How to Calculate Personal Income Tax from Royalties in Vietnam?

How to Calculate Personal Income Tax from Royalties in Vietnam?

Based on clause 4, Article 13 of Circular 111/2013/TT-BTC, the calculation of personal income tax from royalties is as follows:

* In which:

- Taxable income:

Taxable income from royalties is the portion of income exceeding 10 million VND according to the transfer contract, regardless of the number of payments or the number of times the taxpayer receives money when transferring, transferring the right to use the objects of intellectual property rights, and transferring technology.

In case the same object of intellectual property rights or technology transfer is the subject, but multiple transfer or usage transfer contracts are made with the same user, the taxable income is the portion of income exceeding 10 million VND calculated on the total of the transfer or usage transfer contracts.

If the transfer, transfer rights object is co-owned, the taxable income is divided among the co-owners. The distribution ratio is based on the ownership or usage rights certificate issued by the competent state authority.

- The personal income tax rate for income from royalties applies according to the full tax schedule with a tax rate of 5%.

How to calculate personal income tax from royalties in Vietnam? (Image from the Internet)

What is the Tax Period for Personal Income Tax from Royalties in Vietnam?

Based on Article 7 of the Personal Income Tax Law 2007, amended by clause 3, Article 1 of the Amended Personal Income Tax Law 2012, the tax period is stipulated as follows:

Tax period

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

a) The annual tax period applies to income from business; income from salaries, wages;

b) The tax period on each income occurrence applies to income from capital investment; income from capital transfer, except for income from securities transfer; income from real estate transfer; income from winnings; income from royalties; income from franchising; income from inheritance; income from gifts;

c. The tax period on each transfer or annually applies to income from securities transfers.

2. The tax period for non-resident individuals is calculated on each income occurrence applying to all taxable income.

Thus, the tax period for personal income tax from royalties for resident and non-resident individuals is calculated on each income occurrence from royalties.

* According to the provisions of Article 2 of the Personal Income Tax Law 2007, a resident individual is a person who meets one of the following conditions:

- Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months from the first day of presence in Vietnam;

- Having a regular place of residence in Vietnam, including a registered permanent residence or a rented house in Vietnam according to a lease contract.

A non-resident individual is a person who does not meet the conditions of a resident individual.

When is the Time to Determine Taxable Income from Royalties in Vietnam?

Based on Article 16 of the Personal Income Tax Law 2007, the regulations are as follows:

Taxable income from royalties

1. Taxable income from royalties is the portion of income exceeding 10 million VND that the taxpayer receives when transferring, transferring the right to use the objects of intellectual property rights, and transferring technology according to each contract.

2. The time to determine taxable income from royalties is when the organization or individual pays income to the taxpayer.

And based on Article 32 of the Personal Income Tax Law 2007, the regulations are as follows:

Time to determine taxable income

1. The time to determine taxable income for income stipulated in Article 25 of this Law is the time when non-resident individuals receive income or the time of issuing the invoice for selling goods or providing services.

2. The time to determine taxable income for income stipulated in Articles 26, 27, 30, and 31 of this Law is when the organization or individual in Vietnam pays income to the non-resident individual or when the non-resident individual receives income from overseas organizations or individuals.

3. The time to determine taxable income for income stipulated in Articles 28 and 29 of this Law is the time when the transfer contract takes effect.

Thus, the time to determine taxable income from royalties is as follows:

- For resident individuals: it is when the organization or individual pays income to the taxpayer.

- For non-resident individuals: it is when the organization or individual in Vietnam pays income to the non-resident individual or when the non-resident individual receives income from overseas organizations or individuals.