Dear lawyer, I am currently working for a foreign company in Vietnam, I see that the company has a very good incentive system for employees, especially with a fairly high bonus, so I always Try your best to get the bonus. However, I have a question my company’s bonus is quite high, if so, will it be subject to personal income tax? What are the regulations on the amounts for calculating personal income tax? Are bonuses in Vietnam subject to PIT or not? Ask your lawyer to answer.
Thank you for sending your question to us to answer your questions as well as the issue: Are bonuses subject to PIT? This must be the question of many people to answer that question as well as answer the question above, please refer to the following article of lawyer X to clarify the problem!
Legal grounds
The Personal Income Tax Law amending and supplementing the 2012 Personal Income Tax Law;
Circular 111/2013/TT-BTC;
Resolution 954/2020/UBTVQH14.
What is personal income tax?
Personal income tax is the amount that must be deducted from a part of the salary and other income of the income creator and paid to the tax agency to remit into the state budget after it has been deducted. The current personal income tax does not apply to individuals with low income below the prescribed level of tax payment.
Employees who pay personal income tax with dependents will also be entitled to tax deductions according to regulations.
Thus, it can be seen that the higher the income, the higher the PIT payable.
Are bonuses subject to PIT?
According to Clause 2, Article 2 of Circular 111/2013/TT-BTC, 13th month salary is considered as income subject to personal income tax.
In which, bonuses are subject to PIT except the following bonuses which are not included in PIT taxable income:
” e.1) Bonuses attached to titles conferred by the State, including bonuses attached to emulation titles and other forms of commendation in accordance with the law on emulation and commendation, specifically can:
e.1.1) Bonuses attached to emulation titles such as National Emulation Fighter; Emulation fighters at the ministerial, branch, and mass organizations level at the central, provincial, and municipal levels; Grassroots Emulation Soldier, Advanced Labor, Advanced Soldier.
e.1.2) Bonuses with other forms of reward.
e.1.3) Bonuses attached to titles conferred by the State.
e.1.4) Bonuses attached to prizes awarded by associations and organizations belonging to political organizations, socio-political organizations, social organizations, and socio-professional organizations of the central and local levels awarded in accordance with the charter of that organization and in accordance with the provisions of the Law on Emulation and Commendation.
e.1.5) Bonuses attached to Ho Chi Minh prizes, State prizes.
e.1.6) Bonuses with Medals and Badges.
e.1.7) Bonuses accompanied by Certificates of Merit and Certificates of Merit.
The authority to issue commendation decisions, the amount of bonuses attached to the above-mentioned emulation titles and forms of commendation must conform to the provisions of the Law on Emulation and Commendation.
e.2) Bonuses attached to national or international awards recognized by the State of Vietnam.
e.3) Bonuses for technical improvements, inventions and inventions recognized by competent State agencies.
e.4) Bonuses for detecting and reporting law violations to competent State agencies.”
– The time for calculating PIT is the time when the Enterprise pays salaries and bonuses to employees. (Note: the 13th month salary must be paid before the deadline for submitting the enterprise’s annual tax finalization file in order for the salary to be included in reasonable and valid expenses.
– Tax calculation and tax withholding according to the progressive tax schedule for the 13th month bonus and salary in the nature of wages and salaries.”
How to calculate personal income tax on Tet bonuses
Note: When calculating the amount of personal income tax that the employee has to pay, the Tet bonus and 13th month salary are not separate, but aggregated to calculate the total income.
Case 1: The employee signs a contract of 3 months or more
Pursuant to Article 7 of Circular 111/2013/TT-BTC, the personal income tax payable on income from salaries and wages is calculated as follows:
Personal income tax payable = Taxable income x Tax rate (1)
In there:
Taxable income = Taxable income – Deductions (2)
Taxable income is determined according to the following formula:
Taxable Income = Total Income – Exemptions (3)
Based on the above tax calculation formulas, in order to accurately calculate the payable tax amount, it is necessary to follow the following steps sequentially:
Step 1. Calculate total income from salary and wages
Step 2. Calculate tax-exempt income (if any)
Step 3. Calculate taxable income according to formula (3)
Step 4. Calculating deductions such as family deduction, compulsory insurance deduction, etc.
Step 5. Calculate taxable income according to formula (2)
Step 6. Calculate the payable income tax amount according to formula (1).
Case 2: The employee does not sign a contract or signs a labor contract for less than 3 months
Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC stipulating that organizations and individuals pay wages, salaries and other payments to resident individuals who do not sign labor contracts or sign labor contracts. Under 03 months with total income payment of 02 million VND/time or more, tax must be withheld at the rate of 10% of income before paying income to individuals.
Accordingly, organizations and individuals that pay salaries, Tet bonuses and other incomes to employees from VND 2 million/time or more shall deduct 10% at source before paying income.
Does taxable income include social insurance?
Whether employees have to pay personal income tax or not depends on many factors. As follows:
The employee is an individual who does not reside in Vietnam
Personal income tax = Taxable income from wages and salaries x 20%
The employee is an individual residing in Vietnam with a labor contract of less than 3 months, the salary paid from 2 million VND/month
If the labor contract is less than 3 months, the salary paid from 2 million VND/month, personal income tax will be calculated at the full tax rate. Specifically as follows: Personal income tax = Taxable income from wages and salaries x 10%
The employee is an individual residing in Vietnam with a labor contract of 3 months or more
If the labor contract is for 3 months or more, it will be calculated according to the partial progressive schedule. Specifically as follows: Personal income tax = (Taxable income – Deductions) x tax rate = (Total salary received – Deductions – Exemptions) x tax rate
In there:
Total salary received: The total income received by the employee in the tax month, including salary, allowances and other additional payments (including holiday bonuses such as 13th month salary; 2nd day of the month). 9;… Paying in any month will be included in that month’s income)
Deductions: Deductions can be deductions for your own family situation (previously 9 million/month but now 11 million/month), dependents (previously 3.6 million/month) /month but now it is 4.4 million / month), compulsory social insurance.
Tax-exempt items: Including lunch and mid-shift allowances; telephone allowance; costume allowance (maximum 5 million/person/year),….
Tax rates for labor contracts of 3 months or more: Depending on the salary bracket, there will be different tax rates, such as under 5 million, the tax rate is 5%, over 5 million to 10 million, the tax rate is 10 %,….
Taxable income and deductions
Taxable income is the total income that an individual is paid, excluding the following:
Money for lunch, meals between shifts.
Telephone allowance.
Costume allowance.
Working fees.
Income from the part of salary or wages that employees work overtime or night work.
PIT deductions include:
Family deduction: The deduction for yourself is 11 million and the deduction for dependents is 4.4 million/month.
Compulsory social insurance (social insurance, health insurance, unemployment insurance) and insurance in some special occupational fields.
Personal contributions to charity, study promotion or humanitarian: The maximum deduction does not exceed taxable income and must have proof.
In which, the conditions for calculating family deduction for dependents are:
Taxpayers will be charged a deduction for their dependents if they have registered and been granted a tax identification number.
Taxpayers need documents to prove dependents.
How to calculate personal income tax for resident individuals
According to the regulations, non-resident individuals will not be eligible for family circumstance-based deduction, so as long as they have taxable income >0, they will have to pay income tax at the rate of 20%/taxable income;
Deductibles include: insurance contributions, voluntary retirement funds, study promotion contributions, humanitarian contributions, and charity work.
How to calculate income tax for non-resident individuals
Pursuant to Clause 1, Article 18 of Circular 111/2013/TT-BTC stipulating that PIT payable to non-resident individuals will be calculated according to the following formula:
Personal income tax payable = 20% x Taxable income
In which, the taxable income is equal to the total salary, wages and other incomes received by the substitute individual in the tax period and is determined as the taxable income of the resident individual.
Services of LSX
Prestigious professional services: Firstly, the team of consultants and consultants for many years in the field of civil status, and customer support.
On-time: Certainly, with the motto “Get your lawyer right at your fingertips”, we ensure the service always performs on time. The rights and interests of customers always come first.
Cost: Besides, LSX’s service costs are highly competitive; depending on the nature of the particular case. So, we want our guests to have the best possible service experience. Therefore, costs which guaranteed to be the most suitable and economical for customers.
Confidentiality of client information: Finally, all brand information of client LSX will be 100% confidential.
Please contact us immediately if you have any questions about “Are bonuses in Vietnam subject to PIT?”
Contact LSX
Finally, hopefully the information in the article will provide helpful information for readers and help you solve the problem “Are bonuses in Vietnam subject to PIT?“. At the same time, LSX Law firm always has leading lawyers and legal consultants who will help you in legal matters of life. If you have any need, please get in touch with us via hotline: +84846175333 or Email: [email protected]
Please see more:
Vietnamese law on corporate income tax
Procedures for applying for a construction permit in Vietnam
Penalties for late payment, non-payment of personal income tax
Frequently asked questions
According to the provisions of Article 2 of the Personal Income Tax Law 2007 amended and supplemented in 2012, the PIT payers include:
Resident individuals with taxable income arising inside and outside the Vietnamese territory, meeting the following conditions:
Being present in Vietnam for 183 days or more in a calendar year or counting for 12 consecutive months from the first day of presence in Vietnam;
Having a regular place of residence in Vietnam, including having a registered place of permanent residence or having a rented house to live in in Vietnam under a fixed-term lease.
Non-resident individuals with taxable income arising in the territory of Vietnam
Tax is a stable and main source of national revenue, tax is an important tool for the state to regulate the market to guide consumption in a positive direction, protect the domestic market and ensure balance between groups. benefits in society by increasing taxes, reducing taxes; or tax free.
Conclusion: So the above is Are bonuses in Vietnam subject to PIT?. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
