Condition for personal income tax exemption & non-taxable (Part 2)

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 (PIT) and non-taxable.

TAX EXEMPTION AND NON-TAXABLE INCOME

9/ The expenditure on shuttling workers

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:

The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
This is non-taxable income when calculating Personal Income Tax Exemption even if it serves specific employee.

Note:

The expenditure on shuttling employees is not included in taxable incomes of company in compliance with levels of expenditure in labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise… Adequate relevant invoices are required. The expenditure on shuttling employees must not exceed the practical average 1 month’s salary in the tax year.

10/ Payments for housing, electricity, water supply and associated services (if any), not including: benefits in terms of housing, electricity, water supply, and associated services (if any) of housing built by the employer for serving employees in industrial parks free of charge; housing built by the employer in disadvantaged areas and extremely disadvantaged areas that is provided free of charge for employees working therein

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…
There is sufficient proof of cash payment and non-cash payment. (such as invoices…)
Relevant papers proving the poverty in land of the enterprise.
If the person stays at the workplace, the taxable income depends on the house rent or depreciation expense, payments for electricity, water supply, and other services according to the ratio of area that person uses to the total area of the workplace.

Note:

The expenditure on shuttling employees is not included in taxable incomes of company in compliance with levels of expenditure in labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise… There is sufficient proof of cash payment and non-cash payment. (such as invoices…)

11/ The house rent, payment for electricity and water supply, and payment for associated services (if any) paid by the employer on behalf of the employee

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…
There is sufficient proof of cash payment and non-cash payment. (such as invoices…)

A part of the payment is not included in their taxable income

The house rent, payment for electricity and water supply, and payment for associated services (if any) paid by the employer on behalf of the employee shall be included in taxable income according to the actual amount paid on behalf of employees. Nevertheless, the amount must not exceed 15% of the total taxable income (excluding house rent, payment for electricity, water supply, and associated services (if any)) earned at the workplace regardless of income payer.

Note:

The house rent, payment for electricity and water supply, and payment for associated services (if any) paid by the employer on behalf of the employee shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise, appointment letter…
There is sufficient proof of cash payment and non-cash payment. (such as invoices…)
In case an employment contract between an enterprise and an employee has a payment for housing of the employee which is part of the wages, does not contravene regulations of law on salaries and wages, and has sufficient proof, such payment will be in deductible expenses when calculating taxable income.
In case a Vietnamese enterprise signs a contract with a foreign enterprise which states that the Vietnamese enterprise must incur the cost of accommodation of foreign experts during their working period in Vietnam, the house rent paid for foreign experts working in Vietnam by the Vietnamese enterprise will be deductible expenses when calculating corporate income tax.

12/ The amounts given by the income payer for employees “family affairs”

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…
Employees’ family affairs are wedding, illness, childbirth, obsequies of the employees or their families.
The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.

Note:

The amount given by the income payer for employees “family affairs shall be deducted when calculating CIT in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise.
The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.
If eligible, there is proof of expenditures (invoices…), relevant papers (ex: Death Certificate, Marriage certificate, Medical record…)

13/ The benefits that the employer did not specify the payee

Base on:

Article 2 Circular 111/2013/TT-BTC
Cir 96/2015/ TT-BTC
For reference: Official Letter No. 9552/CT- TTHT

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…
If the recipient is the collective of workers, not any specific person, it is not included in taxable income.
If the names of the recipients are specified, it is included in taxable income of employees.
The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.
The expenditures that the employer buys health insurance, accident insurance for families of employees are included in taxable income of employees.

Note:

Direct expenditures on the employees’ welfare in compliance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise… (as: expenditures on employees’ family occasions; expenditures on holiday allowance or treatment support; expenditures on professional training; expenditures on supporting employees’ families affected by natural disasters, hostilities, accidents, illness; expenditures on rewarding employees’ children for their educational achievements; expenditures on allowances for traveling during holidays of the employees; payment for unemployment insurance, health insurance, and other voluntary insurance for employees (except for life insurance and other welfare expenditures)) that are not included in taxable income of company if the total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.

Expenditures on purchase of golf membership; golfing expenses shall be included in taxable incomes of company.
Expenditures on allowances for traveling during holidays of the employees must have written decision of Director, travelling service contract, adequate invoices. There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).
Membership fees (Tennis Club membership, Sports Club Membership….) and other expenditure on services serving individuals such as healthcare, entertainments, sports, recreation…are not included in taxable income of company if the expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.
If employers buy health insurance, and other voluntary insurance for families of employees, the expenditures are included in taxable income of company.

14/ The payments for refresher courses for workers, which suit their professions or accords with plans of the employer

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 courses suit employee’s professions or accords with plans of the employer.
Allowance for travelling, pocket money for employees training abroad that eligible to be defined as business trip according to policy and regulations on business trip of the Company (as: invoices, a written decision of director, internal regulations that to buy air tickets, per diem) shall not be included in taxable income of the employee. Expenditures exceeding Company provisions in charged to taxable income of the employee.

Note:

The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
The expenditure is a direct welfare of employee, if the expenditure is not exceed the practical average 1 month’s salary in the tax year, it shall be deducted when calculating CIT.

15/ Flat expenditures on stationery, business trips, phone calls, costumes, etc

Base on:

Article 2 Circular 111/2013/TT-BTC
Cir 96/2015/ TT-BTC
For Reference: Official Letter No. 2602/CT-TTHT

Quality of Incomes eligible for personal income tax exemption and non-taxable:

Flat expenditures on stationery, business trips, phone calls, costumes, etc. that are in excess of the limits prescribed by the State. The amounts are subject to corporate income tax of instructional documents of the Law on Corporate income tax.
There is proof of cash payments and non-cash payment (for each invoice if purchase of goods/ services of VND 20 million or over (including VAT)), relevant papers proving the payment was paid by the employer.

Clothing:

In-kind expenditure on employees’ clothing with invoices. Monetary expenditure on employees’ clothing that doesn’t exceed VND 05 million/person/year.
In case the enterprise has both monetary and in-kind expenditures on employees’ clothing, the monetary expenditure must not exceed VND 05 million/person/year and the in-kind expenditure must have invoices in order to be deductible.
With regard to special lines of business, such expenditure shall comply with separate regulations of the Ministry of Finance.

Telephone, gas expenditures:

The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.
The level of expense is specified in the employment contract, collective bargaining agreement, the financial regulation of the company/general company/corporation, or the reward scheme issued by the Chairperson of the Executive Board or the Director. The expenditures must not exceed the practical average 1 month’s salary in the tax year. (no need invoices)
The company can also base on invoices to pay the expenditures. In this case, adequate invoices are required.
If there are in excess of the limits prescribed by the State, it will be added to the taxable income of the employee Personal Income Tax Exemption.

Business trips:

Allowance for employees on business trips, allowance for travelling and accommodation of employees on business trips will be deductible expenses when calculating taxable income if they have adequate invoices. If the enterprise pays for the traveling, accommodation, and allowance of employees on business trips in accordance with its financial regulations or rules, such amounts will be deductible.
This expenditure is limited by the financial regulation of the company/general company/corporation.
If there are in excess of the limits prescribed by the financial regulation of the company/general company/corporation, it will be added to the taxable income of the employee Personal Income Tax Exemption.

Stationery:

This expenditure does not serve specific employee.
There is sufficient proof of cash payment and non-cash payment. (such as invoices…)
The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.
This expenditure shall be deducted in accordance with the labor contract or collective bargaining agreement or financial regulation of the company/general company/corporation.

Note:

The expenditure on employees’ clothing shall be deducted when calculating CIT if qualified blow requirements:

In-kind expenditure on employees’ clothing with invoices. Monetary expenditure on employees’ clothing that doesn’t exceed VND 05 million/person/year.
In case the enterprise has both monetary and in-kind expenditures on employees’ clothing, the monetary expenditure must not exceed VND 05 million/person/year and the in-kind expenditure must have invoices in order to be deductible.
With regard to special lines of business, such expenditure shall comply with separate regulations of the Ministry of Finance.

Allowance for business trip:

Allowance for employees on business trips, allowance for travelling and accommodation of employees on business trips will be deductible expenses when calculating taxable income if they have adequate invoices. If the enterprise pays for the traveling, accommodation, and allowance of employees on business trips in accordance with its financial regulations or rules, such amounts will be deductible.
In case the enterprise sends an employee on a business trip (whether at home or overseas), every payment that reaches VND 20 million or above and payment for air tickets that are made with individuals’ banking cards will be considered non-cash payments and deductible if all of the conditions below are satisfied:
There are valid invoices issued by the goods or service provider.
The enterprise has a business trip order.
The enterprise’s financial regulations or rules allow its employees to pay the trip expenses, air tickets with their personal banking cards and get reimbursed by the enterprise.
In case the enterprise buys an air ticket on a website for one of its employees to go on a business trip serving its business operation, the proof of deductible expense shall be the electronic ticket, the boarding pass, and proof of non-cash payments that bear the name of the traveling employee. If the enterprise fails to collect the boarding pass, the proof of deductible expense shall be the electronic ticket, the business trip order, and the proof of non-cash payments.

Telephone, gas expenditures:

The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…
The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.
The exceed shall be included the taxable income of the company.

Stationery

The amount shall be deducted in accordance with the labor rules, financial regulation of the enterprise…
The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.

The exceed shall be included the taxable income of the company.

16/ The tax-free additional payments for working at night or working overtime

Base on:

Labor Code
Cir 96/2015/ TT-BTC
For reference: Official Letter No. 3231/CT-TT&HT

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 Statement reflecting the employee working at night or working overtime is requires. Employer keep this statement and only show the statement if there is any requirement of the authorities.
This is non-taxable income and extra incomes are defined as a minimum. If there are in excess of the limits prescribed by the State, it will not be added to the taxable income of the employee PIT.

Note:

The tax-free additional payments for working at night or working overtime shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…

According to Labor Code, overtime hours in a day shall:

Not exceed 50% of the normal working hours in 01 day; the total normal working hours and overtime hours shall not exceed 12 hours in a day when applying weekly working hours;
Not exceed 12 hours in a day when working overtime on public holidays and weekends.
200-300 overtime hours in a year:

Additional payments for working overtime that not exceed overtime hour according to Labor Code and have proof of payment are not included in taxable income of company.

There are evidences for working overtime as:

Overtime timesheet.
Overtime payroll.

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