Is income from franchise transfers eligible for personal exemptions in Vietnam?

Is income from franchise transfers eligible for personal exemptions in Vietnam?

Based on Article 19 of the Law on Personal Income Tax 2007, amended by Clause 4 Article 1 of the Amended Law on Personal Income Tax 2012, Article 1 of Resolution 954/2020/UBTVQH14, and Clause 4 Article 6 of the Amended Law on Various Tax Laws 2014, specific provisions are as follows:

Personal exemptions

1. Personal exemption is the amount deducted from taxable income before tax calculation on income from business, salary, and wages of the taxpayer who is a Vietnamese resident. The personal exemption includes the following two parts:

a) Exemption for the taxpayer is 11 million VND/month (132 million VND/year);

b) Exemption for each dependent is 4.4 million VND/month.

2. Determination of the exemption for dependents follows the principle that each dependent is only counted once for exemption in one taxpayer.

3. A dependent is a person whom the taxpayer has a responsibility to support, including:

a) Minor children; disabled children, incapable of work;

b) Individuals without income or earning not exceeding the prescribed level, including adult children attending university, college, vocational secondary education, or vocational training; spouse incapable of work; parents beyond working age or incapable of work; other dependents with no shelter whom the taxpayer must directly support.

The Government of Vietnam prescribes the income levels and declarations for determining dependents eligible for the personal exemption.

Thus, based on the above provisions, taxable income from franchise transfers is not eligible for personal exemptions.

What is the basis for tax calculation on income from franchise transfers in Vietnam?

According to Article 17 of the Law on Personal Income Tax 2007, the basis for tax calculation of income from franchise transfers is specifically regulated as follows:

- Taxable income from franchise transfers is the portion of income exceeding 10 million VND received by the taxpayer per franchise agreement.

- The time to determine taxable income from franchise transfers is when the organization or individual pays income to the taxpayer.

Is income from franchise transfers eligible for personal exemptions in Vietnam? (Image from the Internet)

What is the tax basis for calculating income from franchise transfer of Vietnamese non-residents?

According to Article 30 of the Law on Personal Income Tax 2007, specific provisions on the tax basis of franchise transfer income for Vietnamese non-residents are as follows:

- Tax on income from royalties of Vietnamese non-residents is calculated as the portion of income exceeding 10 million VND per contract of transfer, usage rights of intellectual property objects, technology transfer in Vietnam multiplied by a tax rate of 5%.

- Tax on income from franchise transfers of Vietnamese non-residents is calculated as the portion of income exceeding 10 million VND per franchise agreement in Vietnam multiplied by a tax rate of 5%.

What is the tax period for income from franchises in Vietnam?

Based on Article 7 of the Law on Personal Income Tax 2007, amended by Clause 3 Article 1 of the Amended Law on Personal Income Tax 2012, specific provisions are as follows:

Tax Period

1. The tax period for Vietnamese residents is regulated as follows:

a) Annual tax period applies to income from business; income from salaries and wages;

b) Tax period per income occurrence applies to income from capital investment; income from capital transfer except for securities transfer; real estate transfer income; lottery winning income; income from royalties; income from franchise transfers; inheritance income; gift income;

c) Tax period per transfer or annually for income from securities transfer. If individuals apply the annual tax period, they must register from the beginning of the year with the tax authority.

2. The tax period for Vietnamese non-residents is calculated per income occurrence applicable to all taxable income.

Thus, based on the above provisions, the tax period for income from franchise transfers is per occurrence of income.

Which tax tariff applies to income from franchise transfers in Vietnam?

According to Article 23 of the Law on Personal Income Tax 2007, amended by Clause 7 Article 2 of the Amended Law on Various Tax Laws 2014, specific provisions on the tax tariff are as follows:

- The full tax tariff is regulated as follows:

Thus, according to the above regulation, income from franchise transfers will apply the full tax tariff as per the Law on Personal Income Tax 2007.