Is the income from rewards for making excellent achievements that the company rewards to employees subject to personal income tax in Vietnam?
- Is the income from rewards for making excellent achievements that the company rewards employees subject to taxable incomes?
- In case employees earn income from rewards when making excellent achievements, how does the income payer conduct tax withholding?
- In case the income payer deducts the employee's bonus, do they have to issue certificates of tax withheld at source?
Is the income from rewards for making excellent achievements that the company rewards employees subject to taxable incomes?
Pursuant to Clause 2, Article 2 of Circular No. 111/2013/TT-BTC stipulating as follows:
Taxable incomes
According to Article 3 of the Law on Personal income tax and Article 3 of the Decree No. 65/2013/ND-CP, the incomes subject to personal income tax in Vietnam (hereinafter referred to as taxable incomes) include:
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2. Incomes from wages and remunerations.
Incomes from wages and remunerations (hereinafter referred to as wages) are incomes paid to employees from employers, including:
a) Wages, remunerations, and the other amounts paid as wages or remunerations in cash or not in cash.
b) Allowances and benefits, except for:
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dd) Other benefits in cash or not in cash apart from wages paid to the taxpayer by the employer in any shape or form:
Thus, the income from rewards when making excellent achievements is subject to personal income tax.
Is the income from rewards for making excellent achievements that the company rewards to employees subject to personal income tax in Vietnam?
In case employees earn income from rewards when making excellent achievements, how does the income payer conduct tax withholding?
Pursuant to Points b.1, b.2, b.3 Clause 1 Article 25 of Circular No. 111/2013/TT-BTC stipulating as follows:
Tax withholding and certificate of tax withheld at source in Vietnam
1. Tax withholding
Tax withholding is the income payer’s calculating and withholding the tax payable from the taxpayer’s income before paying the income to the tax payer.
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b) Incomes from wages
b.1) The income payer shall deduct tax from incomes of residents that sign employment contracts for 03 months or longer according to the progressive tax table, including the persons that sign such contracts at various places.
b.2) The income payer shall still withhold tax from the incomes earned residents that sign employment contracts for 03 months but resign before such employment contracts expire according to the progressive tax table.
b.3) The income payer shall withhold tax from the incomes earned by the foreigners working in Vietnam based on the duration of work in Vietnam written in the contract or letter of introduction according to the progressive tax table (if the person has worked in Vietnam for at least 183 days in the tax year) or the whole income tax table (if the person has worked in Vietnam for fewer than 183 days in the tax year).
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Thus, the income payer’s calculating and withholding the tax payable from the taxpayer’s income before paying the income to the tax payer as follows:
- The income payer shall deduct tax from incomes of residents that sign employment contracts for 03 months or longer according to the progressive tax table, including the persons that sign such contracts at various places.
- The income payer shall still withhold tax from the incomes earned residents that sign employment contracts for 03 months but resign before such employment contracts expire according to the progressive tax table.
- The income payer shall withhold tax from the incomes earned by the foreigners working in Vietnam based on the duration of work in Vietnam written in the contract or letter of introduction according to the progressive tax table (if the person has worked in Vietnam for at least 183 days in the tax year) or the whole income tax table (if the person has worked in Vietnam for fewer than 183 days in the tax year).
As for the income from rewards when making excellent achievements, in Official Dispatch No. 20479/CT-TTHT in 2023 guided by the Hanoi Tax Department as follows:
In case the employee earns income from commendation when making excellent achievements, the monetary or non-monetary benefits other than salary and wages paid by the employer will be enjoyed by the taxpayer. in any form of income subject to personal income tax under the guidance in Clause 2, Article 2 of Circular No. 111/2013/TT-BTC dated August 105, 2013 of the Ministry of Finance. Income payers shall deduct tax before paying income to employees and declare tax with the Tax Office as prescribed.
Thus, the income payer shall deduct tax for the income from commendation when making excellent achievements before paying income to employees and declaring tax with the Tax Authority as prescribed.
In case the income payer deducts the employee's bonus, do they have to issue certificates of tax withheld at source?
Pursuant to Clause 2, Article 25 of Circular No. 111/2013/TT-BTC on certificate of tax withheld at source as follows:
Tax withholding and certificate of tax withheld at source in Vietnam
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2. Certificate of tax withheld at source
a) After withholding tax as guided in Clause 1 of this Article, the income payer shall issue certificates of tax withheld at source at the request of the persons that have tax withheld from their incomes. The certificate of tax withheld at source shall not be issued if the person delegates the tax settlement.
b) Issuance of certificates of tax withheld at source in some particular cases:
b.1) If the person does not sign an employment contract or signs an employment contract for less than 03 months, the person is entitled to request the income payer to issue the certificate of tax withheld at source every time tax is withheld, or issue a single certificate of tax withheld at source for multiple withholdings in the same tax period.
Example 15: Mr. Q signs a service contract with company X to cultivate ornamental plants on the company’s premises once per month from September 2013 to April 2014. Company X pays an income of 03 million VND per month to Mr. Q. In this case, Mr. Q may request company X to issue monthly or one certificate of tax withheld at source, which reflect the tax withheld over the period from September 2013 to December 2013, and one certificate of tax withheld at source over the period from January 2014 to April 2014.
b.2) If the person signs an employment contract for more than 03 months, the income payer shall issue only one certificate of tax withheld at source in a tax period.
Example 16: Mr. R signs a long-term employment contract (from September 2013 till the end of August 2014) with company Y. In this case, if Mr. R is required to settle tax at the tax authority and requests company Y to issue the certificate of tax withheld at source, company Y shall issue 01 certificate which reflects the tax withheld from September 2013 till the end of December 2013, and 01 certificate for the period from January 2014 till the end of August 2014.
Thus, based on the above-cited regulations, in case the income payer deducts the employee's bonus, it shall issue certificates of tax withheld at source at the request of the persons that have tax withheld from their incomes.
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