Personal income tax must be deducted for severance allowance paid in excess of the provisions of the Labor Code for foreign workers.

On October 31, 2023, the Tax Department of Bac Ninh province issued Official Dispatch No. 5046/CTBNI-TTHT, whereby:

In case the Company pays a severance allowance to foreign workers after returning home:

Severance allowance paid in accordance with the provisions of the Labor Code is not included in employee’s taxable income from wages and remunerations.

For severance allowance paid in excess of the provisions of the Labor Code, the actual portion paid in excess of the provisions of the Labor Code is subject to personal income tax. Before paying emplyees, the company deducts personal income tax according to the full tax schedule applicable to non-resident individuals (20% tax rate).