SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
Ha Noi, day 08 month 09 year 2008
DETAILING A NUMBER OF ARTICLES OF THE LAW ON PERSONAL INCOME TAX
Detailing a number of Articles of the Law on personal Income Tax
Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to the November 21, 2007 Law on personal Income Tax;
Pursuant to the November 29, 2006 Law on Tax Administration;
At proposal of the Finance Minister;
Article l. Scope of regulation
This Decree details a number of articles of the Law on Personal Income Tax and provisions on personal income tax registration, declaration and finalization under the Law on Personal Income Tax.
Article 2. Taxpayers
1. Personal income taxpayers include resident and non-resident individuals who earn taxable incomes specified in Article 3 of the Law on personal Income Tax and Article 3 of this Decree. Taxable incomes of taxpayers are determined as follows:
a) For resident individuals, their taxable incomes are incomes earned inside and outside the Vietnamese territory, regardless of when their incomes are paid;
b) For non-resident individuals, their taxable incomes are incomes earned in Vietnam, regardless of where their incomes are paid.
2. A resident individual means a person who satisfies any of the following conditions:
a) Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of his)her presence in Vietnam;
Individuals present in Vietnam under this Point means those whose
Presence is in the Vietnamese territory.
b) Having a place of habitual residence in Vietnam in either of the following two cases:
- Having a registered place of permanent residence under the law on residence;
- Having a rented house for dwelling in Vietnam under the law on housing, under a rent contract with a term of 90 days or more in a tax year.
3. A non-resident individual means a person who does not satisfy any of the conditions specified in Clause 2 of this Article.
Article 3. Taxable incomes
Taxable incomes of individuals include the following kinds of income:
1. Incomes from production or business activities, including:
a) Incomes from goods production or trading or service provision under law. Particularly for incomes from agricultural production, forestry, salt-making, aquaculture and fishing activities, personal income tax will only be imposed on individuals who do not fully satisfy the conditions for tax exemption specified in Clause 5, Article 4 of this Decree;
b) Incomes from independent professional activities of individuals possessing practice licenses or certificates under law.
2. Salaries or wages receivable by employees from their employers, including:
a) Salaries, wages and amount of similar nature receivable in monetary or non monetary forms;
b) Allowances and subsidies, except those paid under the law on preferential treatment of persons with meritorious services; defense or security allowances; hazard or danger allowances for persons working in branches, occupations or jobs at places where exist hazardous or dangerous elements; allowances for attraction of laborers to work in certain branches or in certain regions specified by law; allowances for sudden difficulties , allowances for laborers suffering from labor accidents or occupational diseases; lump-sum maternity or child adoption allowances; allowances for working capacity loss, lump-sum retirement allowances, monthly survivorship allowances, severance and job loss allowances specified in the Labor Code, other allowances paid by Social Insurance, and allowances for combat of social evils;
Allowances and subsidies not accounted as taxable incomes specified at this Point must be prescribed by competent state agencies.
c) Remunerations receivable as brokerage commissions, payments for participation in schemes or projects, royalties, and other remunerations;
d) Sums of money eared from participation in business associations, boards of directors, control boards, management boards, associations, professional societies and other organizations;
e) Other monetary or non-monetary benefits other than salaries and wages paid by employers to or on behalf of taxpayers in any form:
- House rents, charges for electricity, water and associated services (if any);
- Insurance for employees which employers are not obliged to purchase under law;
Membership fees and charges for other services such as healthcare entertainment, sports, recreation, beauty care, which are provided for individuals upon their request;
- Other benefits provided for by law.
f) Monetary or non-monetary bonuses or rewards in any form, including also bonus securities, except for the following bonuses or rewards:
- Rewards accompanying honorary titles conferred by the State, including also those accompanying emulation titles and other commendation and reward forms under the law on emulation and commendation;
Rewards accompanying international or national prizes recognized by the Vietnamese State;
- Rewards for technical renovations, innovations or inventions recognized by competent state agencies;
- Rewards for detection of and reporting on illegal acts to competent state agencies.
3. Incomes from capital investment, including.
a) Loan interests;
b) Share dividends;
c) Incomes from capital investment in other forms, including also capital contributions in kind, reputation, land use rights, creations or inventions; except for government bond interests.
4. Incomes from capital transfer, including:
a) Incomes from transfer of capital holdings in economic organizations;
b) Incomes from transfer of securities;
c) Incomes from transfer of capital in other forms.
5. Incomes from transfer of real estate, including:
a) Incomes from transfer of rights to use land and assets attached to land;
b) Incomes from transfer of the right to own or use residential houses;
c) Incomes from transfer of the right to lease land or water surface;
d) Other incomes earned from transfer of real estate.
6. Incomes from won prizes in cash or in kind, including:
a) Lottery winnings;
b) Sales promotion winnings in all forms;
c) Betting or casino winnings;
d) Winning in prized games and contests and other forms of winning.
7. Incomes from copyright, including:
a) Incomes from assignment or licensing of intellectual property objects: copyright and related rights; industrial property rights; rights to plant varieties;
b) Incomes from technology transfer: technical know-how, technical knowledge, solutions to production rationalization and technological renewal.
8. Incomes from commercial franchising under the Commercial Law.
9. Incomes from inheritances that are securities, capital holdings in economic organizations or business establishments, real estate and other assets subject to ownership or use registration.
10. Incomes from gins that are Securities, capital holdings in economic organizations or business establishments, real estate and other assets subject to ownership or use registration.
Article 4. Tax-exempt incomes
1. Incomes from transfer or real estate between spouses; parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.
2. Incomes from transfer of residential houses, rights to use residential land and assets attached to residential land received by individuals who have only one residential house or land plot each.
3. Incomes from the value of land use rights of individuals who are allocated land by the State without having to pay land use levy or with reduced land use levy under law.
4. Incomes from receipt of inheritances or gifts that are real estate between spouses, parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.
5. Incomes of households and individuals directly engaged in agricultural or forest production, salt making, aquaculture, fishing and trading of aquatic resources not yet processed into other products or preliminarily processed aquatic products.
Households and individuals directly engaged in production activities specified in this Clause must satisfy the following conditions:
a) Having lawful land or water surface use rights for production, and being directly engaged in agricultural or forest production, salt making or aquaculture. For fishing activities, they must have the right to own or use ships, boats and fishing gears and be directly engaged in these activities;
b) They actually reside in localities where agricultural or forest production, salt making or aquaculture activities are conducted under the law on residence.
6. Incomes from conversion of agricultural land allocated by the State to households and individuals for production.
7. Incomes from interests on deposits at banks or credit institutions or interests from life insurance policies.
8. Incomes from foreign exchange remittances.
9. Salary or wage amounts paid for night shift or overtime work, which are higher than those paid for day shifts or prescribed working hours under law.
10. Retirement pensions paid by Social Insurance under the Law on Social Insurance. Individuals residing in Vietnam are eligible for exemption from personal income tax on pensions paid by foreign countries.
11. Incomes from scholarships, including:
a) Scholarships granted from the state budget;
b) Scholarships granted by domestic and foreign organizations under their study promotion programs.
12. Incomes from indemnities paid under life insurance policies, non-life insurance policies, compensations for labor accidents, compensations paid by the State and other compensations as provided for by law.
13. Incomes received from charity funds licensed or recognized by competent state agencies and operating for charity, humanitarian or non-profit purposes.
14. Incomes received from governmental or non-governmental foreign aid for charity or humanitarian purposes approved by competent state agencies.
The Finance Ministry shall specify procedures and dossiers for identification of tax-exempt incomes stated in this Article.
Article 5. Tax reduction
1. Taxpayers who face difficulties caused by natural disasters, fires, accidents or severe diseases and affecting their tax payment ability may be considered for tax reduction corresponding to the extent of damage they suffer from but not exceeding payable tax amounts.
2. The Finance Ministry shall specify procedures and dossiers for and consideration of personal income tax reduction mentioned in this Article.
TAX BASES FOR A NUMBER OF KINDS OF INCOME OF RESIDENT INDIVIDUALS
INCOMES FROM BUSINESS ACTIVITIES AND INCOMES FROM SALARIES OR WAGES
Article 6. Taxed incomes from business activities, salaries or wages
1. Taxed incomes from business activities, salaries or wages are determined to be equal to taxable incomes from business activities, salaries or wages specified in Articles 7 and 11 of this Decree minus (-) the following amounts:
a) Compulsory social insurance premiums under law, including: social insurance, health insurance, professional liability insurance for some professions subject to compulsory insurance;
b) Reduction based on family circumstances specified in Article 12 of this Decree;
c) Contributions to charity funds, humanitarian funds and study promotion funds specified in Article 13 of this Decree.
2. Taxed incomes of individuals who earn taxable incomes from both business activities and salaries or wages will be the total of their taxable incomes from business activities plus (+) their taxable incomes from salaries or wages minus (-) the amounts specified at Points a, b and c, Clause 1 of this Article.
Article 7. Taxable incomes from business activities
Taxable incomes from business activities are determined to be equal to turnover for calculation of taxable incomes specified in Article 8 of this Decree minus (-) reasonable expenses specified in Article 9 of this Decree.
Article 8. Turnover for calculation of taxable incomes from business activities.
1. Turnover for calculation of taxable incomes from business activities means the total of sales, processing remuneration, commissions, goods or service provision charges generated in a tax period.
The time of determination of turnover is the time of transfer of ownership of goods or completion of services or the time of making goods sale or service provision invoices, regardless of whether such turnover has been collected or not.
2. In some cases, turnover for calculation of taxable incomes is specified as follows:
a) Turnover of goods sold by installment payment is determined according to selling prices of goods sold by lump-sum payment exclusive of deferred payment interest;
b) Turnover of goods or services used for exchange or donation is determined according to the selling price of the same or equivalent product, goods or service at the time of exchange or donation;
c) Turnover from goods processing means sums of money earned from processing activities, covering remuneration, costs of fuel, power and auxiliary materials and other expenses for the goods processing;
d) Turnover from lease of assets means rents periodically paid by lessees under lease contracts. In case lessees pay rents in advance for many years, turnover for calculation of taxable incomes may be allocated to the number of years of advance rent payment or determined according to lump-sum rent payment;
e) Turnover for calculation of taxable incomes in other cases shall be specified by the Ministry of Finance.
Article 9. Reasonable expenses related to the generation of taxable incomes from business activities.
1. Reasonable expenses specified in this Article must be actually paid amounts accompanied with sufficient invoices and vouchers under law.
2. Deductible reasonable expenses include:
a) Salaries, wages, allowances, remunerations and other payments to laborers;
Salaries or wages of individuals who are heads of business households are not accounted as deductible reasonable expenses.
b) Expenses for raw materials, materials, fuels, energy and goods actually used for the production and trading of goods or provision of services related to the generation of turnover and taxable incomes in a period, which shall be calculated according to their reasonable consumption rates and actual ex-warehousing prices determined by business households or individuals themselves that shall be held responsible before law.
c) Expenses for depreciation, regular repair and maintenance of fixed assets used for the production and trading of goods or provision of services. The fixed asset depreciation level is determined based on the value of fixed assets and depreciation duration as specified by the Ministry of Finance;
d) Paid interests on loans for production and business activities directly related to the generation of turnover and taxable incomes;
e) Management expenses;
f) Taxes, charges, fees, land rents payable under law for production, business or service activities;
g) Other expenses related to the generation of incomes.
The Ministry of Finance shall specify other reasonable expenses which are deductible upon calculation of taxable incomes.
Article 10. Taxable incomes and taxed incomes of business individuals who fail to strictly comply with regulations on accounting, invoices and documents.
1. For business individuals who fail to strictly comply with regulations on accounting, invoices and documents and cannot calculate turnover, expenses and taxable incomes, competent tax offices shall assess turnover and the ratio of taxable incomes in order to determine taxable incomes suitable to each production or business line.
2. Based on results of assessment of taxable incomes specified in Clause 1 of this Article, tax offices shall determine presumptive tax amounts according to the principles, order and procedures specified in Article 38 of the Law on Tax Administration.
Article 11. Taxable incomes from salaries or wages
1. Taxable incomes from salaries or wages are determined according to Clause 2, Article 3 of this Law.
2. Time of determination of a taxable income from salary or wage is the time when an employer pays income to a taxpayer or when a taxpayer receives income.
Article 12. Reduction based on family circumstances
Resident individuals who earn incomes from salaries or wages or business activities enjoy reduction based on family circumstances from their taxable incomes before tax calculation as follows:
1. Levels of reduction based on family circumstances:
a) Reduction for a taxpayer himself)herself, which is VND 48 million)year;
b) Reduction for each dependant of a taxpayer, which is VND 1.6 million)month given from the month the taxpayer's obligation to nurture the dependant arises.
2. Each dependant may be counted only once for tax reduction for a taxpayer in a tax year. In case several tax payers share a dependant they are obliged to nurture, they shall reach agreement on registration of this dependant for family circumstance-based reduction for one among them.
3. Persons to be identified as dependants of taxpayers and bases for dependant identification are as follows:
a) Under-18 children;
b) Disabled children who are aged 18 years or older and incapable of working;
c) Children who are studying at universities, colleges, professional secondary schools or job-training schools and have no income or have incomes not exceeding the level specified in Clause 4 of this Article;
d) Persons who are beyond the working age or persons who are at the working age prescribed by law but are disabled and incapable of working or have no income or have incomes not exceeding the level specified in Clause 4 of this Article, including:
- Spouses of taxpayers;
- Blood parents or parents-in-law of taxpayers;
- Other helpless individuals whom taxpayers are obliged to directly nurture.
4. The income level serving as a basis for identification of dependants to be counted for reduction based on family circumstances is an average monthly income of VND 500,000 or less in a year from all income sources.
5. Taxpayer shall themselves declare the number of their dependants evidenced by lawful papers and be held responsible before law for the accuracy of their declaration.
6. The Ministry of Finance shall specify procedures and dossiers for declaration of dependants to be counted for reduction based on family circumstances under this Article.
Article 13. Reduction for charity or humanitarian donations
1. Resident individuals who earn incomes from business activities, salaries or wages enjoy their charity or humanitarian donations deductible from their taxable incomes, including:
a) Donations to organizations or establishments that care for or nurture children in special plights, disabled people and helpless elderly people;
b) Donations to charity funds, humanitarian funds or study promotion funds.
2. Organizations, establishments and funds specified at Points a and b, Clause 1 of this Article must be those licensed or recognized by competent state agencies and operating for charity, humanitarian, study promotion or non-profit purposes.
3. Charity or humanitarian donations made in a year are deductible from taxable incomes of that year and must not be carried forward for deduction from taxable incomes of the subsequent tax year.
Article 14. Partially progressive tariff
1. The partially progressive tariff applies to taxed incomes from business activities, salaries or wages.
2. The partially progressive tariff is specified below: