How to calculate personal income tax for house rent allowance of employee in Vietnam

How to calculate personal income tax for house rent allowance of employee in Vietnam

The employer pays the house rent allowance to the employee in Vietnam as specified in the labor contract, whether it is considered a taxable income of the employee or not is a concern of the employee as well as the employer.

  For example: Company A pays Mr. B”s salary in Vietnam as follows:

1. Basic salary: 12,000,000 VND;
2. Position allowance: 4,000,000 VND;
3. Seniority allowance: 1,000,000 VND;
4. Performance allowance: 2,000,000 VND;
5. House rental allowance: 15,000,000 VND;
6. Lunch allowance: 500,000 VND;
7. Costume allowance: 500,000 VND;

     Total income: 35,000,000 VND;

So, will this amount of VND15,000,000 for house rent allowance be included in taxable income?

* Legal basis:

Clause 2, Article 2 of Circular 111/2013/TT-BTC of the Ministry of Finance of Vietnam stipulates:
"2. Income from salary, wages
Income from wages and salaries is the income an employee receives from an employer, including:
a) Salaries, wages and other amounts of salary and wage nature in cash or non-cash forms.
b) Allowances and subsidies, except for deductible allowances and subsidies
c) Remuneration received in the form of: commissions for sales agents, brokerage commissions; money to participate in scientific and technical research projects; money to participate in projects and schemes; royalties in accordance with the law on royalties; money to participate in teaching activities; money for participation in cultural, artistic, physical training and sports performances; advertising service fees; other service fees, other remuneration.
d) Money received from joining a business association, the enterprise”s board of directors, the enterprise”s supervisory board, the project management board, the management board, associations, professional associations and other organizations.
dd) Cash or non-monetary benefits other than salary or wages paid by the employer, which the taxpayer is entitled to in any form:
dd.1) Housing, electricity, water and accompanying services (if any).
In case an individual lives at the head office, the taxable income is based on house rent or depreciation expenses, electricity, water and other service charges calculated according to the ratio between the personal use area and the total headquarter area.
The house rent paid by the employer to the employee is included in the taxable income according to the actual amount paid, but does not exceed 15% of the total taxable income (not including rent) at the unit.
e) Cash or non-cash bonuses of any kind, including securities bonuses”

Accordingly, "The house rent paid by the employer to the employee shall be included in the taxable income according to the actual amount paid but not exceeding 15% of the total taxable income (excluding house rent) in the unit"

The above regulation means that the house rent that the employer pays to the employee does not exceed 15% of the total taxable income (not including the rent allowance) will be included in the taxable income. This means that a house rent allowance equal to 15% of total taxable income (not including house rent) will have to be included in taxable income. The balance of the house rent allowance paid by the employer to the employee is not subject to taxable income.

* Determination of taxable income for house rent allowance:

Based on the salary data of employee B above, we can determine a number of indicators as follows:

Total income: 35,000,000 VND, of which:
- Total taxable income (excluding rent allowance) = 35,000,000 – 15,000,000 – (500,000 + 500,000) = 19,000,000 VND
- Taxable house rent allowance = 15% x 19,000,000 = 2,850,000 VND

So, total taxable income (including house rent allowance) = 19,000,000 + 2,850,000 = VND 21,850,000
Therefore, the rent paid by the employer to employee is included in the taxable income is 2,850,000 VND, the balance (15,000,000 – 2,850,000 = 12,150,000 VND) will not be included in the taxable income of the employee. In this case, he must pay personal income tax on taxable income of VND 21,850,000.

Any information on how to calculate personal income tax of employee on house rent allowance in Vietnam, feel free to contact us.

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