Ministry of Finance speaks out on proposal to tax personal income on savings interest

The Ministry of Finance proposes to continue to maintain the regulation on personal income tax exemption for savings interest as current regulations.

The Ministry of Finance said that in the proposal to build the draft law on Personal Income Tax (replacement) sent to ministries, branches, localities and people for comments, the Ministry of Finance proposed to continue to maintain the regulation on exemption of personal income tax (PIT) for savings interest as currently regulated.

Regarding interest on savings deposits, the current Personal Income Tax Law stipulates tax exemption for income from interest on deposits at credit institutions, interest from life insurance contracts, interest on government bonds, pensions, etc.

The regulation on exemption of personal income tax on income from interest on deposits at credit institutions aims to encourage individuals who do not have the need to directly invest in production and business to deposit savings through banks - an important capital mobilization channel for the economy. This is also a welfare policy for those who are unable to work (retirees, disabled people...) who have idle money to deposit in banks to receive interest.

Previously, in the draft proposal to develop the latest draft law on personal income tax (replacement) sent to the Government, the Ministry of Finance proposed to review and supplement regulations on taxable income in the direction of adding other income groups (and at the same time assigning the Government to specify details to suit the actual situation), or specify other income as taxable income.

Although the Ministry of Finance did not propose to tax personal income on savings deposits, it also cited examples of taxable income in Thailand, China, and South Korea. The common point is that all three countries tax personal income on income from bank interest. Although the Ministry of Finance has not officially proposed to specifically include savings interest in the personal income tax, the raising of the issue has attracted the attention of the public.

Commenting on the draft proposal to build the Law on Personal Income Tax (replacement) of the Ministry of Finance, the People's Committee of Can Tho City said that the operator should study and expand the tax base. Accordingly, the province proposed that interest on savings deposits should only be exempt from personal income tax for small savings.

However, Ninh Thuan province believes that interest rates on savings deposits, government bonds, and long-term investments should be tax-free to encourage savings and economic development.

As reported by the Vietnam Women's Newspaper, in recent days, many economic experts have commented that including savings interest as a subject of personal income tax in Vietnam is inappropriate and could cause many negative consequences for the economy.

Taxing savings interest can affect the banking system's ability to mobilize capital. Once the amount of people's deposits decreases, commercial banks will have to compete for deposit interest rates, which will lead to an increase in lending interest rates and borrowers (businesses and people) will still be the ones most affected.

Taxing deposit interest is normal in developed countries, but it should not be done in Vietnam at the moment. In the next 5 years, Vietnam should not discuss this tax.

Later, if tax is imposed, it is necessary to determine the subjects and tax threshold and only apply it to people with high income.

Source: https://phunuvietnam.vn/bo-tai-chinh-len-tieng-ve-de-xuat-danh-thue-thu-nhap-ca-nhan-voi-lai-tiet-kiem-20250221093414961.htm