Is housing allowance subject to PIT? How to determine PIT rate applying to employee's housing allowance in Vietnam?

Is housing allowance subject to PIT in Vietnam?

Based on section d.1, point d, clause 2, Article 2 of Circular 111/2013/TT-BTC (amended by clause 2, Article 11 of Circular 92/2015/TT-BTC), the regulations on taxable income are as follows:

Taxable income

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2. Income from wages and salaries

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d) Monetary or non-monetary benefits other than wages and salaries paid by the employer which the taxpayer can enjoy in any form:

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d.1) Housing, electricity, water, and associated services (if any), excluding the benefits related to housing, electricity, water, and associated services provided free of charge by the employer at an industrial zone; housing provided by the employer at economic zones, areas with difficult socio-economic conditions, or areas with especially difficult socio-economic conditions.

In cases where the individual resides at the workplace, taxable income is based on the rental cost or depreciation, electricity, water, and other services calculated per the ratio between the individual’s used area and the entire workplace area.

The housing, electricity, water, and associated services (if any) paid by the employer on behalf of the employee are included in taxable income based on the actual amount paid but shall not exceed 15% of total arising taxable income (excluding housing, electricity, water, and associated services (if any)) at the unit regardless of where the income is paid.

Thus, according to the above regulation, the housing allowance paid by the business on behalf of the employee will be included in the PIT based on the actual amount paid. However, it will be exempt from tax if this allowance does not exceed 15% of the total arising taxable income of the employee, excluding housing, electricity, water, and associated services. If the total housing allowance does not exceed 15% of the employee's total taxable income, this amount will be PIT exempt, and if it exceeds 15%, the exceeding portion will be included in the taxable PIT income.

Is housing allowance subject to PIT? How to determine PIT rate applying to employee's housing allowance in Vietnam? (Image from the Internet)

How to determine PIT rate applying to employee's housing allowance in Vietnam?

In section d.1, point d, clause 2, Article 2 of Circular 111/2013/TT-BTC, amended by clause 2, Article 11 of Circular 92/2015/TT-BTC, the provision is as follows:

Taxable income

...

2. Income from wages and salaries

....

d.1) Housing, electricity, water, and associated services (if any), excluding benefits related to housing, electricity, water, and associated services provided free of charge by the employer at an industrial zone; housing provided by the employer at economic zones, areas with difficult socio-economic conditions, or areas with especially difficult socio-economic conditions.

In cases where the individual resides at the workplace, taxable income is based on the rental cost or depreciation, electricity, water, and other services calculated per the ratio between the individual’s used area and the entire workplace area.

The housing, electricity, water, and associated services (if any) paid by the employer on behalf of the employee are included in taxable income based on the actual amount paid but shall not exceed 15% of total arising taxable income (excluding housing rental) at the unit regardless of where the income is paid.”

Based on the above regulation, the benefits paid by the employer that the taxpayer receives in any form shall be included in income from wages and salaries. Thus, the employee's housing allowance is deducted from personal income tax as follows:

In cases of housing at the workplace, taxable income is based on the rental cost or depreciation, electricity, water, and other services calculated per the ratio between the individual’s used area and the entire workplace area.

Regarding the housing allowance as rental and associated utilities offered by the business to the employee, this shall not exceed 15% of the total arising taxable income.

Is the housing allowance included in the salary for social insurance contributions in Vietnam?

According to the provisions in Clause 2, Article 6 of Decision 595/QD-BHXH 2017, the monthly salary for mandatory social insurance contributions excludes benefits and other allowances, such as:

The monthly salary for mandatory social insurance contributions according to Article 89 of the Law on Social Insurance and guiding documents. To be specific:

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2. Salary decided by the unit

2.1. From January 01, 2016, to December 31, 2017, the monthly salary for mandatory social insurance contributions includes the salary and salary allowances as prescribed in Clause 1 and Point a, Clause 2, Article 4 of Circular No. 47/2015/TT-BLDTBXH dated November 16, 2015, of the Ministry of Labor, War Invalids, and Social Affairs guiding the implementation of certain provisions on labor contracts, labor discipline, material responsibility under Decree No. 05/2015/ND-CP dated January 12, 2015, of the Government of Vietnam detailing and guiding some contents of the Labor Code.

Salary allowances as stipulated at Point a Clause 2 Article 4 of Circular No. 47/2015/TT-BLDTBXH are allowances to compensate for labor conditions, the complexity of work, living conditions, attractiveness of labor that agreed salary in the labor contract has not covered or fully covered, such as position allowance, responsibility allowance, heavy-duty, hazardous, and dangerous allowance; seniority allowance; region allowance; mobile allowance; attractiveness allowance, and similar allowances.

2.2. From January 01, 2018, onwards, the monthly salary for mandatory social insurance contributions is the salary, salary allowances as prescribed in Point 2.1 of this Clause, and other additional amounts as prescribed in Point a, Clause 3, Article 4 of Circular No. 47/2015/TT-BLDTBXH.

2.3. The monthly salary for mandatory social insurance contributions does not include policies and other benefits, such as bonuses as prescribed in Article 103 of the Labor Code, initiative bonuses; mid-shift meals; support for petrol, telephone, travel, housing, childcare, small child care; support when employees have family members die, employees have relatives getting married, employee birthdays, allowance for employees facing difficulties due to labor accidents, occupational diseases, and other supportive and allowance amounts listed as separate items in the labor contract as per Clause 11, Article 4 of Decree No. 05/2015/ND-CP.

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Thus, the housing allowance received by the employee will not be included in the salary for social insurance contributions.