Read More: Successful Job Search Strategies In A Saturated Job Market
HRDept - All your efforts deserve to be rewarded
Personal Income Tax (PIT) on salaries and wages is one of the key taxes that directly affect employees’ earnings. Understanding the tax rates, calculation methods, and exemptions allows individuals to optimize their income while ensuring compliance with the law.
"Mastering tax policies not only helps employees protect their rights but also contributes to building a fair and transparent tax system." – HRDept.vn.
According to the Personal Income Tax Law, individuals earning income from salaries and wages are subject to PIT if their taxable income exceeds the prescribed threshold.
Resident individuals: Those who stay in Vietnam for 183 days or more within a year or have a permanent/temporary residence in Vietnam.
Non-resident individuals: Foreigners earning income in Vietnam but not meeting the residency criteria.
For resident individuals: PIT is calculated based on a progressive tax rate, as follows:
Tax Bracket | Monthly Taxable Income (Million VND) | Tax Rate (%) |
---|---|---|
1 | Up to 5 | 5% |
2 | Over 5 - 10 | 10% |
3 | Over 10 - 18 | 15% |
4 | Over 18 - 32 | 20% |
5 | Over 32 - 52 | 25% |
6 | Over 52 - 80 | 30% |
7 | Over 80 | 35% |
For non-resident individuals: A fixed tax rate of 20% is applied to total income generated in Vietnam.
Example: An employee with a taxable income of 15 million VND per month will have to pay PIT as follows:
First 5 million: 5% x 5 million = 250,000 VND
Next 5 million: 10% x 5 million = 500,000 VND
Last 5 million: 15% x 5 million = 750,000 VND
Total PIT payable: 1,500,000 VND/month
PIT is determined using the formula:
Where:
Taxable income = Total salary and wages - Tax-exempt amounts.
Deductions include:
Personal deduction: 11 million VND/month.
Dependent deduction: 4.4 million VND/month per dependent.
Mandatory social insurance contributions, voluntary pension funds.
Example: An employee with a total income of 25 million VND per month, supporting one child under 18, and contributing 10.5% (2.625 million VND) to mandatory social insurance:
Taxable income = 25 - 11 - 4.4 - 2.625 = 6.975 million VND
PIT payable: 5% x 6.975 million = 348,750 VND/month
According to Article 4 of the Personal Income Tax Law, the following types of income are tax-exempt:
Meal, transportation, and telephone allowances within the legal limits.
Overtime wages for night shifts or public holidays calculated based on base salary.
Maternity benefits, sick leave allowances, and workplace accident compensation.
Corporate welfare benefits (e.g., condolence payments, health check-ups, life insurance up to 3 million VND/month).
"Understanding tax exemptions helps employees retain their benefits and maximize tax advantages." – HRDept.vn.
While taxes are mandatory, employees can apply lawful strategies to minimize their tax burden:
Maximize deductions: Register all eligible dependents to reduce taxable income.
Contribute to voluntary insurance and pension funds: These contributions are deducted before taxable income is calculated.
Opt for non-monetary benefits: Perks such as health insurance and travel allowances are often tax-exempt.
Ensure accurate tax declarations: Proper reporting prevents errors and potential back taxes.
"A well-structured tax policy not only reassures employees but also fosters labor market growth." – HRDept.vn.
PIT on salaries and wages significantly impacts personal finance. Understanding tax regulations, tax brackets, calculation methods, and exemptions allows employees to proactively manage their finances, optimize income, and comply with legal requirements.
"Tax knowledge is not just an obligation; it is a smart approach to optimizing personal and corporate finance." – HRDept.vn.