Lecture taxation chapter 7 personal income tax

TAXATION Chapter 7 Personal Income Tax References • Law on PIT No 04/2007/QH12 dated 21 November 2007; • Law No 26/2012/QH13 dated 22/11/2012 on amendments of PIT; • Law No 71/2014/QH13 dated 26 Novem[.]

Chapter 7: Personal Income Tax

• Law on PIT No.04/2007/QH12 dated 21 November 2007;

• Law No.26/2012/QH13 dated 22/11/2012 on amendments of PIT;

• Law No.71/2014/QH13 dated 26 November 2014;

• Decree 65/2013/ND-CP dated 27 June 2013;

• Decree 91/2014/ND-CP dated 01 October 2014;

• Decree 12/2015/ND-CP dated 12 February 2015;

• Circular 111/2013/TT-BTC dated 15 August 2013;

• Circular 119/2014/TT-BTC dated 25 August 2014;

• Circular 151/2014/TT-BTC dated 10 October 2014;

• Circular 92/2015/TT-BTC dated 15 June 2015;

• Circular 26/2016/TT-BLDTBXH dated 01/09/2016.

Learning Outcomes

• LO 7-1: Understand concept, characteristics and role of PIT.

• LO 7-2: Recognize taxpayers of current PIT of Vietnam.

• LO 7-3: Define taxable incomes of current PIT of Vietnam.

• LO 7-4: Specify PIT exemption and reduction of current PIT

of Vietnam.

• LO 7-5: Explain PIT deductions of current PIT of Vietnam.

• LO 7-6: Identify PIT rates of current PIT of Vietnam.

• LO 7-7: Calculate PIT payable for residents and

nonresidents.

▪ Concept:

▪ Characteristics:

▪ Role:

LO 7-1: Understand concept, characteristics and role of PIT.

▪ Taxpayers are residents and non-residents who have income subject

to PIT, including:

✓ Individuals that have Vietnamese nationality, including those who are working or studying abroad, and earn taxable income.

✓ Individuals that do not have Vietnamese nationality but earn taxable income:

+ Foreigners that work in Vietnam.

+ Foreigners that are not in Vietnam but have taxable income in Vietnam.

LO 7-2: Recognize taxpayers of current PIT of Vietnam.

▪ Individuals who meet one of the following criteria:

✓ Staying in Vietnam from 183 days or more in a calendar year or 12 consecutive months from the date of first arrival.

✓ Having regular accommodation in Vietnam : having registered as permanent / temporary residents or having had a term-housing-renting-contract in Vietnam (from 183 days or more).

▪ Residents are subject to Vietnamese PIT on their taxable income earned within or outside Vietnam’s territory , regardless of locations

of payment and receipt.

▪ Employment income is taxed on a progressive tax rates Other income is taxed at a variety of different rates.

• Individuals that do not meet the conditions for being residents.

• Non-residents are subject to Vietnamese PIT on their taxable income earned within Vietnam’s territory , regardless of the location of payment and receipt.

• Nonresidents are subject to PIT:

✓ at a flat tax rate of 20% on their employment income earned in Vietnam,

✓ at various other rates on their non-employment income.

✓ need to be considered agreement for double taxation avoidance.

Taxable Income

▪ Taxable income generally comprises 10 main types of income:

LO 7-3: Define taxable incomes of current PIT of Vietnam.

6 Income from winning

prizes;

7 Income from royalties

(copyright/patent…)

8 Income from franchise;

9 Income from inheritance;

10 Income from gifts.

1 Employment income;

2 Business income;

3 Income from capital

investment;

4 Income from capital transfer;

5 Income from real estate

transfer;

Employment Income

▪ Taxable employment income includes all cash remuneration and various benefits in-kind, except for following items not subject to PIT :

a) Allowances for noxious and dangerous

works;

b) Allowances for difficulties, labor accident,

occupational illness, childbirth or

adoption, maternity leave, post-maternity

recovery, reduction in work ability,

pension, monthly widow’s pension,

severance pay, redundancy pay,

unemployment, and other benefits

according to Laws on Labor and Social

Insurance

c) Certain benefits in kind provided on a

collective basis (e.g membership fee,

entertainment, healthcare);

d) Flat expenditures on stationery, business trips, telephone, office clothes (≤ 5 million VND if clothes paid in cash) specified in labor contracts, collective agreement or financial regulation of a company;

e) Transportation to and from work;

f) Training for employees’ improvement in skills;

g) Support of an employer for an employee and their relatives in medical examination and treatment;

h) Mid-shift meals (≤730,000VND if the meals paid in cash starting from Oct 15, 2016);

Employment Income (cont.)

a

i) Once per year home leave round trip

airfare for foreign employees and

Vietnamese working overseas based on

labor contracts and air ticket prices;

j) School fees up to high school in Vietnam /

overseas for children of expatriates /

Vietnamese working overseas;

k) Airfares for employees working on a

rotation basis in a number of industries

(e.g petroleum, mining);

l) One-off allowance for relocation: from

Vietnam for Vietnamese working overseas;

to Vietnam for foreigners working in

Vietnam; to Vietnam for Vietnamese

residing overseas on a long term basis and

returning to Vietnam to work;

m) Taxable housing benefit including utilities being the lower of the actual rental paid and 15 per cent of the employee’s gross taxable income (excluding housing with utilities); therefore the amount paid higher than the taxable rental is non-taxable rental n) Employer’s contributions to certain local and overseas non-mandatory insurance schemes without accumulated premiums (e.g medical insurance, accident insurance)

o) Part of night shift or overtime salary payable that is higher than the day shift

or normal working hours salary stipulated by the Labor Code;