I. Definition of Personal Income Tax
Personal income tax refers to the tax that income earners have to deduct and remit part of their salary or from other sources of income into the state budget after deducting amounts have been calculated.
iI. Who are Personal Income Tax Payers
PIT payers include resident and non-resident individuals who earn taxable incomes specified in the Law on Personal Income Tax and relevant regulations. Scope to define taxable income of taxpayers shall be as follows:
– For resident individuals, their taxable incomes are incomes earned inside and outside the Vietnamese territory, regardless of where their incomes are paid.
– For non-resident individuals, their taxable incomes are incomes earned in Vietnam, regardless of where their incomes are paid.
iiI. Who is Tax Resident/Non-Resident?
Residency status of foreign individuals will be defined based on some criteria such as: (i) the number of days present in Vietnam; (ii) permanent address in Vietnam. Accordingly, if a foreign individuals meet one of the following conditions, he/she will be considered as tax resident:
– Being present in Vietnam for a period of 183 days or more within either a calendar year or for 12 consecutive months, counting from the 1st arriving date;
– Having a residence for permanent residence as prescribed by law on residence;
– Having signed a rental contract for a period of over 183 days.
iv. Taxable Incomes
Taxable incomes of individuals include the following kinds of incomes:
– Incomes from production or business activities.
– Incomes from salaries or wages receivable by employees from their employers.
– Incomes from capital investment.
– Incomes from capital transfer.
– Incomes from transfer of real estate
– Incomes from won prizes in cash or in kind
– Incomes from copyright
– Incomes from commercial franchising under the Commercial Law.
– 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.
– Incomes from gifts that are securities, capital holdings in economic organizations or business establishments, real estate, and other assets subject to ownership or use registration.
v. Tax-exempt Incomes
– Incomes from transfer of 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.
– 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.
– Incomes from the value of land use rights of individuals who are allocated land by the State.
– 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.
– 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.
– Incomes from conversion of agricultural land allocated by the State to households and individuals for production.
– Incomes from interests on deposits at credit institutions or interests from life insurance policies.
– Incomes from foreign exchange remittances.
– Wages paid for night shift or overtime work, which are higher than those paid for day shifts or prescribed working hours in accordance with the law.
– Retirement pensions paid by the Social Insurance.
– Incomes from scholarships.
– 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.
– Incomes received from charity funds licensed or recognized by competent state agencies and operating for charity, humanitarian or non-profit purposes.
– Incomes received from governmental or non-governmental foreign aid for charity or humanitarian purposes approved by competent state agencies.
Understanding Personal Income Tax in Vietnam is very necessary for both foreign-invested companies in Vietnam and foreign employees working in Vietnam. To find out more about this subject matter, please follow our series on Personal Income Tax.