Is the employer obligated to provide year-end bonuses for employees in Vietnam? Is the Tet bonus for employees included in deductible expenses when calculating corporate income tax in Vietnam?

Is the employer obligated to provide year-end bonuses for employees in Vietnam?

Based on the regulations stipulated in Article 104 of the Labor Code 2019 as follows:

Bonus

1. A bonus is an amount of money or assets or other forms that the employer rewards to the employee based on the results of production, business, and the level of work completion of the employee.

2. The bonus policy is decided upon and publicly announced by the employer at the workplace after consulting with the employee representative organization at the facility, where such an organization exists.

Thus, it can be seen that the law does not mandate companies to provide year-end bonuses for employees.

The bonus policy will be decided upon by the employer based on the capabilities, performance, and business outcomes of each employee within that employer, and it is subject to the bonus policy established by the employer.

In cases where the business has a Bonus Policy (clearly stipulating the circumstances under which employees receive bonuses) and has publicly informed employees, the business must comply with the employer's Bonus Policy regarding the payment of bonuses to employees.

Is the employer obligated to provide year-end bonuses for employees in Vietnam? (Image from the Internet)

Is the Tet bonus subject to personal income tax in Vietnam?

Based on point e, clause 2, Article 2 of Circular 111/2013/TT-BTC regarding taxable personal income as follows:

Taxable incomes

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

...

2. Income from wages and salaries

Income from wages and salaries is the income received by the employee from the employer, including:

...

e) Bonuses in cash or in kind in any form, including stock bonuses, except for the following bonuses:

e.1) Bonuses acemployering titles awarded by the State, including bonuses acemployering titles of emulation, forms of commendation as stipulated by the law on emulation and commendation, specifically:

e.1.1) Bonuses acemployering emulation titles such as National Emulation Soldier; Ministry, sector, central committee, province, city under central authority emulation soldier; grassroots emulation soldier, Advanced Laborer, Advanced Soldier.

e.1.2) Bonuses acemployering forms of commendation.

e.1.3) Bonuses acemployering titles awarded by the State.

e.1.4) Bonuses acemployering prizes granted by Associations, Organizations belonging to political organizations, socio-political organizations, social organizations, and socio-professional organizations of the central and local levels in accordance with the charter of those organizations and in accordance with the Law on Emulation and Commendation.

...

Thus, the employer's Tet bonus is considered a type of bonus, and this amount is not among the bonuses exempted from PIT.

Therefore, the employer's Tet bonus is an income that is subject to personal income tax.

Is the Tet bonus for employees included in deductible expenses when calculating corporate income tax in Vietnam?

Based on point b, clause 2.6, Article 4 of Circular 96/2015/TT-BTC (amended by clause 2, Article 3 of Circular 25/2018/TT-BTC) stipulating non-deductible expenses when determining taxable income includes:

Deductible and non-deductible expenses when determining taxable income

...

Non-deductible expenses when determining taxable income include:

...

2.6 Expenses for salaries, wages, bonuses for employees in any of the following cases:

a) Expenses for salaries, wages, and other amounts payable to employees that have been accounted into the production and business expenses but not actually paid or do not have payment vouchers in accordance with the law.

b) Salaries, bonuses for employees not specifically documented with eligibility conditions and levels of enjoyments in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the employer, Corporation, Group; Bonus regulation issued by the Chairman of the Board, General Director, Director in accordance with the financial regulations of the employer, Corporation.

- In cases where a business signs a labor contract with a foreigner that specifies expenses for schooling of the foreigner's children in Vietnam from kindergarten to high school level and said expenses are treated as salaries or wages and have full invoices and documents in compliance with regulations, they can be included in deductible expenses when determining taxable corporate income.

- In cases where a business signs a labor contract with an employee specifying housing expenses paid by the business to the employee, this payment is treated as salary, wages, and has full invoices and documents in compliance with regulations, it can be included in deductible expenses when determining taxable corporate income.

- In case a Vietnamese enterprise signs a contract with a foreign enterprise that states the Vietnamese enterprise must bear costs for accommodation of foreign experts during their work period in Vietnam, the rent paid for foreign experts working in Vietnam will be included in deductible expenses when determining taxable corporate income.

Thus, Tet bonuses for employees will be included in deductible expenses when calculating CIT if these bonuses are specifically documented with eligibility conditions and levels of enjoyment in one of the following documents of the enterprise:

- Labor contract;

- Collective labor agreement;

- Corporate financial regulations;

- Corporate bonus regulations.