Do retirees who continue to work have to pay personal income tax in Vietnam?

Do retirees who continue to work have to pay personal income tax in Vietnam?

According to Clause 2, Article 3 of the Law on Personal Income Tax 2007, amended by Clause 1, Article 1 of the Amended Law on Personal Income Tax 2012, taxable income from wages and salaries includes:

- Salaries, wages, and other earnings similar to salaries and wages;

- Allowances and subsidies, except for those: allowances and subsidies as per legal provisions for individuals with meritorious services; defense and security allowances; hazardous and dangerous job allowances; attraction and regional allowances as per legal provisions; sudden hardship subsidies, occupational accident and illness subsidies, one-time childbirth or adoption subsidies, reduced working capacity subsidies, one-time retirement subsidies, monthly widow's pensions, and other benefits as per social insurance laws; termination and unemployment benefits as per the Labor Code; social protection allowances and other allowances and subsidies not in the nature of salaries and wages as per regulations of the Government of Vietnam.

- Remunerations under various forms;

- Income received from participating in business associations, boards of directors, supervisory boards, management councils, and other organizations;

- Other benefits received in cash or in-kind;

- Bonuses, except for bonuses accompanied by State-awarded titles, national and international prizes, technical innovation, invention, and discovery prizes recognized by competent state agencies, and bonuses for reporting legal violations to competent state agencies.

Accordingly, if a person continues to work after reaching retirement age, the income earned is considered as wages and salaries. Therefore, it is subject to personal income tax as prescribed by law.

Do retirees who continue to work have to pay personal income tax in Vietnam? (Image from the Internet)

Are retirement pensions exempt from personal income tax in Vietnam?

Pursuant to Article 4 of the Law on Personal Income Tax 2007 as amended by Clause 2, Article 1 of the Amended Law on Personal Income Tax 2012, individuals receiving retirement pensions are listed among those exempt from personal income tax, specifically:

Tax-exempt income

1. Income from transfers 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, grandparents and grandchildren, and between siblings.

2. Income from transfers of residential house rights, use rights of residential land, and assets attached to residential land of an individual if the individual only possesses one residential house or land use right.

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

4. Income from inheritances or 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, grandparents and grandchildren, and between siblings.

5. Income from households and individuals directly engaged in agricultural production, forestry, salt making, aquaculture, catching, and processing before converting to other products or only undergoing initial processing.

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

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

8. Overseas remittances.

9. Night shift and overtime wages that are higher than the daytime or official working hours prescribed by laws.

10. Retirement pensions paid by the social insurance fund; monthly retirement pensions paid by voluntary retirement funds.

11. Scholarship income, including:

a) Scholarships received from the state budget;

b) Scholarships received from domestic and foreign organizations under its academic support programs.

12. Income from life and non-life insurance contract settlements, labor accident compensation, government compensation, and other compensations as prescribed by law.

13. Income from charitable organizations funds established or recognized by competent state authorities, operating for charitable, humanitarian purposes, not for profit.

14. Income from foreign aid sources for charitable, humanitarian purposes, in governmental and non-governmental forms approved by competent state authorities.

Thus, for retirees or individuals receiving retirement pensions paid by social insurance funds or falling within tax-exempt categories, there is no obligation to pay personal income tax.

Are retirees eligible for personal exemptions when paying personal income tax in Vietnam?

According to Article 9 of Circular 111/2013/TT-BTC, in cases where retirement pensions combined with other sources of income exceed an average monthly income of 1 million VND, retirees cannot register dependents for personal exemptions. Specifically, point d, Clause 1, Article 9 of Circular 111/2013/TT-BTC lists taxpayers' dependents as:

- Children: biological, legally adopted, stepchildren, including:

+ Children under 18 years old (counted by month).

+ Children 18 years old or older with disabilities, unable to work.

+ Children studying domestically or internationally at university, college, professional, vocational training, including those over 18 years still attending high school (counting the waiting time for university results from June to September of 12th grade) without income or an average monthly income in a year from all sources not exceeding 1 million VND.

- Spouse of the taxpayer meeting conditions at point đ, Clause 1, of this Article.

- Birth parents, parents-in-law, step-parents, legal adoptive parents of the taxpayer meeting conditions at point đ, Clause 1, of this Article.

- Other dependents without refuge whom the taxpayer directly supports meeting conditions at point đ, Clause 1, of this Article, including:

- Siblings of the taxpayer.

- Grandparents, aunts, uncles, of the taxpayer.

- Nephews and nieces of the taxpayer, including children of his/her siblings.

- Other dependents as prescribed by law that the taxpayer must directly nurture.

Referring to the provisions of point đ Clause 1 of this Article, the individuals mentioned in sections d.2, d.3, d.4, point d, Clause 1 above must satisfy the following conditions:

- Individuals within working age must satisfy all the following conditions:

+ Have disabilities, unable to work.

+ Have no or average monthly income in a year from all sources not exceeding 1 million VND.

- Individuals outside working age must not have any income or average monthly income in a year from all sources not exceeding 1 million VND.

Thus, based on the above regulations, retirees qualify for personal exemptions when simultaneously meeting the conditions per each category, and their retirement pensions plus other incomes do not surpass an average monthly income of 1 million VND.