Do Lunar New Year gifts valued at 2 million for employees subject to personal income tax in Vietnam?

Do Lunar New Year gifts valued at 2 million for employees subject to personal income tax in Vietnam?

Based on subsection d.7, point d, clause 2, Article 2 of Circular 111/2013/TT-BTC guiding income from wages and salaries:

Taxable incomes

According to Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, taxable personal income includes:

1. Income from business

Income from business is income gained from production and business activities in the following fields:

a) Income from the production and business of goods and services in all fields and sectors as regulated by law, such as: production and trading of goods; construction; transportation; catering business; service business, including house rental services, land use rights, water surfaces, and other assets.

b) Income from independent professional activities of individuals in fields and sectors licensed or certified as prescribed by law.

c) Income from agricultural, forestry, salt production, aquaculture, and fishing activities not meeting the conditions for tax exemption as guided in point e, clause 1, Article 3 of this Circular.

2. Income from wages and salaries

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d) Monetary or non-monetary benefits outside wages and salaries provided by the employer to the taxpayer in any form:

...

d.7) Other benefits.

Other benefits that employers provide to employees on holidays, such as consulting services, tax services for specific individuals or groups, expenses for domestic helpers like drivers, cooks, and other household workers under contract...

...

Other benefits that employers provide to employees on holidays and celebrations, such as expenses for March 8, birthdays, Lunar New Year gifts, and presents for Lunar New Year, are classified as income from wages and salaries and therefore subject to personal income tax.

Therefore, according to this regulation, a Lunar New Year gift in kind valued at 2 million for employees will also be subject to personal income tax.

Do Lunar New Year gifts valued at 2 million for employees subject to personal income tax in Vietnam? (Image from the Internet)

Which income is exempt from personal income tax in Vietnam?

According to Article 4 of Decree 65/2013/ND-CP, the provisions are as follows:

- Income from the transfer of real estate (including residential houses, buildings formed in the future as stipulated in real estate business laws) 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.

- Income from the transfer of residential houses, the right to use homestead land, and properties attached to such land of individuals when the transferor owns only one residential house or one parcel of homestead land in Vietnam.

The individual transferring must meet the following conditions:

+ At the time of transfer, the individual holds ownership or use rights to only one residential house or one parcel of land (including cases with a house or building attached to that parcel);

+ The individual has held ownership or use rights to the house or land for at least 183 days by the time of transfer;

+ The house and rights to the homestead land are transferred entirely.

The determination of ownership and use rights for the house and homestead land is based on the certificate of ownership and use rights.

Individuals transferring the house, or homestead land must declare and bear responsibility before the law for the accuracy of such declarations.

If the competent authority discovers inaccurate declarations, the exemption is not applicable, and legal penalties apply.

- Income from the value of land use rights granted by the State without payment or with reduced land levy.

- Income from inheritance or gifts of real estate (including residential houses, buildings formed in the future as stipulated by real estate business laws) 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.

- Income of households and individuals directly engaging in agricultural, forestry, salt, aquaculture, and fishing activities not processed into other products besides simple processing.

Households and individuals must satisfy the following conditions:

+ Legal land or water use rights for production and direct participation in agricultural, forestry, salt, or aquaculture work. For fishing, they must have ownership or use rights for boats or fishing gear and directly engage in fishing.

+ Actual residency in the local area where these production activities occur, according to the Residence Law.

- Income from converting agricultural land allocated by the State for production.

- Income from interest on bank deposits, credit institution deposits, and interest from life insurance contracts.

- Income from remittances.

- Wage and salary portions for night shifts and overtime paid higher than those for regular working hours, as prescribed by the law.

- Retirement pensions from social insurance funds pursuant to the Social Insurance Law, monthly pensions from voluntary pension funds. Individuals living and working in Vietnam are exempted from taxes on foreign pension incomes.

- Scholarship income, including:

+ Scholarships from the State budget;

+ Scholarships from domestic and foreign organizations (including living allowances) under approved educational support programs.

- Compensation from life and non-life insurance, health insurance, compensation for occupational accidents, state compensations, and other legal compensations.

- Income from charitable funds approved or recognized by competent state agencies, which operate for humanitarian purposes and non-profit.

- Income from foreign charitable, humanitarian aid, either from the Government of Vietnam or non-Government entities approved by competent state agencies.

- Income from wages or salaries of Vietnamese seamen working for foreign or Vietnamese international shipping companies.

- Income of individuals owning or using vessels and individuals working on such vessels from providing goods or services directly supporting offshore fishing.

What are regulations on personal income tax period in Vietnam?

According to Article 7 of the Law on Personal Income Tax 2007 (amended by Clause 3, Article 1 of the Amended Personal Income Tax Law 2012), the tax period is regulated as follows:

- The tax period for resident individuals is determined as follows:

+ Annual tax period applies to income from business activities; income from wages and salaries;

+ Tax period for each occasion of income generation applies to investment income; capital transfer income, excluding securities transfer; real estate transfer income; winning income; royalty income; franchising income; inheritance income; gift income;

+ Tax period for securities transfer is determined either per transfer occasion or annually.

- The tax period for non-resident individuals is determined per income occasion for all taxable incomes.