IMPORTANT UPDATE: PIT Exemption on Overtime Pay from 2026

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.

The Law generally takes effect from 1 July 2026. However, for salary and wage income of resident individuals, the application follows the 2026 tax year, determined on a calendar-year basis from 1 January 2026 to 31 December 2026. Salary and wage income is assessed based on the calendar tax year and is not dependent on the company’s financial year.

Effective timeline of the exemption by residency status:

• 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 1 January 2026 to 30 June 2026, non-resident individuals continue to follow the previous rule, under which only the portion of overtime pay exceeding normal wages is 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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