PIT FOR SUPPORT AND SUPPORT ON TERMINATION OF LABOR CONTRACT

On May 4, 2020, the Tax Department of Ho Chi Minh City has just issued Dispatch 4236/CT-TTHT instructing on PIT with allowances and support when terminating labor contracts (labor contracts).

According to the instructions in Clause 2, Article 2, Clause 2, Article 8, Article 25 Circular 111/2013/TT-BTC and Article 12 Circular 151/2014/TT-BTC, in case the company pays subsidies, support for employees to sign labor contracts with the company for 03 months or more, when the labor contract is terminated, then:
– For severance pay as prescribed by Social insurance law and Labor Code shall not be included in taxable income from salaries and wages of employees.
– For severance pay higher than the specified level of Social insurance law and Labor Code then the company shall aggregate them together with wages and salaries to deduct PIT according to the partially progressive tax schedule before payment.
Particularly for the financial support that the company pays additionally to the employee (in addition to the provisions of the Labor Code and the Law on Social Insurance) after the termination of the labor contract, if this payment is VND 2 million or more, the company must withholding personal income tax at the rate of 10% of total income paid.

=> MonthDownload legal documents here! 


Legal documents:
1. According to Clause 2, Article 2 of Circular 111/2013/TT-BTC stipulating taxable incomes as follows:

“Article 2. Taxable incomes

2. Income from salary, wages
Income from wages and salaries is the income an employee receives from an employer, including:

b) Allowances and subsidies, except for the following allowances and benefits:

b.6) Allowance for unexpected difficulties, allowance for labor accidents, occupational diseases, one-time allowance for childbirth or child adoption, maternity benefits, convalescence and rehabilitation benefits Post-maternity health benefits, benefits due to working capacity decline, lump-sum retirement benefits, monthly survivorship allowances, severance allowances, job loss allowances, unemployment benefits and other benefits according to regulations. Provisions of the Labor Code and the Law on Social Insurance.

Allowances and subsidies and levels of allowances and subsidies not included in taxable income guided at Point b, Clause 2 of this Article must be prescribed by competent State agencies.
In case the guiding documents on allowances, subsidies, allowances, and subsidies apply to the State sector, other economic sectors and other business establishments may base themselves on the list of And the level of allowances and subsidies for the State sector to calculate and subtract.
In case the allowance or subsidy received is higher than the allowance or subsidy according to the above guidance, the excess must be included in taxable income.”

2. According to Clause 2, Article 8 of Circular 111/2013/TT-BTC stipulating taxable incomes from salaries and wages as follows:

“Article 8. Determination of taxable income from business, salary, and wages

2. Taxable income from salary and wages
a) Taxable income from salary and wages is determined by the total amount of salary, wages, remuneration, and other incomes of salary and wage nature that taxpayers receive in the tax period. Tax under the guidance in Clause 2, Article 2 of this Circular.
b) Time of determination of taxable income.
The time to determine taxable income for incomes from salaries and wages is the time when organizations or individuals pay incomes to taxpayers…”
– Article 25 of Circular 111/2013/TT-BTC stipulating tax deduction and tax withholding documents as follows:
“Article 25. Tax withholding and tax withholding documents
1. Tax deduction
Tax withholding means the fact that income-paying organizations and individuals deduct the payable tax amount from the taxpayer's income before paying income, specifically as follows:

b) Income from salary, wages

b.2) For a resident who signs a labor contract for three (03) months or more but leaves work before the end of the labor contract, the income paying organization or individual still deducts tax according to the provisions of this Law. Partial progressive tax schedule.

i) Tax deduction for some other cases
Organizations and individuals that pay wages, remunerations, and other payments to resident individuals do not sign labor contracts (under the guidance at Points c, d, Clause 2, Article 2 of this Circular) or sign contracts. If a labor contract is less than three (03) months and has a total income of two million VND (2,000,000)/time or more, the tax must be deducted at the rate of 10% of the income before paying it to the individual…

3. According to Article 12 of Circular 151/2014/TT-BTC dated October 10, 2014:

“Article 12. To amend and supplement Point c, Clause 2, Article 26 of Circular No. 111/2013/TT-BTC as follows:
“c) Residents earning incomes from salaries, wages, and business are responsible for making a tax finalization declaration if there is an additional tax payable or overpaid tax amount, and request for tax refund or tax offset in the period. next tax return, except for the following cases:…”

Châu Thanh



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