How to calculate personal income tax from transferring contributed capital in Vietnam?

How to calculate personal income tax from transferring contributed capital in Vietnam?

According to point d, clause 1, Article 11 of Circular 111/2013/TT-BTC, the calculation of personal income tax from transferring contributed capital is as follows:

How to calculate personal income tax from transferring contributed capital in Vietnam? (Image from Internet)

What are the bases for calculation of tax on incomes from transferring contributed capital in Vietnam?

According to clause 1, Article 11 of Circular 111/2013/TT-BTC, the bases for calculation of tax on incomes from transferring contributed capital is as follows:

The bases for calculation of tax on incomes from transferring contributed capital is taxable income and tax rate. Specifically:

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

In cases where the enterprise accounts in foreign currency and the individual transfers capital contribution in foreign currency, the transfer price and purchase price of the capital transferred are determined in foreign currency.

If the enterprise accounts in Vietnamese dong and the individual transfers capital contribution in foreign currency, the transfer price must be determined in Vietnamese dong based on the average exchange rate on the interbank foreign exchange market announced by the State Bank of Vietnam at the time of transfer.

+ Transfer Price

The transfer price is the amount that the individual receives under the capital transfer contract.

In cases where the transfer contract does not specify the payment price or the payment price in the contract does not match the market price, the tax authority has the right to determine the transfer price according to the provisions of the tax management law.

+ Purchase Price

The purchase price of the transferred capital is the value of the capital contribution at the time of the capital transfer.

The value of the capital contribution at the time of transfer includes: the value of the capital contribution to establish the enterprise, the value of the additional contributions, the value of the capital acquired, the value of capital increased from recorded profits. Specifically:

++ For capital contributions to establish the enterprise, it is the value of the capital at the time of contribution determined based on accounting books, invoices, and documents.

++ For additional capital contributions, it is the value of the additional contributions at the time of additional contribution determined based on accounting books, invoices, and documents.

++ For capital acquired, it is the value of that capital at the time of acquisition. The purchase price is determined based on the capital acquisition contract. If the capital acquisition contract does not specify the payment price or the payment price in the contract does not match the market price, the tax authority has the right to determine the purchase price according to the tax management law.

++ For capital increased from profits recorded as capital, it is the value of the profits recorded as capital.

+ Related Costs

Related costs deductible for determining taxable income from capital transfer are reasonable actual costs incurred related to generating income from capital transfer with valid invoices and documents. Specifically:

++ Costs for necessary legal procedures for the transfer.

++ Fees and charges paid by the transferor to the state budget when conducting the transfer procedures.

++ Other directly related costs to the capital transfer.

- Tax Rate

The personal income tax rate on incomes from transferring contributed capital applies a flat tax rate of 20%.

- Taxable Income Determination Time

The time to determine taxable income is the time the capital transfer contract takes effect.

For cases of capital contribution with transferred capital, the time to determine taxable income from capital transfer is when the individual transfers or withdraws the capital.

How to declare tax on incomes from transferring contributed capital in Vietnam?

According to clause 4, Article 26 of Circular 111/2013/TT-BTC, the tax declaration on incomes from transferring contributed capital is as follows:

- Resident individuals transferring capital contributions must declare tax for each transfer transaction, regardless of whether income arises.

- Non-resident individuals receiving income from transferring contributed capital in Vietnam do not declare tax directly to the tax authority. The organization or individual receiving the transfer withholds tax according to the guidance at point e, clause 1, Article 25 of Circular 111/2013/TT-BTC and declares tax for each arising transaction.

- Enterprises processing changes to the list of contributing members in case of capital transfer without proof that the transferring individual has fulfilled their tax obligations must declare and pay tax on behalf of the individual.

In cases where the enterprise pays tax on behalf of the individual, the enterprise declares on behalf of the individual’s personal income tax declaration dossier.

The enterprise declares "On behalf of" in the section before "Taxpayer or Legal Representative of Taxpayer" and signs, writes full name, and stamps the enterprise's seal.

The tax calculation dossier and tax receipt should still indicate the taxpayer correctly as the individual transferring the capital contribution (in the case of a resident individual transferring capital) or individual receiving the transfer (in case of a non-resident individual transferring capital).