Are dividends subject to personal income tax in Vietnam?

Are dividends subject to personal income tax in Vietnam?

Based on Point g, Clause 3, Article 2 of Circular 111/2013/TT-BTC (amended by Clause 6, Article 11 of Circular 92/2015/TT-BTC) as follows:

- Income from capital investment

Income from capital investment includes income received under the following forms:

+ Interest received from lending to organizations, enterprises, households, business individuals, or business groups under loan contracts or agreements, excluding interest from deposits received from credit institutions or branches of foreign banks as guided at sub-item g.1, point g, clause 1, Article 3 of this Circular.

+ Dividends received from contributing capital to purchase shares.

+ Profits received from capital participation in limited liability companies, partnerships, cooperatives, joint ventures, cooperative agreements, and other business forms as stipulated by the Law on Enterprises and the Law on Cooperatives; profits received from participating in capital investment to establish credit institutions as stipulated by the Law on Credit Institutions; capital contribution to security investment funds and other investment funds established and operating under legal regulations.

Profits of private enterprises or single-member limited liability companies owned by individuals are not included in taxable income from capital investment.

+ The added value of contributed capital received upon dissolution of enterprises, transformation of operational model, division, separation, merger, consolidation of enterprises, or when withdrawing capital.

+ Income received from bond interest, bills, and other valuable papers issued by domestic organizations, excluding income as guided at sub-item g.1 and g.3, point g, clause 1, Article 3 of this Circular.

+ Income received from capital investment in other forms, including contributions of investment in kind, reputation, land use rights, inventions, patents.

+ Income from dividends paid in stocks, income from profits recorded as increased capital.

Therefore, according to the above regulations, receiving stocks will be subject to personal income tax.

Are dividends subject to personal income tax in Vietnam? (Image from Internet)

What are bases for calculating personal income tax in Vietnam?

According to Article 10 of Circular 111/2013/TT-BTC as follows:

The basis for tax calculation for income from capital investment is taxable income and tax rate.

- Taxable income

Taxable income from capital investment is the taxable income that an individual receives as guided in clause 3, Article 2 of this Circular.

- The tax rate for income from capital investment applies according to the full rate tax table with a tax rate of 5%.

- Time of determining taxable income

The time to determine taxable income for income from capital investment is when the organization or individual pays income to the taxpayer.

For specific cases, the time to determine taxable income is as follows:

+ For income from the increased value of contributed capital, as guided at point d, clause 3, Article 2 of this Circular, the time to determine income from capital investment is when the individual actually receives the income upon dissolution of an enterprise, change of operational model, division, separation, merger, consolidation of an enterprise, or withdrawal of capital.

+ For income from profits recorded as increased capital, as guided at point g, clause 3, Article 2 of this Circular, the time to determine income from capital investment is when the individual transfers capital or withdraws capital.

+ For income from dividends paid by stock, as guided at point g, clause 3, Article 2 of this Circular, the time to determine income from capital investment is when the individual transfers shares.

+ In cases where an individual receives income from overseas capital investment in any form, the time to determine taxable income is when the individual receives the income.

- How to calculate tax

Personal income tax payable = Taxable income × Tax rate of 5%

Thus, according to the aforementioned regulations, shareholders receiving dividends paid by stock do not need to declare and pay personal income tax from capital investment upon receipt. Instead, the tax declaration is required when the shareholder transfers the shares.

Which income types are subject to personal income tax in Vietnam?

Based on clause 1, Article 2 of Circular 111/2013/TT-BTC stipulating taxable income types as follows:

According to Article 3 of the Personal Income Tax Law 2007 and Article 3 of Decree 65/2013/ND-CP, taxable income includes:

- Income from business

Business income is derived from production, business activities in the following areas:

+ Income from the production, trading of goods, services in all sectors, industries under law, such as: production, trading of goods; construction; transportation; food and beverage service; service business, including house rental service, land use rights, water surface, and other assets rental.

+ Income from independent occupational activities of individuals in fields, industries authorized with practice licenses or certificates as per law.

+ Income from agricultural, forestry production, salt-making, aquaculture, fishing activities that do not meet tax exemption conditions guided at point e, clause 1, Article 3 of this Circular.