Pursuant to Article 104 of the Labor Code in 2015 stipulating 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).
Currently, the law does not have any specific regulations on the 13th-month salary. In practice, the 13th-month salary is usually paid by employers to employees at the end of the year. Therefore, the 13th month salary can be considered as a Tet bonus.
How to calculate 13th-month salary in Vietnam? - Source: Internet
The Labor Code in 2019 does not have specific regulations on the 13th-month salary. In practice, the 13th-month salary is often applied to employees who have been working at the company for at least 1 month or more.
Each company has its own way of calculating the 13th-month salary, the following are the 2 most commonly used methods in businesses.
Method 1: Calculate the 13th-month salary based on the average salary
- For employees who have worked for 12 months or more:
13th-month salary = Average salary of 12 months
Mr. A has a salary of 12 million VND/month from January 2021 to October 2021; 15 million VND/month from November 2021.
Therefore, his 13th-month salary is calculated as follows:
[(12 million VND x 10 months) + (15 million VND x 2 months)] / 12 months = 12.5 million VND
- For employees who have worked for less than 12 months:
13th-month salary = M/12 x Average salary
M is the number of months worked in the year of the award
Average salary is the salary calculated based on the time the employee has worked
Ms. B has been working officially at company X since August 2021, as of December 2021, she has worked for 5 months, with a salary of 7 million VND/month.
The 13th-month salary of Ms. B is calculated as follows:
(5 months/12 months) x 7 million VND = 2.9 million VND
In this case, Ms. B has worked for 5 months in 2021. The average salary for the time she has worked is 7 million VND/month. Therefore, her 13th-month salary is 2.9 million VND.
Method 2: Calculate the 13th-month salary based on the salary of the 12th month
To ensure the best interests of employees, many businesses apply the method of calculating the 13th-month salary based on the salary of the 12th month. That is:
13th-month salary = Salary of the 12th month
For example, an employee with a salary of 10 million VND in December will also receive a 13th-month salary of 10 million VND.
This method is applied to employees who have worked for 12 months in the year of the award. For employees who have not worked for 12 months, the 13th-month salary will be calculated in proportion to the number of months worked in the year.
In addition, some employers may also specify other methods of calculating 13th-month salary. such as:
- Based on the employee's base salary
- Based on the company's revenue or profit
The method of calculating 13th-month salary is up to the employer and employee to agree upon in the labor contract or bonus policy.
Deductible and non-deductible expenses when calculating taxable income
1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:
a) The actual expense incurred is related to the enterprise’s business operation.
b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.
c) There is proof of cashless payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).
2. The expenses below are not deductible when calculating taxable income:
2.6. Expenditures on wages and bonus for employees in one of the following cases:
a) Expenditure on wages and other payables to employees that have been included in operating costs in the period but are not actually paid or do not have proof of payment as prescribed by law.
b) Wages, bonuses, life insurance premiums for employees that are not specified in one of the following documents: employment contract, collective bargaining agreement, financial regulation of the company, general company, corporation, reward scheme issued by the President of the Board of Directors, General Director, or Director in accordance with the financial regulation of the company or general company.
According to the regulations above, Lunar New Year bonus and 13th-month salary for employees are considered reasonable expenses if they meet all the conditions in Clause 1, Article 6 of Circular 78/2014/TT-BTC as amended by Article 4 of Circular 96/2015/TT-BTC.
However, the 13th-month salary will not be considered a reasonable expense if:
- It has been recorded as a production and business expense in the period but is not actually paid or does not have supporting documents in accordance with the law.
- It is not clearly stated the conditions and levels of entitlement in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the company, corporation, or conglomerate; Reward regulations specified by the chairman of the board of directors, general director, or director in accordance with the financial regulations of the company, corporation.