F6 Acca Lesson 4 _ Module Pit (Personal Income Tax).Pdf

Tax residents are liable for PIT on worldwide income, while non-residents are taxed at a flat 20% rate on Vietnam-sourced income.. Scope of governing The PIT law applies to both individ

F6 ACCA TAXATION LESSON 4 – PERSONAL INCOME TAX

PART 1 OVERVIEW AND BASIC CONCEPTS

I LEGISLATION

The foundational Law on Personal Income Tax (PIT) in Vietnam remains Law No 04/2007/QH12, originally enacted on November 21, 2007, and effective from January 1, 2009 This law continues to govern the PIT regime, as no comprehensive replacement has been adopted to date It fundamentally transformed the PIT system by eliminating discriminatory treatment between Vietnamese and foreign individuals and introducing comprehensive coverage for various types of individual income that were previously unregulated or overlooked under prior tax frameworks Tax residents are liable for PIT on worldwide income, while non-residents are taxed at a flat 20% rate on Vietnam-sourced income

However, the law has been amended and supplemented multiple times to align with economic changes, international standards (e.g., FATF recommendations), and evolving tax administration needs Key amendments include:

• Law No 26/2012/QH13 (amending and supplementing several tax laws, effective from January 1, 2013)

• Law No 71/2014/QH13 (further amendments to tax laws, effective from January 1, 2015)

• Law No 56/2024/QH15 (amending and supplementing multiple laws, including the PIT Law, effective from various dates in 2025, with some provisions starting January 1, 2026) This recent amendment primarily addresses business income thresholds and e-commerce taxation but does not overhaul the core structure

Significant updates effective in 2025 include:

• Personal Deductions: The personal deduction for taxpayers remains VND 11 million per

month (VND 132 million annually), and the dependent deduction is VND 4.4 million per month per dependent, as adjusted by Resolution No 954/2020/UBTVQH14 (effective since July 1, 2020, and unchanged in 2025)

• Business Income Threshold: From January 1, 2026 (under Law No 56/2024/QH15 and

the new VAT Law No 48/2024/QH15), households and individuals with annual business revenue of VND 200 million or less are exempt from PIT on business income (up from the previous VND 100 million threshold) This aims to support small-scale businesses

• E-commerce and Digital Platforms: Organizations managing e-commerce or digital

platforms must withhold and remit PIT (and VAT) on behalf of sellers, with rates ranging from 0.5% to 5% based on transaction types (effective from April 1, 2025, under amendments in Law No 56/2024/QH15)

• Tax Rates: Progressive rates for residents' employment income range from 5% to 35%,

with a simplified table for calculation Non-residents face a flat 20% on Vietnam-sourced income Investment income is taxed at 5%, and business income at 0.5%–5% depending

on the sector

• Automatic PIT Refunds: From January 24, 2025, Decision No 108/QD-TCT introduces

an automated refund process for individuals self-finalizing PIT returns, streamlining overpayments via the tax IT system

• Filing Deadlines for 2025: For employer-authorized finalization: March 31, 2025 For

self-finalization: May 5, 2025 (extended due to holidays) Monthly/quarterly declarations remain due by the 20th of the following month or end of the next quarter

A full revision of the PIT Law is under preparation by the Ministry of Finance, with a draft expected for National Assembly review in October 2025 and potential passage in May 2026 This aims to simplify the progressive tax brackets (currently 7 levels), adjust thresholds for high-income earners, incorporate incentives for high-skilled talent, and better address new income sources like digital nomads and remote work

II BASIC CONCEPTS

1 Scope of governing

The PIT law applies to both individual residents and non-residents who have taxable income The residence concept under this law is different from preceding regulations and does not base

on the citizenship of the individuals

2 Determination of residency status

The determination of tax residency status under Vietnam’s Personal Income Tax (PIT) regime remains governed by Law No 04/2007/QH12 (as amended by Laws No 26/2012/QH13, No 71/2014/QH13, and No 56/2024/QH15) and detailed in Decree No 65/2013/ND-CP (as amended by Decree No 12/2015/ND-CP) and Circular No 111/2013/TT-BTC (as amended

by Circular No 92/2015/TT-BTC) While the core principles from the original 2008/2009 guidance (e.g., Circular No 84/2008/TT-BTC) remain relevant, they have been updated to reflect modern tax administration practices, digitalization, and alignment with international tax treaties Below is an updated explanation of tax residency criteria for PIT purposes, incorporating current regulations and addressing the provided example

2.1 Physical Presence in Vietnam for 183 Days or More

An individual is deemed a tax resident if they are physically present in Vietnam for 183 days

or more within:

A calendar year (January 1 to December 31), or

A consecutive 12-month period starting from the first day of physical presence in Vietnam Calculation of Days:

The number of days is determined based on immigration records from travel documents (e.g., passport stamps or electronic records)

The day of arrival and day of departure for a single trip are counted as one day If an individual arrives and departs on the same day, it is also counted as one day

The purpose of presence (e.g., business, tourism, or personal) is irrelevant, and calendar days (not working days) are used for the calculation

2.2 Regular Place of Residence in Vietnam

An individual may still be considered a tax resident, even if present in Vietnam for fewer than

183 days, if they have a regular place of residence in Vietnam This is defined as follows: (i) Registered Permanent or Temporary Residence:

Vietnamese Citizens: Individuals with a registered permanent residence under Vietnam’s Law

on Residence (e.g., in the household registration book) are automatically considered tax residents, regardless of their physical presence in Vietnam or overseas work status This effectively classifies most Vietnamese citizens as tax residents

Foreigners: A foreigner is deemed to have a registered residence if they hold a permanent resident card or temporary resident card issued by Vietnamese authorities (e.g., police or immigration department)

(ii) Accumulated Rental Period of 90 Days or More:

An individual is considered to have a regular place of residence if they rent accommodation

in Vietnam (e.g., houses, apartments, hotels, or office-provided lodging) for a cumulative total

of 90 days or more within a tax year (calendar year)

This includes rentals paid by the individual, their employer, or any other party All types of accommodation (hotels, serviced apartments, etc.) are counted

This provision significantly broadens the scope of tax residency, making it likely for foreigners staying in Vietnam for at least 90 days to be classified as tax residents

Source: Circular No 111/2013/TT-BTC, Article 1, as amended, and Decree No

65/2013/ND-CP

2.3 Non-Resident Status

An individual who does not meet either of the above conditions (183 days of presence or regular place of residence) is classified as a non-resident for PIT purposes

Tax Implications of Residency Status

Tax Residents: Subject to PIT on their worldwide income, including income sourced from Vietnam and overseas, regardless of where the payment is made Tax is calculated using progressive rates (5% to 35% for employment income) or specific rates for other income types (e.g., 5% for investment income, 0.5%–5% for business income)

Non-Residents: Subject to PIT only on Vietnam-sourced income at a flat rate of 20% (for most income types, such as employment or services), regardless of whether the payment is made in Vietnam or overseas

Tax Treaties: Vietnam has double taxation agreements (DTAs) with over 80 countries (as of 2025) Under most DTAs, an individual is typically subject to taxation in Vietnam only if they stay for 183 days or more in a 12-month period or meet other treaty-specific criteria (e.g.,

permanent establishment) Tax residents may apply for tax relief under DTAs to avoid double taxation, using forms specified in Circular No 80/2021/TT-BTC (e.g., Form 02/NTNN for DTA relief)

Example: Mr Shenzen’s Tax Residency Status

Background:

Mr Shenzen, a Singaporean expert, first arrived in Vietnam on January 15, 2025, for business purposes

He stayed in Vietnam for 180 days from January 15 to December 31, 2025

He returned in 2026 and stayed for an additional 4 days from January 1 to January 14, 2026 Analysis:

Physical Presence Test: The consecutive 12-month period from January 15, 2025, to January

14, 2026, totals 180 + 4 = 184 days Since this exceeds 183 days, Mr Shenzen is classified as

a tax resident for the 2009 tax year

Alternative Scenario (Regular Place of Residence): Even if Mr Shenzen’s total stay from January 15, 2025, to January 14, 2026, was less than 183 days, he would still be a tax resident

if he rented accommodation (e.g., hotels, apartments) for a cumulative total of 90 days or more in the 2025 tax year This includes rentals paid by his employer or others

3 Taxable income

The PIT Law applies to the following 10 categories of income for tax residents (taxed on worldwide income) and non-residents (taxed only on Vietnam-sourced income) Each category is subject to specific tax rates and exemptions, as outlined in Circular No 111/2013/TT-BTC and related regulations

Income from Business Activities

Scope: Includes income from production, trading of goods, provision of services, and independent professional activities (e.g., doctors, lawyers, or consultants operating independently)

Examples: Revenue from small businesses, freelance services, e-commerce sales, or hailing services (e.g., Grab drivers)

ride-Tax Treatment:

Taxed at 0.5%–5% (flat rates based on the sector, e.g., 1% for trading, 5% for services) under

the presumptive method for individuals/households with annual revenue up to VND 200 million (effective January 1, 2026, per Law No 56/2024/QH15; previously VND 100 million) Businesses exceeding this threshold may use the actual deduction method (progressive rates

Income from Employment

Scope: Includes salaries, wages, allowances, bonuses, commissions, lecture fees, and employment-related benefits (e.g., housing, transportation, or meal allowances provided by employers)

Examples: Monthly salaries, year-end bonuses, stock-based compensation, or in-kind benefits exceeding VND 10 million/month

Tax Treatment:

Residents: Taxed at progressive rates (5%–35%) after deductions (VND 11 million/month for the taxpayer, VND 4.4 million/month per dependent, per Resolution No 954/2020/UBTVQH14)

Non-Residents: Flat 20% rate on Vietnam-sourced employment income

Exemptions: Certain allowances (e.g., one-time relocation allowances, hazardous work allowances) are non-taxable, per Circular No 111/2013/TT-BTC

Note: Employers must withhold PIT and file declarations monthly/quarterly via the eTax system, per Circular No 80/2021/TT-BTC

Income from Capital Investment

Scope: Includes interest from loans, dividends, profits from capital contributions, or other investment-related income

Examples: Bank deposit interest, bond interest, or dividends from shares

Tax Treatment: Flat 5% rate on the gross amount, withheld at source (e.g., by banks or companies)

Exemptions: Interest from government bonds and certain savings accounts is exempt, per Decree No 65/2013/ND-CP

Income from Capital Transfer

Scope: Income from transferring capital contributions, shares, securities, or other capital interests

Examples: Gains from selling shares in a joint-stock company or transferring equity in a limited liability company

Tax Treatment:

Flat 20% rate on the gain (transfer price minus acquisition cost and related expenses)

For securities, a simplified 0.1% rate on the gross transfer value applies, regardless of gain/loss, per Circular No 111/2013/TT-BTC

Note: Individuals must declare and pay PIT upon transfer, unless withheld by the securities company

Income from Real Property Transfer

Scope: Income from transferring land use rights, residential houses, apartments, or other real estate

Examples: Gains from selling a house or transferring land use rights

Tax Treatment: Flat 2% rate on the gross transfer value, regardless of gain/loss or residency status

Exemptions: Transfers of residential houses/land by individuals with only one property in Vietnam are exempt, per Decree No 65/2013/ND-CP

Note: PIT is withheld by the notary or land registration office during the transfer process Income from Winnings

Scope: Income from lotteries, promotional campaigns, betting, or gambling (where legally permitted)

Examples: Lottery prizes, promotional gifts, or casino winnings

Tax Treatment: Flat 10% rate on winnings exceeding VND 10 million per payout

Exemptions: Winnings from state-authorized lotteries or promotional campaigns below VND

10 million are exempt, per Circular No 111/2013/TT-BTC

Note: Payers (e.g., lottery companies) typically withhold PIT at source

Income from Intellectual Property

Scope: Income from royalties or licensing of intellectual property rights, such as patents, copyrights, or trademarks

Examples: Royalties from book publications, music, or software licensing

Tax Treatment: Flat 10% rate on amounts exceeding VND 10 million per contract for residents; non-residents pay 10% on Vietnam-sourced income

Note: Creators receiving income from their own IP (e.g., authors, inventors) may qualify for deductions, per Circular No 111/2013/TT-BTC

Income from Franchising Activities

Scope: Income from granting franchise rights or licensing business models

Examples: Fees received for franchising a restaurant or retail brand

Tax Treatment: Flat 5% rate for residents; non-residents pay 5% on Vietnam-sourced

franchising income

Note: Franchisors must declare income, with withholding by payers in some cases, per Circular No 80/2021/TT-BTC

Income from Inheritances

Scope: Income from inheriting securities, equity in economic organizations, real estate, or other assets requiring ownership registration

Examples: Inheriting shares, land use rights, or a registered vehicle

Tax Treatment: Flat 10% rate on the value exceeding VND 10 million per inheritance Exemptions: Inheritances between close relatives (e.g., spouses, parents, children) are exempt, per Decree No 65/2013/ND-CP

Note: Tax is declared and paid upon registration of ownership transfer

Income from Gifts

Scope: Income from receiving gifts of securities, capital contributions in economic organizations, real estate, or other assets requiring ownership/use right registration

Examples: Receiving gifted shares, a house, or land use rights

Tax Treatment: Flat 10% rate on the value exceeding VND 10 million per gift

Exemptions: Gifts between close relatives (e.g., spouses, parents, children) are exempt, per Decree No 65/2013/ND-CP

Note: Tax is withheld or declared during the registration of ownership transfer

Key Updates for 2025

E-commerce and Digital Income: The rise of digital platforms has prompted new regulations under Decree No 117/2025/ND-CP (effective July 2025) and Law No 56/2024/QH15 (effective April 1, 2025) Income from business activities on e-commerce platforms (e.g., online sales, content creation) falls under Category 1, with platforms required to withhold PIT (0.5%–5%) on behalf of sellers

Exemption Threshold Increase: From January 1, 2026, individuals/households with annual business income of VND 200 million or less are exempt from PIT (previously VND 100 million), per Law No 56/2024/QH15

Digital Tax Administration: All PIT declarations, including for the above categories, must be filed electronically via the eTax system (etax.gov.vn), per Circular No 80/2021/TT-BTC Automated PIT refunds for overpayments are available from January 24, 2025, per Decision

No 108/QD-TCT

Pending PIT Law Revision: A draft PIT Law revision, expected for National Assembly review

in October 2025 and potential adoption in May 2026, may introduce new income categories (e.g., for digital nomads or crypto-related income) and adjust tax rates or exemptions to better address modern income sources

Assessable income

= Taxable income - Allowance deduction - Tax relief Allowable deductions are social insurance, health insurance or donation while tax relief comprise of self relief and dependent relief These shall be discussed in details in Part 2 and Part 3

6 Tax period

For non-resident individuals, tax period shall be the time of arising taxable income, i.e tax is calculated and paid every time of income payment For resident individuals, the tax period depends on the income categories, in particular:

6.1 Income from employment and from business shall have calendar years a tax periods For resident foreigners the first tax period is determined as follow: if that individual has already stayed in Vietnam for at least 183 days as at 31 December of the first year, then the first tax year shall be the calendar year Otherwise the first tax year shall be the 12-month period In any event, the subsequent tax years shall be calendar years

Example:

Mr Tanaka is a Japanese technical expert, who first arrived in Vietnam in 15 January 2025 for business development purposes, he subsequently visits Vietnam many times and the total number of days in Vietnam is as follows:

Case 1

From 15 January 2025 to 31 December 2025:180 days

From 1 January 2026 to 14 January 2026: 4 days

Tanaka's fist tax year shall be the period from 15 January 2025 to 14 January 2025 Second tax year starts from 1 January 2026 to 31 December 2026

Case 2

From 15 January 2025 to 31 December 2025:183 days

From 1 January 2026 to 14 January 2026: 4 days

Tanaka's first tax year shall be calendar year 2025

Case 3

From 15 January 2025 to 31 December 2025:180 days

From 1 January 2026 to 14 January 2026: 2 days

However, the accumulated duration of house rentals is more than 90 days for the above period

In this case, it is unclear from Circular 84 what should be the first tax year A reasonable interpretation would lead to the same tax year as in Scenario 1

6.2 Income from other categories, exempt for transfer of securities, shall have arising time as tax periods, i.e similar to non-residents

income-6.3 For income from for transfer of securities, taxpayers have the choice to apply calendar year as the tax period or pay tax every time they have income The selection of tax period must

be registered with the tax authorities before the beginning of every tax year

III OVERVIEW ON PIT CACULATION METHOD

1 Brief on PIT rate

Similar to the old regulation on PIT, there are two types of PIT rate under the new law on PIT:

• Flat rate: commonly applicable for irregular income or for determination tax of nonresident

• Progressive rate: commonly applicable to resident having regular incomes such as business income and employment income

• Note that where the progressive rate is applied for PIT calculation, it is likely that the CIT finalization is also required

2 Summary of tax treatment on specific taxable incomes

Below is a summary of applicable tax rate to different types of income Refer to Part 2, 3 below for details of treatment

2 Employment income Progressive rate Flat rate

5 Transfer of real estate Flat rate Flat rate

No Type of income Resident Non resident

PART 2 EMPLOYMENT INCOME AND BUSINESS INCOME

A OVERVIEW ON TAX TREATMENT

As noted in the above section, there is a same treatment for employment income and business income In addition, employment income is aggregated with business income for PIT purpose In respect of a tax resident, PIT shall be calculated on the basis of progressive tax rate whilst a flat rate shall be applied for nonresident individual

Of notes, there are two concepts to be remembered: taxable income and assessable income

Statutory Contributions +

Family deductions -

Qualified contributions

In case individual also has other income categories such as capital investment, inheritance, etc during the tax period, these income categories must be declared separately This will be discussed in the Part 3 - Other incomes

B PREPARATION FOR PIT CALCULATION

There are three methods to determine the taxable income from business activities, depending

on the status of bookkeeping of the individual

1.1.1 Deemed method

This method applies to business individuals who do not implement the accounting system and maintain the invoices, documents for tax purposes Under this method, the taxable income

is determined by applying a deemed ratio to the deemed turnover of the tax period

Taxable

Deemed turnover * Deemed ratio The deemed ratio is determined by the General Department of Taxation (“GDT”) for each business activity or they can delegate the provincial tax departments to determine the appropriate rates for each business line

Example:

An individual declared that his total turnover for the year 2025 is VND500,000,000 However, following the research on similar businesses in the same location, the local tax authority concluded that his turnover must be VND700,000,000/year For this line of business, the GDT provides that the deemed taxable income ratio is 20% of turnover

His 2025 taxable business income is: 700,000,000 x 20% = 140,000,000

1.1.2 Partially deemed method

Where the business individuals are only able to record the turnover of the goods and services, but not the relevant expenses, the taxable income shall be determined by applying a deemed ratio to the actual taxable turnover of the tax period

Taxable income = Turnover * Deemed ratio

Example:

In the above example, if the individual maintains all records to prove that his turnover of VND500,000,000 is correct, then the 2025 taxable income is: 500,000,000 x 20% = 100,000,000

It seems that this method would not be popular in practice because the tax authorities may doubt that the business individuals try to lower their turnover by keeping selected documents only while there is currently no effective mechanism to control this

1.1.3 Net profit method

When the business individuals are able to implement the accounting system and maintain adequate records, invoices, etc in a way similar to a company, then the taxable income from

doing business for a tax period is determined as follows:

Taxable

income = Turnover -

Reasonable expenses related to income +

Other taxable income

The rules regarding the determination of taxable income of business individuals under this method is somewhat similar to the Corporate Income Tax regulations due to the similar

nature

Turn over

Turnover is the total receipts from selling of goods, processing fees, commissions, provision

of goods or services arising during the tax period

The timing for recognition of turnover is the time when ownership of the goods is transferred, completion of service OR when the sale invoice is issued, whichever earlier

In addition, goods, services produced by the business individuals which are used for exchange, reward to employees, gift, etc must still be recognized for turnover at the market price However, if the goods or services are used for business purposes then the turnover is equivalent to the cost of goods sold (i.e resulting in zero taxable income)

Expenses

The principles governing deductible expenses for Personal Income Tax (PIT) under Vietnam’s Law No 04/2007/QH12 (as amended by Laws No 26/2012/QH13, No 71/2014/QH13, and No 56/2024/QH15) are outlined in Decree No 65/2013/ND-CP (as amended by Decree No 12/2015/ND-CP) and Circular No 111/2013/TT-BTC (as amended

by Circular No 92/2015/TT-BTC) These regulations have superseded the original Circular

No 84/2008/TT-BTC, but the core principles for deductible expenses remain consistent, with updates to reflect modern tax administration, digitalization, and alignment with international standards Unlike Corporate Income Tax (CIT) regulations, which explicitly list non-deductible expenses, the PIT framework focuses on specifying deductible expenses for individuals using the actual deduction method (also referred to as the “profit method”) for calculating taxable business income

Below is an updated explanation of the deductible expense principles, the specific categories

of deductible expenses, and an analysis of the provided example, incorporating current regulations as of August 28, 2025

Principles for Deductible Expenses

For expenses to be deductible for PIT purposes, they must meet the following conditions: Actually Incurred: The expenses must have been paid or incurred during the tax period Directly Related to Income Generation: The expenses must be directly linked to the production of assessable income in the tax period

Supported by Legitimate Documents: Expenses must be substantiated with proper invoices, receipts, or other legal documents compliant with Vietnam’s tax regulations (e.g., VAT invoices or e-invoices per Decree No 123/2020/ND-CP on electronic invoicing, effective July 1, 2022)

These principles align closely with CIT regulations, but PIT rules are tailored for individuals and households, emphasizing simplicity and flexibility for small-scale businesses

Categories of Deductible Expenses

Unlike CIT regulations, which list non-deductible expenses, the PIT framework (per Circular

No 111/2013/TT-BTC) specifies major deductible expense categories for individuals using the actual deduction method The following are the key deductible expenses, updated to reflect current regulations:

Employment Costs

Scope: Includes salaries, wages, allowances, bonuses, and other employment-related expenses for employees, but excludes the salary or remuneration of the individual named in the business registration certificate (e.g., the business owner)

Limit on Clothing Allowance: A deductible limit of VND 5 million/person/year applies to uniform or clothing allowances (increased from VND 1 million/person/year in Circular No 84/2008/TT-BTC, per Circular No 92/2015/TT-BTC)

Requirement: Must be supported by labor contracts, payroll records, and valid invoices/receipts

Note: PIT withheld for employees is included in employment costs but is not separately deductible as a tax expense

Costs of Materials, Fuel, Supplies, Power, and Goods

Scope: Includes expenses for raw materials, fuel, utilities, and goods used in business operations

Exclusions: Costs of lost materials, goods, or assets are non-deductible unless the losses result from natural calamities, fire, or other force majeure events and are not compensated by insurance or other means

Requirement: Must be supported by valid invoices (e.g., e-invoices compliant with Decree

No 123/2020/ND-CP) Expenses without proper invoices are generally non-deductible Depreciation and Maintenance of Fixed Assets

Scope: Includes depreciation and maintenance costs for fixed assets (e.g., machinery, vehicles, equipment) used for business purposes

Rules: Depreciation follows CIT regulations (per Circular No 45/2013/TT-BTC, as amended), with methods such as straight-line depreciation and specific useful life periods Assets must be registered and used directly for income generation

Requirement: Must be supported by purchase documents, asset registration records, and maintenance invoices

Interest Expenses

Scope: Includes interest on loans used for business operations

Limit: For loans from non-credit institutions (e.g., private lenders), the deductible interest is capped at 150% of the prime rate published by the State Bank of Vietnam (SBV) at the time

of borrowing (as of 2025, the prime rate is approximately 6% per annum, per SBV announcements, so the cap is around 9% per annum)

Exclusions: Interest on loans used for capital contributions to the business itself (e.g., equity investments) is non-deductible

Requirement: Must be supported by loan agreements and payment receipts

Requirement: Must be supported by valid invoices or contracts

Taxes, Fees, and Charges

Scope: Includes business licensing fees, import duties, land rental fees, and input VAT (as individuals using the direct VAT method cannot claim VAT credits)

Exclusions: CIT is not deductible, and PIT withheld for employees is included in employment costs, not as a separate tax expense

Requirement: Must be supported by official receipts or payment documents from relevant authorities

Other Expenses

Scope: Includes any other expenses related to generating taxable income, provided they are necessary and supported by proper documentation (e.g., e-invoices, contracts, or receipts) Flexibility: This provision allows deductions for expenses not explicitly listed, as long as they are directly tied to income generation and substantiated with legitimate documents Examples: Training costs, business travel expenses, or software subscriptions for business operations

Note: The burden of proof lies with the taxpayer to demonstrate the necessity of these expenses during tax audits

Example: Mr Long’s Taxable Income Calculation for 2025

Background:

Mr Long owns a private cafeteria in Hanoi and uses the actual deduction method (profit method) for PIT, maintaining sufficient records

In 2025, his total revenue is VND 2,000,000,000

He claims the following deductible expenses:

Employment cost: VND 800,000,000, including VND 200,000,000 as his own salary

Rental of cafeteria location: VND 500,000,000

Purchase of food, beverages, and materials: VND 300,000,000, of which VND 100,000,000

lacks proper invoices

Analysis of Deductible Expenses (Updated to 2025 Regulations):

Employment Cost:

The VND 200,000,000 salary to Mr Long (the business owner named in the business registration certificate) is non-deductible, per Circular No 111/2013/TT-BTC, Article 6 The remaining employment cost (VND 800,000,000 – VND 200,000,000 = VND 600,000,000) is deductible, assuming it is supported by labor contracts, payroll records, and valid payment documents

If clothing allowances are included, they are deductible up to VND 5 million/person/year (updated limit)

Rental of Cafeteria Location:

The VND 500,000,000 for renting the cafeteria location is deductible, provided it is supported

by a lease agreement and valid invoices (e.g., e-invoices per Decree No 123/2020/ND-CP) Purchase of Food, Beverages, and Materials:

Of the VND 300,000,000, only expenses with proper invoices are deductible Thus, VND 100,000,000 without invoices is non-deductible

Example Calculation (Simplified):

Taxable income after deductions: VND 700,000,000 – VND 132,000,000 (personal deduction) = VND 568,000,000

Apply progressive rates (5%–35% per Circular No 111/2013/TT-BTC) to calculate the exact PIT liability, which requires a detailed breakdown not provided here

1.1.4 Exempt income

There is only one item of business income which is exempt from PIT, i.e when the household

or individuals directly involve in the production of agricultural, forestry, salt, aquaculture products which are in the unprocessed or semi-processed forms

1.2 Employment income

Under the new PIT regime, the tax treatment for PIT from business income is viewed as more specific and straightforward and cover comprehensive in the broad range of employee remuneration

1.2 1 Taxable income

Employment income is one of the 10 taxable income categories under the PIT Law (see previous responses for the full list) Unless specifically exempted (as outlined below), all employment income is subject to PIT, regardless of whether it is received in cash or in-kind The following types of employment income are taxable, per Circular No 111/2013/TT-BTC, Article 2:

Salaries, Wages, and Similar Income

Scope: Includes salaries, wages, and any other income of a similar nature paid to employees under labor contracts or agreements

Examples: Monthly salaries, overtime pay, or performance-based payments

Allowances and Subsidies

Scope: Includes all allowances and subsidies provided by employers, except those specifically exempted (see exemptions below)

Examples: Housing allowances, meal allowances, transportation allowances, or phone allowances, unless explicitly exempt

Remuneration in Other Forms

Scope: Includes payments for services or activities performed as part of employment or professional engagements

Examples:

Brokerage commissions

Remuneration from participation in research projects

Royalties from writing books, articles, or translations

Lecture fees

Fees for cultural/artistic performances or advertising services

Income from Organizational Participation

Scope: Income from involvement in business associations, boards of management, inspection committees, management councils, or other organizations

Examples: Fees for serving on a company’s board of directors or supervisory board

Other Benefits (Cash or In-Kind)

Scope: Includes additional benefits provided by employers, whether in cash or in-kind, that are not part of basic salary or allowances

Examples:

Housing benefits (e.g., employer-provided accommodation or housing allowances exceeding VND 15 million/month, per Circular No 111/2013/TT-BTC)

Utilities or services related to provided housing (e.g., electricity, water)

Non-compulsory insurance (e.g., private health or life insurance)

Membership fees (e.g., golf clubs, health clubs)

PIT consultancy fees or personal services (e.g., maids, drivers for personal use)

Valuation: In-kind benefits are taxed based on their market value or the employer’s recorded cost, supported by valid invoices or contracts

Bonuses (Cash or In-Kind)

Scope: Includes all bonuses, except certain state-awarded bonuses (e.g., national merit awards)

Examples: Performance bonuses, year-end bonuses, or one-time incentives

Special Case (Stock Bonuses): If bonuses are paid in stocks, the taxable value is determined based on the book value in the company’s accounting records at the time of issuance, not the market price This may result in a taxable amount different from the stock’s market value if traded above or below book value

Requirement: Stock bonuses must be documented with issuance records and company accounting data

Taxation on Cash Basis

Employment income is taxed on a cash basis, meaning it is subject to PIT in the tax period (calendar year) when the income is actually paid to the taxpayer, not when it is earned or accrued

Example: A bonus announced in 2010 but paid in 2011 is taxable in the 2011 tax year Implication: Employers must withhold PIT at the time of payment and report it in the corresponding tax period, per Circular No 80/2021/TT-BTC

Exemptions from Taxable Employment Income

Certain employment-related incomes are exempt from PIT, as specified in Circular No 111/2013/TT-BTC, Article 3, and Decree No 65/2013/ND-CP Key exemptions include:

Specific Allowances and Subsidies:

One-time relocation allowances for employees moving to new work locations (domestic or international)

Hardship allowances for work in remote, hazardous, or climatically challenging areas (e.g., offshore oil platforms)

Meal allowances up to the employer’s prescribed limit (e.g., VND 730,000/month as of 2025, adjusted periodically)

Uniform/clothing allowances up to VND 5 million/person/year (updated from VND 1 million

Tax Rates for Employment Income

Tax Residents: Employment income is taxed at progressive rates (5%–35%), after applying personal and dependent deductions:

Personal deduction: VND 11 million/month (VND 132 million/year)

Dependent deduction: VND 4.4 million/month per dependent, per Resolution No 954/2020/UBTVQH14

Progressive Tax Table (per Circular No 111/2013/TT-BTC):

Withholding: Employers must withhold PIT at source and file monthly/quarterly declarations via the eTax system, per Circular No 80/2021/TT-BTC

Example: Mr Binh’s 2025 Performance Bonus

Background:

On December 31, 2025, Mr Binh’s company announced a 2025 performance bonus of VND 10,000,000, to be paid in January 2026

Analysis:

Since PIT on employment income is taxed on a cash basis, the bonus is taxable in the year it

is actually paid (2026), not when it is announced (2025)

Tax Treatment in 2026:

If Mr Binh is a tax resident, the VND 10,000,000 bonus is added to his total employment income for 2026, subject to progressive rates (5%–35%) after deductions (VND 11 million/month for himself, plus VND 4.4 million/month per dependent)

If Mr Binh is a non-resident, the bonus is taxed at a flat 20% rate (VND 2,000,000), as it is Vietnam-sourced income

The employer must withhold PIT at the time of payment (January 2026) and include it in the

2026 tax declarations

1.2.3 Exempt income

The following items are specifically exempt from PIT

• The additional salaries for night shifts or overtime (on top of the regular salary level)

Example:

Mr Duc has average hour rate of VND100,000/working hour During January 2025 he worked overtime for 20 hours at the rate of 150%

The income exempt from PIT would be:20 x (150% - 100%) x 100,000 = VND500,000

• Retirement salaries paid by Social Insurance Fund under the Law on Social Insurance Retirees who earn salaries from Social Insurance Fund may still be subject to PIT if they also have other income taxable to PIT

Individuals living in Vietnam are also entitled to similar exemption if they are paid with pension salaries by foreign pension funds established under the law on social security of such countries This condition may imply that private pension payments are still subject