Allowance regime, latest salary and bonus regulations. Regulations on personal income tax & corporate income tax on salary, bonus and allowance expenses.
For a business, the cost of employee wages is an important factor in determining whether or not it can attract employees. A business with a good salary and bonus policy will increase its competitiveness compared to other businesses in recruiting many talented people. Therefore, understanding the salary and bonus policies and allowances for employees is very important.
I. Regulations, salary and bonus regulations, allowances for employees
1. Regulations on salary, bonus and allowances for employees
Salary, bonus and allowances are indispensable elements in an organization’s human resource policy. Regulations and rules on salary, bonus and allowances for employees are especially important to ensure fairness and transparency in human resource management.
Below are some common regulations and rules on salaries, bonuses, and allowances for employees:
➤ Fairness and transparency
When a business establishes a salary, bonus, and allowance regulation, it will ensure fairness and transparency in determining salaries and allowances for employees. This helps reduce disputes in the payment of salaries, allowances, and bonuses.
➤ Motivate and encourage
A fair and transparent company salary and bonus policy helps motivate and encourage employees. When receiving good salaries, bonuses and allowances, employees will work hard, achieve optimal productivity, and bring benefits to the business.
➤ Retain employees and attract more talent
When employees are paid salaries and given rewards and allowances that are commensurate with the work they contribute, they feel cared for and appreciated. This will retain employees and attract more highly qualified employees.
➤ Manage corporate finance and resources
Enterprises will manage their finances and resources more effectively when they have clear allowances and salary regulations for employees. From there, they can control the budget and optimize the use of resources to meet the strategic business goals of the enterprise.
>> See more: Regulations on salary costs and employee allowances.
2. Basis for developing salary and bonus regulations for employees
➤ Based on legal regulations
Must comply with legal regulations related to the application and development of company compensation policies. This includes compliance with regulations on minimum wages, employee benefits, taxes and other relevant regulations.
>> Learn more: Regional minimum wage and basic salary.
➤ Based on organizational policies and strategies
Compensation and benefits must be aligned with the organization’s strategy and policies. Ensure that the compensation and benefits system is built on the company’s goals, core values, and finances.
➤ Based on job analysis and functional positioning
To calculate the appropriate salary for each job position, businesses need to conduct a detailed analysis of the job and position of each employee. From there, factors such as qualifications, responsibilities, and skills contributed by each job position can be determined.
➤ Based on labor performance
The company’s salary and bonus regulations should be based on employee performance and work results to determine appropriate bonus levels.
In addition, the salary and bonus regulations are also built based on the following factors – which also greatly affect the salary and bonus levels of each enterprise, specifically:
- Education level;
- Number of years of work experience;
- Market and corporate finance.
3. Procedure for building a salary and bonus mechanism for employees
Businesses can take the following steps to develop a salary and bonus policy:
➤ Collect information
Collect information regarding the organization’s current compensation policy, review legal regulations, information about the labor market, competitive factors and the company’s finances.
➤ Detailed job analysis
Conduct an employee job and position analysis to determine factors such as qualifications, expertise, responsibilities, and contribution levels for each position. This helps businesses determine the base salary for each employee and position.
➤ Set goals and evaluation criteria
Based on the objectives and evaluation criteria to determine employee performance including work results, individual contributions, professional capacity, assessment of teamwork ability and other factors depending on the organization’s business area.
➤ Design salary and bonus system
Build a salary and bonus system based on factors such as basic salary, allowances, productivity bonuses, special rewards, etc. At the same time, businesses need to determine bonus percentages, salary levels, and other conditions.
➤ Check and modify
Provide an initial draft of the compensation policy, review and evaluate its fairness, transparency, financial viability and implementation. Then make adjustments and revisions to ensure it is consistent with the specific goals and conditions of the business.
➤ Employee notification and training
Communicate the compensation policy and provide necessary training to employees to ensure understanding of relevant rules and regulations.
>> See more: Procedures for registering a corporate salary scale system.
4. Sample salary and bonus regulations for employees
A typical employee compensation policy will include the following items:
- Purpose;
- Legal basis;
- Scope of application;
- Content on salary and bonus regulations;
- Allowance;
- Calculate and pay salaries;
- Procedures for considering salary increase;
- Bonus mode.
>> Reference: Latest salary and bonus regulations of Online Accounting company.
II. Regulations on corporate income tax for salary, bonus and allowance expenses
1. Conditions for including salary and bonus costs in company expenses when calculating corporate income tax
In Vietnam, regulations on corporate income tax (CIT) related to calculating employee salaries are determined mainly by the Corporate Income Tax Law No. 14/2008/QH12 dated June 3, 2008.
Legal basis:
- Circular 96/2015/TT-BTC;
- Decree amending and supplementing Circular 78/2014/TT-BTC dated June 18, 2014;
- Circular No. 119/2014/TT-BTC;
- Circular 151/2014/TT-BTC dated October 10, 2014;
- Implementation guidance documents.
To include salary, bonus and allowance costs in reasonable expenses when calculating corporate income tax, the following conditions must be met:
- The actual salary paid is related to production and business activities and has payment documents according to regulations;
- There are regulations stating clearly the conditions for receiving benefits and the salary received in one of the following documents:
- Labor contract between enterprise and employee;
- Collective labor agreement of the enterprise;
- Corporate financial regulations;
- Salary and bonus regulations.
2. Allowances, bonuses, and salary expenses are not deductible and are deductible when calculating corporate income tax.
2.1. Allowances, bonuses, and salary expenses are not deductible when calculating corporate income tax.
According to the provisions of Article 6 of Circular 78/2014 amended in Article 4 of Circular 96/2015 and Clause 2, Article 3 of Circular 25/2018/TT-BCT, salaries and bonuses paid to employees in one of the following cases will not be deducted when calculating corporate income tax:
➤ Paying salaries and other payments to employees: The enterprise has recorded them as production and business expenses in the period but has not actually paid them or has no payment documents for employees as prescribed by law.
➤ Salaries and bonuses paid to employees but the conditions and levels of benefits are not specifically stated in one of the following documents:
- Labor contract;
- Labor agreement;
- Corporate financial regulations;
- Bonus regulations are determined by superiors.
➤ In case of paying salaries and allowances to employees but the deadline for submitting the final settlement dossier for the actual year has not been paid, except in cases where the enterprise has made additional provisions for the salary fund of the following year. In that case:
- The reserve level shall not exceed 17% of the annual salary fund;
- Provisions must ensure that the business does not lose money. In case of loss, the full 17% will not be set aside.
➤ Salaries of private enterprises, owners of single-member LLCs (owned by only 1 individual), salaries paid to the board of directors, founders, members of the board of members, and administrators who are not directly involved in managing production and business activities.
2.2. Allowances, bonuses and salary expenses are deducted when calculating corporate income tax.
Paying salaries and bonuses to employees will be counted as deductible expenses if it falls into one of the following cases:
➤ When a business signs a labor contract with a foreign individual, it clearly states that the tuition fee for the foreign employee’s children in Vietnam from kindergarten to high school is paid by the company as salary and wages and has full invoices and documents.
➤ When the labor contract clearly states the housing expense paid by the enterprise to the employee, this payment is considered salary and wages and has full invoices.
➤ When a business signs a contract with a foreign enterprise, which clearly states that the Vietnamese enterprise must pay accommodation costs for foreign experts during their working period in Vietnam, the rent paid to foreign experts is included in deductible expenses.
➤ When paying allowances to employees for travel and accommodation expenses when on business trips, there must be full invoices and documents. In case the enterprise has a lump sum allowance for travel and accommodation expenses for employees on business trips in accordance with the company’s financial regulations, the lump sum allowance will be included in deductible expenses.
➤ When a business sends employees on business trips (domestic and international), there are expenses of 20 million VND or more, including airfare… These expenses are paid by bank cards of individuals eligible for non-cash payments and are included in expenses when meeting the following conditions:
- Have valid invoices and documents issued by the supplier;
- There is a written decision to send on a business trip;
- Internal regulations or financial regulations have provisions allowing employees to pay for business trips using personal bank account cards and then the company will reimburse the employee who made the payment;
- In case a business buys airline tickets through an e-commerce website for employees to go on business trips to serve production and business activities, to include them in reasonable expenses, it is necessary to have an electronic airline ticket, boarding pass and payment via bank, not cash;
- In case the enterprise cannot collect the boarding pass, it is necessary to have a decision to send the individual on a business trip, an electronic flight ticket and a bank payment document from the enterprise with the individual participating in the business trip.
See also:
>> Deductible and non-deductible expenses when calculating corporate income tax;
>> Accounting for salaries and salary deductions according to Circular 200;
>> Payroll calculation and payroll accounting services for businesses.
III . Regulations on personal income tax on salary, bonus and allowance expenses
1. Conditions for including salary and bonus expenses in company expenses when calculating personal income tax
To include salary, bonus and allowance costs in reasonable expenses when calculating personal income tax, the following legal documents are required:
- Labor contract between employee and enterprise;
- Company regulations on salary, bonus and allowances;
- The company’s decision to increase wages;
- Detailed monthly timesheet;
- Payment sheet (signed by employee);
- Build salary scale;
- Employee salary payment voucher, or bank payment document;
- In case an individual authorizes tax settlement on behalf of another person, he/she must have a tax code and a letter of authorization to settle tax on behalf of another person;
- Decision to send on business trip, invoice, travel document;
- Monthly or quarterly personal income tax declaration;
- Year-end personal income tax declaration;
- Personal income tax payment documents (if any).
FREE DOWNLOAD:
>> Personal income tax return (PIT);
>> Authorization letter for personal income tax settlement;
>> Personal income tax settlement declaration.
2. Taxable income and income exempt from personal income tax
2.1. Income subject to personal income tax
- Salary and allowance income: Basic salary, bonuses, allowances for employees and other allowances;
- Income from business activities and provision of services: Profits from business activities, provision of services and income from freelance work;
- Investment income: Dividends, profits from securities and other investment sources;
- Income from real estate: House rental, house sale and real estate transactions;
- Income from real estate transfer: Real estate transfer, sale of house or land;
- Income from artistic and cultural activities: Performing arts, composition and related activities;
- Bonus and advertising income: Bonus and advertising income.
See also:
>> How to declare personal income tax from real estate transfer;
>> How to declare personal income tax from capital contribution and share transfer.
2.2. Income not subject to personal income tax (income exempt from personal income tax)
- Income from real estate transfers between husband and wife, biological parents and biological children, adoptive parents and adopted children, parents-in-law and daughters-in-law, parents-in-law and sons-in-law, grandparents and grandchildren, grandparents and grandchildren or siblings in the family;
- Income from transfer of land use rights, houses and assets attached to land in case the individual has only one house and land use rights in Vietnam;
- Income from land use rights assigned by the State does not have to be paid or has a reduced land use fee;
- Income received from inheritance, gifts of real estate between husband and wife, biological parents and biological children, adoptive parents and adopted children, parents-in-law and daughters-in-law, parents-in-law and sons-in-law, grandparents and grandchildren, grandparents and grandchildren or siblings in the family;
- Income from interest on deposits at credit institutions, state bank branches, life insurance interest, government bond interest;
- Income from remittances;
- Income from night work and overtime is paid higher than wages for daytime work;
- Pension paid by the Social Insurance Fund according to regulations;
- Income from scholarships;
- Income from life and non-life insurance compensation, health insurance for employees, compensation for work accidents, compensation for support according to law, state compensation and other amounts according to regulations;
- Income received from charitable funds licensed to operate by competent state authorities;
- Income received from foreign aid.
See also:
>> How to calculate personal income tax from salary and wages ;
>> How to settle personal income tax online;
>> Personal income tax settlement service.
IV. Frequently asked questions about salary and allowance regulations for employees
1. Is the employee health care package allowance included in deductible expenses when calculating corporate income tax and is there a specific rate?
Health allowances will be included in deductible expenses when calculating corporate income tax, but on condition that the total allowances in the year do not exceed 1 month’s average salary. And there must be invoices and non-cash payment documents when the invoice value is 20 million VND or more.
>> See details: Salary, bonus and allowance expenses are deductible and non-deductible when calculating corporate income tax.
2. Can business expenses for the director of a single-member LLC be included in expenses? What conditions are required for recording?
Travel expenses for the director of a single-member LLC will be deducted and included in expenses when meeting the following conditions:
- There are full documents proving that the expenses are for business activities with legal invoices and documents;
- There is a non-cash payment document for invoices over 20 million VND;
- Have a full set of valid business trip documents such as business trip decision paper, confirmed travel documents, airline ticket, train ticket, hotel, taxi invoices, etc.
>> See details: Deductible and non-deductible salary, bonus and allowance expenses when calculating corporate income tax.