How to calculate personal income tax on income from capital transfer in Vietnam?

Vietnam: What incomes from capital transfer are taxable?

According to Clause 4, Article 2 Circular 111/2013/TT-BTC, as amended by Article 4 Circular 25/2018/TT-BTC, income from the capital transfer consists of the personal income received from:

- Income from transferring capital contributions in a limited liability company (including a single-member limited liability company), partnership company, business cooperation contract, cooperative, people's credit fund, economic organization, or other organizations.

- Income from transferring securities, including income from transferring stocks, stock purchase rights, bonds, treasury bills, fund certificates, and other types of securities prescribed in Clause 1, Article 6 of Securities Law 2019. Income from transferring stocks of individuals in a joint-stock company as prescribed in Clause 2, Article 6 of Securities Law 2019 and Article 120 of the Enterprise Law 2020.

- Income from capital transfer in other forms.

How to calculate personal income tax on income from capital transfer in Vietnam? (Image from the Internet)

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

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

(1) For income from transferring capital contributions

Personal income tax payable = Taxable income × Tax rate

Where:

- Taxable income: Taxable income from transferring capital contribution is determined by the transfer price minus the purchase price of the transferred capital contribution and related reasonable expenses in generating income from the capital transfer.

In case the enterprise's accounting is done in foreign currency and the individual transfers capital contribution in foreign currency, the transfer price and purchase price of the transferred capital contribution shall be determined in foreign currency. If the enterprise's accounting is done in Vietnamese dong and the individual transfers capital contribution in foreign currency, the transfer price must be determined in Vietnamese dong at the average exchange rate on the interbank foreign currency market announced by the State Bank of Vietnam at the time of transfer.

- Tax rate: The personal income tax rate for income from transferring capital contribution is applied as per the full tax rate schedule with a tax rate of 20%.

- Time of determining taxable income: The time of determining taxable income is when the capital transfer agreement takes effect. For capital contribution by capital contribution, the time of determining taxable income from capital transfer is when the individual transfers or withdraws the capital.

(2) For income from transferring securities

Personal income tax payable = Taxable income × Tax rate

Where:

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

+ For securities of public companies traded on the stock exchange, the transfer price of securities is the execution price at the stock exchange. The execution price is the securities price determined from the order matching result or the price formed from negotiated transactions at the stock exchange.

+ For securities not under the above cases, the transfer price is the price recorded in the transfer contract or the actual transfer price or the book value of the unit holding the transferred securities at the time when the financial statement is made closest to the transfer time as prescribed by law on accounting.

- Tax rate: Individuals transferring securities pay tax at a rate of 0.1% on the transfer price of securities each time.

- Time of determining taxable income: The time of determining taxable income from securities transfer activities is determined as follows:

- For securities of public companies traded on the stock exchange, it is the time when the taxpayer receives the income from the securities transfer.

- For securities of public companies that do not trade on the stock exchange but only perform the transfer of ownership through the transfer of ownership system of the Securities Depository Center, it is the time of transferring the ownership of securities at the Securities Depository Center.

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

- For the case of capital contribution by securities but tax is not paid at the time of capital contribution, the time of determining income from the securities transfer for which the capital is contributed is the time when the individual transfers or withdraws the capital.

- For the case of receiving dividends by shares, receiving dividends by shares does not require the individual to pay personal income tax when receiving the shares. When transferring these shares, the individual must pay personal income tax for both investment income and income from securities transfer. Specifically:

  + The basis for determining the personal income tax to be paid for investment income is the value of dividends recorded in the accounting books or the number of shares actually received multiplied (×) by the par value of those shares and the personal income tax rate for investment income.

In case the transfer price of shares received in lieu of dividends is lower than the par value, personal income tax for investment activities is calculated according to the market price at the transfer time.

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

  + The basis for determining the personal income tax to be paid for income from securities transfer is determined according to the instructions at point b, clause 2, Article 11 of [Circular 111/2013/TT-BTC](https://lawnet.vn/vb/Thong-tu-111-2013-TT-BTC-Huong-dan-Luat-thue-thu-nhap-ca-nhan-va-Nghi-dinh-65-2013-ND-CP-3222C.html#dieu_11).

How to calculate personal income tax on income from capital transfer for non-residents in Vietnam?

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

- The personal income tax for income from capital transfer of non-residents is determined by the total amount that the non-resident receives from the transfer of capital at Vietnamese organizations or individuals multiplied (×) by the tax rate of 0.1%, regardless of whether the transfer is performed in Vietnam or abroad.

The total amount that the non-resident receives from transferring capital at Vietnamese organizations or individuals is the transfer price without subtracting any expenses, including capital investment.

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

+ In case of transferring capital contributions, the transfer price is determined as for residents according to the instructions at point a.1, clause 1, Article 11 of Circular 111/2013/TT-BTC.

+ In case of transferring securities, the transfer price is determined as for residents according to the instructions at point a.1, clause 2, Article 11 of Circular 111/2013/TT-BTC.

- Time of determining taxable income:

+ For income from capital transfer of non-residents, the time of determining taxable income is when the capital transfer contract takes effect.

+ For income from securities transfer of non-residents, it is determined as for residents according to the instructions at point c, clause 2, Article 11 of Circular 111/2013/TT-BTC.