Personal income tax is a tax calculated on an individual’s income sources earned from business activities and other sources such as salaries and wages paid by employers, from capital investments, capital transfer, real estate transfer, prize-winning, copyright, and inheritance gifts. Regardless of Vietnamese or foreigners, depending on residence status, and income level, an individual may have to pay from 5% to 35% of the income earned… Among them, income from salary and wages is the most common and also has the most detailed regulations.
Personal income tax declaration, settlement and payment are very important tasks for not only the employer but also the employee, especially when a foreign employee is recruited and working in Vietnam. In addition to taxable income, employees must also be aware of personal income tax exemption and non-taxable.
NON-TAXABLE INCOME
1/ Occupational accident benefits, occupational illness benefits in compliance with Labor Code of Vietnam and Social Insurance Law
Based on:
- 2012 Labor Code of Vietnam
- Article 2 Circular 111/2013/TT-BTC
- Circular 96/2015/TT-BTC
- For reference: Official Letter No. 1385/TCT-CS for reference
Quality of Incomes eligible for personal income tax exemption and non-taxable
The income will be deducted in accordance with the labor contract or collective bargaining agreement.
Besides,
- An investment record of the occupational accident using applicable form. (In case the employee meets with a traffic accident which is defined as an occupational accident, a photocopy of the traffic accident record) is required.
- The latest result in the loss of work capacity due to occupational accidents and occupational diseases of the Medical Assessment Council is required.
- There is proof of cash payments (Invoices) or non-cash payment.
- Medical record and relevant papers to clarify the benefits.
An employee, who participates in compulsory social insurance, is entitled to the benefits regime for labor accidents and occupational diseases, as provided by the Law on Social Insurance.
For an employee subject to compulsory social insurance whose employer has not paid social insurance premiums to the social insurance agency, the employer will pay an amount of money equal to the regime for labor accidents and occupational diseases as provided by the Law on Social Insurance.
An employee is paid the accident/illness compensation or allowance by the employer in accordance with Labor Code.
- The accident/illness compensation:
If there is the employer’s fault in accordance with investment record or the latest result of the Medical Assessment Council.
The payment may be paid in a lump sum or on a monthly basis as agreed upon by the parties.
- The accidents/illness allowance:
In case the employee is at fault, he/she is still entitled to an allowance in accordance with Labor Code.
Level of compensation and benefit as defined hereof is the minimum. Employers are encouraged by the State to pay more than the limit as defined in this Circular in terms of compensation and benefits for occupational accidents and diseases.
Note:
Expenses for compensation, benefits and medical expenses paid for employees as victims of occupational accidents or diseases shall be included in the expenses for regular operation, production and business activities of agencies, enterprises and organizations, and at the same time shall be treated as logical expenses for tax assessment, payment of enterprise income tax by the work force employing enterprises under the Law on enterprise income tax.
2/ Lump-sum allowances for childbirth or adoption, maternity leave benefits, post-maternity recovery benefits
Base on:
- Social Insurance Law of Vietnam
- Article 2 Circular 111/2013/TT-BTC
Quality of Incomes eligible for personal income tax exemption and non-taxable
In pursuance with the Law on Social insurance. Employees have participated in social insurance and have been given lump-sum allowances for childbirth or adoption, maternity leave benefits, post-maternity recovery benefits. This income is non-taxable.
In addition, the female employees will receive the extra allowance for female employees after giving birth for the first time or second time. This income is taxable.
Note:
Extra allowance for female employees after giving birth will be deducted when calculating CIT. Deductible amounts shall not be deductible if they are not spent properly or spent beyond the limits. There is proof of having “family affair” (such as Birth certificate, Medical record, invoices….).
3/ Lump-sum moving allowances for foreigners that move and reside in Vietnam and Vietnamese people that go to work abroad
Base on:
- Article 2 Circular 111/2013/TT-BTC
- For reference: Official Letter No. 8773/CT-TTHT
Quality of Incomes eligible for personal income tax exemption and non-taxable
The income will be deducted in accordance with the labor contract or collective bargaining agreement or appointment letter.
There is proof of cash payments (invoices) and non- cash payments as well as relevant papers to clarify the benefit.
This regulation applies to foreigners living or working in Vietnam for the first time only.
The allowances are based on the regulation of labor contract and not limited by law.
The expenditures related to the transportation of personal belongings of employees the company paid to the supplier of taxable incomes from salaries and wages of employees when calculating PIT.
The income will not be deducted if the labor contract is terminated.
Note:
Lump-sum moving allowances that are paid in cash that shall be deducted in compliance with the labor contract or collective bargaining agreement when calculating Corporate Incomes Tax (CIT).
4/ Supports provided by the employer for medical examination and treatment of fatal diseases suffered by workers and their families
Base on: Article 2 Circular 111/2013/TT-BTC
Quality of Incomes eligible for personal income tax exemption and non-taxable
The employers that provide supports shall keep:
- The copies of the hospital bills that are certified by the employer (if the worker and his or her family pay for the remaining amount after the insurer directly pay the medical facility).
- The copies of the health insurance payment certified by the employer (if the worker and his or her family pays the entire hospital fee and then receive insurance money from the insurer).
- The papers proving the provision of supports for workers and their families who suffer from fatal diseases.
Fatal diseases must be in the list of fatal diseases promulgated by the Ministry of Public Health.
Family of the worker in this case includes children, legitimate adopted children, illegitimate children, stepchildren, spouse, parents, parents-in-law; stepparents, legitimate adoptive parents.
The support that is not included in taxable income is the actual paid amount according to hospital bills but must not exceed the hospital fee paid by the worker and his or her family after being deducted the amount paid by the insurer.
If there are any allowances for illness/accidents not including fatal diseases or occupational accident/illness, it will be included in the taxable income.
Note:
The supports shall be deducted when calculating CIT if the employer that provide supports shall keep.
- The copies of the hospital bills that are certified by the employer (if the worker and his or her family pay for the remaining amount after the insurer directly pay the medical facility).
- The copies of the health insurance payment certified by the employer (if the worker and his or her family pays the entire hospital fee and then receive insurance money from the insurer).
- The papers proving the provision of supports for workers and their families who suffer from fatal diseases.
If there are any allowances for illness/accidents not including fatal diseases or occupational accident/illness, it must not exceed the practical average one month’s salary in the tax year and shall be deducted when calculating CIT. The exceed will be included in company taxable income.
5/ Payment for mid-shift meals, lunch of workers provided by employers that provide mid-shift meals, lunch for their workers in the form of cooking, buying catering services, giving luncheon vouchers
Base on:
- Article 2 Circular 111/2013/TT-BTC
- Cir 96/2015/ TT-BTC
Quality of incomes eligible for personal income tax exemption and non-taxable
The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
The employer that provide supports shall keep the papers proving the provision of payment for mid-shift meals, lunch of workers in the form of cooking, buying catering services, giving luncheon vouchers.
If the employer pays cash for their workers’ meals instead of providing mid-shift meals or lunch, such money is not included in the taxable income if it is confortable with the guidance of the Ministry of Labor, War Invalids and Social Affairs. If the payment is higher than the limit imposed by the Ministry of Labor, War Invalids and Social Affairs, the excess shall be included in taxable incomes (Maximum 680.000 VND).
Note:
In order to be deducted when calculating CIT, the amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
6/ The payment for round-trip air tickets made by the employer for foreign workers in Vietnam or Vietnamese workers overseas to go home once a year
Base on:
- Article 2 Circular 111/2013/TT-BTC
- Cir 96/2015/ TT-BTC
- For reference: Official Letter No. 4440/CT-TTHT
Quality of incomes eligible for personal income tax exemption and non-taxable
The amount must be mentioned in the labor contract of foreign workers in Vietnam or Vietnamese workers overseas.
The basis for determining the payment is the labor contracts and the prices of air tickets from Vietnam to the other country and vice versa for employees to go home once a year.
The employer that provide supports shall keep the papers proving that the employer bought air tickets.
The payments made by contractor for the air tickets for the foreigner to fly from his/her country to Vietnam and other arising expenses in accordance with labor contract and international work schedules shall not be included in their taxable income.
Note:
The payment for round-trip air tickets made by the employer for foreign workers in Vietnam or Vietnamese workers overseas to go home once a year must be mentioned in the labor contract of foreign workers in Vietnam or Vietnamese workers overseas or collective bargaining agreement or, financial regulation of the enterprise, appointment letter and written decision of the director.
If the contract stipulated the payments for round trip air tickets for the foreign workers in Vietnam or the Vietnam workers overseas to go home more than once a year, the amount of money to buy air tickets for the next rounds still to be deducted when calculating corporate income tax, but not deducted when calculating PIT.
The payments for air tickets for employee’s family are included in company taxable income.
7/ The tuition fees for children of foreign workers in Vietnam to study in Vietnam, for children of Vietnamese workers overseas to study overseas from preschool to high school, which is paid by the employer on their behalf
Base on:
- Article 2 Circular 111/2013/TT-BTC
- Cir 96/2015/ TT-BTC
Quality of incomes eligible for personal income tax exemption and non-taxable
The amount that the employer assumes that is the wage and remunerations in:
- Labor Contract
- Labor Rules
It must be the enterprise’s name, address, tax code in the invoices of the payment.
The tuition fees for children of foreign workers in Vietnam to study in Vietnam, for children of Vietnamese workers overseas to study overseas from preschool to high school, which is paid by the employer on their behalf.
Note:
The tuition fees for children of foreign workers in Vietnam to study in Vietnam, for children of Vietnamese workers overseas to study overseas from preschool to high school, which is paid by the employer on their behalf shall be deducted in accordance with: the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise when calculating CIT.
- Studying from preschool to high school
There is proof of cash and non-cash payment (such as adequate invoices that direct company name, company address, company tax code…)
8/ Optional insurance without accrual of premiums for employees (including insurance of insurers that are not established under Vietnam’s law but permitted to sell insurance in Vietnam
Base on:
- Article 2 Circular 111/2013/TT-BTC
- Cir 96/2015/ TT-BTC
- Cir 92/2015/TT-BTC
Quality of incomes eligible for personal income tax exemption and non-taxable
Non-taxable:
- The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
- The amount is not included in taxable income from 30/7/2015 and from 2015 assessment period.
- In case the employer buys optional insurance without accrual of premiums for employees (including insurance of insurers that are not established under Vietnam’s law but permitted to sell insurance in Vietnam), such premiums shall not be included in taxable income of employees. Optional insurance without accrual of premiums is insurance products such as health insurance, death insurance (except for death insurance with refund policy), etc. from which policyholders do not receive the accrued amount of premiums apart from the insurance payout or indemnities paid by the insurer under insurance policies.
Taxable:
- In case the employer buys life insurance (except voluntary pension insurance) and/or other optional insurances with accrual of insurance premiums for the employee from the insurer(s) established and operating under Vietnam’s law, the employee is not required to include the accrued premiums to taxable income when the employer buys the insurance(s). When the contract matures, the insurer shall deduct 10% tax from the accrual of premiums paid by the employer for the employee from July 01, 2013. In case the premium accrual is paid by installments, 10% tax shall be deducted from each payment.
- In case the employer buys life insurance (except voluntary pension insurance) and/or other optional insurances with accrual of insurance premiums for the employee from the insurer(s) not established and operating under Vietnam’s law, the employer has the responsibility to deduct 10% tax from the premiums before paying the employee.
- The expenditures that employers buy life insurance for families of employees shall be included in taxable income of employees.
Note:
- The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
- The amount is not included in taxable income from 30/7/2015 and from 2015 assessment period
- Life insurance can exceed the practical average of 1 month’s salary in the tax year.
- The expenditures that employers buy life insurance for families of employees shall not be included in taxable income of company.
- Optional insurance (not including life insurance) without accrual of premiums that employers buy for employees must not exceed the practical average 1 month’s salary in the tax year. The exceed shall be included in company taxable incomes.
LAWS, DECREES, CIRCULARS GUIDING THE IMPLEMENTATION OF THE LAW ON PERSONAL INCOME TAX EFFECTIVE UNTIL 2024
As of the end of 2024, no new regulations on personal income tax have been added, accordingly, the following regulations will continue to apply:
Personal Income Tax Laws currently effective until 2024:
- Law on Personal Income Tax 2007.
- Law on Amending Tax Laws 2014.
- Law on Amending Personal Income Tax 2012.
- Resolution 954/2020/UBTVQH14 on adjusting the family deduction level of personal income tax issued by the Standing Committee of the National Assembly.
Decrees and Circulars guiding the implementation of the Law on Personal Income Tax currently effective until 2024:
- Decree 91/2014/ND-CP amending Decrees regulating tax.
- Decree 12/2015/ND-CP guiding the Law amending and supplementing a number of articles of the Laws on Taxes and amending and supplementing a number of articles of the Decrees on Taxes.
- Decree 65/2013/ND-CP guiding the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax.
- Circular 92/2015/TT-BTC guiding the implementation of value added tax and personal income tax for resident individuals with business activities; guiding the implementation of a number of amendments and supplements to personal income tax stipulated in the Law amending and supplementing a number of articles of the Laws on Taxes 71/2014/QH13 and Decree 12/2015/ND-CP detailing the implementation of the Law amending and supplementing a number of articles of the Laws on Taxes and amending and supplementing a number of articles of the Decrees on Taxes issued by the Minister of Finance.
- Circular 151/2014/TT-BTC guiding the implementation of Decree 91/2014/ND-CP amending and supplementing a number of articles of the Decree on tax issued by the Minister of Finance.
- Circular 119/2014/TT-BTC amending Circulars 156/2013/TT-BTC, 111/2013/TT-BTC, 219/2013/TT-BTC, 08/2013/TT-BTC, 85/2011/TT-BTC, 39/2014/TT-BTC and 78/2014/TT-BTC to reform and simplify tax administrative procedures issued by the Minister of Finance.
- Circular 111/2013/TT-BTC Guiding the Law on Personal Income Tax and Decree 65/2013/ND-CP issued by the Minister of Finance.
- Circular 20/2010/TT-BTC guiding administrative procedures on personal income tax issued by the Ministry of Finance.
- Directive 22/2008/CT-TTg implementing the Law on personal income tax issued by the Prime Minister.
Read more:
- Condition for personal income tax exemption & non-taxable (Part 2)
- Personal income tax and payroll services in Vietnam
- Managing labor relations for EXPATS in Vietnam
- Save your money and time with a “full package service for personal income tax of foreigner”
- Personal income tax for foreign employees: Methods of declaration and payable amount
- Taxable incomes from wages and remunerations for expats in Vietnam
- Foreign investor, legal rep and chief rep in Vietnam: The local procedures in Vietnam | manage your personal income tax and tax planning
- Optimize payable amount of personal income tax in Vietnam
- Personal income tax (PIT): Annual pit settlement key notes
- The proactive management of wage labor compliance procedure
- Expats working in Vietnam: What you shall keep in mind
- Annual Personal Income Tax for Foreign Employees in Vietnam
- Personal income tax in Vietnam – 10 types of taxable income and tax rates
