How to calculate income tax on Tet bonus

Illustrative image.

Ms. Nguyen Thi Thu ( Dong Nai ), who works at a foreign-invested enterprise (FDI), reported that her year-end bonus (13th month salary) is currently being added to her December or January income, causing a sudden increase in her total monthly income and resulting in higher tax rates under the progressive tax system.

Meanwhile, while the total real income for the entire year remains unchanged, workers have to pay more taxes, resulting in a disadvantage.

Ms. Thu suggested that the competent authorities consider adjusting the regulations to ensure fairness, specifically: allowing the Tet bonus to be averaged on the total annual income; or separating the bonus to apply a more reasonable tax bracket, avoiding disadvantages for employees.

Regarding this matter, the Tax Department has the following opinion:

Clause 2 of Article 3, Clause 2 of Article 28, and Clause 1 of Article 31 of Government Decree No. 65/2013/ND-CP dated June 27, 2013 stipulate:

Article 3. Taxable Income

2. Income from salaries and wages received by employees from their employers, including:

a) Salaries, wages, and other payments of a similar nature received in monetary or non-monetary forms.

...e) Transactions in cash or in kind, in any form, including transactions in securities...

Article 28. Tax Deductions

2. Types of income subject to tax withholding: Income from salaries, wages, fees, including fees from brokerage activities,...

Article 31...

1. Organizations and individuals are responsible for deducting tax when paying income to individuals as follows:

a) For income from salaries and wages of individuals with signed labor contracts: Monthly, the organization or individual pays the tax-deductible income of each individual based on the monthly taxable income and the progressive tax rate schedule...".

According to the provisions of point a, clause 1, point c, clause 2, and point d, clause 6 of Article 8 of Government Decree No. 126/2020/ND-CP dated October 19, 2020, organizations withholding personal income tax shall declare personal income tax monthly/quarterly. Organizations and individuals paying income from salaries and wages are responsible for declaring and settling personal income tax on behalf of individuals authorized by the organization or individual paying the income. Alternatively, individuals may self-declare, pay, and settle personal income tax in certain cases.

Points a and c of Clause 2, Article 2, Clause 2, Article 8, and point b.1 of Clause 1, Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013, issued by the Ministry of Finance , stipulate:

Article 2. Taxable income

2. Income from salaries and wages is the income that employees receive from their employers, including:

a) Salaries, wages, and other payments of a similar nature, whether in monetary or non-monetary form.

...e) Monetary or non-monetary bonuses of any form, including bonuses in the form of securities,...".

Article 8. Determining taxable income from salaries and wages

2. Taxable income from salaries and wages

a) Taxable income from salaries and wages is determined by the total amount of salaries, wages, fees, and other income of a similar nature received by the taxpayer during the tax period, as guided in Clause 2, Article 2 of this Circular.

b) The time of determining taxable income.

The time for determining taxable income from salaries and wages is the time when the organization or individual pays the income to the taxpayer...

Article 25. Tax deductions and tax deduction certificates

1. Tax deduction

… b.1) For resident individuals who sign labor contracts of three (03) months or more, the organization or individual paying the income shall deduct tax according to the progressive tax rate schedule, including cases where the individual signs contracts of three (03) months or more at multiple places."

Thus, the laws on personal income tax policy and tax administration already stipulate the procedures for aggregating income, calculating tax, withholding, declaring tax, paying personal income tax monthly/quarterly, and filing final tax returns for personal income tax from salaries and wages of taxpayers.

Ms. Thu is requested to base her tax calculation and personal income tax declaration on the above regulations and her actual income.

If you still have any questions, please contact your local tax authority for specific guidance.

Source: https://vtv.vn/cach-tinh-thue-thu-nhap-doi-voi-khoan-thuong-tet-100251028144220341.htm