IS PAYMENT FOR PIT ON PROBATION WAGES REQUIRED?

Probation wages is income subject to PIT (personal income) according to regulations. However, depending on each specific case, the tax rate applied on payment of PIT on probation wages is different.

What is probation wages?

According to current Labor law regulations, employers and employees can agree on the content of probation before signing an official labor contract. The content of the probation agreement is recorded in the labor contract or the conclusion of a probation contract.

The employee’s wages during the probationary period is agreed upon by both parties but must be at least equal to 85% of the salary of that job.

Note, the maximum probationary period is as follows:

– 180 days for the position of enterprise executive prescribed by the Law on Enterprises, the Law on management and use of state investment in enterprises;

– 60 days for positions that require a junior college degree or above;

– 30 days for positions that require a secondary vocational certificate, professional secondary school; positions of or for technicians, and skilled employees;

– 06 working days for other jobs.

Why is payment of PIT on probation wages is required?

Pursuant to the provisions in Point a, Clause 1, Article 3 of the Personal Income Tax Law 2007, salaries, wages and amounts of salary and wages are one of the types of taxable income.

Accordingly, probation wages which can be concluded in the probationary contract or recorded as an agreement in the labor contract, is also determined as taxable income because it belongs to the above income group.

Upon payment of PIT on probation wages, what tax rate will be applied?

PIT on probation wages for labor contracts recording probation agreements or probationary contracts with a term of less than 03 months

Specifically, in case of signing a labor contract of less than three (03) months with a total income payment from two million (2,000,000) VND/time, the person paying the income must deduct PIT before paying the employee. The applicable tax rate is 10% on PIT on probation wages.

In case an individual only has income that is subject to tax deduction at the above rate, however, the individual’s estimated total taxable income after deducting family circumstances is not yet at the level of having to pay tax, then the individual Individuals with income make a commitment to send the income-paying organization to the income-paying organization as a temporary basis for not deducting personal income tax. Note, the individual making the commitment must register for tax and have a tax code at the time of commitment.

(Pursuant to Point i, Clause 1, Article 25 of Decree 111/2013/TT-BTC)

PIT on probation wages for labor contracts recording a probationary agreement or a probationary contract with a term of 3 months or more

PIT on probation wages will be calculated according to the following progressive tax schedule:

Level	Assessable income/year (million VND)	Assessable income/month (million VND)	Tax rate (%)
1	Up to 60	Up to 5	5
2	Over 60 to 120	Over 5 to 10	10
3	Over 120 to 216	Over 10 to 18	15
4	Over 216 to 384	Over 18 to 32	20
5	Over 384 to 624	Over 32 to 52	25
6	Over 624 to 960	Over 52 to 80	30
7	Over 960	Over 80	35

(Pursuant to Point b, Clause 1, Article 25 of Decree 111/2013/TT-BTC)

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