Regarding the personal income tax rate applied when deducting personal income tax on payments made after both parties agree to terminate the labor contract, the General Department of Taxation has the following opinion:
Based on Clause 3, Article 36; Clause 2, Article 47 of Law No. 10/2012/QH dated June 18, 2012 of the National Assembly on the Labor Code;
Based on the guidance in point b6, clause 2, Article 2; clause 2, Article 8; point b2, Point i; clause 1, Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax, the Law amending and supplementing a number of articles of the Law on Personal Income Tax and Government Decree No. 65/2013/ND-CP detailing a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax;
According to the above guidelines, in the case where the Company has signed an indefinite-term contract with an employee, and is now negotiating and agreeing to terminate the employment contract with the employee in accordance with Article 36.3 of the Labor Code (agreement to terminate the employment contract), the amounts of salary, wages, and other payments of a similar nature that the Company will pay to the employee upon termination of the employment contract are determined as follows:
– For wages paid to employees, the tax is deducted according to the progressive tax rate schedule.
– Regarding severance pay, if an employee resigns in accordance with the Social Insurance Law and the Labor Code, it is not included in the taxable income from salaries and wages of the employee.
– Regarding additional financial support paid by the company to employees (beyond the provisions of the Labor Code and the Social Insurance Law) after the termination of the employment contract, if this amount is two million (2.000.000) VND or more, the company must deduct personal income tax at a rate of 10% on the total income paid.
