Guidance of Hung Yen Province Tax Department on PIT policy for employees

On 05 May 2020, Tax Department of Hung Yen Province guided a company based in Hung Yen Province (the “Company“) on the personal income tax (PIT) of its employees as follows:

Hung Yen Tax Department guidance on PIT of employees


1. Regarding the salary for working overtime on weekdays and Sundays

Article 3.1.i of Circular No. 111/2013/TT-BTC of the Ministry of Finance regulates the incomes exempt from taxation as follows:

“i) Incomes from salaries, wages for working at night or working overtime paid higher than the salaries, wages for working in day-shift, working hour as prescribed by the regulations of the Labor Code. In particular:

i.1) The salaries, wages paid higher due to working at night, working overtime shall be exempted from tax obligation based on the paid salaries, wages because of working at night, overtime in practice minus (-) salaries, wages paid for the ordinary working day.

In addition, article 106 of Labor Code No. 10/2012/QH13 of the National Assembly regulates about working overtime as follows:

“Article 106. Working overtime

1. Overtime is working period beyond the normal working hour prescribed by laws, collective labor agreements or internal labor rules.

2. An employer can request the employee to work overtime when fully meeting the following conditions:

a) Obtaining the employee’s consent;

b) Ensuring that the number of overtime working hours of the employee does not exceed 50% of the normal working hours per day; in case of applying regulations on weekly work, the total of normal working hours and overtime working hours must not exceed 12 hours per day; does not exceed 30 hours per month and the total of overtime working hours must not exceed 200 hours per year, except for some special cases as stipulated by the Government in which overtime working hours must not exceed 300 hours per year.”

Accordingly, in case the Company incurs payments of salaries, wages for working overtime on weekdays and Sundays, the higher part of salaries, wages due to overtime work on weekdays and Sundays, which is based on the normal working day for the overtime amount not exceeding the level specified in Article 106 of the Labor Code, is exempt from PIT.

2. Regarding phone and petrol allowances

Firstly, Article 2.2.dd4 of Circular No. 111/2013/TT-BTC of the Ministry of Finance provides that:

“dd) Other benefits in cash or not in cash apart from salaries, wages paid to the taxpayer by the employer in any shapes or forms:

dd.4) The expenses on stationery, business trips, phone calls, costumes, etc. that are in excess of the limits prescribed by the State. The expenses are not included in taxable incomes in the cases below:

dd.4.1) For the officers and employees in public service agencies, Communist Party’s agencies, associations: the expenses shall apply the guiding documents promulgated by the Ministry of Finance.

dd.4.2) For the employees working in business organization, representative offices: the expenses shall comply with the income level subject to corporate income tax according to the guiding documents of the Law on corporate income tax.


Secondly, Article 6.1 of Circular No. 78/2014/TT-BTC of the Ministry of Finance amended, supplemented by Article 4 of Circular No. 96/2015/TT-BTC provides conditions to determine deductible expenses when calculating CIT as follows:

“Article 6. Deductible and non-deductible expenses for determining taxable income

1. Except for the expenses specified in Clause 2 of this Article, enterprises may deduct all expenses that fully satisfy the following conditions:

a) Actual expenses arising in relation to the production and business activities of enterprises.

b) Expenses with fully lawful invoices, documents as required by law.

c) Expenses for purchase of goods, services with the value of VND20 million or more (VAT-inclusive prices) must have non-cash payment documents when making payment.


Thirdly, Article 3.2 of Circular No. 25/2018/TT-BTC dated 15 August 2013 by the Ministry of Finance states that salaries and wages are not determined as deducted expenses in the following cases:

“2. Amending the first passage of sub-point b point 2.6 Clause 2 Article 6 of the Circular No. 78/2014/TT-BTC (amended, supplemented in Article 4 of the Circular No. 96/2015/TT-BTC dated 22 June 2015 of the Ministry of Finance):

“b) Salaries, bonuses for employees not stated in the Conditions for entitlement and rates of entitlement in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation or Group; Reward regulations provided by the President of Management Board, General director or Director under the financial regulations of the Company or Corporation.”

As such, in case the phone and petrol allowances for employees specified with the conditions and levels of entitlement in one of the dossiers prescribed in Article 3.2 of Circular No. 25/2018/TT-BTC, are included in deductible expenses when determining the enterprise’s income subject to CIT, these allowances are not calculated in the income subject to CIT .

3. Regarding the house rental

Article 2.2.dd1 of Circular No. 111/2013/TT-BTC dated 15 August 2013 by the Ministry of Finance amended, supplemented by Article 11.2 of Circular No. 92/2015/TT-BTC regulates the income subject to PIT as follows:

“dd.1) Payments for housing, electricity, water supply and ancillary services (if any).

If the person stays at the workplace, the taxable income depends on the house rent or depreciation expense, payments for electricity, water supply, and other services according to the ratio of area that person uses to the total area of the workplace.

The house rental paid by the employers on behalf of the employee shall be included in the taxable income according to the actual amount, which must not exceed 15% of the total taxable income (excluding house rent) earned at the workplace.”

According to the above provision, the rental that the Company paid on behalf of employees shall be included in the income subject to PIT based on the actual payment amount but not exceeding 15% of the total taxable income generated (excluding the house rental) at the unit regardless of where the income is paid.

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