Salary Payment for Unused Leave Days Not Subject to Personal Income Tax

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The General Department of Taxation provides guidance on determining taxable personal income (PIT) for income from salaries and wages for non-leave days as follows:

Based on the current regulations and the opinion of the Ministry of Labor, Invalids and Social Affairs (MOLISA) in Official Dispatch 64/QHLDTL-TL dated February 21, 2020, MOLISA states*: "In cases where the employer has set the annual leave schedule as prescribed in Clause 2 Article 111 of the Labor Code, but for some reason, the employer requires the employee to work on annual leave days, this time is considered overtime."*

Based on the provisions at point i Clause 1 Article 3 of Circular 111/2013/TT-BTC, the tax-exempt income includes:

“i) Income from night work, overtime wages that are higher than regular day wages, and working hours prescribed by the Labor Code. Specifically: as follows:

i.1) The portion of wages for working at night, overtime that is exempt from tax is based on the actual wage paid for night work, overtime minus (-) the regular daily wage.

...

i.2) The organization, individual paying the income must prepare a detailed list clearly reflecting the night work time, overtime, and the additional wages paid for night work, overtime paid to the employee. This list is kept at the income-paying unit and presented upon request of the tax authority.”

Thus, the salary paid for the unused leave days of the employee is considered as overtime salary, and this income is not subject to PIT.

Lan Anh

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