What level of regional allowance compared to the region-based minimum wage is subject to personal income tax in Vietnam?

What level of regional allowance compared to the region-based minimum wage is subject to personal income tax in Vietnam?

Pursuant to Clause 3, Article 6 of Decree 204/2004/ND-CP which stipulates salary allowance policies as follows:

Salary Allowance Policies

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3. Regional Allowance:

Applicable to individuals working in remote, isolated, and adverse climate areas.

The allowance comprises 7 levels: 0.1; 0.2; 0.3; 0.4; 0.5; 0.7 and 1.0 compared to the region-based minimum wage. For non-commissioned officers and conscripts of the armed forces, the regional allowance is calculated based on the private soldier's military rank allowance.

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Pursuant to 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 Salaries and Wages

Income from salaries and wages is the income received by employees from their employers, including:

a) Salaries, wages, and items of a salary or wage nature, in either cash or non-cash forms.

b) Allowances and subsidies, except for the following allowances and subsidies:

b.1) Monthly and lump-sum preferential allowances as prescribed by the law on preferential treatment for people with meritorious service.

b.2) Monthly allowances and lump-sum subsidies for individuals participating in national defense, resistance, international missions, and young volunteers who have completed their tasks.

b.3) National defense and security allowances; subsidies for armed forces.

b.4) Hazardous and dangerous allowances for industries, sectors, or jobs at workplaces with hazardous or dangerous elements.

b.5) Attraction allowances, regional allowances.

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Therefore, according to the above regulations, the regional allowance is among the types of allowances not subject to taxable income, hence Personal Income Tax (PIT) does not apply to this subject.

What level of regional allowance compared to the region-based minimum wage is subject to personal income tax in Vietnam? (Image from Internet)

Shall taxpayers facing difficulties in paying tax due to natural disasters receive a tax reduction in Vietnam?

Pursuant to Clause 1, Article 4 of Circular 111/2013/TT-BTC which stipulates as follows:

Tax Reduction

In accordance with Article 5 of the Personal Income Tax Law, Article 5 of Decree No. 65/2013/ND-CP, taxpayers encountering difficulties due to natural disasters, fires, accidents, or serious illnesses affecting their tax-paying ability are eligible for tax reduction corresponding to the level of damage but not exceeding the tax liability. Specifically:

1. Determining the Reduced Tax Amount

a) Tax reduction assessment is conducted annually. Taxpayers experiencing difficulties due to natural disasters, fires, accidents, or serious illnesses in any tax year are eligible for a reduction in tax payable for that tax year.

b) The tax payable used as a basis for tax reduction assessment is the total personal income tax payable by the taxpayer in the tax year, including:

b.1) Personal income tax paid or withheld for income from capital investment, capital transfer, real estate transfer, winnings, royalties, franchising, inheritance; and gift income.

b.2) Personal income tax payable for income from business and income from salaries and wages.

c) The basis for determining the level of damage eligible for tax reduction is the total actual cost incurred to remedy the damage minus (-) any compensation received from insurance organizations (if any) or from organizations or individuals causing the accident (if any).

d) The reduced tax amount is determined as follows:

d.1) If the tax payable in the tax year exceeds the level of damage, the tax reduction equals the level of damage.

d.2) If the tax payable in the tax year is less than the level of damage, the tax reduction equals the tax payable.

Thus, according to the above regulations, tax reduction is conducted on a tax year basis. Taxpayers who have difficulties due to natural disasters, fires, accidents, or serious illnesses in any tax year are eligible for a reduction in the tax payable for that year.

Similarly, in the absence of difficulties due to natural disasters, fires, accidents, or serious illnesses this year affecting tax payment capability, tax reduction is not applicable.

What rewards are not subject to personal income tax in Vietnam?

Pursuant to Clause 2, Article 2 of Circular 111/2013/TT-BTC which stipulates rewards in cash or non-cash in any form, including stock bonuses, except for the following rewards:

- Bonus money attached to titles conferred by the State, including bonuses accompanying emulation titles and forms of commendation prescribed by the law on emulation and commendation, specifically:

+ Bonuses attached to emulation titles such as National Emulation Fighter; Sector-level Emulation Fighter, Central Agency, Ministry, Sector, Province, and City Emulation Fighter; Basic Emulation Fighter, Advanced Laborer, Advanced Soldier.

+ Bonuses attached to forms of commendation.

+ Bonuses attached to titles conferred by the State.

+ Bonuses attached to awards given by Associations, organizations under Central and local political organizations, social-political organizations, social organizations, social-professional organizations that are suitable with their regulations and laws on Emulation and Commendation.

+ Bonuses attached to the Ho Chi Minh Prize, State Prize.

+ Bonuses attached to commemorative medals and insignias.

+ Bonuses attached to Certificates of Merit, Certificates of Commendation.

The authority to issue commendation decisions and the reward levels corresponding to emulation titles and forms of commendation must comply with the provisions of the Emulation and Commendation Law.

- Bonuses accompanying national and international awards recognized by the State of Vietnam.

- Bonuses for technical improvements, inventions, and innovations recognized by the competent state agencies.

- Bonuses for the discovery and reporting of legal violations to the competent state authorities.