How is personal income tax calculated on year-end bonus and 13th month salary?

Recently, a citizen sent a petition to the Tax Department ( Ministry of Finance ) raising the question: when receiving a year-end bonus (13th month salary) it is added to the income of December or January, causing the total income of that month to skyrocket and be subject to personal income tax at a higher level according to the progressive tax schedule .

Meanwhile, actual income throughout the year remains unchanged, but workers are disadvantaged due to higher tax deductions (this person is working at a foreign-invested enterprise).

Thuế thu nhập cá nhân với tiền thưởng cuối năm, lương tháng 13 được tính thế nào? - Ảnh 1. — *Year-end bonuses and 13th-month salaries are subject to personal income tax. (Photo: TNO)*

Therefore, this individual recommends that the Ministry of Finance consider amending the tax calculation method for year-end bonuses. Specifically, allowing businesses and employees to choose to calculate the average bonus on the total income of the whole year; or separate the bonus to apply a reasonable tax rate, avoiding causing unnecessary disadvantages to employees. Thereby, the competent authorities consider making the tax policy reasonable, fair and creating positive motivation for employees.

Responding to the above petition, the Tax Department cited Decree No. 65/2013/ND-CP of the Government regulating taxable income and determining taxable income from salaries and wages. Accordingly, income from salaries, wages and amounts of salary and wage nature in cash or non-cash forms, including stock bonuses, is taxable income.

For individuals who have signed labor contracts, every month the organization or individual paying income deducts tax from each individual based on the monthly taxable income and the progressive tax table. The organization or individual paying income from salary or wages is responsible for declaring and settling taxes and settling taxes on behalf of the authorized individual, or the individual performing the declaration, payment, and declaration of personal income tax.

The organization that deducts personal income tax declares tax monthly or quarterly. Thus, the monthly personal income tax that the enterprise deducts from employees is only a provisional payment. At the end of the year, the taxpayer makes a tax settlement, the tax authority will determine the exact amount of tax to be paid (if there is a shortage, more must be paid, if there is a surplus, it will be refunded).

Source: Thanh Nien

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