PERSONAL INCOME TAX

Non-Taxable Employment Income under Decree No. 253/2026/ND-CP and Circular No. 87/2026/TT-BTC

Effective from July 1, 2026, Decree No. 253/2026/ND-CP and Circular No. 87/2026/TT-BTC introduce significant amendments and additions to the regulations governing non-taxable employment income for Personal Income Tax (PIT) purposes.

Understanding these non-taxable benefits enables employers to establish appropriate employee welfare policies while ensuring compliance with Vietnam's PIT declaration and withholding regulations.

1. Employee Welfare, Allowances and Uniform Benefits

(1) Mid-shift Meal Allowance

The following meal benefits are not subject to Personal Income Tax:

• Employer-provided meals;
• Purchased meal boxes;
• Meal vouchers;
• Cash meal allowances.

Where the employer provides a cash meal allowance, the amount not exceeding VND 1,200,000 per employee per month is exempt from PIT. Any excess amount shall be included in taxable income.

(2) Uniform Allowance

The following uniform benefits are non-taxable:

• Uniforms provided in kind: fully exempt from PIT.
• Uniform allowance paid in cash: exempt up to VND 5,000,000 per employee per year.

Any amount exceeding this limit is subject to PIT.

(3) Telephone, Office Supplies and Business Travel Allowances

The following lump-sum allowances are not subject to PIT:

• Telephone allowance;
• Office supplies allowance;
• Business travel allowance;
• Other work-related fixed allowances.

These benefits are non-taxable provided that:

• They are stipulated in the company's Financial Regulations, Salary Policy, or Internal Regulations; and
• The allowance level is reasonable and consistent with the employee's duties and the company's actual business operations.

(4) Severance Allowance and Job Loss Compensation

Under the new regulations, all severance payments and job loss compensation paid by the employer are exempt from PIT, including any amount exceeding the minimum level prescribed under the Labor Code if such payment is made in accordance with the employer's internal policy.

This is one of the notable changes introduced under Decree No. 253/2026/ND-CP.

(5) Financial Support for Serious Illness Treatment

Financial assistance provided by the employer for the treatment of serious illnesses is not subject to PIT when granted to:

• Employees;
• Biological parents;
• Parents-in-law;
• Spouse;
• Children.

To qualify for PIT exemption, the following documents are required:

• Medical records or certification of a serious illness;
• Valid medical invoices and supporting documents;
• Employer's payment evidence.

The exempt amount must not exceed the actual medical expenses payable after deducting reimbursements from health insurance or other insurance providers, if any.

(6) Employer-Paid Non-Mandatory Insurance

Employer contributions to the following insurance plans are not taxable:

• Voluntary pension insurance;
• Health insurance;
• Accident insurance;
• Other voluntary insurance policies without an investment or savings component.

Insurance policies containing investment, cash value or premium refund features are subject to separate PIT regulations.

(7) Welfare Payments for Weddings, Funerals and Employee Support

The following welfare benefits provided by employers are not subject to PIT:

• Wedding gifts;
• Funeral assistance;
• Bereavement support;
• Employee and family visitation allowances.

These benefits are exempt provided that:

• They are stipulated in the company's internal regulations; and
• They satisfy the deductible expense conditions for Corporate Income Tax (CIT) purposes, including the limitation that total welfare expenses do not exceed one month's average actual salary paid during the tax year.

(8) One-Time Relocation Allowance

A one-time relocation allowance paid under the employer's policy is exempt from PIT for:

• Foreign employees relocating to Vietnam for work;
• Vietnamese employees assigned to work overseas;
• Overseas Vietnamese returning to Vietnam for long-term employment;
• Employees transferred to areas with exceptionally difficult socio-economic conditions.

2. Transportation, Housing and Education Benefits

(1) Employee Shuttle Transportation

Transportation arranged by the employer for employees commuting between:

• Home and workplace; and
• Workplace and home

Not subject to PIT where transportation is provided collectively for employees.

(2) Employer-Provided Housing

The value of employer-provided accommodation is exempt from PIT where the employer constructs and provides housing for employees.

This includes:

• Electricity;
• Water;
• Property management fees;
• Related utility services.

(3) Housing Rent Paid by the Employer

Where the employer pays rental expenses on behalf of an employee, the taxable housing benefit is capped at 15% of the employee's total taxable employment income (excluding housing rent).

Any rental amount exceeding this limit will not increase the employee's taxable income.

(4) Tuition Fees for Employees' Children

Employer-paid tuition fees are exempt from PIT in the following cases:

• Tuition for children of foreign employees attending preschool through high school in Vietnam;
• Tuition for children of Vietnamese employees working overseas attending preschool through high school abroad.

The tuition benefit must be specified in the labor contract or the employer's internal policy.

(5) Annual Round-Trip Airfare

The employer-paid cost of one annual round-trip air ticket is exempt from PIT for:

• Foreign employees working in Vietnam traveling to their home country for annual leave; and
• Vietnamese employees working overseas returning to Vietnam for annual leave.

Appropriate invoices and supporting documents must be maintained.

3. Awards and Statutory Allowances

(1) State Awards and Honors

The following awards are exempt from PIT:

• Awards accompanying emulation titles;
• Awards accompanying commendation certificates;
• Prizes granted by the State in accordance with legislation on emulation and commendation.

(2) Awards for Inventions and Technical Innovations

The following awards are not subject to PIT:

• Awards for inventions;
• Awards for technical innovations;
• Rewards for reporting legal violations recognized by competent State authorities.

(3) Statutory Allowances and Benefits

The following statutory allowances and benefits are exempt from PIT:

• Hazardous working condition allowance;
• Regional allowance;
• Attraction allowance;
• Occupation-specific allowances prescribed by the Government;
• Occupational accident allowance;
• Occupational disease allowance;
• One-time childbirth allowance;
• One-time adoption allowance;
• Other statutory allowances provided under labor, social insurance and preferential treatment laws.

Important Notes for Employers

To ensure that the above benefits qualify as non-taxable employment income, employers should:

• Establish comprehensive financial, salary and welfare policies, or collective labor agreements where applicable;
• Clearly define eligible employees, payment conditions and benefit levels;
• Maintain labor contracts, internal decisions, invoices, payment vouchers and supporting documentation;
• Comply with accounting, taxation and document retention requirements to facilitate future tax inspections and audits.

By properly implementing these regulations, employers can optimize employee welfare programs while ensuring full compliance with Vietnam's Personal Income Tax regulations.