Question: Is an employer required to withhold 10% personal income tax (PIT) when paying salary to an employee after the employment contract has been terminated?
Answer:
Under Clause 2, Article 50 of Decree No. 253/2026/ND-CP, where an employer pays salary, wages, or other income to an employee after the employment contract has been terminated, the payment remains subject to 10% personal income tax (PIT) withholding on the gross amount, provided that the payment is VND 5 million or more per payment.
Accordingly, where the employee’s final month’s salary is paid after the employment relationship has ended, the employer is not required to apply the progressive tax rates. Instead, the employer must withhold 10% of the payment in accordance with the above regulation, provided the payment threshold is met.
It should be noted that the 10% withholding is merely a withholding-at-source mechanism and does not represent the employee’s final PIT liability. Upon filing the annual PIT finalization, the employee may recalculate the actual tax payable and, where applicable, claim a tax refund or offset any overpaid tax in accordance with tax regulations.
In practice, many employers continue to apply the progressive PIT rates when paying salary after an employee has left the company. However, since Decree No. 253/2026/ND-CP came into effect, employers should review their payroll and tax withholding procedures to ensure compliance and minimize potential tax risks.
Conclusion:
Under Decree No. 253/2026/ND-CP, where an employer pays salary or other employment-related income after an employee’s employment contract has been terminated, the employer must withhold 10% PIT from the gross payment if the amount is VND 5 million or more per payment. The employee may subsequently finalize their PIT liability and claim a refund or tax credit where the amount withheld exceeds the actual tax payable.
If your business requires legal advice on personal income tax withholding, PIT finalization, or other legal issues relating to employees’ tax obligations, please contact SB Law. Our experienced lawyers and legal professionals are ready to provide timely and practical legal support.
