According to Vietnam’s regulations, what incomes are not subject to personal income tax?

Personal income tax (PIT) shall be calculated based on taxable income and income and tax rate. Taxable income equals taxed income minus the deductions. To calculate taxed income, taxpayers must subtract tax-exempt income from total income. According to Vietnam’s regulations, what incomes are not subject to personal income tax?

Do probationary contracts withhold personal income tax in Vietnam?

According to Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, tax-free incomes include:

1. Deductible allowances and benefits when calculating PIT:

According to Point b Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam amended by Clause 1 Article 11 of Circular No. 92/2015/TT-BTC, deductible allowances and benefits when calculating PIT include:

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

- Monthly allowances and lump-sum 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 support 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.

Note: The allowances and benefits that are not included in taxable incomes must be defined by competent authorities.

2. Payments for housing, electricity, water supply and ancillary services

According to section dd.1 Point dd Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam amended by Article 11 of Circular No. 151/2014/TT-BTC, payments for housing, electricity, water supply and ancillary services are not subject to tax include:

- Benefits from houses provided by the employers for workers working in the industrial zones, economic zones;

- Benefits from houses provided by the employers for workers working in disadvantaged or severely disadvantaged areas.

3. Cash or non-monetary benefits

According to section dd.2 Point dd Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam amended by Clause 3 Article 11 of Circular No. 92/2015/TT-BTC:

- If the employer buys optional insurance without accrual of premiums for employees (including insurance of insurers that are not established under Vietnam’s law but permitted to sell insurance in Vietnam), such premiums shall not be included in taxable income of employees. 

- Optional insurance without accrual of premiums are insurance products such as: health insurance, death insurance (except for death insurance with refund policy), etc. from which policyholders do not receive the accrued amount of premiums apart from the insurance payout or indemnities paid by the insurer under insurance policies.

4. Membership fees and other expenditure on services serving individuals

According to section dd.3 Point dd Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, the following expenses will not be included in taxable income:

- Membership fees (such as membership card of golf course, tennis course, cultural, artistic, sports clubs, etc.) - if the card specifies the user or group of users.

- Expenditures on other services individuals such as: healthcare, entertainments, sports, recreation, etc. - if the names of the recipients are specified. If the recipient is the collective of employees, not any specific person, it is not included in taxable income.

5. Flat expenditures on stationery, business trips, phone calls, costumes

According to section dd.4 Point dd Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, flat expenditures are not included in taxable income in the cases below:

- For the officials and employees in public service agencies, communist party’s agencies, associations: the flat expenditure shall apply guiding documents promulgated by the Ministry of Finance.

- For the employees working in businesses and representative offices: the flat expenditure shall conform to the income that incurs corporate income tax and guiding documents of the Law on Enterprise income tax.

- For the employees in international organizations and representative offices of foreign organizations: the flat expenditure shall comply with regulations of such international organizations and representative offices of foreign organizations.

6. Expenditure on shuttling employees

According to section dd.5 Point dd Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam amended by Clause 4 Article 11 of Circular No. 92/2015/TT-BTC, the expenditure on shuttling employees is not included in taxable incomes of employees according to rules and regulations of the employer.

7. Payments for refresher courses for employees

According to section dd.6 Point dd Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam, the payments for refresher courses for employees, which suit their professions or accords with plans of the employer, shall not be included in the incomes earned by employees.

8. Rewards in cash or not in cash in any shape or form, including rewards in the form of securities

Rewards not included in taxable income:

- Prize money associated with the titles awarded by the State, including the prize money associated with honorary titles as prescribed by law:

+ Prize money associated with honorary titles awarded by Ministries, central and provincial agencies and associations, excellent employee titles.

+ Prize money associated with the awards.

+ Prize money associated with the titles awarded by the State.

+ Prize money associated with the awards presented by associations and organizations belonging to central and local political organizations, socio-political organizations, social organizations, social organizations that conforms with their charters and the Law on Emulation and commendation.

+ Prize money associated with the Ho Chi Minh Prize and National Prize.

+ Prize money associated with medals or badges.

+ Prize money associated with certificates of merit.

- Prize money associated with national prizes and international prizes recognized by Vietnam.

- Rewards for technical innovations and inventions recognized by competent authorities.

- Rewards for reporting violations of law to competent authorities.

9. Other benefits

According to Point g Clause 2 Article 2 of the Circular No. 111/2013/TT-BTC of the Ministry of Finance of Vietnam supplemented by Clause 5 Article 11 of Circular No. 92/2015/TT-BTC, the followings are not included in taxable income:

- Supports provided by the employer for medical examination and treatment of fatal diseases suffered by employees and their families.

- The amount received according to regulations on using vehicles of state agencies, public service agencies, communist party’s organizations, and associations.

- The amount received according to the regulations on public housing.

- Other payments received, apart from wages, for participation in consultation, appraisal, and inspection of legislative documents, Resolutions, political reports, inspectorates, serving votes, citizens; for costumes and other tasks directly serving the operation of the Office of the National Assembly, the Ethnic Communities Council, committees of the National Assembly, the delegations of the National Assembly, the Central Office, the departments of the Communist Party, City/Province Committees and their departments.

- Payment for mid-shift meals, lunch of employees provided by employers that provide mid-shift meals, lunch for their employees in the form of cooking, buying catering services, and giving luncheon vouchers.

- The payment for round-trip air tickets made by the employer for foreign employees in Vietnam or Vietnamese employees overseas to go home once a year.

- The tuition fees for children of foreign employees in Vietnam to study in Vietnam, for children of Vietnamese employees overseas to study overseas from preschool to high school, which is paid by the employer on their behalf.

- The amounts received from sponsors are not included in the taxable income if the sponsorship beneficiary is a member of the sponsoring organization; the sponsorship is funded by government budget or managed in accordance with regulations of the State; from composting literary and artistic works, scientific research, accomplishment of political objectives of the State, or other activities that conforms with their charters.

- The payments paid by the employer for dispatching, reassigning foreign employees in Vietnam in accordance with labor contracts and international work schedules of some industries such as petroleum, mineral extraction.

- The amounts given by the income payer for employees’ family affairs shall comply with rules and regulations of the income payer and the guidance on determination of income subject to corporate income tax of instructional documents of the Law on Corporate income tax.

Above are all incomes which shall be deducted when calculating PIT. Taxpayers need to pay attention to determine the correct amount of payable tax.

Thuy Tram

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