How to calculate personal income tax for capital investment incomes

As you may observe from Personal Income Tax for Foreigners in Vietnam – Part 1 and Personal Income Tax for Foreigners in Vietnam (Part 3), incomes from capital investment will be considered as a taxable income. In this article, we will discuss on how to calculate the personal income tax (PIT) on such an income.

i. Define the incomes from capital investment

As mentioned in Part 3 of the series of Personal Income Tax for Foreigners in Vietnam, incomes from capital investment can be one of the followings:

– Interest on the loans given to other organizations, enterprises, business households, business individuals and groups of business individuals according to loan contracts or agreements, except for the interests paid by credit institutions and branches of foreign banks according to Point g.1 Clause 1 Article 3 of the Circular No. 111/2013/TT-BTC.

– The dividends earned from capital contribution to purchase of shares.

– Profits from capital contributions to limited liability companies, partnerships, cooperatives, joint-ventures, business cooperation contracts, and other forms of business under the Law on Enterprises and the Law on Cooperatives; profits from capital contribution in establishment of credit institutions according to the Law on credit institutions, capital contributions to securities investment fund and other investment funds that are established and operated within the law.

Profits from capital investment of private companies and single-member limited liability companies under the ownership of individuals shall not be included in taxable income.

– The added value of capital contribution received when the enterprise is dissolved, converted, divided, split, merged, amalgamation, or upon capital withdrawal.

– Incomes from interest on bonds, treasury bills, and other valuable papers issued by Vietnamese organizations, except for the incomes defined in Point g.1 and g.3 Clause 1 Article 3 of the Circular No. 111/2013/TT-BTC.

– The incomes from capital investment in other forms, including capital contribution in kind, by reputation, rights to use land, patents.

– Incomes from dividends paid in bonds, incomes from reinvested profit.

(Such incomes are stipulated in Paragraph 3, Article 2 of Circular 111/2013/TT-BTC as amended and supplemented under Paragraph 6, Article 11 of Circular 92/2015/TT-BTC)

iI. PIT calculation for capital investment income

Taxable income from capital investment is the income that an individual receives under the instructions in Item 1 above. The tax rate on capital gains income is subject to the Full Tariff at 5%.

Personal income tax on income from capital investment of non-resident individuals is determined by the total taxable income received by individuals from capital investment in organizations in Vietnam multiply (×) by the 5% tax rate. Accordingly, the applicable formula will be as follows:

Personal income tax payable = Total taxable income x Tax rate (5%)

Such formula will be applied for both residents and non-residents.

iII. Time of determination of taxable income

Time of determination of a taxable income with respect to income from capital investment is the time when an organization or individual pays income to a taxpayer. For some special cases, you can observe at Item 3 of Part 3 of the series of Personal Income Tax for Foreigners in Vietnam

iV. Documents for PIT declaration applicable to capital investment income

– If you are an individual who directly declares tax, submit Form 04/NNG-TNCN (issued together with Circular No. 92/2015/TT-BTC) Personal income tax return (Applies to individuals with income). import from business, capital investment, copyright, franchise, winnings from abroad).

– If the enterprise pays income with a deduction of tax for the capital investment income of both resident and non-resident individuals, they shall declare tax according to Form No. 06/TNCN enclosed with Circular No. 92/2015/TT-BTC.

V. Deadline for filing PIT declaration documents

Tax period upon each time of income generation will apply to income from capital investment. The deadline for submitting a tax declaration dossier for each time a tax obligation arises is the 10th (ten) day from the date of the tax liability.