How to calculate income tax on Tet bonus

Illustration photo.

Ms. Nguyen Thi Thu ( Dong Nai ) is working at a foreign-invested enterprise (FDI) and reflects that currently the year-end bonus (13th month salary) is being added to December or January income, causing the total income in the month to increase dramatically and be taxed at a higher level according to the progressive tax schedule.

Meanwhile, the total actual income of the year remains unchanged, but workers have to pay more taxes, leading to disadvantages.

Ms. Thu suggested that the competent authority consider adjusting the regulations to ensure fairness, specifically: allowing the average calculation of the Tet bonus on the total annual income; or separating the bonus to apply a more reasonable tax rate, avoiding disadvantages for employees.

On this issue, the Tax Department has the following opinion:

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

"Article 3. Taxable income

2. Income from wages and salaries that employees receive from employers, including:

a) Salaries, wages and amounts of the nature of salaries or wages received in cash or non-cash forms.

...e) Monetary or non-monetary payments in any form, including securities...

... Article 28. Tax deduction

... 2. Types of income subject to tax deduction:... Income from salaries, wages, remuneration, including remuneration 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: Every month, the organization or individual paying the income deducts tax from each individual based on the monthly taxable income and the Progressive Tax Schedule...".

According to the provisions of Point a, Clause 1, Point c, Clause 2 and Point d, Clause 6, Article 8 of Decree No. 126/2020/ND-CP dated October 19, 2020 of the Government, organizations that deduct 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 taxes and settling on behalf of individuals authorized by organizations and individuals paying income. Or individuals shall declare, pay taxes, and declare and settle personal income tax themselves in some cases.

At point a, point c, clause 2, Article 2, clause 2, Article 8 and point b.1, clause 1, Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance stipulates:

"Article 2. Taxable income

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

a) Salaries, wages and amounts of salary or wage nature in cash or non-cash forms

...e) Bonuses in cash or non-cash in any form, including bonuses in securities,...".

"Article 8. Determination of 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, remunerations, and other incomes of a salary or wage nature that the taxpayer receives during the tax period according to the guidance in Clause 2, Article 2 of this Circular.

b) Time of determining taxable income.

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

"Article 25. Tax deduction and tax deduction documents

1. Tax deduction

… b.1) For resident individuals signing labor contracts for three (03) months or more, the organization or individual paying the income shall deduct tax according to the progressive tax table, including cases where the individual signs contracts for three (03) months or more in many places".

Thus, the law on personal income tax policy and the law on tax management have provisions on income synthesis, tax calculation, deduction, tax declaration, monthly/quarterly personal income tax payment, and personal income tax finalization declaration from salaries and wages of taxpayers.

We recommend that Ms. Thu base on the above regulations and actual income to calculate and pay personal income tax in accordance with regulations.

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

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