How should Tet bonuses and 13th-month salaries be correctly understood? Are 13th-month salaries and Tet bonuses subject to personal income tax?
In the article below, Expertis will answer these questions to provide businesses and employees with accurate and legally compliant information.
1. Understanding the 13th-Month Salary
According to Article 103 of the Labor Code, Law No. 10/2012/QH13 stipulates the following regarding bonuses for employees:
Article 103. Bonuses
1. Bonuses are sums of money that employers reward employees based on annual business performance and the employee's level of job completion.
2. The bonus regulations are decided by the employer and publicly announced at the workplace after consulting with the collective labor representative organization at the establishment.
In fact, the law does not stipulate a 13th-month salary, so businesses can consider the 13th-month salary as a Tet bonus. Therefore, in principle, the 13th-month salary and bonus are not mandatory. Whether or not a 13th-month salary (bonus) is given depends on the agreement between the employer and the employee through the labor contract, collective bargaining agreement, and especially on the annual business performance of the enterprise (production and business unit).
2. Is the 13th-month salary subject to personal income tax?
According to Clause 2, Article 2 of Circular 111/2013/TT-BTC, the 13th-month salary is considered taxable income subject to personal income tax.
In this case, all bonuses are subject to personal income tax except for the following bonuses which are not included in taxable income:
e.1) Bonuses accompanying titles awarded by the State, including bonuses accompanying emulation titles and forms of commendation as prescribed by law on emulation and commendation, specifically:
e.1.1) Bonuses accompanying emulation titles such as National Emulation Soldier; Emulation Soldier at the ministerial, sectoral, central mass organization, provincial, and centrally-administered city levels; grassroots Emulation Soldier, Advanced Worker, Advanced Soldier.
e.1.2) Bonuses accompanying other forms of rewards.
e.1.3) Bonuses accompanying titles awarded by the State.
e.1.4) Bonuses accompanying awards presented by associations and organizations under political organizations, socio-political organizations, social organizations, and professional social organizations at the central and local levels, in accordance with the charter of that organization and in compliance with the provisions of the Law on Emulation and Commendation.
e.1.5) Bonuses accompanying the Ho Chi Minh Prize and the State Prize.
e.1.6) Bonuses accompanying commemorative medals and badges.
e.1.7) Bonuses accompanying Certificates of Merit and Commendations.
The competence to issue reward decisions and bonus levels together with the emulation titles and rewards mentioned above must comply with the provisions of the Emulation and Reward Law.
e.2) Bonuses accompanying national and international awards recognized by the Vietnamese State.
e.3) Bonuses for technical improvements, inventions, and discoveries recognized by competent State agencies.
e.4) Rewards for detecting and reporting violations of the law to competent State authorities.”
– The time for calculating personal income tax is the time when the enterprise pays salaries and bonuses to its employees. (Note: the 13th-month salary must be paid before the deadline for submitting the annual tax return for the salary to be included as a legitimate and valid expense.)
– Calculate and deduct taxes according to the progressive tax rate schedule for bonuses and 13th-month salaries that are considered part of wages or salaries.”
