Is Vietnamese lucky money subject to personal income tax? Is it deductible when calculating corporate income tax?
Is Vietnamese lucky money subject to personal income tax?
According to the provisions of Clause 2 Article 3 of the 2007 Personal Income Tax Law (amended by Clause 1 Article 1 of the 2012 Amended Personal Income Tax Law and the 2014 Amended Tax Laws), taxable income includes income from wages, salaries, and other income of a wage, salary nature.
Therefore, to determine whether Vietnamese lucky money is subject to personal income tax (PIT), it is necessary to clearly distinguish the nature of the lucky money. To be specific:
(1) Lucky money from family, relatives
Based on the regulations at Clause 10 Article 2 of Circular 111/2013/TT-BTC, which stipulates taxable income from receiving gifts as follows:
Taxable income
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- Income from receiving gifts
Income from receiving gifts is the income an individual receives from domestic and foreign organizations and individuals. To be specific:
a) For receiving gifts as securities, including: shares, share purchase rights, bonds, treasury bills, fund certificates, and other securities as stipulated by the Law on Securities; shares of individuals in joint-stock companies as stipulated by the Law on Enterprises.
b) For receiving gifts as stakes in economic organizations, business establishments including: capital in limited liability companies, cooperatives, partnerships, business cooperation contracts, capital in private enterprises, individual business establishments, capital in associations, funds allowed to establish under the law, or entire business establishments if privately owned.
c) For receiving gifts as real estate, including: land use rights; land use rights with attached assets; house ownership rights, including future formed houses; infrastructure and construction works attached to land, including future formed construction works; land rental rights; water surface rental rights; other income received from real estate inheritance by any means; except for income from real estate gifts guided at Point d, Clause 1, Article 3 of this Circular.
d) For receiving gifts as other assets that must be registered for ownership or use rights with State management agencies such as: cars; motorcycles, motorbikes; watercraft, including barges, canoes, towboats, pushers; yachts; aircraft; hunting guns, sporting guns.
Based on the above regulations, there is no regulation that income from cash gifts must bear PIT. Lucky money received from family and relatives is a gift representing luck, not income from wages, salaries, or business activities.
Thus, income from lucky money gifts from family and relatives is not subject to PIT.
(2) Lucky money from a income payer:
Based on Point e Clause 2 Article 2 of Circular 111/2013/TT-BTC, which stipulates taxable income as follows:
Taxable income
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2. Income from wages, salaries
Income from wages, salaries is income employees receive from employers, including:
...
e) Bonuses in cash or in kind in all forms, including bonuses in securities, except for the following bonuses:
e.1) Bonuses associated with titles awarded by the State, including bonuses associated with titles of emulation, forms of reward according to the law on emulation and commendation, specifically:
e.1.1) Bonuses associated with emulation titles such as National Emulation Soldier; Emulation Soldier at the ministry, sector, central organization or province, centrally-run city; Grassroots Emulation Soldier, Advanced Worker, Advanced Soldier.
e.1.2) Bonuses associated with forms of commendation.
e.1.3) Bonuses associated with titles awarded by the State.
e.1.4) Bonuses associated with awards given by associations, organizations belonging to political organizations, socio-political organizations, social organizations, social-professional organizations at central and local levels appropriate to the charter of that organization and in accordance with the Law on Emulation and Commendation.
e.1.5) Bonuses associated with the Ho Chi Minh Prize, State Prize.
e.1.6) Bonuses associated with Commemorative Medals, Badges.
e.1.7) Bonuses associated with Certificates of Merit, Certificates of Commendation.
The authority to decide on commendations, the amount of bonuses associated with emulation titles, and forms of reward mentioned above must comply with the provisions of the Law on Emulation and Commendation.
e.2) Bonuses associated with national prizes, international prizes recognized by the Vietnamese State.
e.3) Bonuses for technical innovations, inventions recognized by competent State agencies.
e.4) Bonuses for discovering, reporting legal violations to competent State agencies.
....
According to the above provisions, Vietnamese lucky money given by the income payer to employees can be considered either a bonus or income of a wage, salary nature. Therefore, if this amount is purposefully paid by the enterprise, included in the salary or bonus policy, the employee must consider it taxable PIT income.
Thus, lucky money from the income payer may be subject to personal income tax (PIT) depending on how the enterprise pays and accounts for it:
- Case where tax must be paid: If the lucky money amount is purposefully paid by the enterprise, included in the salary or bonus policy, or officially recorded in the accounting system, it is considered taxable income. In this case, the employee may have to pay PIT if their income remains taxable after deductions.
- Case where tax is not required: If the lucky money is purely symbolic, not part of the salary or bonus regulations, and not officially accounted for, it can be considered a non-taxable gift.
Is Vietnamese lucky money subject to personal income tax? (Image from the Internet)
Can Vietnamese lucky money be deducted for corporate income tax (CIT) calculation?
Based on Point 2.30 Clause 2 Article 6 of Circular 78/2014/TT-BTC (amended, supplemented by Article 4 Circular 96/2015/TT-BTC and Clause 4 Article 3 Circular 25/2018/TT-BTC):
Deductible and Non-deductible Expenses in Determining Taxable Income
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- Non-deductible expenses in determining taxable income include:
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2.30. Expenses not corresponding to taxable revenue, except for the following expenses:
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- Expenses of welfare nature directly paid to employees such as: expenses for funerals, weddings for employees and their families; vacation expenses, treatment support; expenses for additional training at educational institutions; support for families affected by disasters, accidents, illness; rewarding children of employees with good academic achievements; travel support expenses for holidays, Tet for employees; accident insurance, health insurance, other voluntary insurance for employees (except expenses for buying life insurance for employees, voluntary retirement insurance for employees guided at Point 2.11 of this Article) and other welfare expenses. Total welfare expenses shall not exceed the actual average one-month salary in the tax year of the enterprise.
...
Additionally, according to Official Dispatch 2489/CT-TTHT issued by the Ho Chi Minh City Tax Department on March 24, 2016, guiding tax policies as follows:
In the case that in the year 2014, the income payer incurs expenses of a welfare nature directly given to employees such as: expenses for funeral, wedding for employees, Vietnamese lucky money, vacation, etc., and other welfare expenses, if there are lawful invoices and documents and the total welfare expenses do not exceed the actual average one-month salary implemented during the income payer's tax year, then the income payer can consider these as deductible expenses in determining taxable corporate income (CIT).
Thus, lucky money given to employees at the beginning of the year is considered one of the welfare expenses. This is recognized as a deductible expense when calculating corporate income tax (CIT).
Note: The total welfare expenses mentioned above must not exceed the actual average one-month salary paid during the enterprise's tax year.
Where is the place for enterprises to pay corporate income tax in Vietnam?
Based on Article 12 of Decree 218/2013/ND-CP stipulating the place to pay taxes as follows:
Place to Pay Taxes
- Enterprises pay taxes at the localities where their headquarters are located. In cases where enterprises have production establishments dependent on accounting located in provinces or centrally run cities other than where their headquarters are situated, taxes are paid at the location of the headquarters and the production establishment.
Corporate income tax payable in provinces or centrally run cities where there are dependent accounting production establishments is calculated by the income tax payable by the enterprise multiplied by the ratio between costs incurred at the dependent accounting production establishment and the total costs of the enterprise.
The tax payment stipulated in this Clause does not apply to construction projects, components of projects, or construction establishments that conduct dependent accounting.
The decentralization, management, and use of revenue from corporate income tax are implemented in accordance with the Law on State Budget.
- Dependent accounting units of enterprises that account for the industry as a whole with income outside the main business activities shall pay tax in the provinces or centrally-run cities where these business activities take place.
- The Ministry of Finance guides the place to pay taxes stipulated in this Article.
Thus, enterprises pay CIT at:
- The locality where the enterprise's headquarters is located.
In cases where enterprises have production establishments dependent on accounting in a province or city directly under central authority different from where the headquarters is located, taxes are calculated based on the location of the headquarters and the production establishment.
Note: this regulation does not apply to construction projects, components of projects, or construction establishments that conduct dependent accounting.
- The province or city directly under central authority where there are business activities: For dependent accounting units of enterprises that account for the whole industry with income from outside the main business operations.
