Quick answer: When a contract states a net salary (take-home, tax-exclusive), the company cannot apply the net figure straight to the tax brackets — it must first be grossed up to taxable income before computing PIT. The conversion principle: find the gross income level at which, after subtracting the tax due, the employee takes home exactly the agreed net. Under the 5-bracket progressive schedule applicable from tax year 2026, a net salary of VND 45 million/month grosses up to about VND 52 million, with PIT of about VND 6.9 million/month — far above the “naive” calculation of applying 45 million to the brackets.
Applicable legal bases
The framework below is in force as of 20 October 2026 and directly governs this article:
- Law on Personal Income Tax 109/2025/QH15 (effective 01/07/2026; provisions on employment income of resident individuals apply from tax year 2026; replaces Law 04/2007/QH12) — 5-bracket progressive schedule: 5% (up to 10 million), 10% (10–30 million), 20% (30–60 million), 30% (60–100 million), 35% (above 100 million VND/month); family deductions VND 15.5 million (self) and VND 6.2 million/month (per dependent).
- Decree 253/2026/ND-CP (effective 01/07/2026) — guidance on determining taxable income for tax-exclusive income and the conversion method.
- Law on Tax Administration 108/2025/QH15 (effective 01/07/2026, replacing Law 38/2019/QH14) — withholding and filing obligations of the payer.
In-depth analysis
Net salary deals are standard for foreign experts: the candidate wants certainty about monthly take-home pay, and the company absorbs all PIT and insurance. But technically, PIT is always computed on gross income — income before tax. When the company pays the tax on the employee’s behalf, that tax is economically part of the employee’s income, so it must be added back to arrive at the correct taxable income. Skipping the conversion and applying the net figure to the brackets is a common accounting error that produces systematic underpayment, caught at finalization.
The conversion formula in principle: Taxable income (gross) = Take-home pay (net) + PIT payable + mandatory insurance (if paid by the company). Because the progressive rate depends on the very gross figure being solved for, conversion uses iteration: assume a gross level, compute tax under the progressive schedule, check whether the remaining net matches the agreed figure, and adjust. The implementing guidance (formerly an appendix to Circular 111/2013, now under Decree 253/2026) publishes ready conversion tables by income band so companies can look up instead of iterating manually.
Worked example: net VND 45 million/month
Resident expert, agreed net VND 45 million/month (tax-exclusive; assuming mandatory insurance and family deductions already handled, to keep it simple — in reality both must be added before conversion). Step 1: try gross VND 52 million. Step 2: tax under the 5 brackets: 10 million × 5% = 0.5 million; 20 million × 10% = 2 million; 22 million × 20% = 4.4 million; total tax = VND 6.9 million. Step 3: check net = 52 − 6.9 = VND 45.1 million ≈ the agreed 45 million. So taxable income is about VND 52 million/month and PIT about VND 6.9 million/month.
Compare with the wrong shortcut: applying 45 million directly to the brackets gives tax of only 10 × 5% + 20 × 10% + 15 × 20% = 0.5 + 2 + 3 = VND 5.5 million — short by VND 1.4 million/month, i.e. more than VND 16.8 million/year. The gap is reassessed with late-payment interest at finalization. The lesson: the true tax cost of a net-salary contract is always higher than a quick estimate — model it fully before making the offer.
Three common conversion mistakes
One, forgetting to add mandatory insurance and deductions before conversion. The correct order: agreed net → add mandatory insurance (if company-paid) → subtract family deductions → “adjusted net” → convert to gross → compute tax. Reversing the order gives the wrong number.
Two, using the old conversion table. Conversion tables are tied to the tax schedule; the schedule changed from 7 brackets to 5 from tax year 2026, with different bands and rates. The old table yields the wrong gross — use the table under Decree 253/2026.
Three, not updating when net changes mid-year. A net raise, a new net allowance or a net bonus all change the month’s converted gross — reconvert for each adjustment; one fixed gross figure cannot serve the whole year.
Common risks and how to prevent them
- Applying the net figure straight to the brackets: systematic underpayment — always convert to gross first.
- Using the old 7-bracket conversion table: check the conversion table under the current guidance (Decree 253/2026).
- Not stating “net” clearly in the contract: disputes when finalization produces gaps — the contract must state whether net includes mandatory insurance and who bears the difference if tax policy changes.
- Ignoring net bonuses: Tet bonuses paid net must also be converted for that month — Tet month often pushes gross into a higher bracket.
Frequently asked questions
1. Why can’t the net salary go straight into the tax brackets?
Because PIT is computed on pre-tax (gross) income. When the company pays the tax for the employee, that tax is part of the employee’s income and must be added back — skipping this step systematically understates the tax.
2. Net VND 45 million/month — what is the real tax?
Grossed up to about VND 52 million, PIT is about VND 6.9 million/month (5-bracket schedule from tax year 2026, assuming insurance and deductions handled). The “naive” math gives only 5.5 million — short by 1.4 million/month.
3. Where is the conversion table?
The guidance implementing the PIT Law (now Decree 253/2026/ND-CP) publishes tables converting tax-exclusive income to taxable income by band. Do not use the old 7-bracket table.
4. Must I reconvert if net salary rises mid-year?
Yes. Every net adjustment (raise, new allowance, net bonus) requires reconverting gross for that period — one fixed gross figure cannot cover the whole year.
Key takeaway for investors
Net salary is not a figure for direct tax computation — it is the destination, while taxable (gross) income is the starting point of every calculation. Under the new 5-bracket schedule, the true tax cost of a net contract always exceeds a quick estimate; model it fully (including company-paid insurance and net bonuses) before closing the offer with the expert.
This article has been quality-reviewed by the FLAW AI Legal Council This content is legal reference only and does not replace counsel for a specific case.
