Salary paid after termination of employment: 10% PIT withholding or the progressive tax schedule?

An employee's contract ends on 30 June, but the enterprise pays the remaining June salary in July. Should the payment still be withheld under the progressive tax schedule, or is the 10% rate required?

InOfficial Letter No. 10049/NBI-QLDN1dated 3 August 2026, the Ninh Binh Provincial Tax Authority confirms that the 10% rate applies. The Official Letter also clarifies two issues that often give rise to errors in practice: the income base for withholding and when an employee may submit an undertaking for temporary non-withholding.

1. Legal basis

Tax-exempt income:Clauses 1 and 3, Article 26 of Decree No. 253/2026/ND-CP dated 30 June 2026:

• Pay for night work and overtime performed at the workplace is exempt from PIT where the conditions and working-hour requirements under labour law are met (Clause 1).
• The portion of night-work pay, overtime pay, or payment for untaken annual leave exceeding the statutory limits is included in the individual's taxable income (Clause 3).

Withholding at the 10% rate:Clause 2, Article 50 of Decree No. 253/2026/ND-CP:

• Organisations and individuals paying salaries, wages, remuneration, or other amounts to resident individuals without an employment contract or under an employment contract of less than 3 months, including salary or other income paid after termination of employment, must withhold 10% from any payment of VND 5 million or more per payment before payment and remit the tax withheld.
• For payments below VND 5 million per payment, 10% withholding applies only at the individual's request.

2. Withholding method for salary paid after termination of employment

According to the Ninh Binh Provincial Tax Authority, where a resident employee terminates their employment contract on 30 June 2026 and the company pays the salary for June 2026 on 10 July 2026, the payment falls squarely within the case of "salary paid to an employeeafter termination of the employment contract" under Clause 2, Article 50 of Decree No. 253/2026/ND-CP. Accordingly:

• For each individual and each payment of VND 5 million or more, the company must withhold 10% PIT before paying the income.
• For each payment below VND 5 million, the company withholds 10% only at the individual's request.

In other words, where salary is paid after the employment contract has terminated, the enterpriseappliesthe 10% withholding rate instead of the progressive tax schedule, even if the employee was previously engaged under a long-term employment contract.

3. What income forms the basis for 10% withholding?

The company must withhold 10% from taxable salary and wage income before paying it to the individual. Specifically:

Excluded from the withholding base:income that is tax-exempt under the regulations, including night-work pay, overtime pay, and payment for untaken annual leave, provided that the applicable conditions, working hours, and statutory limits under labour law are satisfied. The portion exceeding the statutory limits must be included in taxable income (Clause 3, Article 26 of Decree No. 253/2026/ND-CP).

No deductions apply when withholding 10%:compulsory insurance contributions, family circumstance-based deductions, and other deductions. These deductions are used to determine assessable income under the progressive tax schedule or at tax finalisation only, not for provisional 10% withholding under Clause 2, Article 50 of Decree No. 253/2026/ND-CP.

This is a common practical error: many entities deduct family circumstance-based deductions before applying the 10% rate, resulting in insufficient PIT withholding.

4. Undertaking for temporary non-withholding

An individual may submit an undertaking only when both of the following conditions are met:

1. The individual is subject to withholding at the 10% rate; and
2. The individual's estimated total taxable income for the year, after family circumstance-based deductions, is below the threshold at which PIT becomes payable.

Based on a valid undertaking, the company may temporarily refrain from withholding tax and must compile the list of individuals and their income as prescribed.

If the individual subsequently earns additional income from business activities, salaries, wages, or other sources that results in tax payable, the individual is responsible for declaring, finalising, and paying the tax and for the accuracy of the undertaking. Fraudulent declarations will be handled in accordance with law.

💡Recommendations for enterprises

1. Review all payments made after termination of employment (final salary, outstanding bonuses, and unpaid allowances) and process them separately from the regular payroll to apply the correct 10% withholding rate.
2. Reassess the withholding base: exclude tax-exempt income, but do not deduct compulsory insurance contributions or family circumstance-based deductions before applying the 10% rate.
3. Review each payment separately rather than aggregating all payments for the month, because the VND 5 million threshold applies to each payment made toeach individual.
4. Reconcile night-work pay, overtime pay, and payment for untaken annual leave against the conditions, working hours, and statutory limits under labour law to correctly identify any excess that must be included in taxable income.

This newsletter has been prepared by Crowe Vietnam for general information purposes only and is not a substitute for advice tailored to specific circumstances. Enterprises should consult the original legal instruments and seek professional advice before applying the information to actual situations.