December 20, 2016. The General Department of Taxation issued Official Dispatch No. 5918/TCT-TNCN regarding personal income tax policy on payments upon termination of labor contracts.
Article table of contents
In the case where the Company signs an indefinite-term contract with the employee, and now the Company is negotiating and agreeing to terminate the labor contract with the employee according to Clause 3, Article 36 of the Labor Code (mutually agreed termination of the labor contract), the Company's payment of salaries, wages, and wage-like amounts to the employee upon termination of the labor contract is determined as follows:
- For the salary paid to the employee, it is deducted according to the progressive tax rate schedule;- For severance pay, the employee's resignation according to the provisions of the Law on Social Insurance and the Labor Code is not included in the taxable income from the employee's salary and wages.- For additional financial support that the company pays to the employee (besides the provisions of the Labor Code and the Law on Social Insurance) after the termination of the labor contract, if this payment is two million (2,000,000) VND or more, the Company must withhold PIT at 10% on the total income paid.
See detailed content at Official Dispatch 5918/TCT-TNCN.
