Are life insurance premiums eligible for personal income tax deduction in Vietnam?

Are life insurance premiums eligible for personal income tax deduction in Vietnam?

Based on point a, clause 2, Article 9 of Circular 111/2013/TT-BTC, regarding deductions for insurance payments:

Deductions for Insurance Contributions, Voluntary Pension Funds

a) Insurance payments include: social insurance, health insurance, unemployment insurance, professional liability insurance for certain occupations that require mandatory insurance participation.

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Accordingly, insurance payments, including social insurance, health insurance, unemployment insurance, and professional liability insurance for certain occupations that require mandatory insurance participation, are considered insurance and voluntary pension fund contributions deductible when calculating personal income tax.

Thus, the cost of purchasing life insurance, not being mandatory participation insurance, is not among the insurance contributions deductible for personal income tax purposes.

Are life insurance premiums eligible for personal income tax deduction in Vietnam? (Image from the Internet)

Are income from life insurance contract interest and life insurance contract compensation exempt from personal income tax in Vietnam?

According to point g, Article 3 of Circular 111/2013/TT-BTC:

Tax-Exempt Income

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g) Income from interest on deposits at credit institutions, foreign bank branches, interest from life insurance contracts; income from interest on Government of Vietnam bonds.

g.1) Tax-exempt deposit interest as prescribed in this point refers to the individual income received from interest on deposits in Vietnamese Dong, gold, foreign currency at credit institutions, foreign bank branches established and operating under the Law on Credit Institutions in forms of non-term deposits, term deposits, savings, deposit certificates, term notes, treasury bills, and other forms of receipted money under the principle of full principal and interest repayment to the depositor as agreed.

The basis for determining tax-exempt income from deposit interest is the savings book (or savings card), deposit certificate, term note, treasury bill, and other documents under the principle of full principal and interest repayment to the depositor as agreed.

g.2) Interest from life insurance contracts refers to the interest that an individual receives according to a life insurance purchase contract from insurers.

The basis for determining tax-exempt income from interest on life insurance contracts is the interest payment voucher from the life insurance contract.

g.3) Interest from Government of Vietnam bonds refers to the interest that an individual receives from purchasing Government of Vietnam bonds issued by the Ministry of Finance.

The basis for determining tax-exempt income from interest on Government of Vietnam bonds is the par value, interest rate, and term on Government bonds.

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Thus, income from interest on life insurance contracts and life insurance contract compensation is tax-exempt income. The basis for determining tax-exempt income from interest on life insurance contracts is the interest payment voucher from the life insurance contract.

How is the personal income tax period determined?

According to Article 7 of the Personal Income Tax Law 2007 (amended and supplemented by clause 3, Article 1 of the Amended Personal Income Tax Law 2012), the personal income tax period is determined as follows:

(1) For Resident Individuals

- The annual tax period applies to income from business; income from salaries and wages;

- The tax period per occurrence of income applies to income from capital investment; income from capital transfer, except for income from securities transfer; income from real estate transfer; income from lottery winnings; income from royalties; income from franchising; income from inheritance; and income from gifts;

- The tax period per transfer occurrence or annually applies to income from securities transfer.

Additionally, the annual tax period for income from business and income from salaries and wages is guided in Article 6 of Circular 111/2013/TT-BTC as follows:

- For resident individuals:

+ Annual tax period: applies to income from business and income from salaries and wages.

 In case an individual is present in Vietnam for 183 days or more in a calendar year, the tax period is calculated on a calendar year basis.  In case an individual is present in Vietnam for less than 183 days in a calendar year but for 183 days or more in 12 consecutive months starting from the first day of presence in Vietnam, the first taxable period is determined as 12 consecutive months from the first day of presence in Vietnam. From the second year onwards, the tax period is based on a calendar year basis.

+ Tax period per occurrence of income: applies to income from capital investment, income from capital transfer, income from real estate transfer, income from lottery winnings, income from royalties, income from franchising, income from inheritance, and income from gifts.

+ Tax period per occurrence or annually applies to income from securities transfer.

(2) For Non-Resident Individuals

The tax period for non-resident individuals is calculated per occurrence of income.

In cases where a non-resident business individual has a fixed business location such as a store or booth, the tax period applies as for resident individuals with income from business.