Non-Taxable – Condition For Personal Income Tax Exemption And Non-Taxable (P1)

non-taxable

Non-Taxable – Condition For Personal Income Tax Exemption And Non-Taxable (P1)

Personal income tax declaration, settlement and payment are very important tasks for not only the employer but also the employee, especially when a foreign employee is recruited and working in Viet Nam. In addition to taxable income, employees must also be aware of personal income tax exemption and non-taxable.

non-taxable

Non-taxable income:

1/ Occupational accident benefits, occupational illness benefits in comply with Labor Code of Vietnam and Social Insurance Law

Based on:

  • 2012 Labor Code of Vietnam
  • Article 2 Circular 111/2013/TT-BTC
  • Circular 96/2015/TT-BTC
  • For reference: Official Letter No. 1385/TCT-CS for reference

Quality of Incomes eligible for personal income tax exemption and non-taxable:

The income will be deducted in accordance with the labor contract or collective bargaining agreement.

Besides,

  • An investment record of the occupational accident using applicable form. (In case the employee meets with a traffic accident which is defined as an occupational accident, a photocopy of the traffic accident record) is required.
  • The latest result of loss of work capacity due to occupational accidents and occupational diseases of the Medical Assessment Council is required.
  • There is proof of cash payments (Invoices) or non-cash payment.
  • Medical record and relevant papers to clarify the benefits.

An employee, who participates in compulsory social insurance, is entitled to the benefit regime for labor accidents and occupational diseases, as provided by the Law on Social Insurance.

For an employee subject to compulsory social insurance whose employer has not paid social insurance premiums to the social insurance agency, the employer will pay an amount of money equal to the regime for labor accidents and occupational diseases as provided by the Law on Social Insurance.

Employee is paid the accident/illness compensation or allowance by the employer in accordance with Labor Code.

  • The accident/illness compensation:

If there is the employer’s fault in accordance with investment record or the latest result of the Medical Assessment Council.

The payment may be paid in a lump sum or on a monthly basis as agreed upon by the parties.

  • The accidents/illness allowance:

In case the employee is at fault, he/she is still entitled to an allowance in accordance with Labor Code.

Level of compensation and benefit as defined hereof is the minimum. Employers are encouraged by the State to pay more than the limit as defined in this Circular in terms of compensation and benefits for occupational accidents and diseases.

Note:

Expenses for compensation, benefits and medical expenses paid for employees as victims of occupational accidents or diseases shall be included in the expenses for regular operation, production and business activities of agencies, enterprises and organizations, and at the same time shall be treated as logical expenses for tax assessment, payment of enterprise income tax by the work force employing enterprises under the Law on enterprise income tax.

2/ Lump-sum allowances for childbirth or adoption, maternity leave benefits, post-maternity recovery benefits

Base on:

  • Social Insurance Law of Vietnam
  • Article 2 Circular 111/2013/TT-BTC

Quality of Incomes eligible for personal income tax exemption and non-taxable:

In pursuance with the Law on Social insurance. Employees have participated in social insurance and have been given lump-sum allowances for childbirth or adoption, maternity leave benefits, post-maternity recovery benefits. This income is non-taxable.

In addition, the female employees will receive the extra allowance for female employees after giving birth for the first time or second time. This income is taxable.

Note:

Extra allowance for female employees after giving birth will be deducted when calculating CIT. Deductible amounts shall not be deductible if they are not spent properly or spent beyond the limits. There is proof of having “family affair” (as: birth certificate, Medical record, invoices….).

3/ Lump-sum moving allowances for foreigners that move and reside in Vietnam and Vietnamese people that go to work abroad.

Base on:

  • Article 2 Circular 111/2013/TT-BTC
  • For reference: Official Letter No. 8773/CT-TTHT

Quality of Incomes eligible for personal income tax exemption and non-taxable:

The income will be deducted in accordance with the labor contract or collective bargaining agreement or appointment letter.

There is proof of cash payments (invoices) and non- cash payments as well as relevant papers to clarify the benefit.

This regulation apply to foreigners living or working in Vietnam for the first time only.

The allowances are based on regulation of labor contract and not limited by law.

The expenditures related to the transportation of personal belongings of employees the company paid to the supplier of taxable incomes from salaries and wages of employees when calculating PIT.

The income will not be deducted if the labor contract is terminated.

Note:

Lump-sum moving allowances that is paid in cash that shall be deducted in comply with the labor contract or collective bargaining agreement when calculating Corporate Incomes Tax (CIT).

4/ Supports provided by the employer for medical examination and treatment of fatal diseases suffered by workers and their families

Base on: Article 2 Circular 111/2013/TT-BTC

Quality of Incomes eligible for personal income tax exemption and non-taxable:

The employers that provide supports shall keep:

  • The copies of the hospital bills that are certified by the employer (if the worker and his or her family pay for the remaining amount after the insurer directly pay the medical facility).
  • The copies of the health insurance payment certified by the employer (if the worker and his or her family pays the entire hospital fee and then receive insurance money from the insurer).
  • The papers proving the provision of supports for workers and their families who suffer from fatal diseases.

Fatal diseases must be in the list of fatal diseases promulgated by Ministry of Public Health.

Family of the worker in this case include: children, legitimate adopted children, illegitimate children, stepchildren, spouse, parents, parents-in-law; stepparents, legitimate adoptive parents.

The support that is not included in taxable income is the actual paid amount according to hospital bills, but must not exceed the hospital fee paid by the worker and his or her family after deducted the amount paid by the insurer.

If there are any allowances for illness/accidents not including fatal diseases or occupational accident/illness, it will be included in the taxable income.

Note:

The supports shall be deducted when calculating CIT if the employer that provide supports shall keep.

  • The copies of the hospital bills that are certified by the employer (if the worker and his or her family pay for the remaining amount after the insurer directly pay the medical facility).
  • The copies of the health insurance payment certified by the employer (if the worker and his or her family pays the entire hospital fee and then receive insurance money from the insurer).
  • The papers proving the provision of supports for workers and their families who suffer from fatal diseases.

If there are any allowances for illness/accidents not including fatal diseases or occupational accident/illness, it must not exceed the practical average one month’s salary in the tax year and shall be deducted when calculating CIT. The exceed will be included in company taxable income.

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

Base on:

  • Article 2 Circular 111/2013/TT-BTC
  • Cir 96/2015/ TT-BTC

Quality of incomes eligible for personal income tax exemption and non-taxable:

The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…

The employer that provide supports shall keep the papers proving the provision of payment for mid-shift meals, lunch of workers in the form of cooking, buying catering services, giving luncheon vouchers.

If the employer pays cash for their workers’ meals instead of providing mid-shift meals or lunch, such money is not included in the taxable income if it is confortable with the guidance of the Ministry of Labor, War Invalids and Social Affairs. If the payment is higher than the limit imposed by the Ministry of Labor, War Invalids and Social Affairs, the excess shall be included in taxable incomes (Maximum 680.000 VND).

Note:

In order to be deducted when calculating CIT, the amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…

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

Base on:

  • Article 2 Circular 111/2013/TT-BTC
  • Cir 96/2015/ TT-BTC
  • For reference: Official Letter No. 4440/CT-TTHT

Quality of incomes eligible for personal income tax exemption and non-taxable:

The amount must be mentioned in the labor contract of foreign workers in Vietnam or Vietnamese workers overseas.

The basis for determining the payment is the labor contracts and the prices of air tickets from Vietnam to the other country and vice versa for employees to go home once a year.

The employer that provide supports shall keep the papers proving that the employer bought air tickets.

The payments made by contractor for the air tickets for the foreigner to fly from his/her country to Vietnam and other arising expenses in accordance with labor contract and international work schedules shall not be  included in their taxable income.

Note:

The payment for round-trip air tickets made by the employer for foreign workers in Vietnam or Vietnamese workers overseas to go home once a year must be mentioned in the labor contract of foreign workers in Vietnam or Vietnamese workers overseas or  collective bargaining agreement or, financial regulation of the enterprise, appointment letter and written decision of the director.

If the contract stipulated  the  payments for  round trip air tickets for the foreign workers in Vietnam or the Vietnam workers overseas to go home more than once a year , the amount of money to buy air tickets for the next rounds  still to be deducted when calculating corporate income tax, but not deducted when calculating PIT.

The payments for air tickets for employee’s family are included in company taxable income.

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

Base on:

  • Article 2 Circular 111/2013/TT-BTC
  • Cir 96/2015/ TT-BTC

Quality of incomes eligible for personal income tax exemption and non-taxable:

The amount that the employer assumes that is the wage and remunerations in:

  • Labor Contract
  • Labor Rules

It must be enterprise’s name, address, tax code in the invoices of the payment.

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

Note:

The tuition fees for children of foreign workers in Vietnam to study in Vietnam, for children of Vietnamese workers overseas to study overseas from preschool to high school, which is paid by the employer on their behalf shall be deducted in accordance with: the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise when calculating CIT.

  • Studying from preschool to high school

There is proof of cash and non-cash payment (As: adequate invoices that direct company name, company address, company tax code…)

8/ 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

Base on:

  • Article 2 Circular 111/2013/TT-BTC
  • Cir 96/2015/ TT-BTC
  • Cir 92/2015/TT-BTC

Quality of incomes eligible for personal income tax exemption and non-taxable:

Non-taxable:

The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…

The amount is not include in taxable income from 30/7/2015 and from 2015 assessment period.

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.”

Taxable:

In case the employer buys life insurance (except voluntary pension insurance) and/or other optional insurances with accrual of insurance premiums for the employee from the insurer(s) established and operating under Vietnam’s law, the employee is not required to include the accrued premiums to taxable income when the employer buys the insurance(s). When the contract matures, the insurer shall deduct 10% tax from the accrual of premiums paid by the employer for the employee from July 01, 2013. In case the premium accrual is paid by installments, 10% tax shall be deducted from each payment.

In case the employer buys life insurance (except voluntary pension insurance) and/or other optional insurances with accrual of insurance premiums for the employee from the insurer(s) not established and operating under Vietnam’s law, the employer has the responsibility to deduct 10% tax from the premiums before paying the employee.

The expenditures that employers buy life insurance for family of employee shall be included in taxable income of employees.

Note:

The amount shall be deducted in accordance with the labor contract or collective bargaining agreement, labor rules, financial regulation of the enterprise…

The amount is not include in taxable income from 30/7/2015 and from 2015 assessment period

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.

In case the employer buys life insurance (except voluntary pension insurance) and/or other optional insurances with accrual of insurance premiums for the employee from the insurer(s) established and operating under Vietnam’s law, the employee is not required to include the accrued premiums to taxable income when the employer buys the insurance(s). When the contract matures, the insurer shall deduct 10% tax from the accrual of premiums paid by the employer for the employee from July 01, 2013. In case the premium accrual is paid by installments, 10% tax shall be deducted from each payment.

In case the employer buys life insurance (except voluntary pension insurance) and/or other optional insurances with accrual of insurance premiums for the employee from the insurer(s) not established and operating under Vietnam’s law, the employer has the responsibility to deduct 10% tax from the premiums before paying the employee.

Life insurance can exceed the practical average 1 month’s salary in the tax year.

The expenditures that employers buy life insurance for family of employee shall not be included in taxable income of company.

Optional insurance (not including life insurance) without accrual of premiums that employers buy for employees must not exceed the practical average 1 month’s salary in the tax year. The exceed shall be included in company taxable incomes.

To Be Continue…

With more than 10 years of delivering business consultation for more than 1000 companies and employees in Viet Nam, Viva Business Consulting is capable to consult and implement any query you have in the most practical way. We prevent your business from any potential risks in advance so you can manage foreign employees in the most simple and cost effective way.

Reference: Personal income tax for foreign employees – Methods of declaration and payable amount



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