To: Department of Taxation of Hung Yen province

In response to Dispatch No. 1642/CT-QLKK dated August 15, 2007 of Department of Taxation of Hung Yen province providing guidance on payment of personal income tax on severance pay and house rent paid by the employer upon termination of employment contracts, General Department of Taxation hereby provides some guidance as follows:

Pursuant to Point 4.6, Section 4, Part I of Circular No. 81/2004/TT-BTC dated August 13, 2007 of the Ministry of Finance on guidelines for the Government's Decree No. 147/2007/ND-CP dated July 23, 2004 elaborating the implementation of the Ordinance on income tax incurred by high earners: “The incomes that are not subject to tax include severance pay and redundancy pay provided in accordance with regulations of the State. This regulation does not apply if the employee receives severance pay when he/she stops working at one unit and is transferred to another unit of the same company or office of a multinational company.”;

Article 42 of the Labor Code prescribes that: “When terminating an employment contract with an employee that has regularly worked for the company or organization for one year or longer, the employer is responsible for providing a severance pay which equals (=) half a month’s salary multiplied by (x) the number of working years plus (+) benefits, if any”.

Accordingly, when UGINOX Vietnam Co. Ltd gives severance pay to a foreign employee with whom the employment contract is terminated, the severance pay given within the limit prescribed by the State is not subject to personal income tax. The part of the severance pay in excess to the limit prescribed by the State and the house rent paid by the Company on behalf of the foreign employee are considered regular incomes and thus subject to personal income tax.

The limit to severance pay is determined according to the wage under the employment contract, which is the arithmetic mean of the wages of 06 months before the employment contract is terminated as prescribed in Article 15 of the Government's Decree No. 114/2002/ND-CP dated December 31, 2002 on guidelines for some Articles on wages of the Labor Code.

The proof of severance pay given to Vietnamese and foreign employees are the receipts for severance pay issued by the employer and documents certifying the termination of employment contracts in cases such as contract expiration, employee’s or employer’s unilaterally terminating the employment contract, etc. as prescribed in Article 36, 37, 38, or Clause 1 Article 41 of the Labor Code.

Department of Taxation of Hung Yen province shall instruct Uginox Co. Ltd to implement this Dispatch./.

...

...

...

PP THE DIRECTOR
DEPUTY DIRECTOR




Le Hong Hai

Công văn số 3675/TCT-TNCN về thuế Thu nhập cá nhân đối với khoản phụ cấp thôi việc do Tổng cục Thuế ban hành