Question 86: Are house rent allowances subject to PIT and considered as deductible expenses of Employers when calculating CIT?

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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 Employees is 15% the total taxable income (exclusive of house rent)[1]. As such, if the house rent that the Employer pays on behalf of Employees is higher than 15% 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 Employees have to pay.

While guiding documents of the Law on PIT now do not prescribe the maximum house rent allowance that Employees are entitled to as well as the conditions and supporting documents, the house rent that the Employer pays on behalf of Employees 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 Employees;
  • The house rent expenses that the Employer pays on behalf of Employees must be stated specifically in one of the following documents: LCs; CLA; Financial regulations of the company, corporation, group; Reward regulations passed by the Chairman of the Board of Directors, general director and director under the financial regulations of the company and corporation;
  • Have all invoices and source documents as required; and
  • Payments are made by bank transfer if the house rent is over 20 million dong.

Therefore, in addition to stating 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 Employees. It can be house rent agreements and source documents of house rent payment if the Employer leases the houses for Employees; or the document to prove that Employees actually use the house rent allowances that are paid in addition to the salary and other allowances. If the Employer cannot prove this, the house rent allowance may not be counted as deductible expenses in calculating CIT.

[1]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 15/6/2015

[2]Article 6 Circular 78/2014/TT-BTC dated 18/6/2014 as amended and supplemented by Article 4 Circular 96/2015/TT-BTC dated 22/6/2015