Is cell phone allowance subject to personal income tax in Vietnam?

Is cell phone allowance subject to PIT in Vietnam?

According to Official Dispatch 79557/CT-TTHT of 2018, it explicitly outlines the personal income tax (PIT) obligations concerning employee allowances as follows:

...

2.9. Allowances for travel expenses during leave not in accordance with the Labor Code.

Allowances for employees on business trips, travel expenses, and accommodation costs are deductible when determining taxable income if full invoices and documents are provided. In cases where companies allocate fixed amounts for travel, accommodation, and allowances for employees on business trips and these allocations comply with the company's financial or internal regulations, such expenditures can be included in deductible expenses...

Based on the aforementioned regulations, in cases where a company pays allowances for housing rent, fuel (from home to company at a fixed monthly rate), telephone, and diligence allowances for employees, specifying the entitlements and levels in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation, Group; Reward regulations stipulated by the Chairman of the Board of Directors, General Director, or Director according to the financial regulations of the Company, Corporation, then:

For housing rent, fuel allowances, and diligence allowances: The company is allowed to account these as deductible expenses when determining taxable income if they comply with the provisions of Article 4 of Circular No. 96/2015/TT-BTC and include these in the employee's taxable PIT income.

Regarding the cell phone allowance: a fixed cell phone allowance provided to individuals can be included as a deductible expense for corporate income tax purposes according to the Corporate Income Tax Law, which in turn is excluded from taxable PIT income.

In cases where the cell phone allowance provided exceeds the stipulated fixed amount, the excess must be included in the taxable PIT income.

...

Thus, the cell phone allowance does not need to be included in the employee's taxable personal income for PIT purposes if it is within a reasonable fixed amount. However, if this allowance exceeds the stipulated amount, the excess must be included in the taxable PIT income.

Is cell phone allowance subject to PIT in Vietnam? (Image from the Internet)

Which incomes are exempt from personal income tax in Vietnam?

According to Article 4 of the Law on Personal Income Tax 2007, as supplemented by Clause 3 of Article 2 of the Law Amending Tax Laws 2014 and amended by Clause 2 of Article 1 of the Law on Amendments to Law on Personal Income Tax 2012, it stipulates the types of personal income that are exempt from PIT as follows:

- Income from real estate transfers between spouses; biological parents to biological children; adoptive parents to adopted children; parents-in-law to daughters-in-law; parents-in-law to sons-in-law; paternal grandparents to grandchildren; maternal grandparents to grandchildren; siblings to each other.

- Income from the transfer of residential houses, homestead land use rights, and assets attached to homestead land held by an individual who possesses only one residential house, homestead land.

- Income from the value of land use rights allocated by the State to individuals.

- Income from inheritance or gifts as real estate between spouses; biological parents to biological children; adoptive parents to adopted children; parents-in-law to daughters-in-law; parents-in-law to sons-in-law; paternal grandparents to grandchildren; maternal grandparents to grandchildren; siblings to each other.

- Income of households and individuals directly involved in agricultural, forestry, salt production, aquaculture, catching fisheries without processing into other products or only undergoing basic processing.

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

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

- Income from remittances.

- Higher wages and salaries for night work and overtime compared to day work wages and salaries in accordance with the law.

- Retirement pensions paid by the Social Insurance Fund; monthly pensions paid by voluntary pension fund.

- Income from scholarships, including:

+ Scholarships funded by the state budget;

+ Scholarships received from domestic and foreign organizations under educational support programs of these organizations.

- Income from compensation for life and non-life insurance contracts, compensation for labor accidents, state compensation, and other compensations as prescribed by law.

- Income from charitable foundations approved or recognized by competent state agencies, operating for charitable, humanitarian, non-profit purposes.

- Income from foreign aid for charitable, humanitarian purposes, whether governmental or non-governmental, approved by competent state agencies.

- Income from wages and salaries for Vietnamese seafarers working for foreign shipping companies or Vietnamese shipping companies engaged in international transport.

- Income of individuals who are ship owners, individuals entitled to use ships and individuals working on ships from activities supplying goods and services directly serving off-shore fishing activities.

What are regulations on the personal income tax calculation period in Vietnam?

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

- For resident individuals, the tax calculation period is defined as follows:

+ Annual period applicable to income from business; income from wages and salaries;

+ Each instance of income generation applicable to income from capital investment; capital transfer, except securities transfer; real estate transfers; winnings; royalties; franchising; inheritance; gifts;

+ Each securities transfer or annually for securities transfer income.

- For non-resident individuals, the tax calculation period is each instance of income generation for all taxable income.