Personal Income Tax In Vietnam

Personal Income Tax In Vietnam

 

LHD Law Firm would like to provide a brief of Personal Income Tax (PIT) in Vietnam for businessman’s reference:

 

1.     Tax Residency

Residents are those individuals meeting one of the following criteria:

• residing in Vietnam for 183 days or more in either the calendar year or the period of 12 consecutive months from the date of first arrival;

• having a permanent residence in Vietnam (including a registered residence which is recorded on the permanent/temporary residence card in case of foreigners);

• residing in Vietnam for more than 90 days but less than 183 days in a tax year and unable to prove tax residence in another country.

Tax residents are subject to Vietnamese PIT on their worldwide taxable income, wherever it is paid or received.

Employment and business income is taxed on a progressive tax rates basis. Other income is taxed at a variety of different rates.

Individuals not meeting the conditions for being tax resident are considered tax non-residents. Non-residents are subject to PIT at a flat tax rate of 20% on the income received as a result of working in Vietnam in the tax year, and at various other rates on their non-employment income.

However, this will need to be considered in light of the provisions of any DTA that might apply.

2.     Tax Year

The Vietnamese tax year is the calendar year. However, where in the calendar year of first arrival an individual is present in Vietnam for less than 183 days, his/her first tax year is the 12 month period from the month of arrival. Subsequently, the tax year is the calendar year.

3.     Employment Income

The definition of taxable employment income is broad and includes all cash remuneration and benefits-in-kind. However, the following items are not subject to tax:

• Payments for business trips (subject to a cap);

• Payments for telephone charges (subject to a cap);

• Payments for uniform/stationery costs (subject to a cap);

• Overtime premium (i.e. the additional payment above the normal wage,not the full amount of the overtime/nightshift payment);

• One-off allowance for relocation to Vietnam for resident expatriates;

• Once per year home leave round trip airfare for resident expatriates;

• School fees for resident expatriates’ children from primary to high school in Vietnam;

• Training;

• Mid-shift meals (subject to a cap if the meals are paid in cash) and

• Certain benefits in kind provided on a collective basis (e.g. membership fee, entertainment, healthcare, transportation to and from work).

There are a range of conditions and restrictions applicable to the above exemptions.

4.     Non-employment Income

Taxable non-employment income includes:

• Business income (including rental income);

• Investment income (e.g. interest, dividends);

• Gains on sale of shares;

• Gains on sale of real estate;

• Inheritances in excess of VND10 million.

5.     Non-taxable Income

Non-taxable income includes:

• Interest earned on deposits with credit institutions/banks and on life insurance policies;

• Compensation paid under life/non-life insurance policies;

• Retirement pensions paid under the Social Insurance law (or the foreign equivalent);

• Income from transfer of properties between various direct family members;

• Inheritances/gifts between various direct family members.

• Monthly retirement pensions paid under voluntary insurance schemes.

6.     Foreign Tax Credits

In respect of tax residents who have overseas income, PIT paid in a foreign country is creditable.

7.     Tax Deductions

Tax deductions include:

Contributions to mandatory social, health and unemployment insurance schemes;

Contributions to voluntary pension schemes;

Contributions to certain approved charities;

Tax allowances:

• Personal allowance: VND 9 million/month;

• Dependent allowance: VND 3.6 million/month/ dependent. The dependent allowance is not automatically granted, and the taxpayer needs to register qualifying dependents and provide supporting documents to the tax authority.

8.     PIT Rates

Residents – employment and business income

Annual Taxable Income     Monthly Taxable Income       Tax rate

(million VND)                     (million VND)

0 – 60                                         0 – 5                                       5%

60 – 120                                     5 – 10                                     10%

120 – 216                                   10 – 18                                    15%

216 – 384                                   18 – 32                                    20%

384 – 624                                   32 – 52                                    25%

624 – 960                                   52 – 80                                    30%

More than 960                       More than 80                                35%

 

If you would like further information on Personal Income Tax in Vietnam, please either email to our Partners at: all@lhdfirm.com