Vietnam: What is the time for payment of the 13th-month salary? Is income from the 13th-month salary subject to PIT? How to calculate the 13th-month salary?
What is the time for payment of the 13th-month salary in Vietnam?
The 13th-month salary is understood as a bonus that enterprises pay extra to employees for Tet holidays, in addition to paying December's salary. Therefore, this salary is often referred to as the 13th month salary.
In general, the 13th-month salary is considered a form of Tet bonus that employees enjoy from employers. Because it is a "bonus", enterprises are not required to pay the 13th-month salary. Therefore, the 13th-month salary will be agreed upon by the employee and the employer or decided by the employer based on the production and business results of the enterprise during the year.
The payment of the 13th-month salary and the time for payment of the 13th-month salary will be decided by the employer. However, because of the nature of the "Tet bonus", usually, the 13th-month salary is paid before the employee takes the Tet holiday. It is paid before or at the same time as the salary period before the Tet holiday, depending on the arrangement of the enterprise.
Is income from the 13th-month salary in Vietnam subject to PIT?
Under the provisions of Point e, Clause 2, Article 2 of Circular 111/2013/TT-BTC (amended and supplemented by Article 11 of Circular 92/2015/TT-BTC) on incomes subject to personal income tax 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, the incomes subject to personal income tax (hereinafter referred to as taxable incomes) include:
...
2. Incomes from wages and remunerations.
Incomes from wages and remunerations (hereinafter referred to as wages) are incomes paid to employees from employers, including:
...
e) Rewards in cash or not in cash in any shape or form, including rewards in the form of securities, except for:
e.1) Prize money associated with the titles awarded by the State, including the prize money associated with honorary titles as prescribed by law:
e.1.1) Prize money associated with honorary titles awarded by Ministries, central and provincial agencies and associations, excellent employee titles.
e.1.2) Prize money associated with the awards.
e.1.3) Prize money associated with the titles awarded by the State.
e.1.4) Prize money associated with the awards presented by associations and organizations belonging to central and local political organizations, socio-political organizations, social organizations, professional-social organizations that conforms to their charters and the Law on Emulation and Commendation.
e.1.5) Prize money associated with the Ho Chi Minh Prize and National Prize.
e.1.6) Prize money associated with medals or badges.
e.1.7) Prize money associated with certificates of merit
The powers to decide the commendation and prize money associated with the titles and awards above must be conformable with the Law on Emulation and commendation.
e.2) Prize money associated with national prizes and international prizes recognized by Vietnam.
e.3) Rewards for technical innovations and inventions recognized by competent authorities.
e.4) Rewards for reporting violations of law to competent authorities.
…
Thus, according to the above-mentioned provisions, income from the 13th-month salary in Vietnam is subject to PIT.
How to calculate the 13th-month salary in Vietnam?
Because the 13th-month salary is a bonus based on the agreement and will of the employer, the 13th-month salary shall be calculated by different methods. Below contents are a few common methods to calculate a 13th-month salary:
(1) Based on the average monthly salary for the whole year
According to this calculation, the 13th-month salary is the average salary of the months in which employees have worked in 2023.
The calculation formula is as follows:
13th month salary = [January’s salary + February’s salary +...+ Monthly salary ...] /Total number of months |
Example 1: Mr. A has 12 months of work in 2023. His 13th-month salary is the total salary of 12 months divided by 12.
Example 2: In 2023, Mr. B have worked for 4 months. Mr. B's 13th-month salary is the total salary of 4 months divided by 4.
(2) Based on ratio
In some enterprises, the 13th-month salary can be calculated based on the bonus ratio to the total average salary for the year.
This ratio is calculated based on productivity and results and the working style of employees.
The calculation formula is as follows:
13th month salary = Bonus ratio x Average salary |
> Excel file of 13th-month salary suggests:
Here
(3) Based on December’s salary
In addition, another method to calculate the 13th-month salary is that the employee will receive a salary equal to the salary received in December.
The calculation formula is as follows:
13th-month salary = December’s salary |
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