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[Taxation] Guidance from the Directorate General of Taxation regarding income tax calculation when salary is guaranteed take-home pay

2023/12/07

In the General Department of Taxation Official Letter No.5250/TCT-DNNCN dated November 24, 2023, the General Department of Taxation informed the Hanoi Tax Department about the income conversion rules when calculating taxable income from net salary when calculating personal income tax.

In the labor contract between a company and a foreign worker, if the salary is shown and paid as take-home pay and the company is responsible for the co-payment of health insurance premiums, housing expenses, and personal income tax, the personal income tax calculation In such cases, taxable income and personal income tax should be calculated in accordance with Article 7, Paragraph 4, a of the Ministry of Finance’s Circular No. 111/2013/TT-BTC dated August 15, 2013.

・The amount paid by the company for health insurance premiums is initially added to income as an allowance, but is then subtracted as a legal deduction.

・Housing expenses borne by the company are either “actual housing expenses borne by the company” or “15% of taxable income excluding housing expenses”, assuming that the company contracts with the lender and pays directly. The smaller amount is added to taxable income.

Similar guidance was also issued by the Ministry of Finance in Official Letter No. 2037/BTC-TCT dated February 16, 2017.

References:
Directorate General of Taxation Official Letter No.5250/TCT-DNNCN dated November 24, 2023
Ministry of Finance Official Letter No. 2037/BTC-TCT dated February 16, 2017