Are wages paid for overtime work of subject to personal income tax in Vietnam?

Are wages paid for overtime work of subject to personal income tax in Vietnam?

Based on Article 4 of the Law on Personal Income Tax 2007 regarding tax-exempt income, the regulations are as follows:

Tax-Exempt Income

1. Income from the transfer of real estate between spouses; biological parents and children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; siblings.

2. Income from the transfer of a personal residence, residential land use rights, and properties attached to residential land where the individual owns only one residence, residential land.

3. Income from the value of land use rights assigned by the State to individuals.

4. Income from inheritance, gifts of real estate between spouses; biological parents and children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; siblings.

5. Income of households and individuals directly engaged in agricultural, forestry, salt making, aquaculture, and fishing activities that have not been processed into other products or have only undergone preliminary processing.

6. Income from the conversion of agricultural land assigned to households and individuals by the State for production.

7. Income from interest on deposits at credit institutions, interest from life insurance contracts.

8. Income from remittances.

9. The portion of wages for night work, overtime paid higher than daytime work wages, and intra-hour work wages as prescribed by law.

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Therefore, wages paid for overtime work (including night work wages, overtime) paid higher than daytime work wages and intra-hour work wages as prescribed by law are not subject to personal income tax.

Are wages paid for overtime work of subject to personal income tax in Vietnam? (Image from the Internet)

Which employees are personal income taxpayers in Vietnam?

Based on Article 2 of the Law on Personal Income Tax 2007, the employees subject to personal income tax include:

- The individual liable to personal income tax is a resident individual with taxable income specified in Article 3 of the Law on Personal Income Tax 2007 arising within and outside the territory of Vietnam, and non-resident individuals with taxable income specified in Article 3 of the Law on Personal Income Tax 2007 arising within the territory of Vietnam.

- A resident individual is a person who meets one of the following conditions:+ Present in Vietnam for 183 days or more within a calendar year or for 12 consecutive months from the first day of presence in Vietnam;+ Having a permanent residence in Vietnam, including having a registered permanent residence or rented house for dwelling in Vietnam under a lease contract with a term.

- A non-resident individual is a person who does not meet the conditions stipulated in Clause 2, Article 2 of the Law on Personal Income Tax 2007.

How to calculate personal income tax period in Vietnam?

Based on Clause 6, Article 3 of the Tax Administration Law 2019, the regulation is as follows:

Interpretation of Terms

In this Law, the following terms are construed as follows:

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6. The tax period is the period for determining the amount of tax payable to the state budget according to the tax laws.

7. Tax declaration form is a document in the form prescribed by the Minister of Finance, used by taxpayers to declare information to determine the amount of tax payable.

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The personal income tax period is understood as the period for determining the amount of tax payable to the state budget according to the tax laws.

Based on Article 7 of the Law on Personal Income Tax 2007, amended by Clause 3, Article 1 of the Amended Law on Personal Income Tax 2012, the personal income tax period is determined as follows:

- For resident individuals:

+ The tax period by year applies to income from business; income from salaries and wages.

+ The tax period by each income generation applies to income from capital investment; income from capital transfer, except for income from securities transfer; income from real estate transfer; income from winnings; income from royalties; income from franchise; income from inheritance; income from gifts.

+ The tax period by each transfer or by year for income from securities transfer.

- For non-resident individuals: the tax period by each income generation applies to all taxable income.