According to Article 26 of Decree No. 253/2026/ND-CP effective from July 1 and guidance from the Tax authority, the exemption of personal income tax (PIT) from salaries and wages in some specific cases. In which, salaries and wages for working at night, overtime, salaries and wages paid for days without leave are eligible for PIT exemption.
The case of application is that outside normal working hours, enterprises have arising nighttime work (calculated from 10 pm to 6 am the next morning) at the workplace in accordance with regulations on conditions and time according to labor law.
Exchanging at the online workshop with the theme "Overview of major changes in personal income tax, social insurance and foreign labor management in Vietnam", Ms. Ngo Thi Kim Anh - Deputy General Director - Tax and Personnel Consulting of EY Vietnam Consulting Joint Stock Company said: "According to current regulations, employees working at night or overtime will be paid higher wages. Previously, personal income tax exemption was only applied to surplus shares.
Ms. Kim Anh gave an example, if an employee works overtime on a normal working day and is paid at 120% of the hourly salary, then according to the old regulations, only the 20% difference is tax-exempt; and 100% of the salary corresponding to the overtime hours must still be subject to personal income tax.
However, according to Decree No. 253, employees are exempt from tax for the entire amount of wages paid for nighttime work and overtime work in accordance with the law.
Notably, the payment of overtime wages is only applied to this incentive when fully complying with the provisions of the Labor Code. Current law clearly stipulates the limits on overtime hours.
Article 60 of Decree 145/2020/ND-CP stipulates as follows:
The total number of overtime hours does not exceed 50% of the normal working hours in 01 day when doing overtime on a normal working day, except for the cases specified in Clauses 2, 3 of this Article.
The total number of overtime hours in a day does not exceed 50% of normal working hours; the total number of overtime hours does not exceed 40 hours in a month; and a maximum of 200 hours or 300 hours in a year depending on the case.
Therefore, Ms. Kim Anh believes that businesses need to build and store complete records and documents, and at the same time establish strict internal control procedures to prove that overtime work is organized in accordance with regulations. This will be an important basis when explaining to tax authorities or in cases of inspection and examination.
Regarding the payment of unused leave pay, representatives of EY Vietnam Consulting Joint Stock Company gave the case that the employee did not use it at the time of termination of the labor contract.
According to previous regulations, this income is still subject to personal income tax. According to the new regulations, this is a positive change when unused leave pay will not be included in personal income taxable income.
However, businesses need to pay attention that the payment of this amount must be in accordance with the provisions of Clause 3, Article 113 of the Labor Code.
