Every year, there are income sources from wages and salaries that are subject to Personal Income Tax (PIT). Individuals who earn these incomes are required to pay PIT to the Tax authorities.
1. What is PIT?
PIT, or Personal Income Tax, is understood as a sum of money deducted from a portion of salary and other sources of income generated by individuals, which is paid to the Tax authorities for the state budget. This amount is paid after deductions have been applied.
Currently, PIT is not applicable to individuals with low incomes below the stipulated threshold (below 11 million Vietnamese dong).
2. Subjects liable for PIT calculation from wages and salaries
Based on Article 2 of the PIT Law as amended in 2014, the subjects liable for tax payment consist of two groups:
- Resident individuals are those who reside in Vietnam as per the legal regulations, with rental contracts lasting 183 days or more within the tax year, or individuals who have a regular presence in Vietnam for 183 days or more in a lunar year or continuously for 12 months from the first day of their presence in Vietnam.
- There are two cases for applying PIT to resident individuals:
- Individuals with labor contracts lasting 3 months or more,
- Individuals with labor contracts lasting less than 3 months or no labor contract.
(2) Non-resident individuals are those who do not meet the residency conditions as mentioned above but have taxable income. They are often foreigners working in Vietnam.
3. Is housing allowance subject to personal income tax?
According to legal regulations, taxable income is the total income that individuals receive, excluding the following five items:
- Meal allowances during work shifts or lunch.
- Telephone allowances.
- Uniform allowances.
- Business trip expenses.
- Overtime and night-shift pay received by laborers.
Thus, housing allowances do not fall under the exempted categories and are subject to PIT.
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