What is the maximum number of months of severance allowance that public employees can receive due to downsizing in Vietnam? Is severance allowance subject to personal income tax in Vietnam?
What is the maximum number of months of severance allowance that public employees can receive due to downsizing in Vietnam?
Pursuant to Point a, Clause 2, Article 5 of Decree 178/2024/ND-CP which stipulates how to determine the period of service and salary for calculating entitlements, policies are as follows:
How to Determine the Period of Service and Salary for Calculating Entitlements, Policies
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- The period for calculating severance allowances is the period of work with compulsory social insurance contributions in agencies of the Communist Party, the State, socio-political organizations, and the armed forces as specified in Article 1 of this Decree:
a) If the period of work with compulsory social insurance contributions is 5 years or more, the period for calculating severance allowance is a maximum of 5 years (60 months).
b) If the period of work with compulsory social insurance contributions is less than 5 years, the period for calculating severance allowance is equal to the period of work with compulsory social insurance contributions.
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- The current monthly salary is the monthly salary immediately preceding the cessation of work, including: The salary level according to rank, grade, position, job title, professional title, or the salary level agreed upon in the labor contract and salary allowances (including: Leadership position allowance; excess seniority allowance; professional seniority allowance; preferential allowance according to profession; responsibility allowance by profession; public service allowance; party, political organization allowance; special allowance for the armed forces).
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Additionally, Clause 1, Article 10 of Decree 178/2024/ND-CP stipulates as follows:
Severance Policies for Public Employees and Workers as Specified in Points a and c, Clause 1, Article 2 of this Decree
Public employees and workers who are from 2 years of age or more up to retirement age as specified in Appendix I, Appendix II attached to Decree No. 135/2020/ND-CP and do not qualify for early retirement policies as specified in Article 7 of this Decree, if they cease work they are entitled to the following policies:
1. Entitled to severance allowance:
a) For those who cease work within the first 12 months from the date of the decision to reorganize the machinery of the competent authority, they are entitled to an allowance equal to 0.8 months of current salary multiplied by the number of months calculated for severance allowance.
b) For those who cease work from the 13th month onwards from the date of the decision to reorganize the machinery of the competent authority, they are entitled to an allowance equal to 0.4 months of current salary multiplied by the number of months calculated for severance allowance.
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Based on the above two provisions, it can be seen that the period for calculating severance allowance due to downsizing is the period of work with compulsory social insurance contributions in agencies of the Communist Party, the State, socio-political organizations, and the armed forces. The period for calculating severance allowance is a maximum of 5 years (60 months) for those who have 5 years or more of work with compulsory social insurance contributions.
*How to Determine the Amount of Severance Allowance that Public Employees Receive When downsizing:
(1) For public employees ceasing work within the first 12 months from the date of the decision to reorganize the organizational machinery:
Severance allowance = 0.8 months of current salary x number of months calculated for severance allowance
(2) For public employees ceasing work from the 13th month onwards from the date of the decision to reorganize the organizational machinery:
Severance allowance = 0.4 months of current salary x number of months calculated for severance allowance
What is the maximum number of months of severance allowance that public employees can receive due to downsizing in Vietnam? Is severance allowance subject to personal income tax in Vietnam? (Image from the Internet)
Is the severance allowance for downsizing subject to personal income tax in Vietnam?
Pursuant to Point b.6, Clause 2, Article 2 of Circular 111/2013/TT-BTC stipulates as follows:
Taxable Incomes
According to Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, taxable incomes for personal income tax include:
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- Income from wages and salaries
Income from wages and salaries is income received by workers from employers, including:
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b) Allowances, subsidies, excluding the following allowances, subsidies:
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b.6) Sudden difficulty allowance, work accident subsidy, occupational disease subsidy, one-time allowance for childbirth or adoption, maternity benefit, convalescence, health restoration after maternity, allowance due to reduced working capacity, one-time retirement allowance, monthly survivor allowance, severance allowance, job loss allowance, unemployment benefit, and other allowances as prescribed by the Labor Code and the Law on Social Insurance.
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Thus, according to the above provisions, the severance allowance is not included in taxable income for personal income tax; therefore, the severance allowance, in all cases, including when downsizing, will not be subject to personal income tax.
Who is subject to paying personal income tax under current regulations in Vietnam?
Pursuant to Article 2 of the Law on Personal Income Tax 2007, individuals subject to personal income tax are residents with taxable incomes prescribed in Article 3 of the Law on Personal Income Tax 2007 arising inside and outside the territory of Vietnam, and non-residents with taxable incomes prescribed in Article 3 of the Law on Personal Income Tax 2007 arising within the territory of Vietnam.
In which:
- A resident individual is a person who meets one of the following conditions:
+ Present in Vietnam for 183 days or more calculated in a calendar year or 12 consecutive months from the first day of presence in Vietnam;
+ Having a regular place of residence in Vietnam, including having a registered permanent residence or a leased house to stay in Vietnam according to a lease contract.
- A non-resident individual is a person who does not meet the following conditions:
+ Present in Vietnam for 183 days or more calculated in a calendar year or 12 consecutive months from the first day of presence in Vietnam;
+ Having a regular place of residence in Vietnam, including having a registered permanent residence or a leased house to stay in Vietnam according to a lease contract.
