Is overtime pay at night subject to personal income tax in Vietnam?

Who are personal income taxpayers in Vietnam?

Pursuant to Article 1 of Circular 111/2013/TT-BTC, as amended by Article 2 of Circular 119/2014/TT-BTC, taxpayers include:

- Resident individuals:

+ Present in Vietnam for 183 days or more within a calendar year or in 12 consecutive months from the first day of presence in Vietnam;+ Having a permanent place of residence in Vietnam;

+ Having taxable income.

- Non-resident individuals with taxable income.

Clause 4 Article 1 of Circular 111/2013/TT-BTC states that taxpayers include:

- Individuals with Vietnamese nationality (including individuals sent to work, labor, or study abroad with taxable income);

- Individuals without Vietnamese nationality but with taxable income (including: foreigners working in Vietnam, foreigners not present in Vietnam but having taxable income generated in Vietnam).

Is overtime pay at night subject to personal income tax in Vietnam? (Image from Internet)

Is overtime pay at night subject to personal income tax in Vietnam?

Pursuant to point i clause 1 Article 3 of Circular 111/2013/TT-BTC, regulations on tax-exempt income are as follows:

Tax-exempt income

1. Pursuant to Article 4 of the Law on Personal Income Tax, Article 4 of Decree No. 65/2013/ND-CP, tax-exempt income includes:

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i.1) The portion of wages and salaries paid higher due to working at night, overtime is tax-exempt based on the actual wages and salaries paid due to working at night, overtime minus (-) the wages and salaries calculated according to regular working hours.

Example 2: Mr. A has a daily wage regulated by the Labor Code of VND 40,000/hour.

- If an individual works overtime on regular days, and is paid VND 60,000/hour, the tax-exempt income is:

VND 60,000/hour – VND 40,000/hour = VND 20,000/hour

- If an individual works overtime on holidays or days off, and is paid VND 80,000/hour, the tax-exempt income is:

VND 80,000/hour – VND 40,000/hour = VND 40,000/hour

i.2) Organizations and individuals paying income must make a detailed time sheet for night work, overtime, and additional wages paid due to night work, overtime paid to employees. This time sheet must be kept at the income-paying unit and presented upon request by the tax authority.

The portion of wages and salaries paid higher due to working at night, overtime is tax-exempt based on the actual wages and salaries paid due to working at night, overtime minus the wages and salaries calculated according to regular working hours.

Thus, only the portion of income (overtime pay) paid higher than the wages and salaries for regular working hours is tax-exempt.

When are individuals with income from wages and salaries not required to finalize personal income tax in Vietnam?

According to point d.3 clause 6 Article 8 of Decree 126/2020/ND-CP, stipulated as follows:

Taxes declared monthly, quarterly, annually, per occurrence of tax obligation and tax finalization declarations

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Resident individuals with income from wages and salaries directly declare personal income tax finalization with the tax authorities in the following cases:

If there is additional tax payable or overpaid tax requested to be refunded or offset in the next tax declaration period, except in the following cases: individuals with additional tax payable after annual finalization of VND 50,000 or less; individuals with tax payable less than the pre-paid tax amount who do not request a tax refund or offset in the next tax declaration period; individuals with income from wages and salaries with labor contracts of 03 months or more at one unit, and additional spot income at other places averaging not more than VND 10 million per month in the year and have been deducted 10% personal income tax if there is no request for tax finalization for this income part; individuals whose employers buy life insurance (except voluntary pension insurance), other non-mandatory insurance with accumulated premiums where the employer or insurer has deducted 10% personal income tax on the premium amount paid or contributed by the employer for the employee, the employee does not need to finalize personal income tax for this income portion.

Individuals present in Vietnam less than 183 days in the first calendar year, but 183 days or more within 12 consecutive months from the first day present in Vietnam.

Foreign individuals ending their working contract in Vietnam must finalize tax with the tax authorities before leaving the country. If individuals have not finalized tax with the tax authorities, they must authorize the income-paying organization or other individuals or organizations to finalize tax according to regulations. If the income-paying organization or other individuals or organizations accept the authorization, they are responsible for the additional tax payable or refunds of overpaid tax of the individuals.

Resident individuals with income from wages and salaries who are subject to tax reduction due to natural disasters, fires, accidents, serious illnesses affecting their tax payment ability do not authorize the income-paying organization or individuals to finalize taxes on their behalf but must directly finalize with the tax authorities according to the regulations.

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Thus, individuals with income from wages and salaries are not required to finalize personal income tax in the following cases:

- Individuals with additional tax payable after annual finalization of VND 50,000 or less;- Individuals with tax payable less than the pre-paid tax amount who do not request a tax refund or offset in the next tax declaration period;

- Individuals with income from wages and salaries with labor contracts of 03 months or more at one unit, and additional spot income at other places averaging not more than VND 10 million per month in the year and have been deducted 10% personal income tax if there is no request for tax finalization for this income part;

- Individuals for whom employers buy life insurance (except voluntary pension insurance), other non-mandatory insurance with accumulated premiums where the employer or insurer has deducted 10% personal income tax on the premium amount paid or contributed by the employer for the employee, the employee does not need to finalize personal income tax for this income portion.