October 13, 2021

Gross Pay vs Nett Pay: What You Should Know, And How To Calculate?

When you're working abroad, it can be difficult to calculate what your nett pay will be. There's a lot of information about gross pay and deductions from gross pay. In this article, we break down the differences in gross vs nett pays for these countries: Singapore, Malaysia, Hong Kong, Vietnam, Philippines, Indonesia and Thailand. We also give some advice on how to best deal with taxes in different countries.

What Is Gross Pay?

Gross pay is the amount that you're paid before any deduction or tax. This would include your salary, allowances, bonuses and overtime payments.

What Is Nett Pay?

Nett pay is what you will receive after all deductions have been taken out of your gross pay. Common examples of deductions include taxes, insurance premiums (health), social contributions etc. These factors make up for your 'take home' income which means how much money you actually get to keep in hand per month/ year.

1) Malaysia

In Malaysia (residents and non-residents) it works slightly differently where you will need to contribute to Employees Provident Fund (EPF), Social Security Organisation (SOCSO) and monthly tax deduction. The EPF was established to help employees save for a comfortable retirement by making voluntary contributions to the fund. You have the option of contributing at least 9% of your gross salary each month.

Employees who make contributions to SOCSO qualify for financial compensation in the case of work-related injuries and travel. For tax deduction, if your yearly employment income is more than RM34,000 (after EPF deductions), you must register a tax file and your employer may take a sum from your pay for monthly tax deduction payments.

Lastly, for yearly tax payments, employees in Malaysia will have to submit yearly reports of gross pay earned during that year which includes foreign employment too. You will then be taxed accordingly, this is usually between 0-30% (If this amount exceeds the total monthly tax deduction, you will have to pay the balance amount in a lump sum at the end of the taxation year). 

Here are some important details for deductions and tax rates.

a. SOCSO (The Social Security Organisation)
  • 2 types of schemes: Employee Injury Scheme, and Invalidity Pension Scheme
  • Function to provide social security protection in terms of cash, provide benefits for employees in private sectors in case of workplace injuries, emergencies, occupational sickness and death
  • Eligible for employees of age below 60 years old working in a private company in Malaysia
  • Employees contributes 0.5% from monthly salary whereas employers will contribute another 1.75% (contribution rates depends on the total monthly salary of employee)
  • For foreign employees, 1.25% is contributed from their insured monthly wages by their employer
b. EPF (Employees Provident Fund)
  • Provides compulsory retirement savings for pensionable employees in Malaysia
  • Employees contribute 9% of monthly salary
  • Employer contributes 13% for employee’s salary below RM5000, 12% for employee’s salary above RM5000 
c. Income Tax
  • Monthly tax contribution rate range from 0% to 30% depending on the employee’s salary amount
  • Foreign employees who worked longer than 182 days with resident status will follow Malaysia tax laws 

2) Hong Kong

Hong Kong, as a tax haven, has especially competitive income tax rates for non-residents and company taxes. Besides tax, employees and self-employed people must pay 5% of their wages to their MPF fund (Mandatory Provident Fund). Expatriates are not subjected to MPF if they enter Hong Kong to work for less than 13 months, or if they are members of an overseas retirement system.

Individual tax rates are progressive, with the net chargeable income (i.e. assessable income after deductions and allowances) taxed at a rate of 2% and up to 17%. Hong Kong's tax system is based on a territorial principle. This implies that only income earned in Hong Kong is taxable there. However, income that has been taxed in another jurisdiction may be excluded from the salary tax in Hong Kong, and earnings earned outside of Hong Kong can also be considered non-Hong Kong sourced (exempted from Hong Kong salaries tax). Hong Kong salaries tax does not apply to income earned in the city by visitors who spend less than 60 days there. 

Here are some important details for deductions and tax rates. This is a list of what you need to do if filing your taxes this year, so make sure that it's in order!

a. MPF (Mandatory Provident Fund)
  • A compulsory savings scheme for employees and self-employed employees with age range from 18 to 64 years old 
  • Contribution to be done by employees and employers on the 10th day of each month. For new employees, their first contribution is the 60th day of their employment 
  • Expatriates are not eligible if they work in Hong Kong for less than 13 months or are covered by another scheme from the overseas
  • 3 types of schemes:

i.  Master Trust Schemes

  • Provide benefits such as sick pay and personal time off
  • Employer and employee contribute 5% each from employee’s monthly income 

ii.  Employer-sponsored Schemes

  • Applicable for employees of a single employer

iii.  Industry Schemes

  • Applicable to employees where labour mobility is high; catering / construction industries
  • Employer contribution is based on employee’s daily income
b.  Salaries Tax / Personal Income Tax
  • Employee contribution rate that ranges from 2% to 15%(maximum) from the net income for 2020/21 

3) Vietnam

All Vietnamese citizens, including foreign workers who have resided in the country for more than six months, must contribute to the three systems. The following percentages must be paid by the employee: Social insurance (8%), health insurance (1.5%) and unemployment insurance (1%).

In Vietnam, Residents of Vietnam are taxed on their worldwide income, whereas non-residents are taxed on their Vietnam-sourced earnings only. The highest tax bracket in Vietnam is 35%, while taxes for non-residents are levied at a flat rate of 20%. Foreign currency income is converted to Vietnamese dong when calculating taxable income.

Here are the important details you need to know about deductions and tax rates.

a. Personal Income Tax (PIT)
  • Tax resident (with requirements of residing in Vietnam for 183 days or more in a calendar year holds a temporary/permanent residence card in Vietnam, leases a property for 183 days or more) and Non-tax Residents are subject to a calendar year as their standard tax year
  • Taxable income must be converted to Vietnamese dong if the source of income if from foreign currency
  • Tax reduction for dependents is VND4,400,000 per month. 
  • Dependent qualification:
    • i. Aged below 18 years old
    • ii. Aged above 18 years old with low income (not exceeding VND 1 million)
    • iii. Spouses/Parents/Tax residents who are unable to work or have low income
  • Reduction can be claimed by only one person for each dependent
b. Social Security Organisation (Compulsory Insurances)
  • Provides social security protection to employees and dependents through social security schemes 
  • Employees and employers are compulsory to pay for 3 types of insurance which are social insurance, health insurance and unemployment insurance (include Trade Union)
  • Employees who worked less than 3 months need to pay for Social Insurance by their own
  • Foreign employees are exempt from Unemployment Insurance, however, are applicable to pay for Social Insurance at a rate of 3.5% for the employer portion

4) Philippines

The Social Security System (SSS), the Home Development Mutual Fund (Pag-IBIG), and the Philippine Health Insurance Corporation (PhilHealth) provide social welfare services in the Philippines. Employers and employees are obliged by law to contribute to these organisations via payroll deductions as required by the Philippine Labour Code. The SSS contribution is 3.63% of an employee’s monthly salary. The Pag-IBIG fund has a monthly fixed contribution of ₱100. The employee's wage is used to calculate the employee's PhilHealth contribution. The employer must pay half of the premium and 50% of the monthly instalments will be taken out of the employee's salary. The basic salary range is from ₱10,000 to ₱50,000 per month, which equals the minimal deposit of ₱275 and the maximum deposit of ₱1,375  each month.

The Filipino government taxes its citizens up to 32% no matter what their income is, regardless if it comes from the Philippines or not. Non-Filipinos are only taxed on any wages that have been earned while living there.

The deduction and tax in the Philippines is a complicated system, but it's important for you to know the basics. Here we will break down your deductions and rates so that they make sense in context!

a.  Social Security System (SSS) 
  • A social insurance scheme for private sectors employees in the Philippines
  • Provide benefits for members (employees) such as sickness, maternity, retirement, disability, death, funeral and unemployment

*due to Covid-19, the social security contributions will be at 12% for the meantime with the approval from The House of Representatives

b.  Government Security Insurance System (GSIS)
  • A social insurance scheme for government and public sector employees 
  • Provide benefits for members(employees) such as separation from the service, retirement, disability and death
c. Philippine Health Insurance Corporation (PHIC) / Philhealth
  • Provide affordable health insurance coverage for Philippines employees
  • The contribution rate is 3.5% to be shared equally among employee and employer with a monthly basic salary floor of ₱10,000 and ceiling of ₱70,000
  • Self-employed members contribute ₱2,400 per year with a monthly income of ₱25,000.00, monthly income of more than ₱25,000.00 contribute ₱3,600 per year
  • Overseas Filipino Worker (land-based) and Sponsored Members (contributions being paid by someone else) contribute ₱2,400 per year
d. Home Development Mutual Fund (HDMF) / Pag-IBIG Fund
  • A regular savings programme for members of Pag-IBIG Fund or HDMF 
  • Eligible for voluntary membership of age range 18 years old to 65 years old, whereas mandatory membership (include private employees, self-employed and expatriates) cannot exceed the age of 60 years old 
  • Provide benefits such as short term loans and housing loans 
  • Employees and employers share the contribution rate from employee's salary
  • Overseas Filipino Workers are also compulsory to contribute to Pag-IBIG coverage  
  • Self-employed members contribute PHP100 per month with a maximum income of PHP 5,000 
e. Income Tax  
  • Residents in the Philippines are taxed up to 32% from their net income regardless if their sources of income are from the Philippines or overseas
  • Non-residents in the Philippines are only taxed from their income which their source of income is from the Philippines 
  • Corporate income tax is 30% for domestic and resident foreign corporations from net taxable income
  • Resident and non-resident of foreign corporations are taxable only on derived from sources in the Philippines

5) Indonesia

In Indonesia, social security contributions are made in three different areas: Old age contribution (2%), healthcare (1%) and pension (1%).

Resident citizens in Indonesia are taxed on their worldwide income, whereas non-residents are only taxed on locally sourced earnings. Non-resident employees are taxed with a general withholding tax of 20% on their income source within Indonesia.

Here are the important details you need to know about deductions and tax rates.

a.  Social Security (BPJS Ketenagakerjaan)
  • Provide security to employees throughout working in the company until the reach of pension 
  • 4 types of pension programmes:
    • i. Occupational accident (to be paid by employer entirely)
    • ii. Old age
    • iii. Death benefit/ life insurance (to be paid by employer entirely)
    • iv. Pension
  • Duration of involvement of employees with Social Security (BPJS Ketenagakerjaan) should be at least 5 years time
  • Pension can be withdrawn by employees once they reach the age of 55 years old / the employee quits his/her work
b. Health Insurance (BPJS Kesehatan)
  • Employers and employees need to contribute to the health insurance 
  • The contribution rates below are applied to salaries up to a maximum of IDR 12,000,000 per month  
  • The coverage includes a maximum of 5 family members. An additional family member may be registered to a contribution rate of 1 % per person per month
c. Tax Income
  • Tax resident is taxed based on worldwide income
  • Indonesian citizens who are living overseas for more than 183 days a year are eligible for foreign tax subjects 
  • Non-resident employees are taxed with general withholding tax at 20% on their income source within Indonesia
  • Tax on severance payments

6) Thailand

In Thailand, foreigners who don't have an employment visa or work permit can only stay in the country for 90 days at one time before having to leave to renew their visas. If you're staying longer than this then you will have to pay Thai personal income tax for the amount of time that exceeds 90 days, regardless of your salary is paid in Thailand or not.

There's also a maximum allowance on what can be taxed but it varies depending on where you're working and how much money per year is earned. Thailand has very high rates of taxation where foreigners who earn more than 800,00 baht/year automatically need to pay 30%. However, if they're married to Thai nationals or earning less than that could get away with paying only 20%. Employees are also required to contribute 5% of their pay to Employee Social Security. The maximum monthly payment is 750 Baht.

Here are the important details you need to know about deductions and tax rates.

a.  Social Security System
  • A fund to provide coverage and security to insured employees (both Thai and foreign employees)
  • Provide benefits:
    • i. Injury/sickness benefits
    • ii. Maternity benefits
    • iii. Disability benefits
    • iv. Death benefits
    • v. Child benefits
    • vi. Old age benefits
    • vii. Unemployment benefits
  • Government pay a supplement of 2.75% which means the total contribution is 12.75% 
b. Income Tax
  • Income tax rate applicable to residents and non-residents in Thailand
  • An resident is a person who is in Thailand for more than 180 days and more in a calendar year
  • Non-resident might be taxed at 15% from gross income for other income (not including employment income)
  • Residents in Thailand contribute on a progressive tax rate to the following taxable income
c. Income Tax Table for 2021
  • Corporate tax income rate is 20% on net profit. *rates vary depending on types of taxpayers

What Are Common Deductions?

This would include: 

  • Taxes - can range from 0-35% depending on your location 
  • Social contributions - these depend on where you live and what type of contract you have 
  • Insurance premiums (health, life etc.) - these can depend on your contract and location of work

What Else Should I Know About Gross Vs Nett Pays?

There are several factors that can influence your take-home pay such as income tax, health insurance premiums, social security contributions etc. There isn't too much of a difference in the amount you will receive if you were to compare gross vs nett pays with some examples listed above. However, we recommend getting advice from a tax consultant or accountant so they can help you understand how it works in your destination country. There's no 'one size fits all' model when it comes to dealing with taxes and salary calculations for different countries, so working closely with a tax consultant or accountants would be the best way to go about it.

Some people think that it's better to be paid on a gross basis as this means they will receive more money but the reality is often very different from what you might expect. Taxes and other deductions can make up for 50% of the total income which leaves you with little savings over time. No matter where in Asia or the world, always remember to keep track of all your expenses so that when tax season comes around again, you know exactly how much taxes need to be paid. We hope this article has been helpful by breaking down some differences between Gross vs Nett pays across a few different countries.

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