Vietnam’s 35% top income tax rate among Southeast Asia’s highest
Vietnam’s top individual income tax rate of 35% is among the highest in Southeast Asia, Deloitte Vietnam said in a report and called for changes.
Thailand and the Philippines have similar top rates while they are 24% in Singapore and 30% in Malaysia and Myanmar.
The British audit and consulting company was commenting on the Ministry of Finance’s recent proposal to amend the Personal Income Tax Law.
The ministry plans to reduce the number of tax brackets from seven to five, but maintain the 35% maximum marginal rate though increasing the income threshold for it to VND100 million per month from the current VND80 million.
The Ministry of Finance said the top rate would be retained since it aligns with international levels. Countries such as Thailand, Indonesia, and the Philippines also have a 35% rate while China, South Korea and Japan impose up to 45%, it said.
It also proposes to raise the deduction for health and education expenses, which would lower tax burden, it added.
But many analysts describe the 35% rate as too high. Nguyen Thuy Duong, head of personal tax advisory at professional services firm KPMG Vietnam, said Vietnam applies the 35% rate for income that is 10 times its per capita GDP as against Thailand’s 20 times and Indonesia’s 62 times.
This means the upper-middle class is subject to the top rate while in other countries only the wealthiest pay it, she added.
KPMG recommended reducing the top rate from 35% to 30% to align with international practices and help attract skilled workers.
This was backed by the Ho Chi Minh City Tax Advisors and Agents Association and the Vietnam Automobile Manufacturers Association.
Tax experts say a lower tax rate not only attracts talent but also influences foreign investment decisions, encourages legitimate wealth creation and helps prevent tax evasion.
A 25% cap also has supporters. Phan Huu Nghi, deputy director of the Institute of Banking and Finance, said a 25% cap would better fit Vietnam’s modest average income and need for economic growth and investment.
« When our average income reaches higher thresholds, we can consider increasing the personal income tax rate. »
Vietnam’s per capita income has been rising steadily, reaching $4,700 last year, and the government has ambitious growth targets to help achieve high-income status by 2045.
Vu Minh Khuong of the Lee Kuan Yew School of Public Policy in Singapore said at 6.5% annual GDP growth, the per capita income could reach $15,000 by 2045 and $20,000 by 2050.
Personal income tax is now the third largest source id revenues for the government behind value-added and corporate taxes.
Last year total revenues topped VND2 quadrillion, with personal income tax accounting for VND189 trillion, up 20% year-on-year. It accounted for 9.3% of total revenues as against 5.3% in 2011.
A VnExpress survey in August found 73% of respondents favoring a maximum personal tax rate of 20–25% and 7% wanting a 30% ceiling while only 5% supported the 35% cap.
Even if the 35% cap were to be retained kept, the thresholds should be raised, analysts said.
Nguyen Van Duoc, director of Trong Tin Accounting and Tax Consulting, called for the threshold to be raised to VND120–150 million a month rather than VND100 million.
Duong said the 35% rate should only be for an income of 20 times per capita GDP instead of the current 10, which means the threshold should to be raised to VND120 million.
Deloitte Vietnam has called on the government to raise the thresholds for all brackets, especially at the higher levels, to dovetail with economic growth and attract talent.
By Phuong Dung & Quynh Trang – VnExpress.net – September 19, 2025