As you may observe from the article Personal Income Tax for Foreigners in Vietnam – Part 1, taxable incomes include incomes from business, incomes from wages and remunerations, incomes from capital investment, incomes from capital transfer, incomes from real estate transfer, incomes from winning prizes, incomes from copyright, incomes from franchising, incomes from inheritance, incomes from receipt of gifts. This part of the series on Personal Income Tax for Foreigners will focus on personal income tax imposed on incomes from capital investment.
I. Types of incomes from capital investment
Incomes from capital investment can be classified into the following types:
– 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.
iI. Tax rate
Under Article 10.2 of Circular No. 111/2013/TT-BTC, the tax rate on the income from capital investment is 5%.
iIi. Tax calculation time
The income from capital investment shall be calculated when the taxpayer is paid by the income payer.
The times to calculate such income in some special cases will be as follows:
– The income from additional value of capital contribution guided in Point d Clause 3 Article 2 of the Circular No 111/2013/TT-BTC shall be calculated when the person actually receives the income when the enterprise is dissolved, converted, divided, merged, amalgamated, or when the capital is withdrawn.
– The income from reinvested profit as guided in Point g Clause 3 Article 2 of the Circular No. 111/2013/TT-BTC shall be calculated when the person transfers or withdraws capital.
– The income from dividend in shares guided in Point g Clause 3 Article 2 of the Circular No. 111/2013/TT-BTC shall be calculated when the person transfers his shares.
– Where the individual receives an income from outward investment in any shape or form, the assessable income shall be calculated when the person receives the income.
iv. Relevant laws and regulations
The following pieces of legislation, regulations, and documents are the grounds mainly governing the tax imposed on incomes from capital investment.
– Circular No. 111/2013/TT-BTC on the implementation of the law on personal income tax, the law on the amendments to the law on personal income tax, and the Government’s Decree No. 65/2013/ND-CP elaborating a number of articles of the law on personal income tax and the law on the amendments to the law on personal income tax.
– Circular No. 92/2015/TT-BTC on guidelines for VAT and personal income tax incurred by residents doing business, amendments to some articles on personal income tax of the Law No. 71/2014/QH13 on the amendments to tax laws, and the Government’s Decree No. 12/2015/ND-CP dated February 12, 2015.
– Circular No. 156/2013/TT-BTC guidance on some articles of the law on tax administration, the law on the amendments to the law on tax administration, and the Government’s Decree No. 83/2013/ND-CP.