Vietnam: Do teachers have to pay personal income tax?

Do teachers have to pay personal income tax?

According to the provisions of Article 1 Circular 111/2013/TT-BTC amended by Article 2 Circular 119/2014/TT-BTC off the Ministry of Education and Training of Vietnam, individuals subject to personal income tax are those earning taxable income both within and outside the territory of Vietnam, regardless of the place where income is paid, including:

- Resident individuals signing labor contracts for 03 months or more;

- Individuals not signing labor contracts/signing labor contracts for less than 03 months.

According to specific taxable income provisions stipulated in Article 2 Circular 111/2013/TT-BTC as follows:

Taxable income

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2. Income from wages and salaries

Income from wages and salaries includes earnings received by employees from employers, including:

a) Wages, salaries, and amounts of a similar nature in cash or non-cash forms.

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

b.1) Monthly preference allowances and one-time allowances according to regulations on preferences for those with meritorious services.

...

Additionally, based on Article 1 Resolution 954/2020/UBTVQH14 on family allowance levels as follows:

Family allowance levels

Adjusting the family deduction levels stipulated in Clause 1 Article 19 of the Law on Personal Income Tax No. 04/2007/QH12 as amended and supplemented under Law No. 26/2012/QH13 as follows:

1. The deduction level for taxpayers is 11 million VND/month (132 million VND/year);

2. The deduction level for each dependent is 4.4 million VND/month.

Thus, teachers who earn income from wages and salaries in Vietnam will be subject to personal income tax as stipulated.

Specifically, teachers without dependents must pay personal income tax when their total income from wages and salaries exceeds 11 million VND/month (this income has already subtracted compulsory insurance contributions and other contributions such as charity, humanitarian,…), if they register family deductions for one dependent, then the threshold is above 15.4 million VND.

Do teachers have to pay personal income tax? (Image from Internet)

When are teachers exempt from personal income tax?

According to Clause 1 Article 7, Clauses 1, 2, and 3 of Article 9 Circular 111/2013/TT-BTC, individuals without dependents are exempt from personal income tax if their total income from wages and salaries is below 11 million VND/month after deducting the following:

- Compulsory insurance contributions, voluntary retirement funds, charity, humanitarian, and study promotion donations.

- Tax-exempt incomes.

- Non-assessable personal income.

Simultaneously, according to Point i Clause 1 Article 25 Circular 111/2013/TT-BTC, individuals residing under labor contracts of less than 03 months/not signing labor contracts with a total payment of 2 million VND or more per occasion must have tax withheld at a rate of 10% on the income before payment.

Except when individuals estimate that the total taxable income after family deduction does not meet the tax threshold, they can submit a commitment (based on the form issued with tax administration guidelines) to the paying organization as a temporary basis not to withhold their personal income tax.

This means individuals not signing labor contracts or signing labor contracts for under 03 months with wage income above 2 million VND per occasion are subject to a 10% tax rate, unless they qualify and make a commitment according to Form 08/CK-TNCN issued with Circular 80/2021/TT-BTC.

Thus, teachers are exempt from personal income tax when:

- Individuals without dependents are not required to pay personal income tax if the total income from wages and salaries is below 11 million VND/month after deductions.

- Individuals not signing labor contracts/signing labor contracts for under 03 months who have wage income less than 2 million VND per occasion or 2 million VND per occasion and above but qualify for a commitment that their total taxable income after family deduction does not reach the tax threshold are not subject to personal income tax.

What types of rewards teachers do not pay personal income tax on?

Based on Point e Clause 2 Article 2 Circular 111/2013/TT-BTC, the following reward types are exempted from personal income tax for teachers:

(1) Rewards accompanying titles conferred by the state, including rewards accompanying emulation titles and commendations under the law on emulation and commendation, specifically:

- Rewards accompanying emulation titles such as: National Emulation Soldier; Emulation Soldiers at ministerial, sectoral, central mass organizations, provinces, and central-affiliated cities; grassroots Emulation Soldiers, Advanced Workers, and Advanced Laborers.

- Rewards accompanying commendations.

- Rewards accompanying titles conferred by the state.

- Rewards accompanying awards conferred by associations, organizations belonging to political organizations, political-social organizations, social organizations, and central and local professional social organizations in accordance with their charters and the law on emulation and commendation.

- Rewards accompanying Ho Chi Minh Prize, State Prize.

- Rewards accompanying commemorative medals, badges.

- Rewards accompanying certificates of merit, commendations.

Note: The authority to issue commendation decisions, the amount of rewards accompanying emulation titles and commendations must comply with the law on emulation and commendation.

(2) Rewards accompanying national and international awards recognized by the Vietnamese State.

(3) Rewards for technical improvements, inventions, and discoveries recognized by competent state agencies.

(4) Rewards for detecting and reporting violations of the law to competent state agencies.