INSTRUCTIONS ON HOW TO CALCULATE PERSONAL INCOME TAX IN 2021 - TAXPAYERS NEED TO PAY ATTENTION!

Nowadays, personal income tax calculation and related issues are the most concerned topics when the time of personal income tax finalization is nearly coming. Current circulars and documents regulating personal income tax include: Circular 111/2013/TT-BTC, Circular 92/2015/TT-BTC, Decree 125/2020/ND-CP and many other documents and dispatches. The personal income tax calculation in 2021 is complicated when the tax calculation method is divided into many specific cases. Below is an article on how to calculate tax so that taxpayers can calculate the amount of personal income tax they have to pay.

Specifically:

1. Personal income tax calculation for employees who sign a contract of 3 months or more:

- In case the employee signs a labor contract of >= 3 months, the personal income tax calculation will be calculated according to the progressive tax table.

Calculation formula:

Amount of personal income tax payable = Taxable income x personal income tax rate

Inside:

a) Taxable income:

Taxable income = Taxable personal income tax – Deductions

Taxable personal income tax = Total income of the month – Incomes not subject to personal income tax

Specifically:

+ Total income in the month: is the total salary and allowances received in the month (not yet deducted any amount).

+ Incomes not subject to personal income tax in 2021 include:

• Meals: Up to 730,000 VND/month (according to Circular 26/2016/TT-BLDTBXH)
• Costume fees: Up to 5,000,000 VND/year
• Phone fees: According to company regulations
• Business trip fees: According to actual vouchers or contract fee
• Overtime pay with higher amount paid than normal working hours
• Accommodation allowance in the amount exceeding 15% of taxable income.

+ Deductions:

• Personal deduction: 11,000,000 VND/month
• Dependents deduction: VND 4,400,000/month

(This discount is applicable from July 1, 2020)

b) Tax rate:

👉 Example to understand clearly how tax is calculated according to the progressive tax table:

For example: Ms. Nguyen Thu Trang has signed a labor contract with TASCO Tax Agent Service Limited Liability Company with a term of 1 year (from August 2020 to August 2021). In October 2020, TASCO company paid Ms. Trang's salaries as follows:

+ Main salary: 12,000,000 VND

+ Lunch allowance: 1,000,000 VND

+ Phone allowance: 500,000 VND

+ Fuel allowance: 500,000 VND

Ms Trang's total income in October 2020 at TASCO is 14,000,000 VND

+ Social insurance: 1,260,000 VND deducted from salary.

Ms. Trang registered for deduction at TASCO and has no dependents.

❓ How much personal income tax does Ms. Trang has to pay?

- Taxable income = 14,000,000 - 730,000 (meals) - 500,000 (phone bill) - 1,260,000 (social insurance) = 11,510,000 VND

- Taxable income = 11,510,000 – 11,000,000 (self-deduction) = 510,000 VND

Taxable income is 510,000 VND belong to step 1 in the above progressive tax table, so the personal income tax payable by Ms. Trang is 510,000 x 5% = 25,500 VND

Conclusion:

+ The lunch allowance is 1,000,000 VND but only tax exempt with the amount of 730,000 VND

+ Phone allowance is exempt from personal income tax

+ Fuel allowance is not exempt from personal income tax.

2. Personal income tax calculation for probationary staffs who sign a labor contract with a term of less than 3 months:

For employees who sign a contract of less than 3 months, sign a probationary labor contract or do not sign a labor contract, the personal income tax is calculated as follows:

Personal income tax payable = Total income x 10%

Note: Total income from 2,000,000 VND or more is subject to personal income tax

👉 Specific example:

Ms. Nguyen Thi A signs a probationary labor contract at TASCO company with a term of 1 month and has the following salary:

+ Probationary salary: 4,000,000 VND

+ Lunch allowance: 500,000 VND

+ Travel allowance: 500,000 VND

❓ How much personal income tax does Ms. A has to pay?

Ms. A's total taxable income = 4,000,000 + 500,000 + 500,000 = 5,000,000 VND

Personal income tax payable by Ms. A = 5,000,000 x 10% = 590,000 VND

⭕ Note: In order not to be subject to personal income tax deduction, these employees can commit 02/CK-TNCN with the following conditions:

+ Already have Tax Identification Number

+ Only have income at 1 place

+ Having an estimated total income in the year that is not enough to pay personal income tax (income less than 132 million/year)

3. Personal income tax calculation for foreign workers:

- For foreign employees who are non-resident individuals, personal income tax is calculated as follows:

Tax payable = Total income x 20%

⭕ Note: If the employee is a foreigner but is determined to be a resident in Vietnam, the personal income tax calculation is the same as that of a Vietnamese (Section 1 and Section 2).

👉 Example: SAS English Center hired a foreign expert to train teachers in Vietnam within 1 month with an income of 30,000,000 VND.

Foreign expert tax payable = 30,000,000 x 20% = 6,000,000 VND

4. Personal income tax calculation for employees working in different places:

* In case the employee works in many places and has many different sources of income, the personal income tax calculation is relatively complicated.

* Relating to the time of personal income tax calculation: The time of personal income tax calculation is the time of income payment.

Specifically: If the salary in December 2020 is paid in January 2021, the personal income tax amount is determined to be in January 2021.

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