What policies are available for employees who do not meet the conditions for early retirement in Vietnam under Decree 178? Is severance pay for employees subject to personal income tax in Vietnam?

What policies are available for employees who do not meet the conditions for early retirement in Vietnam under Decree 178?

Pursuant to Article 10 of Decree 178/2024/ND-CP, employees who are at least 2 years below the retirement age and do not meet the conditions for early retirement as specified in Article 7 of Decree 178/2024/ND-CP, if they resign, are entitled to the following policies:

(1) Entitlement to severance pay:

- For those who resign within the first 12 months from the date the organizational structure rearrangement decision is issued, they will receive a severance allowance equal to 0.8 months of their current salary multiplied by the number of months used to calculate the severance allowance.

- For those who resign from the 13th month onwards from the date the organizational structure rearrangement decision is issued, they will receive an allowance equal to 0.4 months of their current salary multiplied by the number of months used to calculate the severance allowance.

(2) Entitlement to an allowance of 1.5 months of their current salary for each year of working with mandatory social insurance contributions.

(3) Entitlement to preserve the social insurance contribution period or claim a one-time social insurance benefit according to the provisions of social insurance law.

(4) Entitlement to unemployment insurance according to the provisions of unemployment insurance law.

What policies are available for employees who do not meet the conditions for early retirement in Vietnam under Decree 178? (Image from the Internet)

Is severance pay for employees subject to personal income tax in Vietnam?

According to point b.6, clause 2 of Article 2 of Circular 111/2013/TT-BTC the regulation is as follows:

Taxable income items

According to Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, taxable income includes:

...

2. Income from wages and salaries

Income from wages and salaries is the income an employee receives from their employer, including:

...

b) Various types of allowances and benefits, except for the following allowances and benefits:

...

b.6) Emergency hardship benefits, accident and occupational disease benefits, one-time maternity leave benefits or adopting a child, maternity policies, convalescence and health restoration post-maternity, benefits due to reduced working capacity, one-time pension benefits, monthly death benefits, severance pay, job loss benefits, unemployment benefits, and other benefits as prescribed by the Labor Code and the Law on Social Insurance.

...

According to the above regulations, severance pay for employees is not included in taxable income for PIT, so severance pay is not subject to PIT.

What income is subject to personal income tax in Vietnam?

Based on Article 3 of the Law on Personal Income Tax 2007 (amended by clause 1 of Article 1 of the Amendment to the Law on Personal Income Tax 2012 and Article 2 of the Law amending the Laws on Taxation 2014), taxable PIT income includes:

(1) Income from business activities

Income from business activities includes:

- Income from goods and services production and business activities;

- Income from independent practice activities of individuals with a license or practice certificate in accordance with the law.

Income from business does not include income of business individuals with annual revenue of 100 million VND or less.

(2) Income from wages and salaries

Income from wages and salaries includes:

- Wages, salaries, and items of a wage or salary nature;

- Allowances and benefits, excluding the following: allowances and benefits according to the law on preferential treatment for people with contributions; defense and security allowances; hazardous and harmful work allowances; region-specific allowances as prescribed by law; emergency hardship allowances; accident and occupational disease benefits; one-time maternity leave benefits or adopting a child; benefits due to reduced working capacity; one-time pension benefits; monthly death benefits; and other benefits as prescribed by the law on social insurance; severance pay, job loss benefits as prescribed by the Labor Code; social protection-based allowances and other allowances and benefits not of a wage or salary nature as prescribed by the Government of Vietnam.

(3) Income from capital investment

Income from capital investment includes:

- Loan interest income;

- Dividend income;

- Income from other capital investment forms, excluding income from government bond interest.

(4) Income from capital transfer

Income from capital transfer includes:

- Income from the transfer of capital in economic organizations;

- Income from securities transfer;

- Income from capital transfer in other forms.

(5) Income from real estate transfer

Income from real estate transfer includes:

- Income from the transfer of land use rights and assets attached to land;

- Income from transferring ownership or use rights of houses;

- Income from transfer of land lease rights, water surface lease rights;

- Other income from real estate transfer in any form.

(6) Income from winnings

Income from winnings includes:

- Lottery winnings;

- Promotional winnings;

- Betting winnings;

- Winnings from games, competitions with prizes, and other forms of winnings.

(7) Income from royalties

Income from royalties includes:

- Income from the transfer of intellectual property rights;

- Income from technology transfer.

(8) Income from franchise

(9) Income from inheritance

Income from inheritance which is securities, capital portions in economic organizations, business establishments, real estate, and other assets required to register ownership or use.

(10) Income from gifts

Income from gifts which is securities, capital portions in economic organizations, business establishments, real estate, and other assets required to register ownership or use.