Enterprises are obliged to deduct personal income tax before paying taxable income to employees in accordance with the law.

Legal grounds:

• Decree No. 65/2013/ND-CP;
• Circular No. 111/2013/TT-BTC.

We receive the following questions:

This year, some colleagues and I were rewarded by the company for our effective work results. This bonus is taken from the company’s bonus fund. But the company retains the personal income tax. So I would like to ask, if I receive a bonus from the reward fund, do I have to pay personal income tax?

In principle, the income that employees receive paid by the company is subject to personal income tax, except in certain cases, regardless of whether the expenditure is deducted from regular business capital or from Funds are appropriated from the enterprise’s after-tax profits.

For company bonuses for employees, based on point e, Clause 2, Article 3 of Decree No. 65/2013/ND-CP as follows:

Article 3. Taxable income

Individual taxable income includes the following types of income:

…

2. Income from salaries and wages that employees receive from employers, including:

e) Money or non-monetary bonuses of any kind, including stock bonuses, except the following bonuses:

• Bonuses accompanying titles conferred by the State, including bonuses accompanying emulation titles, forms of reward according to the provisions of law on emulation and commendation;
• Bonuses accompanying national awards and international awards recognized by the State of Vietnam;
• Bonuses for technical improvements, inventions, and inventions recognized by competent state agencies;
• Bonuses for detecting and reporting violations of law to competent state agencies.

According to the above regulations, only bonuses due to titles or achievements recognized by State agencies are not subject to personal income tax.

Therefore, if an enterprise deducts rewards for employees from the reward fund because the employee has effective working results, this is income subject to personal income tax, and the enterprise must deduct personal income tax before paying bonuses for workers.