Vietnam: Are employees required to pay personal income tax on Tet bonuses and 13th-month salaries?

Are Tet bonuses and 13th month salary subject to personal income tax in Vietnam? (Illustration)

Are Tet bonuses and 13th month salary subject to personal income tax in Vietnam?

The current Labor Code and the Labor Code 2019, effective from January 1, 2021, do not stipulate the 13th month salary. However, in practice, Tet bonuses or the so-called 13th month salary are considered a reward from enterprises to employees based on production, business results, and the level of work completion by the employees over the year.

According to Article 104 of the Labor Code 2019 (effective January 1, 2021), it stipulates:

“Bonus is an amount of money or assets or in other forms that the employer rewards the employee based on production, business results, and the level of work completion by the employee.

The bonus regulation will be decided and publicly announced by the employer at the workplace after consulting with the employees’ representative organization at the establishment where available.”

Additionally, at Point e, Clause 2, Article 2 of Circular 111/2013/TT-BTC regulates that income from wages and salaries is income that employees receive from employers, including bonuses in cash or non-cash in any form, including stock bonuses, are subject to PIT, except for bonuses accompanied by commendations, awards, medals, and prizes conferred by the state.

Also, according to Resolution 954/2020/UBTVQH14, the family deduction for taxpayers is 11 million VND/month (132 million VND/year), and for each dependent, it is 4.4 million VND/month.

Therefore, according to the above regulations, employees receiving Tet bonuses and 13th month salary are subject to PIT. However, employees only need to pay tax on Tet bonuses and 13th month salary after deducting the family deduction of 11 million VND/month (for individuals) and 4.4 million VND/month (for each dependent) if the resultant amount is still positive.

Example: Ms. A (with a 6-year-old child) has a salary of 20 million VND/month and receives a Tet bonus and 13th month salary of 20 million VND, totaling 40 million VND. After deducting the family deduction of 15.4 million VND, Ms. A has 24.6 million VND left for PIT calculation.

How to calculate PIT on Tet bonuses and 13th month salary for employees

According to the Law on Personal Income Tax 2007, PIT from bonuses and 13th month salary is calculated as follows:

PIT payable = Taxable income x Tax rate (1)

Where:

- Taxable income = Taxable revenue - Deductions (2)- Taxable revenue = Total income – Exempt amounts (3)

For convenience in PIT calculation, Appendix 01/PL-TNCN issued with Circular 111/2013/TT-BTC specifies the progressive tax calculation method in a simplified tax table as follows:

Example: Ms. A (supporting a 6-year-old child) has a salary of 20 million VND/month, a Tet bonus and 13th month salary of 20 million VND, and insurance contributions of 8% for social insurance, 1.5% for health insurance, and 1% for unemployment insurance. The PIT is calculated as follows:

- Total income Ms. A receives is 40 million VND;- Total insurance contributions: 20,000,000 x 8% + 20,000,000 x 1.5% + 20,000,000 x 1% = 2,100,000 VND;- Family deduction is 11,000,000 + 4,400,000 = 15,400,000 VND;- Taxable income = 40,000,000 - 2,100,000 - 15,400,000 = 22,500,000 VND.

Therefore, the PIT Ms. A must pay is: 20% x 22,500,000 - 1,650,000 = 2,850,000 VND.

Moreover, to make it easier to calculate PIT, customers and members can access the PIT calculation utility HERE.

Ty Na

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