Is income from donations of 16.7 billion VND taxable in Vietnam? What are penalties for misappropriation of charity funds in Vietnam?
Is income from donations of 16.7 billion VND taxable in Vietnam?
Based on Article 3 of the Personal Income Tax Law 2007 (amended by Clause 1, Article 1 of the Amended Personal Income Tax Law 2012 and Article 2 of the Amended Laws on Tax 2014), taxable personal income under the Personal Income Tax Law includes:
- Income from business:
- Income from salaries and wages:
- Income from capital investments:
- Income from capital transfers:
- Income from real estate transfers:
- Income from lotteries:
- Income from copyrights:
- Income from franchising:
- Income from inheritance:
- Income from gifts:
Income from charitable donations is considered as income from receiving gifts. However, Clause 10 of Article 2 of Decree 111/2013/TT-BTC clarifies which incomes from gifts are subject to Personal Income Tax as follows:
Taxable Incomes
According to Article 3 of the Personal Income Tax Law and Article 3 of Decree No. 65/2013/ND-CP, taxable personal income includes:
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- Income from receiving gifts
Income from receiving gifts refers to income that an individual receives from organizations and individuals within and outside the country, specifically:
a) For receiving gifts in the form of securities, including stocks, stock purchase rights, bonds, treasury bills, fund certificates, and other securities as defined by the Securities Law; shares held by individuals in joint-stock companies as stated in the Enterprise Law.
b) For receiving gifts as part of the capital in economic organizations, business establishments, including: capital in limited liability companies, cooperatives, partnerships, business cooperation contracts, capital in private enterprises, individual business establishments, capital in associations and funds authorized to be established under the law or if it is the entire business establishment in the case of private enterprises, individual business establishments.
c) For receiving gifts in the form of real estate, including: land use rights; land use rights with attached assets; ownership rights of houses, including future housing; infrastructure and construction works attached to land, including future construction works; land lease rights; water surface lease rights; other income from inheritance of real estate in any form; except for income from gifts in real estate as guided at Point d, Clause 1, Article 3 of this Circular.
d) For receiving gifts in other assets that require ownership or usage rights registration with the State management authorities like cars, motorcycles, mopeds, ships, including barges, canoes, tugboats, push boats; boats, including yachts; aircraft; hunting and sports guns.
According to the above regulations, it can be seen that charitable donations do not fall under taxable personal income. Currently, there is no legal document that specifically identifies donations received from the community in the form of charity as taxable income for the recipient.
Therefore, receiving 16.7 billion VND in charity does not require personal income tax payment.
Is income from donations of 16.7 billion VND taxable in Vietnam? (Image from the Internet)
What are penalties for misappropriation of charity funds in Vietnam?
The misappropriation of charity funds in Vietnam is a legal violation and, depending on its nature and severity, can result in administrative penalties or criminal liability. Specifically:
(1) Administrative Penalties:
According to Point c, Clause 1, Article 15 of Decree 144/2021/ND-CP:
Violations Regarding Damage to Assets of Other Organizations and Individuals
- Fines ranging from 2,000,000 VND to 3,000,000 VND for the following acts:
a) Theft of assets, intrusion into areas such as residences, warehouses, or other locations managed by others for the purpose of theft or appropriation of assets;
b) Public appropriation of assets;
c) Using deceit or evading to appropriate assets, or at the time of returning the assets borrowed, rented, or received from others through a contract, while having the means and capability, but deliberately not returning;
d) Not returning assets borrowed, rented, or received through contracts from others but using them for illegal purposes causing incapability of returning the assets;
dd) Negligence causing damage to assets of the State, organizations, or enterprises.
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Thus, individuals may be fined from 2,000,000 VND to 3,000,000 VND for deceitfully appropriating assets, including exploiting the charitable name for personal gain but not constituting a criminal offense.
Additionally, they must return the unlawfully appropriated funds and may have the instruments used in the violation confiscated (if any).
Note: The above monetary fine is applicable to the administrative violation of an individual. For organizations committing the same violation, the fine is twice the amount for individuals as per Clause 2, Article 4 of Decree 144/2021/ND-CP).
(2) Criminal Liability
If the act of misappropriating charity funds fully constitutes a criminal offense, the violator will face criminal prosecution. Common applicable charges include:
- For acts using deceit (such as impersonating a charity organization, soliciting contributions to appropriate funds) making others trustingly hand over property can be prosecuted for fraudulent appropriation of property under Article 174 of the Ciminal Code 2015.
- For initially honestly soliciting charity, but later arising the intent to appropriate the received funds can be prosecuted for abuse of trust to appropriate property under Article 175 of the Ciminal Code 2015.
Accordingly, for these two acts, the minimum penalty includes non-custodial reform for up to 3 years or imprisonment from 6 months to 3 years, and the maximum can be life imprisonment, depending on the nature and severity of the violation.
(3) Example
If an individual solicits 16.7 billion VND in donations but retains most of the funds for personal use, the authorities will consider:
- Administrative Penalty: If the amount appropriated is small and lacks criminal elements (below 2,000,000 VND), a maximum fine of 3 million VND (individual) and restitution is required.
- Criminal Liability: If appropriating 2 million VND or more with clear deceitful evidence (such as falsifying bank statements, not transferring money to those in need), they will be prosecuted under Article 174 or 175, with imprisonment possibly up to life sentence if the amount is significantly large (like billions).
What are cases of cancellation of outstanding tax, late payment interest and fines in Vietnam?
As stipulated in Article 85 of the Law on Tax Administration 2019, the following cases qualify for cancellation of outstanding tax:
(1) Enterprises or cooperatives declared bankrupt have fulfilled payments as per bankruptcy law without any remaining assets to pay owed taxes, late payments, or penalties.
(2) Individuals who have died or been declared legally dead or incapacitated by the court without any assets, including inheritable assets, to pay owed taxes, late fees, or penalties.
(3) Tax debts, late payments, or penalties of taxpayers not covered under Clauses 1 and 2, Article 85 of the Law on Tax Administration 2019, where the tax authority has applied enforcement measures as specified in Point g, Clause 1, Article 125 of the Law on Tax Administration 2019 and these amounts have been outstanding for more than 10 years since the tax due date with no capability to recover.
Taxpayers, being individuals, business individuals, household heads, sole proprietors, and single-member limited liability companies, who have had their tax, late payment, and penalty debts forgiven under this clause before returning to production, business, or establishing new production, business facilities must repay the forgiven amounts to the State.
(4) Taxes, late payments, and penalties for cases affected by natural disasters, catastrophes, or widespread epidemics, having been granted late payment fee waivers under Clause 8, Article 59 of the Law on Tax Administration 2019 and have had tax payment deferrals under Point a, Clause 1, Article 62 of the Law on Tax Administration 2019, yet still incur damages and cannot restore production or business nor pay the owed taxes, late fees, or penalties.
The Government of Vietnam mandates coordination between tax authorities, business registration authorities, and local governments to ensure that forgiven tax payments, late fees, or penalties are reimbursed to the State budget as per Clause 3, Article 85 of the Law on Tax Administration 2019 before issuing business registration certificates or business project creation permits; and details Clause 4, Article 85 of the Law on Tax Administration 2019.
