Global Watch - Vietnam - Personal income tax treatment of shares awarded to employees 

Presumably, due to the current stock market activity, the initial public offerings by Vietnamese companies, and the issuing of shares to employees by many of these companies, OL 1867 has been issued.  It would appear that OL 1867 targets Vietnamese joint stock companies awarding shares to their employees.  However, OL 1867's application is much broader and will also impact foreign companies and their Vietnamese and expatriate employees.
 
According to the Letter, share awards are considered a bonus-in-kind, provided by the employer, and therefore subject to PIT as "regular income"?
 
The taxable value of the share award is determined by:

• The actual price paid by companies / employers for shares purchased externally for employees; and
   
• The face value of shares where a company issues shares to reward its employees.

Interestingly, OL 1867 refers to the "face value" as the basis for determining the taxable value.  We have had informal discussions with the GDT and they have indicated that this was intended.  Again, this appears to have been driven by the common Vietnamese situation whereby shares are often awarded at a value which is less than both the par / face value and the market value.  For foreign companies issuing shares to employees, use of the par / face value is likely to significantly reduce the impact of this Letter.
 
Employers are required to withhold tax when shares are awarded to employees.  Although OL 1867 does not specify when the share award will be taxed, it appears that PIT is payable at the time of award.  The share awards / bonuses will be included in the average monthly income calculation during the year end finalization.

"The Bottom Line" The broader issue of the PIT implications of stock options is yet to be properly addressed and the situation remains uncertain.