Vietnam Releases New Circular on Personal Income Tax Exemptions Related to Medical Treatment

On June 8, 2011, Vietnam’s Ministry of Finance issued Circular No.78/2011/TT-BTC regarding personal income tax exemption. Accordingly, allowances provided by the company to employees for medical treatment to cure serious diseases of those employees or their direct family members shall not be subject to personal income tax if the amount paid is from profits after tax, or the welfare fund, or the reward fund of the company.

According to the Circular, valid companies include:

• Businesses established under Vietnam Law and regulations
• Businesses established under foreign laws that have resident establishments and non-resident establishments in Vietnam
• Organizations established and operated under Law on Corporative
• Organizations having production and business activities arising incomes

Family members of employees that are supported in treating serious diseases include the father, mother, spouse, child or legalized adoption.

The allowance level might be equal to or a part of the actual medical treatment expense, but shall not exceed the actual hospital expense minus (-) compensations from the health insurance fund.

The company who pays allowances is responsible to maintain the following supporting documents:

• A copy of payment voucher for hospitals expenses, certified by the company; or
• A copy of health insurance’s compensations, certified by the company; and
• Payment vouchers evidencing that employees receive such allowances from the company.

The Circular shall be effective after 45 days from the date of signing on June 8, 2011.

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