Is it illegal for employers to not give Tet bonuses to employees in Vietnam?

Is it illegal for employers to not give Tet bonuses to employees in Vietnam?

Article 104 of the Labor Code 2019 provides for bonuses as follows:

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).

According to the above regulations in Vietnam, the law does not require the company to give Tet bonuses to employees. Therefore, Tet bonus depends on the company's business performance and indicators; employees’ performance in a year. Therefore, your company's announcement of not giving Tet bonuses to employees is not breaking the law.

Are employees' Tet bonuses exempt from personal income tax in Vietnam?

At Point e, Clause 2, Article 2 of Circular 111/2013/TT-BTC stipulating taxable incomes as follows:

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, social organizations that conforms with there 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, for the Tet bonus for an employee, the bonus amount must be included in the employee's personal income tax in Vietnam.

Which personal incomes are tax-exempt incomes in Vietnam? 

In Article 4 of the 2007 Personal Income Tax Law, which is amended by Clause 2, Article 1 of the 2012 Personal Income Tax Law, and Clause 3, Article 2 of the Law on Amending Tax Laws 2014 stipulates tax-exempt incomes as follows: 

1. 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.

2. 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.

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

4. 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.

5. 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.

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

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

8. Incomes from foreign exchange remittances.

9. 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.

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

11. Incomes from scholarships, including:

a/ Scholarships granted from the state budget;

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

12. 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.

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

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

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

16. 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.

The above are the incomes that employees will be exempt from personal income tax in accordance with the law in Vietnam.

Best Regards!