On 18 November 2009, the General Department of Taxation issued Official Letter No. 4743/TCT-TNCN ("Letter 4743") replying to the question whether employment income earned from August to December 2008 but actually paid in September and October 2009 are subject to personal income tax ("PIT").
On 19 June 2009 in its Resolution No. 32/2009/QH12 ("Resolution 32") the National Assembly approved a PIT exemption for various types of income for 2009. However, a lot of questions on the implementation of the PIT Law have been raised since. One such question is whether the determination of exemption is based at the time income is paid or the time it is earned.
A specific case, as mentioned in the Summary, on this very question has been addressed by Letter 4743.
In providing an answer, Letter 4743 quotes the relevant provisions in Circular No. 160/2009/TT-BTC dated 12 August 2009 of the Ministry of Finance providing guidelines on PIT exemption in 2009 pursuant to Resolution 32 and Official Letter No. 1823/BTC dated 18 February 2009 of the Ministry of Finance providing guidelines on PIT deferment.
For the sake of simplicity, two rules can be drawn:
- Salaries and wages earned in the period of entitlement to a PIT exemption (from 1 January 2009 to June 2009) ("Exempt Period") are entitled to a PIT exemption
- Salaries and wages earned from 2008 which were paid during the Exempt Period are also entitled to PIT exemption
Letter 4743 concludes that "income from teaching overtime by the instructors of the University of Tien Giang earned from August to December 2008 but actually paid in September and October 2009 (past the PIT deferment duration) are determined to be incomes subject to PIT and are not entitled to PIT exemption."