[2026]Overtime pay is exempt from personal income tax
Under the Personal Income Tax Law 2025, overtime pay is classified as PIT-exempt income. This represents a change from the previous regulation under the 2007 PIT Law, where only the portion of overtime pay exceeding normal working wages was exempt from tax.
This law will take effect from July 1, 2026. However, for income from salaries and wages of resident individuals, the application will be based on the 2026 tax year, determined according to the calendar year from January 1, 2026 to December 31, 2026. Income from salaries and wages is determined according to the calendar year tax period and is not dependent on the fiscal year of the enterprise.
Time of application
- Resident individuals: All overtime pay is fully exempt from PIT from 1 January 2026.
- Non-resident individuals: All overtime pay is fully exempt from PIT from 1 July 2026
During the period from January 1, 2026 to June 30, 2026, non-resident individuals will still be subject to the old personal income tax rate on overtime pay, meaning only the portion of overtime pay that exceeds the normal working salary will be tax-exempt.
This change directly impacts overtime payroll calculations and PIT withholding in 2026. Companies should ensure accurate identification of employees’ residency status and income payment timing to apply the regulation correctly.
If your company requires a payroll process review, tax policy updates, or case-specific advisory support, please contact our tax and payroll specialists for assistance.
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