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

What incomes from capital investment are taxable?

According to Clause 3, Article 2 of Circular 111/2013/TT-BTC, as amended by Clause 6, Article 11 of Circular 92/2015/TT-BTC, income from capital investment constitutes the personal income received in the following forms:

- Interest received from lending to organizations, enterprises, households, individuals in business, or groups of individuals in business according to a loan contract or agreement, excluding interest received from deposits in credit institutions or branches of foreign banks as guided in sub-clause g.1, point g, clause 1, Article 3 of Circular 111/2013/TT-BTC.

- Dividends received from capital contributions in share purchases.

- Profits received from participating in capital contributions to limited liability companies, partnerships, cooperatives, joint ventures, business cooperation contracts, and other business forms as stipulated by the Law on Enterprises and the Law on Cooperatives; profits received from participating in the establishment of credit institutions according to the Law on Credit Institutions; contributions to securities investment funds and other investment funds established and operating by law.

Incomes from capital investment do not include the profits of private enterprises or single-member limited liability companies wholly owned by an individual.

- The additional value of capital contributions received upon the dissolution of an enterprise, transforming the operational model, division, separation, merger, consolidation, or capital withdrawal.

- Income from bonds, promissory notes, and other valuable papers issued by domestic organizations, excluding income as guided in sub-clause g.1 and g.3, point g, clause 1, Article 3 of Circular 111/2013/TT-BTC.

- Other income from capital investment in any form including capital contributions in kind, name value, land use rights, inventions, and patents.

- Income from dividends paid by shares, and income from profits recorded as an increase in capital.

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

How to calculate personal income tax on incomes from capital investment for resident Individuals in Vietnam?

According to Article 10 of Circular 111/2013/TT-BTC, the calculation of personal income tax from capital investment for resident individuals is as follows:

Personal Income Tax Payable = Taxable Income × Tax Rate of 5%

In detail:

- Taxable Income

Taxable income from capital investment is the taxable income that an individual receives as guided in Clause 3, Article 2 of Circular 111/2013/TT-BTC, as amended by Clause 6, Article 11 of Circular 92/2015/TT-BTC.

- The tax rate for income from capital investment is applied based on the whole rate schedule, with a tax rate of 5%.

- Timing for Determining Taxable Income

The timing for determining taxable income for income from capital investment is when the organization or individual pays income to the taxpayer.

Specific cases for determining taxable income timing include:

+ For income from increased capital contribution value as guided in point d, clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing is when the individual receives income upon the dissolution of the enterprise, transformation of the operational model, division, separation, merger, consolidation, or capital withdrawal.

+ For income from profits recorded as capital increase as guided in point g, clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing is when the individual transfers capital or withdraws capital.

+ For income from dividends paid by shares as guided in point g, clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing is when the individual transfers shares.

+ For income from overseas capital investment in any form, the timing for determining taxable income is when the individual receives the income.

How to calculate personal income tax on incomes from capital investment for non-resident individuals in Vietnam?

According to Article 19 of Circular 111/2013/TT-BTC which defines personal income tax on income from capital investment for non-resident individuals:

- Personal income tax on income from capital investment for non-resident individuals is determined based on the total taxable income that the non-resident individual receives from investing in organizations or individuals in Vietnam, multiplied (×) by the tax rate of 5%.

- Taxable income and the timing for determining taxable income from capital investment of non-resident individuals are defined similarly to the taxable income and the timing for determining taxable income from capital investment of resident individuals as guided in clauses 1 and 3, Article 10 of Circular 111/2013/TT-BTC.