PERSONAL INCOME TAX FOR TRADE UNIONS GIVING LUCKY MONEY AND THE TET HOLIDAY GIFTS TO EMPLOYEES

Dear Valued Clients,

The contents mentioned below is a summary related to personal income tax (“PIT”) when Employees receive lucky money and Tet holiday gifts from the Union Trade.

1. Situation 1: the SOURCE OF FUNDING, then this funding is taken from the FUNDING OF THE TRADE UNION (“TU“):

(i) Under Article 2.2 on Circular No. 111/2013/TT-BTC taxable incomes must be received from the Company;

(ii) Article 27, Law on the Trade Union prescribed the expenses of a trade union, and it is detailed by Article 6.1.3, Decision No.4290/QD-TLD dated March 01, 2022, of the Vietnam General Confederation of Labor:

“1.3. Expenditures on visits and allowances.

a) Expenditures on visiting trade union members.

– Expenditures on visiting trade union members who are sick or on maternity leave, suffers an accident, in case of death of family (biological parents or parents-in-law; spouses, children) and death, marriage of trade union members.

– Expenditures on visiting and giving gifts to trade union members on public holidays, etc.; date of establishment of Vietnam Trade Unions on July 28; giving birthday gifts to trade union members; giving gifts to trade union representatives when they no longer join executive committees of grassroots-level trade unions.

b) Expenditures on subsidizing trade union members and employees.

Expenditures on subsidizing trade union members and employees facing difficulties due to occupational accidents, risk accidents, affected by natural disasters, epidemics, fires, fatal diseases, and Agent Orange causing damage to health or property.

The expenditure level of visiting and subsidizing trade union members and those who are not trade union members shall be regulated by grassroots-level trade unions.”

⇒ Under these regulations, grassroots-level trade union provides gifts and lucky money to the employees for Tet holiday shall not be required to pay Personal Income Tax (Kindly see the Official Dispatch attached hereto).

2. Situation 2: Considering the method of gifting:

(i)  Under Article 2.10, Circular guiding the LPIT:

“10. Incomes from gifts

Incomes from gifts are those received by individuals from domestic or foreign organizations and individuals, specifically:

a) Gifts being securities, including stocks, stock purchase rights, bonds, bills, fund certificates and other kinds of securities as provided in the Securities Law; shares of individuals in joint-stock companies as provided in the Enterprise Law.

b) Gifts being capital holdings in economic organizations or business establishments, including capital contributions to limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises, proprietorships, associations or funds licensed to be established under law or whole business establishments being private enterprises or proprietorships.

c) Gifts being real estate, including land use rights, right to use land with assets attached to land, right to own houses, including houses to be formed in the future; infrastructure and construction works attached to land, including construction works to be formed in the future; right to lease land or water surface, except real estate guided at Point d, Clause 1, Article 3 of this Circular.

d) Gifts being other assets which are subject to registration of ownership or use rights with state management agencies, including cars, motorbikes; mopeds; boats, including barges, canoes, tug boats and push boats; ships, including cruises; aircraft; hunting rifles and sporting rifles.”

(ii)   Article 16.1, Circular guiding the LPIT prescribing the tax base for income from gifts:

“Taxed income from inheritances and gifts is the value of assets inherited or received as gifts which exceeds VND 10 million upon each time of receipt.”

 ⇒ With the two (02) regulations provided above:

–   Lucky money in CASH shall not be taxed (because this form of gifting for this kind of asset is not subjected to personal income tax (https://chinhsachonline.chinhphu.vn/chi-qua-tang-bang-tien-doanh-nghiep-co-phai-ke-khai-thue-64725.htm);

–   If gifted in kind, such gifts must be worth VND 10,000,000 (Ten million) or more to be taxable.

Therefore, trade union executive committee needs to follow the above instructions to properly implement the policy.

Best regards./.