Question regarding Personal income tax (“PIT”) for Foreigner’s business trip expenses in the following cases:
Case 1: Foreigners (non-residents) go on a bussiness trip in Vietnam according to Parent Company’s decision. All expenses will be covered by Parent company. If Vietnam company pays for the expenses, the Parent Company will pay back the expense to Vietnam side later. In this case, is the payment on behalf by Vietnam company subject to PIT?
Case 2: Foreigners (non-residents) go on a bussiness trip in Vietnam. All expenses (Air ticket, hotel, business travel expenses (if any)) will be covered by Vietnam company. If Parent company pays for the expenses, the Vietnam company will pay back the expense to the Parent company. In this case, is the payment of these expenses subject to PIT?
Regarding PIT related to expats’ business trip expense
Case1: Parent Company pays for expenses in full and does not claim Vietnam company back
Case2: Parent Company pays for expenses and then claims Vietnam company back
(All expenses will be covered by Parent Company)
(All expenses will be covered by Vietnam Company)
(1) Business travel expense, airfares, hotel fee, etc., are determined as business trip expenses according to the policies and regulations on business travel of the Parent Company.
In essense, this is the business trip expenses and it is not subject to PIT.
However, in order not to be subject to PIT, there must be supporting documents including:
+ Regulations of the parent company on payment of these business trip expenses (or specified in the labor contract)
+ Decision on sending work trips by Parent Company.
+ Summary sheet of business trip expenses…
In case, the business trip expenses are not stated in Parent Company’s regulations, and the Company cannot collect the supporting, the Vietnamese tax authorities still require to calculate PIT for experts.
In essense, this is the expense incurred when the experts go on a business trip in Vietnam => this is not a personal benefit. Therefore, it is not a taxable income, same as case1. (The supporting document is similar to the one in case1).
However, In this case, Vietnam must return the above fee to the Parent company. In practice, some local tax authorities may require to calculate PIT for this expense. The reason is that experts are not Vietnamese workers, so this is the income of those individuals.
Companies should refer to the instructions at the local tax and may consider sending an official letter to the tax authority for appropriate guidance.
(2) Salary corresponding to the working time in Vietnam
Experts (non-resident) have to pay PIT for the income from wages earned in Vietnam. Experts’s PIT on incomes from wages equals the taxable income from wages multiplied (x) 20% tax.
Incomes from wages and remunerations include wages, remunerations, and the other amounts paid as wages or remunerations in the tax period in accordance with Clause 2, Article 2 of Circular 111/2013/TT-BTC.
The income subject to PIT must be determined according to the actual received amount (the company needs to confirm with the foreign contractor to obtain the expert's income in 1 month, then calculates according to the corresponding number of working days in Vietnam).
Note: In case the tax officer determines that the taxable income level is unreasonable (lower than the market), the tax authority will have the right to impose tax.
Official Letter No. 5442/TCT-TNCN in 2017 regarding instruction on PIT policy for expats issued by General Department of Tax.
Official Letter No. 594/TCT-TNCN in 2015 regarding PIT policy for travel expense, accommodation costs issued by General Department of Tax
Official Letter No. 48774/CT-HTr in 2016 regarding PIT policy for non-resident issued by Hanoi Tax Autrthority
Official Letter No. 3370/TCT-TNCN in 2014 regarding the responsibility to declare and pay PIT for foreign issued by General Department of Tax
Question 02: Company organizes games when traveling, and a lucky draw, does the winning employee have to pay PIT?
Answer: Currently, there are many opinions of tax departments to determine whether gifts from lucky draw are income from salaries or wages or income from winning prizes to determine the respective PIT liability. Accordingly:
Case 1: Gifts with salary or wage nature, considered as other benefits for employees, must be included in taxable income.
Official Letter No. 4991/CT-TTHT in 2017 regarding PIT issued by Ho Chi Minh city Tax Department
Pursuant to the above provisions, in case the Company, according to the presentation, organizes a lucky draw to give gifts to employees at the year-end party, the Company shall aggregate the winning value into the PIT taxable income from salary and remunerations of employee to calculate, withhold, declare and pay PIT according to the progressive tax table as prescribed.
Official Letter No. 2510/CT-TTHT in 2017 regarding value added tax declaration and deduction issued by Ho Chi Minh city Tax Department
In case the Company purchases goods to reward employees on the New Year's Eve through a lucky draw, when exporting the prize goods, the Company must issue an invoice, calculate and pay VAT as selling goods to customers but it is not included in CIT taxable revenue. Gift expenses not exceeding 1 month's average salary actually paid in the tax year of the company are included in the deductible expenses when determining the taxable income and input VAT amount of the gift purchase invoice will be declared and deducted (if the conditions are met for deductible expenses and VAT deduction according to regulations). The value of gifts for employees is included in the income from wages and remunerations (including the case of receiving gifts from lucky draws).
Case 2: Gifts are income from winning prizes, the gift value exceeding 10 million VND will be included in taxable income.
Official Letter No. 3469/CTHN-TTHT in 2023 regarding PIT on gifts and bonus for employees issued by Hanoi Tax Department
In case the Company organizes contests for employees and employees' relatives, if the prize value exceeds VND 10 million received by the individual winning the prize, the Company shall deduct PIT according to the instructions in Item g Clause 1 Article 25 of Circular No. 111/2013/TT-BTC mentioned above.
Official Letter No. 24601/CTHN-TTHT in 2023 regarding PIT on income from winning prizes for employees issued by Hanoi Tax Department
In case the employee receives a reward in kind from participating in prize-winning contests or other forms of winning organized by the Company, it is determined as income from winning according to the instructions in Clause 6, Article 2 of Circular No. 111/2013/TT-BTC dated 15/08/2013 issued by the Ministry of Finance, if the prize value exceeds 10 million VND received by the individual winning the prize, the Company shall deduct PIT before paying prizes to winning individuals, the withheld tax amount is determined according to the guidance in Article 15 of Circular No. 111/2013/TT-BTC dated August 15, 2013.
The personal income tax declaration for organizations paying income from winning prizes to individuals is prepared according to the form specified in Appendix II issued together with Circular No. 80/2021/TT-BTC dated 29 September 2021 of the Ministry of Finance.