How is PIT calculated for Vietnamese non-residents with income from capital transfer?

How is personal income tax calculated for Vietnamese non-residents with income from capital transfer?

According to Article 20 of Circular 111/2013/TT-BTC, personal income tax for income from capital transfer for Vietnamese non-residents is calculated as follows:

- Personal income tax for income from capital transfer by Vietnamese non-residents is determined by multiplying the total amount received by the Vietnamese non-resident from the transfer of capital at Vietnamese organizations or individuals by the tax rate of 0.1%, irrespective of whether the transfer occurs in Vietnam or abroad.

The total amount received by the Vietnamese non-resident from the transfer of capital at Vietnamese organizations or individuals is the transfer price without any deductions for costs, including capital costs.

- The transfer price in each specific case is determined as follows:

+ In the case of transferring contributed capital, the transfer price is determined similar to that of Vietnamese residents as guided in point a.1, clause 1, Article 11 of Circular 111/2013/TT-BTC.

+ In the case of transferring securities, the transfer price is determined similar to that of Vietnamese residents as guided in point a.1, clause 2, Article 11 of Circular 111/2013/TT-BTC.

- Time of determining taxable income:

+ For income from the transfer of contributed capital by a Vietnamese non-resident, it is the time when the capital transfer contract takes effect.

+ For income from securities transfer by a Vietnamese non-resident, it is determined as for a Vietnamese resident as guided in point c, clause 2, Article 11 of Circular 111/2013/TT-BTC.

How is PIT calculated for Vietnamese non-residents with income from capital transfer? (Image from the Internet)

What types of income are subject to personal income tax from capital transfer in Vietnam?

According to clause 4, Article 2 of Circular 111/2013/TT-BTC, amended by Article 4 of Circular 25/2018/TT-BTC, income from capital transfer is personal income derived from:

- Income from the transfer of contributed capital in limited liability companies (including single-member limited liability companies), partnership companies, business cooperation contracts, cooperatives, credit institutions, economic organizations, or other organizations.

- Income from securities transfer, including income from the transfer of shares, share purchase rights, bonds, treasury bills, fund certificates, and other types of securities as stipulated in clause 1, Article 6 of Securities Law 2019. Income from the transfer of shares by individuals in joint-stock companies as stipulated in clause 2, Article 6 of Securities Law 2019 and Article 120 of Enterprises Law 2020.

- Income from capital transfer under other forms.

How to calculate personal income tax on income from capital transfer for Vietnamese residents?

According to Article 11 of Circular 111/2013/TT-BTC, as amended by Article 16 of Circular 92/2015/TT-BTC, personal income tax on income from capital transfer for Vietnamese residents is calculated as follows:

(1) For income from the transfer of contributed capital

Personal Income Tax Payable = Taxable Income × Tax Rate

Where:

- Taxable Income: Taxable income from the transfer of contributed capital is determined by the transfer price minus the purchase price of the transferred capital and reasonable expenses related to generating income from capital transfer.

In cases where the enterprise accounts in foreign currency, and the individual transfers contributed capital in foreign currency, the transfer price and purchase price of the transferred capital are determined in foreign currency. If the enterprise accounts in Vietnamese Dong and the individual transfers capital in foreign currency, the transfer price must be converted into Vietnamese Dong based on the average interbank foreign exchange rate announced by the State Bank of Vietnam at the time of transfer.

- Tax Rate

The personal income tax rate for income from the transfer of contributed capital is applied according to the comprehensive tax rate at 20%.

- Time of determining taxable income

The time of determining taxable income is when the capital transfer contract takes effect. In cases where capital is contributed through capital transfer, the time to determine taxable income from capital transfer is when the individual transfers capital or withdraws capital.

(2) For income from securities transfer

Personal Income Tax Payable = Taxable Income × Tax Rate

Where:

- Taxable Income:

Taxable income from securities transfer is determined as the transfer price of securities each time. The transfer price of securities is determined as follows:

+ For securities of a public company traded on a Stock Exchange, the transfer price is the execution price at the Stock Exchange. The execution price is the securities price determined from matching orders or prices formed from agreed transactions at the Stock Exchange.

+ For securities not in the above cases, the transfer price is the price recorded in the transfer contract, the actual transfer price, or the price according to the accounting books of the unit transferring securities based on the latest financial report according to accounting laws before the transfer.

- Tax Rate:

Individuals transferring securities are taxed at a rate of 0.1% of the transfer price of securities each time.

- Time of determining taxable income:

The time to determine taxable income from securities transfer is determined as follows:

- For securities of a public company traded on a Stock Exchange, it is when the taxpayer receives income from the securities transfer.

- For securities of a public company not traded on a Stock Exchange, but ownership is transferred through the securities depository system, it is when the ownership change is recorded at the Securities Depository Center.

- For securities not in the above cases, it is when the securities transfer contract takes effect.

- For cases where securities are contributed as capital and not yet taxed upon contribution, the time to determine income from securities transfer through capital contribution is when the individual transfers capital or withdraws capital.

- For cases of receiving dividends in shares.

In cases of receiving dividends in shares, individuals are not required to pay personal income tax upon receiving the shares. When transferring these shares, individuals must pay personal income tax for both income from investment capital and income from securities transfer. To be specific:

+ The basis for determining the personal income tax payable for income from investment capital is the value of dividends recorded in accounting books or the number of shares actually received multiplied by the par value of those shares and the personal income tax rate on income from investment capital.

If the transfer price of shares received instead of dividends is lower than the par value, personal income tax is calculated on the investment capital activity according to the market price at the time of transfer.

After receiving dividends as shares, if the individual transfers shares of the same type, they must declare and pay personal income tax for dividends received as shares until all shares received in lieu of dividends are exhausted.

+ The basis for determining the personal income tax payable for income from securities transfer is determined as guided in point b, clause 2, Article 11 of Circular 111/2013/TT-BTC.