A draft decree guiding the implementation of the Personal Income Tax (PIT) Law is being widely viewed by legal experts as a strategic policy move, going beyond mere technical tax adjustments to support long-term economic transformation.

The Ministry of Finance has recently released the draft for public feedback, with the decree expected to take effect from July 1. The draft specifies 21 categories of tax-exempt income, adding five, aimed at encouraging individuals working in priority sectors aligned with national development strategies.

Notably, the proposed exemptions cover high-value fields such as science, technology, innovation, and digital transformation. Income from salaries and wages earned through scientific research, technological development, and innovation activities would be exempt from PIT. High-quality human resources in the digital industry, as well as professionals engaged in high-tech research and strategic technologies, would enjoy tax exemptions for up to five years.

The policy is designed to operationalise the Politburo’s Resolution No.57-NQ/TW on breakthroughs in science and technology development, innovation, and national digital transformation, and Resolution No.68-NQ/TW on private sector development, while creating stronger incentives for experts and scientists to contribute to national competitiveness in the digital era.

In addition, the draft proposes exemptions on overtime pay, night-shift wages, and payments for unused annual leave compensation so as to support workers and enhance labour productivity.

In the agricultural sector, tax exemptions are extended to income from cooperative members and partnerships in large-scale farming, forestry, and aquaculture, with the goal of attracting investment and promoting sustainable, modern agricultural production. The decree also amends regulations on tax exemptions on pension payments made by the social insurance fund; income paid by supplementary pension funds and voluntary pension funds (including both monthly and lump-sum payments) to encourage the development of retirement programmes.

It expands tax incentives to support financial market development. These include exemptions on interest from local government bonds, similar to government bonds, and preferential treatment for green finance instruments such as green bonds and carbon credits. A 50% reduction in PIT is proposed for individual investors’ income from certain investment funds over a five-year period, alongside exemptions on long-term holdings of open-ended fund certificates.

According to Dang Van Cuong, a legal expert, the draft reflects a significant shift in tax policy thinking, from “tax collection” to “revenue nurturing.” By accepting short-term reductions in tax revenue, the State aims to stimulate economic growth, attract high-quality human capital, and broaden the tax base in the long run.

However, he also cautioned that clearer criteria are needed to define eligible beneficiaries, particularly in areas such as “high-tech human resources” and “innovation.” Over-expansion of tax exemptions, if not carefully designed, could risk eroding the tax base and undermining equity among taxpayers.

Importantly, the decree is expected to enhance transparency, standardisation, and digitalisation in tax administration. Clearly defined exemption categories will provide a stronger legal foundation for tax authorities in processing, monitoring, and enforcement, while reducing inconsistencies across localities.

For individuals and businesses alike, the policy promises tangible benefits. Workers may see higher post-tax income and improved living standards, while enterprises can better design remuneration packages to attract and retain talent. Ultimately, the draft decree marks a critical step toward building a modern, transparent, and development-oriented tax system in support of Vietnam’s knowledge-based economy./.