How to determine the basis for calculating personal income tax on income from technology transfer in Vietnam?

Is income from technology transfer subject to personal income tax in Vietnam?

Based on the provisions at Clause 7, Article 2 of Circular 111/2013/TT-BTC regarding income from royalties as a category of taxable personal income as follows:

Taxable Income

According to the provisions of Article 3 of the Law on Personal Income Tax and Article 3 of Decree 65/2013/ND-CP, taxable personal income includes:

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7. Income from royalties

Income from royalties is the income received when transferring, transferring the ownership rights, usage rights of intellectual property rights' objects as prescribed by the Law on Intellectual Property; income from technology transfer as prescribed by the Law on Technology Transfer. Specifically as follows:

a) The objects of intellectual property rights are implemented according to the provisions of Article 3 of the Law on Intellectual Property and related guiding documents, including:

a.1) Objects of copyright including literary works, artistic works, scientific works; objects of rights related to copyright include: recording, filming of broadcasting programs, satellite signals carrying encrypted programs.

a.2) Objects of industrial property rights include inventions, industrial designs, layout-designs of semiconductor integrated circuits, trade secrets, trademarks, trade names, and geographical indications.

a.3) Objects of rights to plant varieties which are breeding materials and harvested materials.

b) The objects of technology transfer are implemented according to the provisions of Article 7 of the Law on Technology Transfer, including:

b.1) Transfer of technical know-how.

b.2) Transfer of technological knowledge in the form of technology options, technological processes, technical solutions, formulas, technical specifications, drawings, technical diagrams, computer programs, data information.

b.3) Transfer of solutions for rationalizing production, technological innovation.

Income from the transfer, transfer of rights to the objects of intellectual property rights and the above-mentioned technology transfer also includes cases of re-transfer.

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Thus, income from technology transfer is one of the types of income from royalties and is subject to personal income tax.

How to determine the basis for calculating personal income tax on income from technology transfer in Vietnam? (Image from the Internet)

How to determine the basis for calculating personal income tax on income from technology transfer in Vietnam?

* For resident individuals:

Based on the provisions at Article 13 of Circular 111/2013/TT-BTC, the tax base for income from royalties is taxable income and tax rate.

In which:

[1] Taxable Income

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

In case the same object of intellectual property rights, technology transfer but the transfer, rights transfer contract is executed through multiple contracts with the same user object, the taxable income is the portion of income exceeding 10 million VND calculated over the total contracts for transfer and rights transfer.

In case the transfer object, rights transfer is jointly owned, the taxable income is distributed among the individual owners. The distribution rate is based on the ownership or usage rights certificate issued by a competent State agency.

[2] The personal income tax rate for income from royalties is applied according to the full tax scale with a tax rate of 5%.

[3] The time of determining taxable income from royalties is the time of paying royalties.

* For non-resident individuals:

Based on the provisions at Clause 1, Article 22 of Circular 111/2013/TT-BTC, the tax base for income from royalties is taxable income and tax rate.

In which:

[1] Taxable income from royalties for individuals is the portion of income exceeding 10 million VND per transfer contract, rights transfer of objects of intellectual property rights, technology transfer in Vietnam multiplied by a tax rate of 5%.

Income from royalties is determined according to the guidance at Clause 1, Article 13 of Circular 111/2013/TT-BTC.

[2] The personal income tax rate for income from royalties is applied according to the full tax scale with a tax rate of 5%.

[3] The time of determining income from royalties is the time organizations or individuals pay income from royalty transfer to non-resident individuals.

Is taxable personal income calculated in Vietnamese Dong?

According to the provisions in Article 5 of Circular 111/2013/TT-BTC, taxable personal income is calculated in Vietnamese Dong.

- In case taxable income is received in foreign currency, it must be converted into Vietnamese Dong at the average exchange rate on the inter-bank foreign currency market at the time the income arises.

- For foreign currencies without an exchange rate with Vietnamese Dong, they must be converted through a foreign currency that has an exchange rate with Vietnamese Dong.

- Taxable income received not in money must be converted into Vietnamese Dong according to the market price of that product or service or similar or equivalent products, services at the time the income arises.