🔍 ALL OVERTIME PAY WILL BE TAX-FREE FROM 2026 – RIGHT OR WRONG?

🔍 ALL OVERTIME PAY WILL BE TAX-FREE FROM 2026 – RIGHT OR WRONG?

This is a question that many enterprises and employees are concerned about when
Law on Personal Income Tax 2025 officially issued.

👉 The answer is: RIGHT, but we still need to understand the true nature of the law.

✅ 1. From January 1, 2026, how is overtime pay exempt from personal income tax?

📌 Clause 8, Article 4 of the Law on Personal Income Tax 2025 specify the types of
income that are exempt from personal income tax, including:

Night shift pay, overtime pay; salaries and wages paid for days not taken as legally mandated leave.

📌 Article 29 of the Law on Personal Income Tax 2025 provides:

• The Law takes effect from July 1, 2026;
• However, provisions on income from salaries and wage
  apply from the tax year 2026.

👉 Therefore, for enterprises applying the calendar year as the tax period:

✔️ All overtime pay for resident individuals is exempt from personal income tax
from January 01, 2026.

⚖️ 2. New points compared to the old regulations

🔹 According to the Law on Personal Income Tax 2008 (Clause 9, Article 4):

👉 Only the portion of overtime pay that exceeds the normal working-hour wage is tax-exempt.

🔹 Under the Law on Personal Income Tax 2025:

👉 All overtime and night shift pay is exempt from personal income tax.

📌 This is a very important change that directly benefits employees.

📋 3. Income SUBJECT TO personal income tax from salaries and wages

(Based on Article 3 of the Law on Personal Income Tax 2025)

• Salaries, wages and other payments of a salary or wage nature.;
• Remuneration, monetary or non-monetary benefits;
• Allowances, subsidies and other income, except for exempt income as stipulated
  (Preferential allowances for meritorious individuals, national defense and security allowances,
  social insurance benefits, severance pay, social welfare benefits, etc).

👉 Note: Overtime and night shift pay are exempt from tax under Article 4 ,
and therefore are not included in taxable income from 2026.

👤 4. Who is subject to personal income tax??

📌 Based on Artical 2 of the Law on Personal Income Tax 2025, Taxpayers include:

• Resident individuals with taxable income arising both within and outside Vietnam;
• Non-resident individuals with taxable income arising in Vietnam.

👉 A resident individual is a person:

• Who is present in Vietnam for 183 days or more in a year or within a 12-month period; or
• Who has a permanent residence in Vietnam.

🔎 CONCLUSION

✔️ From the 2026 tax period (January 1,2026):

👉 All overtime and night shift pay received by resident individuals
is exempt from personal income tax.

✔️ Enterprises need to review their personal income tax calculation, payroll and
payroll software in order to apply the new regulations correctly.

📚 Legal basis: Law on Personal Income Tax 2025.

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