Are Special Allowances and Long-Service Allowances in Border Areas Exempt from Personal Income Tax
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Dien Bien Tax Department responds to a civil servant working in a particularly difficult border area regarding PIT exemptions for special allowances and long-service allowances. Per guidance in Point b, Clause 2, Article 2 of Circular 111/2013/TT-BTC and Clause 1, Article 11 of Circular 92/2015/TT-BTC: area allowances (phu cap khu vuc) and attraction allowances (phu cap thu hut) paid in accordance with regulations of competent State authorities are excluded from PIT taxable income. Note: The tax authority's official conclusion addresses only phu cap khu vuc and phu cap thu hut - it does not directly confirm the exemption of phu cap dac biet (special border allowance) or phu cap lau nam (long-service allowance) that the taxpayer asked about. The excess of any allowance above the level set by competent State authorities must be included in taxable income.
Question
Do civil servants and public employees (not under the Ministry of National Defence) working in particularly difficult border areas, who receive special allowances and long-service allowances, have these two allowances excluded from PIT taxable income from wages and salaries?
Official guidance
Dien Bien Tax Department based its response on Point b, Clause 2, Article 2 of Circular 111/2013/TT-BTC dated 15 August 2013 and Clause 1, Article 11 of Circular 92/2015/TT-BTC dated 15 June 2015.
Under these provisions, wages and salary income includes allowances and subsidies, except those listed in Point b of Clause 2, Article 2. Exempt allowances include: preferential monthly allowances and one-time allowances for persons with meritorious services; allowances for participants in resistance, national defence, and international missions; defence and security allowances; hazardous and dangerous work allowances; attraction allowances and area/regional allowances; hardship, occupational accident, and social insurance subsidies; social protection allowances; serving allowances for senior leaders; one-time relocation allowances for transfer to specially difficult areas; village health worker allowances; and sector-specific special allowances.
All of the above allowances must be stipulated by a competent State authority to qualify for exclusion from taxable income.
The tax authority's conclusion: area allowances (phu cap khu vuc) and attraction allowances (phu cap thu hut) paid in accordance with regulations of competent State authorities are not included in PIT taxable income. Where the actual amount paid exceeds the prescribed level, the excess is taxable.
Important note: The tax authority did not directly conclude on the exemption of phu cap dac biet (special/border allowance) or phu cap lau nam (long-service allowance) specifically asked about. Only phu cap khu vuc and phu cap thu hut were addressed in the conclusion. Taxpayers should contact the Dien Bien Tax Department (tel: 0215.383.7667) for specific guidance on their situation.
Action points
- Verify that the special and long-service allowances your unit pays are stipulated by a competent State authority.
- If actual allowance amounts exceed the prescribed level, the excess must be declared and PIT paid.
- Contact Dien Bien Provincial Tax Department (0215.383.7667) for confirmation on specific allowance types.