Is income from bond interest subject to personal income tax in Vietnam?

Is income from bond interest subject to personal income tax in Vietnam?

Pursuant to point g, clause 3, Article 2 of Circular 111/2013/TT-BTC (as amended by clause 6, Article 11 of Circular 92/2015/TT-BTC) as follows:

- Income from capital investment

Income from capital investment is the income that individuals receive in forms such as:

+ Interest received from lending to organizations, enterprises, households, business individuals, or groups of business individuals under loan contracts or agreements, excluding interest received from deposits at credit institutions or branches of foreign banks, as guided in sub-clause g.1, point g, clause 1, Article 3 of this Circular.

+ Dividends received from capital contributions to purchase shares.

+ Profits received due to participation in capital contributions to a limited liability company, partnership, cooperative, joint venture, business cooperation contract, and other forms of business according to the Enterprise Law and the Cooperative Law; profits received due to participating in capital contributions to establish credit institutions according to the Law on Credit Institutions; capital contribution to Securities Investment Funds and other investment funds established and operating under legal provisions.

Enterprise profits of private businesses, single-member limited liability companies owned by individuals are not included in taxable income from capital investment.

+ The increased part of the capital value received upon dissolution of the enterprise, conversion of activity models, division, separation, merger, consolidation of enterprises, or when withdrawing capital.

+ income from bond interest, treasury bills, and other valuable papers issued by domestic organizations, except for income as guided in sub-clauses g.1 and g.3, point g, clause 1, Article 3 of this Circular.

+ Other income from capital investment in other forms, including cases of capital contributions by assets, goodwill, land use rights, inventions, patents.

+ Income from dividends paid in shares, income from profits added to capital.

Thus, according to the above provisions, income from bond interest is subject to personal income tax.

Is income from bond interest subject to personal income tax in Vietnam? (Image from the Internet)

When is the income from bond interest subject to personal income tax calculated in Vietnam?

According to the provisions of Article 10 Circular 111/2013/TT-BTC as follows:

The basis for tax calculation on income from capital investment is taxable income and tax rates.

- Taxable income

Taxable income from capital investment is the taxable income that individuals receive as guided in clause 3, Article 2 of this Circular.

- The tax rate for income from capital investment applies according to the total tax schedule at a rate of 5%.

- Time for determining taxable income

The time for determining taxable income on income from capital investment is the time organizations or individuals pay income to taxpayers.

Particularly, the time for determining taxable income for certain cases is as follows:

+ For income from the increased value of capital contributions guided in point d, clause 3, Article 2 of this Circular, the time for determining income from capital investment is when the individual receives income upon enterprise dissolution, conversion of activity models, division, separation, merger, consolidation of enterprises, or when withdrawing capital.

+ For income from profits added to capital as guided in point g, clause 3, Article 2 of this Circular, the time for determining income from capital investment is when the individual transfers capital, withdraws capital.

+ For income from dividends paid in shares as guided in point g, clause 3, Article 2 of this Circular, the time for determining income from capital investment is when the individual transfers shares.

+ In case individuals receive income from foreign investment in any form, the time for determining taxable income is when the individual receives income.

- Tax calculation method

Personal income tax payable = Taxable income × Tax rate 5%

Thus, it can be seen that income from bond interest subject to personal income tax will be based on the time for determining income from capital investment, which is when the individual transfers capital, withdraws capital.

Which incomes are subject to personal income tax in Vietnam?

Pursuant to clause 1, Article 2 Circular 111/2013/TT-BTC regulations on taxable income are as follows:

According to the provisions of Article 3 Personal Income Tax Law 2007 and Article 3 Decree 65/2013/ND-CP, taxable personal income includes:

- Income from business

Income from business is income obtained from production and business activities in the following fields:

+ Income from production, business of goods, and services in all business fields and sectors according to the law, such as production, business of goods; construction; transportation; food and beverage businesses; service businesses, including house rental services, land use rights, water surface, and other properties.

+ Income from independent practice activities of individuals in fields and sectors granted a practicing certificate or license according to legal regulations.

+ Income from agriculture, forestry, salt making, aquaculture, and fishing that do not meet the tax exemption conditions guided in point e, clause 1, Article 3 of this Circular.