The 13th month salary is actually a bonus. Based on the results of activities in the year, companies reward the employees. The name of the 13th month salary but the companies must base on the profit in the year and the level of completion of the work of the employee to decide the reward. Therefore, the 13th salary is based on profit, not on the employee's monthly salary.
Under the Labor Code 2012, Article 103 on bonuses:
"1. Bonus is a sum of money paid by an employer to his/her employees on the basis of annual business results and the level of work performance of employees.
2. Bonus regulations must be decided and publicly announced by the employer at the workplace after consultation with the representative organization of the grassroots-level employees’ collective."
According to the Circular No.78/2014/TT-BTC guiding the implementation of the Goverment on the Law on Corporate Income Tax, Article 6.2.5 on non-deductible expenses for determining taxable income to salaries, wages and bonuses payable to employees:
“Salaries and bonuses for employees for which the conditions for entitlement and rates of entitlement are not specified in one of the following dossiers: labor contract; collective labor agreement; financial regulations of the company, corporation or group; reward regulations issued by the chairman of the Board of Directors, general director or director under the financial regulations of the company or corporation”
And under the Circular No.111/2013/TT-BTC on the implementation of the Law on Personal Income Tax, Article 2 on the taxable incomes:
“Wages, remunerations, and the other amounts paid as wages or remunerations in cash or not in cash”
Then, best law firm in labor in Hanoi can sum up for the 13th month salary:
1. The monthly salary of 13 (or 14, 15 ...) is a bonus, calculated as deductible expenses, if such reward is stated in one of the following documents of the company:
- Labor contracts
- Collective labor agreement
- Company regulation
- Company bonus regulation
2. The monthly salary of 13 must be suitable with the business results of the company and the level of completion of the work of the employee. After deducting salary, do not affect the profitability of the company.
13th month salary is not limited to salaries and wages during normal working months. It may not be equal to one month's average salary, but may also be equal to the employee's monthly salary, depending on the business results of the company.
3. The 13th month wage is subject to Personal Income Tax
- When deducting the 13th month salary, the company is deducted from the expense of the reporting year.
- When paying the 13th month salary, depending on the time of payment to calculate PIT income of the employee in the reporting year or next year.
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