Are interests subject to personal income tax in Vietnam?

Are interests subject to personal income tax in Vietnam?

Based on clauses 2 and 3 of Article 3 of the Law on Personal Income Tax 2007, as amended by clause 2 of Article 2 of the Law on Amendments to Various Tax Laws 2014, clause 1 of Article 1 of the Law on Amendments to the Law on Personal Income Tax 2012, the specific provisions are as follows:

Taxable Income

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2. Income from salaries and wages, including:

a) Salaries, wages, and amounts of a salary or wage nature;

b) Allowances and subsidies, except allowances and subsidies as stipulated by law, such as those for people with meritorious services, national defense, security, hazardous jobs, attraction areas, as well as unexpected difficulty subsidies, labor accident allowances, occupational disease benefits, one-time maternity or adoption grants, impairment benefits, one-time retirement grants, monthly survivorship benefits, severance pay, unemployment benefits under labor law, and other social insurance allowances;

c) Remuneration in various forms;

d) Money received from participation in business associations, boards of directors, supervisory boards, management councils, and organizations;

dd) Other monetary or non-monetary benefits received by the taxpayer;

e) Bonuses, excluding those accompanying State-awarded titles, national, international prizes, technical improvements, patents recognized by State agencies, law violation discovery bonuses reported to competent state agencies.

3. Income from capital investment, including:

a) Loan interest;

b) Share dividends;

c) Income from capital investment in other forms, excluding income from Vietnam government bond interest.

...

Thus, as per legal provisions, interest from loans is subject to personal income tax.

What is the tax assessment period for interests in Vietnam?

According to Article 7 of the Law on Personal Income Tax 2007, amended by clause 3 of Article 1 of the Law on Amendments to the Law on Personal Income Tax 2012, the specific provisions are as follows:

Tax Assessment Period

1. The tax assessment period for resident individuals is stipulated as follows:

a) The tax assessment period for income from business activities; income from salaries and wages is annual;

b) The tax assessment period for each occurrence of income for capital investment income; income from capital transfers, excluding stock transfers; income from real estate transfers; prize winning income; royalty income; franchise income; inheritance income; gift income;

c) The tax assessment period for each stock transfer or annually, if the individual opts for annual taxation, registration with the tax office is required at the beginning of the year.

2. The tax assessment period for non-resident individuals is calculated for each occurrence of taxable income.

Thus, based on legal provisions, the personal income tax assessment period for interests is on each occurrence.

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

What tax schedule applies to interests in Vietnam?

According to clause 2 of Article 23 of the Law on Personal Income Tax 2007, amended by clause 7 of Article 2 of the Law on Amendments to Various Tax Laws 2014, the specific provisions regarding the comprehensive tax schedule are as follows:

The comprehensive tax schedule is stipulated as follows:

Thus, according to the aforementioned regulation, interests applies the comprehensive tax schedule.

Is taxable interests eligible for personal exemption in Vietnam?

Based on Article 19 of the Law on Personal Income Tax 2007, amended by Clause 4 of Article 1 of the Law on Amendments to the Law on Personal Income Tax 2012, Article 1 of the Resolution 954/2020/UBTVQH14, and clause 4 of Article 6 of the Law on Amendments to Various Tax Laws 2014, the provisions are as follows:

personal exemption

1. personal exemption is the amount deducted from taxable income before tax calculation for income from business activities, salaries, and wages of resident individuals. The deduction includes the following components:

a) The deduction level for the taxpayer is 11 million VND/month (132 million VND/year);

b) The deduction level for each dependent is 4.4 million VND/month.

2. Determining the deduction level for dependents follows the principle that each dependent can only apply for a deduction once to one taxpayer.

3. Dependents are persons whom the taxpayer has the duty to support, including:

a) Minor children; disabled children, unable to work;

b) Individuals without income or with income not exceeding the stipulated level, including adult children studying at university, college, technical school or vocational school; spouses unable to work; parents who are past working age or unable to work; others with no support whom the taxpayer directly supports.

the Government of Vietnam prescribes the income level, declaration for identifying dependents for personal exemption.

Thus, as per the above provisions, taxable interests is not eligible for personal exemption.