Question 1: How much gifts to employees being worth has to be subject to Personal income tax (“PIT”) and how to calculate it?
Answer:
Depend on kinds of gifts: benefits paid as wages or remunerations; winning prizes or gifts to determine personal income taxable income
+ Gifts received as wages or remunerations: there will be no limit on the amount of gift, full amount of gifts will be accounted into taxable income.
+ Gifts from winning prizes: The excess over VND 10 million of the gifts received will be accounted into taxable income.
+ Gifts received normally: the excess over VND 10 million of the gifts received and the gifts have to be registered ownership. The time of determination of assessable income from gifts is when the individual carries out the procedure for registering ownership and right of use of the gifts.
Legal basis
1/ Gifts received as wages or remunerations are considered to other benefits for employees, hence they have to be subject to personal income tax.
Official letter 4991/CT-TTHT in 2017 regarding Personal income issued by Ho Chi Minh City Tax Department
Based on the above provisions, in case the Company as presented organizes a lucky draw for employees at its year end party, the Company will incorporate the winning value into the income subject to personal income tax from salaries and wages of employees to calculate, deduct, declare and pay personal income tax according to the partially progressive tax in accordance with regulations.
Official letter 2510/CT-TTHT in 2017 regarding declaration, deduction of value-added tax issued by Ho Chi Minh City Tax Department
In case the Company purchases goods to reward employees on New Year's Eve through a lucky draw when delivering the prize goods, the Company must issue invoices, calculate, declare, and pay VAT as if selling goods to customers, however, the company does not include it in corporate income taxable revenue. Gift expenses that do not exceed 1 month’s actual average salary paid in the enterprise's tax year are included in deductible expenses when determining income subject to corporate income tax and the input VAT amount of gift purchase invoices can be declared deductible (if they meet the conditions for being included in deductible expenses and VAT deduction according to regulations). The value of gifts given to employees is included in income from wages (including cases of receiving gifts from lucky draws).
Official Letter 3300/CTHPH-TTHT dated 17th October 2022 issued by Hai Phong Tax Department
If the company buys Lunar New Year gifts for employees in December and gives them to employees on January 25 of the following year, this is a benefit that the employee is entitled to, hence this gift is included in taxable income. The tax period is January when employees receive gifts.
2/ The excess over VND 10 million of gifts from winning prizes will be subject to personal income
Official Letter 3469/CTHN-TTHT in 2023 issued by Hanoi Tax Department
In case the Company organizes contests for employees and employees' relatives, if the prize value received by the winning individual exceeds VND 10 million, the Company shall deduct personal income tax according to the instructions in Item g, Clause 1 Article 25 of Circular 111/2013/TT-BTC mentioned above.
Official Letter 24601/CTHN-TTHT in 2023 issued by Hanoi Tax Department
In case an employee receives a reward in kind for participating in prize-winning contests or other forms of prizes organized by the Company, it is determined as income from winning prizes according to the instructions in Clause 6, Article 2 of Circular 111/2013/TT-BTC dated August 15, 2013 issued by the Ministry of Finance, if the prize value received by the winning individual exceeds 10 million VND, the Company shall deduct personal income tax before giving rewards to winning individuals, the amount of tax withheld is determined according to the instructions in Article 15 of Circular 111/2013/TT-BTC dated August 15, 2013.
Personal income tax declaration for organizations paying income from winning prizes to individuals is carried out according to the form specified in Appendix II issued together with Circular No. 80/2021/TT-BTC dated September 29 2021 of the Ministry of Finance.
For more information, please kindly refer to Clause 6, Article 2, and Article 15 of Circular 111/2013/TT-BTC
3/ Gifts that are income from gifts, exceeds VND 10 million, and must be registered ownership will be subject to personal income tax
Official 3469/CTHN-TTHT in 2023 issued by Hanoi Tax Department
In case employees receive a gift in kind from the Company, it is a "Gift in the form of a shopping card (voucher, gift card) or in kind (candy gift basket, cup, shirt, etc....." if this gift is given not in the nature of salary or wages and not falling under the provisions of Clause 10, Article 2 of Circular 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance, individuals receiving the above gifts do not have to declare and pay personal income tax for this gift.
For more information, please kindly refer to Clause 10, Article 2, and Article 16 of Circular 111/2013/TT-BTC
Question 2: Is lunch allowance subject to personal income tax?
Answer:
- If the company provides lunch, it is not included in personal income taxable income.
- If the company pays in cash for lunch of employees during the month, the lunch allowance will not be included in personal income taxable income if the expenditure does not exceed 730,000 VND/person/month; In case the expenditure is higher than this level, the excess amount will be included in the income subject to personal income tax.
- In cases where an enterprise both organizes mid-shift meals in the form of direct cooking and pays in cash to individuals and employees, with the maximum amount not exceeding 730,000 VND/person/month, the allowance will not be included in the taxable income of the employees according to the instruction of the Ministry of Labor, War Invalids and Social Affairs.
Legal basis
According to Item g.5, Clause g, Article 2 of Circular 111/2013/TT-BTC
Article 2. Taxable incomes
g) The incomes below are not included in taxable incomes:
g.5) Payment for mid-shift meals, lunch of employees provided by employers that provide mid-shift meals, lunch for their employees in the form of cooking, buying catering services, giving luncheon vouchers.
If the employer pays cash for their employees’ meals instead of providing mid-shift meals or lunch, such money is not included in the taxable income if it is conformable with the guidance of the Ministry of Labor, War Invalids and Social Affairs. If the payment is higher than the limit imposed by the Ministry of Labor, War Invalids and Social Affairs, the excess shall be included in taxable incomes.
The expenditures of state-owned enterprises, public service agencies, communist party agencies, and associations shall not exceed the limits imposed by the Ministry of Labor, War Invalids and Social Affairs. For non-public enterprises and organizations, the expenditures shall be decided by the head and the union president, and shall not exceed the limits imposed on state-owned enterprises.
Official Letter 35220/CTHN-TTHT in 2021 regarding personal income tax for telephone allowance and lunch allowance issued by Hanoi Tax Department
In case the Company does not organize lunch or mid-shift meals but pays in cash for lunch or mid-shift meals for employees, it will not be included in the individual's taxable income if the expenditure is in accordance with the guidance of the Ministry of Labor. - Invalids and Social. In case the expenditure level is higher than the guidance level of the Ministry of Labor, War Invalids and Social Affairs, the excess expenditure must be included in the individual's taxable income.
Official Letter 4767/TCT-DNNCN in 2019 regarding personal income tax policy on mid-shift meal allowance for employees issued by the General Department of Taxation
Based on the above instructions, when the employer organizes mid-shift meals or lunches for employees in the form of directly cooking, buying meals, issuing meal vouchers and does not organize mid-shift meals, lunch but pays in cash for employees, the allowance is not included in the individual's taxable income if the expenditure level is in accordance with the guidance of the Ministry of Labor, War Invalids and Social Affairs. In case the expenditure level is higher than the guidance level of the Ministry of Labor, War Invalids and Social Affairs, the excess expenditure must be included in the individual's taxable income according to current regulations.
In cases where an enterprise both organizes mid-shift meals in the form of direct cooking and pays in cash to individuals and employees, with the maximum amount not exceeding 730,000 VND/person/month, the allowance will not be included in the taxable income of the employees according to the instruction of the Ministry of Labor, War Invalids and Social Affairs.
In addition, according to Clause 4, Article 22 of Circular 26/2016/TT-BLDTBXH dated September 1st 2016 of the Ministry of Labor, War Invalids and Social Affairs, the company implements the midday meal allowance for workers with maximum amount not exceeding 730,000 VND/person/month. The implementation of mid-shift meals follows the instructions in Circular No. 22/2008/TT-BLDTBXH dated October 15, 2008 of the Ministry of Labor, War Invalids and Social Affairs guiding the implementation of mid-shift meals in state companies.