Family deduction for dependents who are supportless persons in PIT calculation

In determining taxable income for the calculation of PIT, taxpayers are entitled to certain deductions, including contributions to social insurance, health insurance, unemployment insurance, and other allowances or subsidies as prescribed by law. Additionally, taxpayers may claim family deductions, which include deductions for themselves and for their dependents. While identifying dependents such as children, spouses, or parents of the taxpayer is relatively straightforward, challenges arise in cases where the dependents are supportless persons for whom the taxpayer has to directly nurture. Establishing the legal basis for such dependency and proving the taxpayer’s financial responsibility remain complex issues. 

Pursuant to Clause 1, Article 19 of the Law on PIT 2007 (as amended and supplemented in 2012 and 2014), the family deduction is an amount deducted from taxable income prior to the calculation of tax on income derived from business, salaries, and wages of resident taxpayers. The rationale for the family deduction regime is is that the State exempts from taxation the portion of a taxpayer’s income necessary to sustain the taxpayer’s labor capacity, which includes both self-sustenance and the financial maintenance of dependents.2 

Under Resolution No. 954/2020/UBTVQH14, promulgated by the National Assembly Standing Committee on June 2, 2020, the family deduction applicable from the 2020 tax period is set at 11 million VND per month (equivalent to 132 million VND per year) for the taxpayer and 4.4 million VND per month for each dependent. 

Regarding the determination of dependents for PIT purposes, pursuant to Point d, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC, issued by the Ministry of Finance on August 15, 2013, dependents are classified as follows: 

1. Children, including biological children, legally adopted children, illegitimate children, and stepchildren of either the taxpayer or their spouse. 
2. Spouse of the taxpayer, provided they meet the conditions specified in Point d, Clause 1 of this Article. 
3. Parents, including biological parents, parents-in-law (maternal or paternal), stepparents, and legally adoptive parents of the taxpayer, provided they meet the conditions specified in Point d, Clause 1 of this Article. 
4. Supportless persons whom the taxpayer has to directly nurture, provided they meet the conditions specified in Point d, Clause 1 of this Article. 

For “supportless persons whom the taxpayer has to directly nurture”, the following individuals qualify as dependents: 

1. Biological siblings of the taxpayer. 
2. Grandparents, including paternal and maternal grandparents, as well as paternal aunts, uncles, and older paternal/maternal cousins of the taxpayer. 
3. Grandchildren, specifically children of the taxpayer’s biological siblings. 
4. Other individuals whom the taxpayer is legally required to support in accordance with applicable laws. 

However, not every individual falling within the aforementioned categories automatically qualifies as a dependent. To be eligible, they must satisfy additional conditions as stipulated in Point d, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC, issued by the Ministry of Finance on August 15, 2013, as follows: 

1. For individuals of working age, they must: Be disabled and incapable of working; and have no income, or their average monthly income from all sources in the relevant tax year must not exceed VND 1,000,000. 
2. For individuals outside of working age, they must have no income, or their average monthly income from all sources in the relevant tax year must not exceed VND 1,000,000. 

In practice, taxpayers often face difficulties in proving both the relationship and the obligation to support a dependent, particularly in demonstrating that the dependent is “supportless”. Currently, Vietnamese tax law does not explicitly define the term “supportless”; however, its interpretation can be inferred from various legal provisions, including: 

1. Clause 5, Article 4 of Decree No. 31/2013/ND-CP, dated April 9, 2013, defines a “supportless person living alone” as someone who lives alone and has no or no longer has relatives. 
2. Article 6 of Decree No. 07/2000/ND-CP, dated March 9, 2000, classifies individuals eligible for regular support by communes and wards including: 

1. 1. Orphans under 16 years old who have lost both parents, have been abandoned, or have no relatives to rely on. This includes children who have lost one parent where the surviving parent is either missing (as per Article 88 of the Civil Code) or lacks the capacity to provide care. 
   2. Elderly individuals (aged 60 or older) living alone without support, including those with a spouse who is also elderly and weak, has no children or grandchildren to rely on, and lacks a source of income. Women aged 55 or older with no income and receiving social assistance benefits remain eligible for continued support. 
   3. Severely disabled persons without a source of income or support, including those whose relatives are elderly, weak, or impoverished and unable to provide care. 
   4. Persons with chronic mental illnesses, such as schizophrenia or severe mental disorders, who have undergone repeated treatment at specialized mental health facilities without significant improvement, and who either live alone without support or belong to a poor household. 

Referring to the above regulations, a “supportless person” can be defined as an individual who has no, or no longer has, children or a spouse of working age who is in normal health and capable of providing financial support. This explanation is consistent with the guidance of the Ho Chi Minh City Tax Department in Official Dispatch No. 6087/CT-TTHT, dated June 29, 2016. Accordingly, taxpayers may register for family deductions for dependents classified as supportless persons whom the taxpayer has to directly nurture, provided these dependents meet the specified legal conditions. 

In summary, family deductions represent a tax policy with significant social benefits, promoting tax fairness and reflecting humanitarian principles within the tax system. From a social and ethical perspective, family deductions for dependents help alleviate the financial burden on employees, thereby encouraging them to support and care for their families. Therefore, it is essential for taxpayers to fully understand the relevant legal provisions to ensure proper application when registering dependents for family deductions, especially in the case of supportless persons whom the taxpayer has to directly nurture. 

(1) Bui Thi Men (2021), Current status of family deduction policy when calculating personal income tax in Vietnam, Journal of Economic and Banking Studies, No. 233 – October 2021, https://hvnh.edu.vn/tapchi/vi/thang-10-2021/bui-thi-men-thuc-trang-chinh-sach-giam-tru-gia-canh-khi-tinh-thue-thu-nhap-ca-nhan-o-viet-nam-570.html. 

Share: