Answer:
The guiding documents of the Law on PIT prescribe the maximum tax rate imposed on the house rent that the Employer pays on behalf of the Employee is 15% of the total taxable income (exclusive of house rent)[1]. As such, if the house rent that the Employer pays on behalf of the Employee is higher than 15% of the total taxable income (exclusive of house rent), the excess will not be counted into the taxable income.
Considering the regulations above, some Employers tend to use part of the total of the salary and payable allowances as the house rent allowance (not as a cash payment but the Employer pays the rent directly to the landlord) to lower the PIT that the Employee has to pay.
While guiding documents of the Law on PIT now do not prescribe the maximum house rent allowance that the Employee is entitled to as well as the conditions and supporting documents, the house rent that the Employer pays on behalf of the Employee must, in the regard of CIT, fully satisfy the following conditions to be qualified as deductible expenses in calculating CIT[2]:
- Houses are actually leased for the Employee;
- The house rent expenses that the Employer pays on behalf of the Employee must be stated specifically in one of the following documents: LC; CLA; Financial regulations of the enterprise, corporation, group; Reward regulations passed by the Chairman of the Board of Directors, general director and director under the financial regulations of the enterprise and corporation;
- Have all invoices and source documents as required; and
- Payments are made by bank transfer if the house rent is over VND20 million.
Therefore, in addition to specifying the house rent in the LC or the CLA, the Employer may still be required by local taxation authorities to provide invoices or source documents for the house rents paid on behalf of the Employee. It can be house rent agreements and source documents of house rent payment if the Employer leases the houses for the Employee; or the document to prove that the Employee actually uses the house rent allowances that are paid in addition to the salary and other allowances. If the Employer cannot prove the above requirements, the house rent allowance may not be counted as deductible expenses in calculating CIT.
[1]Article 2.2 (đ.1) of Circular 111/2013/TT-BTC dated 15/8/2013 as amended and supplemented by Circular 151/2014/TT-BTC dated 10/2014 and Circular 92/2015/TT-BTC dated 15 June 2015
[2] Article 6 of Circular 78/2014/TT-BTC Ministry of Finance dated 18 June 2014 as amended and supplemented by Article 4 of Circular 96/2015/TT-BTC dated 22 June 2015 and Article 3.2 Circular 25/2018/TT-BTC dated 16 March 2018.
