For both the Gregorian New Year and the Lunar New Year of the Pig 2019, many businesses distributed bonuses to their employees. The bonus amounts varied depending on the individual and their job position.
When receiving Tet bonuses, employees are, of course, still required to pay full personal income tax on the bonuses received from the company, but are exempt from paying social insurance contributions on those bonuses. In principle, when income is generated, individuals are subject to personal income tax (except in certain cases exempted by state law).
Lunar New Year bonuses: joys and sorrows.
Article 3 of the amended Personal Income Tax Law of 2012 includes allowances, subsidies, and bonuses… Therefore, Tet bonuses will be subject to personal income tax just like regular monthly income.
The tax calculation for bonuses is based on a progressive tax rate system, similar to that applied to regular wages and salaries. This means each income bracket has a corresponding tax rate ranging from 5% to 35%.
(5 x 5%) + [(10-5) x 10%] = 0,75 million VND.
Meanwhile, if you receive a bonus of 30 million VND, the taxable amount will be: (5 x 5%) + (5 x 10%) + (8 x 15%) + [(30-18) x 20%] = 4,35 million VND
The amount deducted for tax purposes will generally differ from the standard tax calculation method in most companies. The deducted amount is usually lower than the standard calculation. This is because it's only a provisional tax amount allocated for monthly deductions. The exact figure will only be known during the tax settlement period of the following year. Therefore, employees receiving Tet bonuses during this period will have to wait until the tax settlement period in January 2020 to know the exact amount of personal income tax deducted.
This is why the amount of money to be collected back can reach tens, even hundreds of millions of dong, because the income tax on Tet bonuses has not been fully settled.
The current 7 tax brackets for personal income tax calculation.
The amount of tax a person has to pay based on their Tet bonus.
For employees with dependents, family allowance deductions, etc., the amount will be reduced or waived as stipulated in the amended Personal Income Tax Law of 2012.
