Vietnam: Things employees need to know to be entitled to tax exemption and reduction

As we all know, Personal Income Tax is an amount that income earners have to deduct part of their salary or from other sources of income into the state budget. So are there any cases where employees who earn income from wages and salaries may not need to pay this tax or pay a lower rate than prescribed?

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According to Clauses 9, 10 and 15 Article 4 of the Law on Personal income tax 2007 of Vietnam (amended in 2012 and 2014) and Clause 3 Article 2 of the Law on Amendments to Tax Laws 2014 of Vietnam, employees will be exempt from personal income tax for the following incomes from salaries and wages:

- 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;

- Wages paid for overtime work, which are higher than those paid for working hours in accordance with law;

- Retirement pensions paid by the Social Insurance Fund;

- Retirement pensions paid monthly by the Voluntary Retirement Fund;

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

Concurrently, according to Article 5 of the Law on Personal income tax 2007 of Vietnam, Article 5 of Decree No. 65/2013/NĐ-CP and Article 4 of Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, 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.

Tax reduction shall be considered in the tax year. The taxpayer shall receive tax reduction for the tax year in which the taxpayer suffers from natural disaster, fire, accident, or fatal disease.

In this case, in order to be entitled to personal income tax reduction, taxpayers need to follow the procedures specified in Article 46 of Circular No. 156/2013/TT-BTC.

- Nguyen Trinh -

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