Every year, near the Tet holiday, businesses will pay Tet bonuses to employees after a year of working. Here are things not everyone knows about Tet bonuses according to Vietnam’s regulations.
Article table of contents
1. Enterprises are not required to give Tet bonuses to employees
According to Article 104 of the Labor Code 2019 of Vietnam, 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. 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).
The fact in 2020 is that many businesses have to go bankrupt, suspend business or cut down staff due to the serious impact of the Covid-19 pandemic. Therefore, this year's Tet bonus regulations will also inevitably be affected. In fact, whether a business has a Tet bonus or not is decided by the business, based on the business performance or the employees’ performance.
Therefore, the law also stipulates that enterprises are not required to give Tet bonuses to employees in all cases. Employees will be entitled to Tet bonus if there is an agreement in the labor contract, according to the internal regulations of the enterprise on Tet bonus, the collective labor agreement and depends largely on the revenue and profit of the enterprise and the productivity and work efficiency of employees.
2. Are Tet bonuses subject to corporate income tax?
According to Clause 2 Article 3 of the Circular No. 25/2018/TT-BTC of the Ministry of Finance of Vietnam amending Clause 2 Article 6 of the Circular No. 78/2014/TT-BTC (amended by Article 4 of the Circular No. 96/2015/TT-BTC), salaries and bonuses for employees for which the conditions for entitlement and rates of entitlement are not specified in one of the following documents: employment contract; collective labor agreement; financial regulations of the company, corporation or group; reward regulations issued by the President of the Board of Directors, general director or director under the financial regulations of the company or corporation.
Thus, in case the Tet bonus for employees is specified in terms of conditions and benefits right away in the labor contract, collective labor agreement, financial regulations, etc., it will be deducted when calculating income subject to corporate income tax.
However, if Tet bonuses for employees are not specified in the above documents, it must be included in expenses when determining taxable income.
3. Are Tet bonuses subject to personal income tax?
According to Point e Clause 2 Article 2 of Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, rewards in cash or not in cash in any shape or form, including rewards in the form of securities shall subject to personal income tax, except for bonuses attached to certificates of merit, diplomas of merit, medals and prizes conferred by the State.
Concurrently, according to Resolution No. 954/2020/UBTVQH14 of the Standing committee of the National Assembly of Vietnam, personal exemption is 11 million VND/month (132 million VND/year), dependent exemption is 4,4 million VND/dependent/month.
Thus, according to the above provisions, employees who receive Tet bonuses must pay personal income tax. However, employees only have to pay Tet bonus tax after deducting the exemptions, but it is still positive.
4. Are Tet bonuses a basis for compulsory social insurance premium?
According to Official Dispatch No. 560/LĐTBXH-BHXH dated February 06, 2018, monthly salary on which compulsory social insurance premiums are based shall comply with provisions of Article 89 of the Law on Social Insurance of Vietnam, Article 17 of the Decree No. 115/2015/NĐ-CP guiding the Law on Social Insurance and Article 30 of the Circular No. 59/2015/TT-BLĐTBXH. From January 01, 2018 onwards, the monthly salary on which social insurance premiums are based is the salary, salary allowance and additional amounts that can be determined with a specific amount along with the salary agreed in the labor contract and paid regularly in each pay period.
Note: The monthly salary on which the compulsory social insurance premium is based does not include: Additional amounts for which a specific amount of money cannot be determined together with the salary agreed upon in the labor contract, paid regularly or irregularly in each pay period associated with the working process and results of the employee's work performance; other benefits such as initiative bonus, mid-shift meal allowance, allowances for petrol, phone, transportation, housing, childcare, child rearing, support when employees have relatives died, employees have relatives getting married, employees' birthdays, allowances for employees in difficult circumstances when suffering from occupational accidents, occupational diseases and other grants and subsidies.
Thus, Tet bonuses of employees working at enterprises will not serve as a basis for calculating social insurance premiums.
Le Vy
- Key word:
- Labor Code 2019
- Tet bonuses
