Are Tet bonuses subject to personal income tax in Vietnam?

Who must pay personal income tax in Vietnam?

Pursuant to Article 2 of the Personal Income Tax Law 2007, it is stipulated that persons must pay personal income tax:

Taxpayers

1. Personal income taxpayers include residents who earn taxable incomes specified in Article 3 of this Law inside and outside the Vietnamese territory and non-residents who earn taxable incomes specified in Article 3 of this Law inside the Vietnamese territory.

2. Resident means a person who satisfies one of the following conditions:

a/ Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam;

b/ Having a place of habitual residence in Vietnam, which is a registered place of permanent residence or a rented house for dwelling in Vietnam under a term rent contract.

3. Non-resident means a person who does not satisfy any of the conditions specified in Clause 2 of this Article.

Thus, personal income taxpayers are resident individuals with taxable income arising within and outside the territory of Vietnam and non-resident individuals with taxable income arising within Vietnamese territory.

Are Tet bonuses subject to personal income tax in Vietnam? (Image from the Internet)

Are Tet bonuses subject to personal income tax in Vietnam?

Pursuant to Article 104 of the 2019 Labor Code, regulations on bonuses:

Bonuses

1. A bonus means an amount of money, a piece of property or item that is provided by an employer for his/her employees on the basis of the business performance or the employees’ performance.

2. A bonus regulation shall be decided and publicly announced at the workplace by the employer after consultation with the representative organization of employees (if any).

Pursuant to Points a, b, e, Clause 2, Article 2 of Circular 111/2013/TT-BTC regulating taxable incomes:

Taxable income

...

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:

...

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.

...

Thus, Tet bonus is an amount of money paid by businesses and organizations to employees on the occasion of New Year or Lunar New Year. Tet bonuses are usually paid based on the production and business results of the enterprise, organization and the level of work completion of the employee in Vietnam.

Thus, Tet bonus can be considered an amount of money in the nature of salary or wages awarded by the employer to the employee in Vietnam.

Therefore, Tet bonuses belong to the employee's personal income taxable income in Vietnam.

What income is exempt from personal income tax in Vietnam?

Pursuant to Article 4 of the Personal Income Tax Law 2007, amended and supplemented by Clause 3, Article 2 of the Law Amending Tax Laws 2014 and Clause 2, Article 1 of the Amended Personal Income Tax Law 2012, stipulates personal income tax-exempt incomes:

- Incomes from transfer of real estate between spouses; parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.

- Incomes from transfer of residential houses, rights to use residential land and assets attached to residential land received by individuals who have only one residential house or land plot each.

- Incomes from the value of land use rights of individuals who are allocated land by the State.

- Incomes from receipt of inheritances or gifts that are real estate between spouses, parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.

- Incomes of households and individuals directly engaged in agricultural or forest production, salt making, aquaculture, fishing and trading of aquatic resources not yet processed into other products or preliminarily processed aquatic products.

- Incomes from conversion of agricultural land allocated by the State to households and individuals for production.

- Incomes from interests on deposits at credit institutions or interests from life insurance policies.

- Incomes from foreign exchange remittances.

- Wages paid for night shift or overtime work, which are higher than those paid for day shifts or prescribed working hours in accordance with law.

- Retirement pensions paid by the Social Insurance Fund; retirement pensions paid monthly by the Voluntary Retirement Fund.

- Incomes from scholarships, including:

+ Scholarships granted from the state budget;

+ Scholarships granted by domestic and foreign organizations under their study promotion programs.

- Incomes from indemnities paid under life insurance policies, non-life insurance policies, compensations for labor accidents, compensations paid by the State and other compensations as provided for by law.

- Incomes received from charity funds licensed or recognized by competent state agencies and operating for charity, humanitarian or non-profit purposes.

- Incomes received from governmental or non-governmental foreign aid for charity or humanitarian purposes approved by competent state agencies.

- Income from salaries, remunerations of Vietnamese crewmembers working for foreign shipping companies or Vietnamese shipping companies that provide international transport services.

- Incomes from provision of goods/services directly serving offshore fishing earned by individuals being ship owners, individuals having the right to use ships, and incomes of crewmembers on ships.

Best regards!