General Department of Taxation talks about temporary deduction of 10% personal income tax for unemployment benefits

The General Department of Taxation has just responded to some opinions in the press that it is necessary to immediately amend the regulations on calculating personal income tax (PIT) with unemployment benefits because this is not salary.

Referring to the fact that tens of thousands of laid-off workers were paid unemployment benefits by their businesses to cover their living expenses, but 10% of their personal income tax was also temporarily deducted. Some opinions said that it is necessary to immediately amend the regulations on calculating personal income tax on unemployment benefits because this is not a salary.

Regarding this issue, the General Department of Taxation said that, based on the provisions of Clause 2, Article 2 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance; Clause 2, Article 8 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance; Point i, Clause 1, Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance.

Accordingly, in case the employer pays the employee a severance allowance, the severance allowance paid according to the Law on Social Insurance and the Labor Code shall not be included in the income subject to personal income tax; the severance allowance paid higher than the provisions of the Law on Social Insurance and the Labor Code shall be included in the employee's taxable income for this higher income.

According to the provisions of Clause 1, Article 25 of Circular No. 111/2013/TT-BTC, when an individual has income subject to personal income tax, the organization paying the income must deduct tax when paying the income and declare and pay the deducted tax to the state budget (The company is responsible for issuing personal income tax deduction certificates to employees).

The tax deducted during the year is a provisional amount. When an individual makes a tax settlement, the amount of personal income tax payable in that year will be re-determined. In case the individual's income is not yet at the taxable level or the tax payable is lower than the tax deducted during the year, the individual will be refunded tax according to regulations.

Therefore, when settling taxes, employees whose tax payable is less than the tax deducted during the year will be refunded according to the provisions of law.

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