater risk lies in classifying a payment incorrectly, applying the right rule from the wrong date, or lacking the records needed to defend the chosen tax treatment. The 2026 annual finalisation will be the first time these issues are tested together.

The Bottom Line

Employers should pay particular attention to five points:

• Cash meal allowances for mid-shift meals or lunch are exempt only up to VND 1.2 million per employee per month, and the new cap applies from 1 July 2026.
• Employer-built housing may be tax-exempt, while rent paid on an employee's behalf may be taxable.
• The new wording on night work and overtime is broader than before, but the exemption remains closely tied to labour-law conditions and supporting records. Payment for untaken annual leave is exempt only where it complies with labour law.
• The 10% withholding threshold is VND 5 million for each payment. The VND 15 million average-monthly threshold is a separate annual-finalisation test for additional income earned elsewhere.
• A dependant may have average monthly income of up to VND 3 million, but employers must still maintain proper document controls.

Primary legal sources:

• Decree No. 253/2026/ND-CP dated 30 June 2026, effective from 1 July 2026.
• Circular No. 87/2026/TT-BTC dated 30 June 2026, effective from 1 July 2026.
• The 2019 Labour Code, in particular Articles 107 and 113.3.
• Official Letter No. 2231/CST-TN dated 31 July 2026 and its accompanying appendix.

Vilasia is a Vietnamese law firm specialising in M&A, venture capital, finance and competition law. The firm was named Best New Law Firm at the Vietnam Law Firm Awards 2026, organised by Asia Business Law Journal.