Personal Income Tax (PIT) Exemption
The Vietnamese Ministry of Finance Official letter 8465/BTC-CST dated 22 June 2012 states that individual tax payers having assessable income subject to PIT at the first threshold rate of 5% (the assessable income does not exceed VND5m) are exempt from PIT from July 1 2012 to December 31 2012.
Assessable income is the taxable income less allowable deductions. Allowable deductions are:
1. Taxpayers compulsory Social Medical and Unemployment insurance contributions (SMUI);
2. Individual deduction VND4m per month;
3. Dependents family deduction VND1.6m per month per dependent;;
4. Any other allowable deduction.
HR2B expects further official letters on how this exemption will be handled for tax finalisation calculations at the end of the year. We expect that this will be handled the same way as for the 2011.
How will this change affect your Company?
The overall cost of your payroll is not affected. You will see that slightly more money is paid to your lower paid staff and slightly less money is paid to the tax office. See examples below.
How will this change affect your Staff?
Staff whose assessable monthly income is less than VND5m per month will be exempt from PIT. This will affect your staff whose contracted salary and family size put them in the first 5% assessable income band. Typically this is salaries of between VND5m to VND12m per month depending of family size. See the example below.
Staff whose monthly assessable income is more than VND5m per month continue to make PIT contributions as a normal.
What do you need to do?
HR2B has incorporated this change into the payroll calculations of our customers. Our customers will notice this change in their Payroll Closing Report as of July 2012.
HR2B will include an announcement of the change on July 2012 pay-slip to employees. Our help desk is available to employees who want to know more about these changes.
HR2B Payroll Specialist is available to answer any questions you may have about these changes.
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A) Monthly Calculations - before and after Exemption (VND’000s)
This example shows how the same employee will benefit with a 2% increase in net take home pay after the implementation of the exemption. Note the cost to company does not change.
B) Monthly Calculations - Effect of Family Size (VND’000s)
This example shows how two employees on the same salary will have different net salary because of family size. Employee 3 has one child dependent. This makes their taxable income less than VND5m and so they qualify for a tax exemption. Employee 4 does not have an exemption as their taxable income is over VND5m.