Which bonuses of employees are eligible for PIT exemption in Vietnam?

Which bonuses of employees are eligible for PIT exemption in Vietnam?

According to Clause 2, Article 3 of the Personal Income Tax Law 2007, taxable income includes:

Taxable incomes

Incomes liable to personal income tax include the following kinds of income, except for incomes eligible for tax exemption specified in Article 4 of this Law:

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2. Incomes from salaries and wages, including:

a/ Salaries, wages and amounts of similar nature;

b/ Allowances, except for those paid under legal provisions on preferential treatment of persons with meritorious services; defense or security allowances; hazard or danger allowances for persons working in branches, occupations or jobs at places where exist hazardous or dangerous elements; allowances for attraction of laborers to work in certain branches or in certain regions specified by law; allowances for sudden difficulties, allowances for laborers having labor accident or suffering from occupational disease, lump-sum maternity or child adoption allowances; allowances for working capacity loss, lump-sum retirement allowances, monthly survivorship allowances, severance and job loss allowances specified in the Labor Code, other allowances paid by the Social Insurance, and allowances for combat of social evils;

c/ Remuneration of all kinds;

d/ Sums of money earned for participation in business associations, boards of directors, control boards, management boards and other organizations;

e/ Other monetary or non-monetary benefits received by taxpayers;

f/ Bonuses, rewards, except for rewards accompanying honorary titles conferred by the State or international or national prizes; rewards for technical renovations, creations or inventions recognized by competent state agencies; rewards for detection and reporting of illegal acts to competent state agencies.

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Therefore, according to current regulations, bonuses for employees are considered as incomes from salaries and wages. Therefore, income from employee bonuses is subject to PIT.

However, if the bonus falls into one of the following categories, the employee is not required to pay personal income tax:

- Rewards accompanying honorary titles conferred by the State;

- Rewards accompanying international or national prizes;

- Rewards for technical renovations, creations or inventions recognized by competent state agencies;

- Rewards for detection and reporting of illegal acts to competent state agencies.

Which bonuses of employees are eligible for PIT exemption in Vietnam? (Image from the Internet)

Which allowances and benefits are not subject to PIT in Vietnam?

Based on point b, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC amended by point 1, Article 11 of Circular No. 92/2015/TT-BTC, allowances and benefits not subject to personal income tax include:

- Monthly benefits, lump-sum benefits and allowances according to regulations of law on incentives for contributors.

- Monthly allowances and lump-sump allowances for the persons that participate in the resistance movements, national defense, fulfillment of international tasks, and discharged volunteers.

- Benefits for national defense and security; subsidies for the armed forces.

- Benefits for dangerous or harmful works.

- Benefits for employees in disadvantaged areas.

- Irregular allowances for difficulties, occupational accident benefits, occupational illness benefits, lump-sum allowances for childbirth or adoption, maternity leave benefits, post-maternity recovery benefits, benefits for reduction in work ability, lump-sum pension, monthly widow’s pension, severance pay, redundancy pay, unemployment benefits, and other benefits according to the Labor Code and the Law on Social insurance.

- Benefits for beneficiaries of social security.

- Benefits for senior officers.

- Lump-sum benefits for the persons reassigned to the areas facing extreme economic and social difficulties, lump-sum supports for officers working for sovereignty over sea and islands as prescribed by law. 

- Lump-sum moving allowances for foreigners that move and reside in Vietnam and Vietnamese people that go to work abroad, and Vietnamese people that have long-term residence overseas then go back to work in Vietnam.

- Benefits for medical employees in villages.

- Occupational benefits.

In which cases is personal income tax reduced?

Based on Article 5 of the Personal Income Tax Law 2007, tax reduction is determined as follows:

Tax reduction

Taxpayers who face difficulties caused by natural disasters, fires, accidents or severe diseases and affecting their tax payment ability may be considered for tax reduction corresponding to the extent of damage they suffer from but not exceeding payable tax amounts.

Therefore, taxpayers are eligible for personal income tax reduction if they face difficulties caused by natural disasters, fires, accidents or severe diseases and affecting their tax payment ability.

Tax reduction is determined based on the extent of damage they suffer from but not exceeding payable tax amounts.

Best Regards!