Notes on Personal Income Tax (PIT) calculation for each type of income

Personal Income Tax (“PIT”) is the tax obligation of individuals who arise incomes. However, the way of PIT calculation under regulations of law corresponding to each type of income is different.

Through this article, BLawyers Vietnam will summarize how to process PIT calculation for each type of income as prescribed.

PIT

1. PIT calculation on incomes from salaries, wages

Individuals who are the employees working for the employers, having incomes from salaries, wages or equivalents to wages under Article 2.2 of Circular No. 111/2013/TT-BTC, is obliged to pay PIT.

a. For residents

PIT amount = Assessable income x Tax rate (under the progressive tax table)

In which:

(i) Assessable income = Taxable income – Deductions

Taxable income includes incomes from salaries, wages, and those of nature of wages and salaries that employees receive from employers under Article 2.2 of Circular No. 111/2013/TT-BTC.

The prescribed deductions include:

  • Family deduction: VND 11 million/month (or VND 132 million/year) for the taxpayer and VND 4.4 million/person/month (or VND 52.8 million/person/year) for dependent.
  • Deductions for insurance premiums, voluntary retirement funds.
  • Deductions for charitable, humanitarian, and academic donations.

(ii) Tax rates under the progressive tax table

PIT

b. For non–residents

PIT amount = Taxable income x Tax rate of 20%

In which:

(i) Taxable income includes incomes from salaries, wages, and those of nature of wages and salaries that employees receive from employers under Article 2.2 of Circular No. 111/2013/TT-BTC for working in Vietnam, regardless of where income is paid.

Of note, the expats who have both worked in Vietnam and abroad but cannot separate the income generated in Vietnam be applied the following formula:

  • For expats who are not present in Vietnam:

  • For expats who are present in Vietnam

(ii) Tax rate of 20%

2. PIT calculation on incomes from business activities

Business households and individuals who have incomes from business and production activities must pay taxes for each sector, production, and business line (regardless of whether or not there is business registration) under Article 2.1 of Circular No. 111/2013/TT-BTC, except for tax-exempt incomes.

Of note, business households and individuals who have revenues of VND 100,000,000/year or less, must not pay tax on business activities.

a. For residents

The residents shall calculate and pay tax under 3 following methods:

  • Periodic declaration: means a method of declaring, calculating the tax on a proportion of actual revenue earned per month or quarter applied for business households and individuals who have the large-scale or who chooses to pay tax by this method.
  • Separate declaration: is the method of declaring and calculating the tax on a proportion of actual revenue earned separately applied for the business individuals who have casual business operations and do not have fixed business locations.
  • Presumptive tax: is the method of calculating the tax on a fixed tax amount determined by the tax authority for business households and individuals that are not in implementing the above two methods.

Of note, for individuals who have income from property leasing in Vietnam, there are separate regulations on the method of PIT calculation.

Accordingly, the tax amount is calculated on a proportion of revenue (for the method of periodic declaration and separate declaration) under the following formula:

PIT amount = PIT taxable revenue x PIT rate

VAT amount = VAT taxable revenue x VAT rate

In which:

(i) PIT and VAT taxable revenue is revenue including such taxes incurred during the tax period from the production and trading of goods and services (regardless of whether the money has been collected or not collected).

(ii) PIT and VAT rate corresponding to each sector and industry under the tax rate listed in Appendix I of Circular No. 40/2021/TT-BTC.

b. For non-residents

The non-residents will calculate PIT on a proportion of revenue generated in Vietnam on each revenue generation.

Accordingly, the PIT amount is calculated under the following formula:

PIT amount = Taxable revenue x Tax rate

In which:

(i) Taxable revenue is the entire amount from the provision of goods and services incurred in Vietnam including expenses paid by the buyer on behalf of non-residents that are not refunded.

(ii) Tax rate:

  • Goods trading: 1%
  • Service provision: 5%
  • Production, construction, transportation, and other business activities: 2%.

3. PIT calculation on incomes from transferring contributed capital, transferring securities

Individuals earning incomes from transferring contributed capital in economic organizations (i.e., limited liability company, partnership, business cooperation contract, cooperative, people’s credit fund, economic organization, others organization) or transferring securities (i.e., transferring shares, call options on shares, bonds, treasury bills, fund certificates, and other securities) must pay PIT in accordance with laws.

a. For residents
a.1. For income from transferring contributed capital

PIT amount = Assessable Income x Tax rate of 20%

In which:

(i) Assessable income = Transfer price – Purchase price of transferred capital – Relevant reasonable expenses

Accordingly, the transfer price is the amount that an individual receives under the capital transfer contract and the purchase price of the transferred capital is the value of contributed capital at the time of transferring capital.

(ii) Tax rate of 20%

a.2. For income from transferring securities

PIT amount = Assessable income x Tax rate of 0,1%

In which:

(i) Assessable income is the securities transfer price each time.

Accordingly, the securities transfer price is determined as follows:

  • For securities of public companies that are traded at the Stock Exchange is the transaction price at the Stock Exchange; or
  • For securities not falling into the above cases: the transfer price is the price stated in the transfer contract or the actual transfer price or the price according to the accounting books at the time of making the latest financial statement before the time of transfer.

(ii) Tax rate of 0.1%

b. For non-residents
b.1. For income from capital transfer

PIT amount = Assessable income x Tax rate of 0,1%

In which:

(i) Assessable income is the total amount that non-residents receive from the transfer of capital at Vietnamese organizations and individuals, not excluding any expenses including the cost price.

(ii) Tax rate of 0.1% regardless of whether the transfer made in Vietnam or abroad.

4. PIT calculation on income from winning prizes, receiving inheritances, and receiving gifts

Residents earning incomes from winning prizes, receiving inheritances, receiving gifts under Article 2.6 and Article 2.10 of Circular No. 111/2013/TT-BTC or non-residents having such incomes arising in Vietnam are obliged to calculate and pay PIT as prescribed, except for tax-exempt incomes.

Accordingly, the PIT amount is calculated under the following formula:

PIT amount = Assessable income x Tax rate of 10%

In which:

(i) Assessable income is determined:

  • For income from winning prizes: assessable income is the prize value in excess of 10 million VND that taxpayers receive for each winning time, regardless of the number of times the prize is received.
  • For income from inheritance, gift: assessable income from inheritance, gifts is the value of property received as inheritance or gifts in excess of 10 million VND each time.

(ii) Tax rate of 10%

5. PIT calculation on income from real estate transfer

Individuals who have income from real estate transfer in the forms specified in Article 2.5 of Circular No. 111/3013/TT-BTC are obliged to calculate and pay PIT as prescribed, except for tax-exempt incomes.

Accordingly, the PIT amount is calculated under the following formula:

PIT amount = Transfer price x Tax rate of 2%

In which:

(i) The transfer price for the transfer of land use rights, land lease or water surface lease is the price stated on the transfer contract at the time of transfer.

(ii) Tax rate of 2%.

6. PIT calculation on income from franchising, copyright

Resident individuals with incomes arising from franchises, copyrights according to Articles 2.7 and Article 2.8 of Circular No. 111/2013/TT-BTC or non-residents with such incomes arising in Vietnam are obligated to calculate and pay PIT as prescribed.

Accordingly, the PIT amount is calculated under the following formula:

PIT amount = Assessable income x Tax rate of 5%

In which:

(i) Assessable income:

  • For income from franchising: assessable income is the income of more than 10 million VND under the franchise contract, regardless of the number of payments or the number of payments received by the taxpayer. If the same object of commercial rights, but the transfer is made into many contracts, the assessable income is the excess of 10 million VND on the total franchise contracts.
  • For income from royalties: assessable income from royalties is the income more than VND 10 million under the transfer contract, regardless of the number of payments or the number of payments received by the taxpayer, obtained when transferring, transferring the right to use objects of intellectual property rights, transferring technology.

(ii) Tax rate of 5%

7. PIT calculation on income from capital investment

Residents who have incomes from capital investments inside and outside Vietnam and non-residents whose incomes are generated in Vietnam under Article 2.3 of Circular No. 111/2013/TT-BTC are obliged to calculate and pay PIT as prescribed, except for tax-exempt incomes:

Accordingly, the PIT amount is calculated under the following formula:

PIT amount = Assessable income x Tax rate of 5%

In which:

(i) Assessable income are incomes from the capital investment that an individual receives in forms as prescribed.

(ii) Tax rate of 5%.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

Date: 11 March 2022

Writer: Thu Tran & Tuyen Pham

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