From 1 July 2026, businesses face a cluster of major changes: a higher base salary, a lifted social insurance and health insurance cap, and a new Personal Income Tax (PIT) law. Update your payroll, tax and insurance settings for July 2026 now to avoid miscalculations in this July pay run.
| Question | Answer |
|---|---|
| What changes from 1 July 2026? | The base salary rises to VND 2,530,000, and the social insurance and health insurance cap rises to VND 50,600,000. |
| Can PIT still be declared monthly? | No. PIT on salaries moves to quarterly declaration, effective from 8 May 2026. |
| Have the deduction levels changed? | Yes. The personal deduction rises to VND 15.5 million and each dependant to VND 6.2 million per month. |
| Who is affected by the higher cap? | Only employees whose insurance base salary exceeds VND 46,800,000 per month. |
| What should businesses do first? | Reconfigure the insurance cap for the July pay run and merge April to June PIT into the Q2 return. |
| Is overtime and night shift pay subject to PIT? | No. Under Decree 253/2026/ND-CP, overtime and night shift pay is exempt from PIT, and the business must keep a log to substantiate it. |
What are the July 2026 Vietnam payroll tax and social insurance changes?
Four important legal documents converge in their effective dates or finalization timing in Q3 2026. Reading and connecting them is the only reliable way to prevent system errors:
- Decree 161/2026/ND-CP: Shifts the base salary (the reference level), which in turn moves the social insurance, health insurance and trade union funding caps.
- Decision 1109/QD-CT: Changes the PIT return rhythm from monthly to quarterly.
- PIT Law No. 109/2025/QH15: Comprehensively changes taxable income, family deductions and narrows the progressive tax schedule.
- Decree 293/2025/ND-CP: Sets the regional minimum wage (in force from January but governing the unemployment insurance cap throughout 2026).
The sections below work through each change, state who is affected and by how much, then close with a Q3 compliance checklist to hand to whoever runs payroll. Every figure carries its legal basis and effective date so you can trace it to source before applying it.
Base salary rises to VND 2,530,000, lifting the insurance cap
The base salary rises from VND 2,340,000 to VND 2,530,000 per month from 1 July 2026 under Decree 161/2026/ND-CP issued on 15 May 2026. Because this figure is also the reference level for insurance contributions, it directly sets the maximum salary used to compute social insurance and health insurance.
Under Social Insurance Law No. 41/2024/QH15, the monthly insurance contribution salary is capped at twenty times the reference level. The cap therefore rises from VND 46,800,000 to VND 50,600,000, applied from the July 2026 pay run. This is only a change to the cap. Contribution rates are unchanged, so nothing shifts for employees whose insurance base salary sits below the old cap.
| Item | Until 30 June 2026 | From 1 July 2026 |
|---|---|---|
| Base salary (reference level) | VND 2,340,000 | VND 2,530,000 |
| Social insurance and health insurance cap (20 times) | VND 46,800,000 | VND 50,600,000 |
| Trade union dues cap for members | VND 234,000 | VND 253,000 |
These figures apply from 1 July 2026 under Decree 161/2026/ND-CP. Confirm the current base salary on the Government Portal before running payroll, since the reference level may be reviewed again as the public sector pay framework is reformed further.
Which employees will contribute more?
Only employees whose monthly insurance base salary exceeds the old cap of VND 46,800,000 are affected. For this group, both the employer and employee contributions for social insurance and health insurance rise, because the fixed percentage now applies to a larger base. Employees with an insurance base salary at or below VND 46,800,000 see no change.
In practice, the first place this appears is the payroll of foreign experts and senior managers, since this group’s insurance base salary usually sits above the cap. If all of a company’s employees are below that threshold, the higher cap has no cash impact this quarter, and the only task is to confirm the parameter is correct in the system.
Worked example: An employee with an insurance base salary of VND 60,000,000 per month.
- Before 1 July 2026: Contributes only on the maximum cap of VND 46,800,000.
- From 1 July 2026: Must contribute on the new cap of VND 50,600,000 (an increase of VND 3,800,000 in the calculation base).
The monthly difference arising from the July pay run:
- Employee (9.5% deduction, being 8% social insurance plus 1.5% health insurance): An extra VND 3,800,000 x 9.5% = VND 361,000 per month is withheld.
- Employer (21.5% contribution, being 17.5% social insurance plus 3% health insurance plus 1% occupational accident and disease insurance): Personnel cost rises by VND 3,800,000 x 21.5% = VND 817,000 per month per employee.
What must businesses reconfigure in the July pay run?
Update the social insurance and health insurance cap to VND 50,600,000 in the payroll system before processing July payroll. Recalculate contributions for every employee with an insurance base salary above VND 46,800,000, and re-declare the adjusted contributions to the local social insurance authority so records match what was withheld. The trade union dues cap for members also rises to VND 253,000, equal to ten percent of the new base salary.
For a foreign employee who leaves Vietnam, the higher cap also lifts the one-time payout: the claim is worth two months of average insured salary for every year contributed, with the salary capped at VND 50.6 million per month from July 2026. See terra’s one-time Social Insurance claim service for foreigners for the formula, fees and timeline.
Running July payroll on the new cap?
terra handles reconfiguring the cap, recalculating contributions and re-declaring to the social insurance authority so your July pay run closes cleanly.
Monthly PIT declaration removed, moving to quarterly
Vietnam has removed monthly PIT declaration for income from salaries and wages under Resolution 66.16/2026/NQ-CP dated 7 April 2026 and Decision 1109/QD-CT of the Ministry of Finance, effective from 8 May 2026. Income paying organizations that previously declared PIT monthly now declare once per quarter, changing the filing timing and how in quarter withholding is reconciled.
The eTax electronic filing system and the HTKK software have been updated and, in most cases, no longer accept monthly PIT returns. The returns for April, May and June 2026 are merged into the Q2 2026 return. The tax authority is expected to issue further guidance on how to handle April returns filed before the change.
When is the quarterly PIT return due?
The quarterly PIT return follows the standard tax administration deadline: the last day of the first month of the following quarter. The Q2 2026 return covering April to June is therefore due at the end of July 2026. Because the schedule compresses three months of withholding into one filing, reconciliation gaps that used to surface monthly now arrive all at once.
What does this change for the payroll team?
The withholding itself does not change. Businesses still withhold PIT in each pay run, but report and pay quarterly rather than monthly. The real risk lies in cash flow and reconciliation. Set up an internal control that reconciles withheld tax against the total monthly payroll even though the filing cycle is quarterly, so discrepancies are caught before the return is due rather than at quarter end.
PIT Law 2026: deductions, brackets and exemptions
The new Personal Income Tax Law, Law No. 109/2025/QH15, was passed by the National Assembly on 10 December 2025 and takes effect from 1 July 2026, replacing the 2007 law. The provisions most relevant to payroll, being the deduction levels and the schedule for income from salaries and wages, apply from tax year 2026, meaning businesses need to withhold on the new basis from 1 January 2026. The detailed application is guided by Decree 253/2026/ND-CP, set out in the section immediately below.
The personal deduction rises from VND 11 million to VND 15.5 million per month, and the deduction for each dependant rises from VND 4.4 million to VND 6.2 million per month. In other words, each taxpayer gains an extra VND 4.5 million in deduction and each dependant an extra VND 1.8 million per month, lifting take home pay in the middle salary band.
| Deduction | Before 2026 | From tax year 2026 |
|---|---|---|
| Personal deduction | VND 11,000,000 | VND 15,500,000 |
| Deduction per dependant | VND 4,400,000 | VND 6,200,000 |
| Number of brackets | 7 brackets | 5 brackets |
| Top bracket threshold (35%) | Over VND 80 million/month | Over VND 100 million/month |
The deduction levels and bracket thresholds apply from tax year 2026. The procedural detail is now set out in Decree 253/2026/ND-CP and Circular 87/2026/TT-BTC, so businesses should reconcile bracket boundaries directly against these two documents.
How do the new deductions change take home pay?
Consider an employee earning VND 50 million per month with one registered dependant. Total monthly deductions are now VND 15.5 million personal plus VND 6.2 million dependant, before compulsory insurance and other deductible items. Under the old thresholds, this same employee had total deductions of only VND 15.4 million, so the new rules take about VND 6.3 million of income out of the tax net each month for this profile. The largest impact falls on employees supporting a family.
What does the five bracket schedule mean for foreign experts?
The schedule drops from seven brackets to five, the top rate stays at 35 percent, and the threshold for the top bracket rises from taxable income over VND 80 million to over VND 100 million per month. For foreign experts who are tax residents on high salaries, more of their income now sits in the lower and middle brackets, reducing tax actually paid without raising the employer’s cost. Non-resident individuals remain subject to a flat 20 percent on salary income arising in Vietnam, so this schedule applies only once an expert meets the residency condition.
What Decree 253/2026/ND-CP means for payroll from 1 July 2026
The PIT Law 2025 sets the framework, while how it applies to payroll sits in Decree 253/2026/ND-CP, issued on 30 June 2026, effective from 1 July 2026 and replacing Decree 65/2013/ND-CP. This is the group of changes that touches the tax withheld in each pay run directly, not the year end procedure. The sections below read from the angle of what the person running payroll needs to reconfigure.
Overtime and night shift pay exemption, with a new record keeping duty
Overtime and night shift pay is exempt from PIT, but the exemption comes with a documentation duty. The income paying organization must keep a log detailing the night and overtime hours worked and the amounts paid, retained at the business and produced on request by the tax authority. If no separate log is kept, the business must substantiate it through the payroll register, timesheets and employment contracts. Missing documentation means losing the exemption.
Night shift pay is defined within the window from 10 pm to 6 am the following morning. Pay for night hours outside this window that is not overtime pay is not exempt. The effective date differs by residency status, and this is where payroll with foreign staff is prone to error.
| Person | Night shift and overtime pay | Salary tax schedule |
|---|---|---|
| Tax resident individual | Exempt, applied for tax year 2026 | Progressive, 5 brackets |
| Non-resident individual | Exempt from 1 July 2026 | Flat 20% |
Mid shift meal allowance exemption raised to VND 1.2 million
A mid shift or lunch meal allowance paid in cash above VND 1.2 million per person per month is added to taxable income, while the portion at or below VND 1.2 million is exempt. Where the business provides meals directly by cooking on site, buying meal boxes or issuing meal vouchers, no cap applies. This item specifically applies from 1 July 2026.
Voluntary pension and life insurance deduction raised to VND 3 million
Contributions to supplementary pension insurance, voluntary pension insurance and life insurance are deductible from taxable income up to VND 3 million per month, covering both the employer paid portion and the employee paid portion. The old cap was only VND 1 million per month, so this is real headroom to reduce the tax burden for employees who hold these insurance products.
Severance and job loss allowances excluded from taxable income
Unemployment allowance, severance allowance and job loss allowance are not included in taxable income. If the business sets a level higher than the statutory one in its financial regulations, internal rules, employment contract or collective labour agreement, the portion paid above that level is also excluded from taxable income. Previously the excess remained taxable, so this is a notable easing when handling terminations.
New deductions for medical and education expenses
A resident taxpayer may deduct medical expenses up to VND 23 million per year and education and training expenses up to VND 24 million per year for themselves and their dependants, subject to valid invoices and supporting documents. This is an entirely new deduction and should be built into the document collection process ahead of the 2026 finalization.
Housing rent paid by the employer
Housing rent paid on behalf of an employee is added to taxable income at the actual amount paid, but capped at 15 percent of total taxable income at the unit, excluding the rent itself. Since expat packages often include housing, this is a payroll parameter to review.
Higher 10% withholding threshold for casual income
The 10 percent withholding threshold on payments to individuals without an employment contract, or with a contract under three months, rises from VND 2 million to VND 5 million per payment.
Transition handling before and after 1 July 2026
For salary tax already declared under the old rules during the period from 1 January 2026 to before 1 July 2026, businesses do not have to re-file monthly or quarterly returns, and only adjust at the 2026 annual finalization. This directly resolves the concern about compressed reconciliation gaps noted in the quarterly filing section above.
| Item | New rule under Decree 253 | Applies from |
|---|---|---|
| Overtime and night shift pay | Exempt, mandatory log of hours worked | Resident: tax year 2026. Non-resident: 1 July 2026 |
| Mid shift meal allowance paid in cash | Exempt up to VND 1.2 million/month, no cap if meals provided directly | 1 July 2026 |
| Voluntary pension, life insurance | Deduction raised to a maximum of VND 3 million/month | Tax year 2026 |
| Severance and job loss allowances | Not taxable, including the excess where set by internal rules | On the decree’s effective date |
| Medical and education expenses | Deduction up to VND 23 million and VND 24 million/year | Tax year 2026 |
| Housing rent paid by the employer | Capped at 15% of total taxable income | On the decree’s effective date |
| 10% withholding on casual income | Threshold raised from VND 2 million to VND 5 million/payment | On the decree’s effective date |
The decree is effective from 1 July 2026. The provisions on salary income for resident individuals apply for the whole of tax year 2026, while the mid shift meal allowance is fixed to the 1 July 2026 date. Reconcile against Article 69 of Decree 253/2026/ND-CP to confirm the exact date for each item before running payroll.
Have staff working night shifts or overtime on your payroll?
terra configures the exempt and deductible items under Decree 253, and keeps the night and overtime log so your business holds the PIT exemption correctly.
Regional minimum wage and the unemployment insurance cap
The regional minimum wage rose from 1 January 2026 under Decree 293/2025/ND-CP issued on 10 November 2025, replacing Decree 74/2024/ND-CP. The average increase is 7.2%. This change took effect earlier in 2026, but belongs in every July review because it sets the unemployment insurance cap and affects the full year budget alongside the July base salary increase.
Under the labour law framework, the unemployment insurance contribution salary is capped at twenty times the regional minimum wage. For Region I, where the minimum is now VND 5,310,000, the unemployment insurance cap reaches VND 106,200,000 per month. Businesses must also ensure no contract in Region I pays below the new floor of VND 5,310,000.
| Region | Monthly minimum wage from 1 January 2026 |
|---|---|
| Region I | VND 5,310,000 |
| Region II | VND 4,730,000 |
| Region III | VND 4,140,000 |
| Region IV | VND 3,700,000 |
The regional minimum wage applies from 1 January 2026 under Decree 293/2025/ND-CP. The list of localities assigned to each region has also been updated, so check each work location against the current appendix, since ward and commune mergers have changed some classifications.
A tidy way to confirm the full year in one pass is a compliance review that checks payroll configuration, the insurance contribution base and the reporting calendar against current rules, rather than checking each rule in isolation.
Optimize operations with a payroll service
Continuous structural changes in the law at a single point in time pose a significant challenge for a company’s internal HR team.
Beyond ensuring legal compliance, a payroll service on the BPaaS model integrates secure technology that keeps employee salary data fully protected. The business saves on software cost, personnel cost and management time, and can focus resources on its core operations.
Summary
The July 2026 payroll, tax and insurance update can be handled rule by rule, but they all land in the same pay run, so the safe approach is to reconfigure the cap, move to quarterly PIT declaration, apply the new exemptions and deductions under Decree 253 and confirm the new deduction levels in a single review rather than patching piecemeal. If your business wants a second pair of eyes over the configuration before closing July, let terra help.
