The 2025 Law on Personal Income Tax (PIT) officially expands the scope of tax-exempt income to include night shift pay, overtime pay, and compensation for unused annual leave. While this landmark policy aims to provide direct financial support to employees, the implementation timeline varies significantly based on residency status. Details are as follows:
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1. Tax exemption policy for night shift, overtime, and unused annual leave days
Pursuant to Clause 8, Article 4 of the Law on Personal Income Tax 2025, the following types of income are classified as tax-exempt:
- Salary for working at night.
- Salary for working overtime.
- Salaries and wages paid for unused annual leave days in accordance with the provisions of the law.
2. Implementation Timeline
The commencement date for applying these tax incentives is specifically distinguished based on the tax residency status of the taxpayer:
- For Resident Individuals: The tax exemption for the aforementioned income types takes effect from the 2026 tax period, specifically starting from January 1, 2026.
- For Non-Resident Individuals: The application date is from July 1, 2026, coinciding with the official effective date of the Law.
Note: During the period prior to July 1, 2026, non-resident individuals shall still comply with the previous regulations, whereby tax exemption only applies to the portion of overtime pay that is higher than the normal hourly wage.
3. Criteria for Determining Resident and Non-Resident Status
The classification of taxpayers under Article 2 of the Law on Personal Income Tax 2025 is based on the following legal conditions:
- Resident Individuals: An individual who satisfies either of the following two conditions:
- Being present in Vietnam for 183 days or more within a calendar year or within 12 consecutive months from the first date of arrival.
- Having a regular place of residence in Vietnam (including a registered permanent residence or a rented house under a lease agreement with a specific term).
- Non-Resident Individuals: An individual who does not satisfy the aforementioned residency conditions.
