Is income from freelance work subject to personal income tax in Vietnam? Which income is exempt from personal income tax in Vietnam?

Is income from freelance work subject to personal income tax in Vietnam?

Based on point i, clause 1, Article 25 of Circular 111/2013/TT-BTC which specifically regulates

Tax deduction and tax withholding certificates

1. Tax deduction

....

i) Tax deduction for certain other cases

Organizations and individuals paying wages, remuneration, or other types of payments to resident individuals not signing a labor contract (as guided in points c, d, clause 2, Article 2 of this Circular) or signing a labor contract under three (03) months with a total payment of two million (2,000,000) VND/time or more must deduct tax at a rate of 10% on the income before payment to the individual.

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Referring to the regulations at points c, d, clause 2, Article 2 of Circular 111/2013/TT-BTC, the taxable income is defined as follows:

Taxable Income

As regulated in Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, taxable personal incomes include:

....

2. Income from salaries and wages

Income from salaries and wages is the income received by employees from employers, including:

a) Salaries, wages, and other items of a wage nature in forms of money or non-money.

....

c) Remuneration received in forms such as: commission for sales agency, brokerage commission; money for participating in scientific and technical research projects; money for participating in projects, schemes; royalties as per legal policies on royalties; money for participating in teaching activities; money for cultural, artistic, sports performances; advertising services money; other service money, other remuneration.

d) Money received from participating in business associations, enterprise boards of directors, enterprise supervisory boards, project management boards, management councils, associations, professional associations, and other organizations.

Thus, through the two aforementioned regulations, income from freelance work is considered income from salaries and wages. Therefore, those doing freelance work are subject to personal income tax if their income reaches the taxable level.

Is income from freelance work subject to personal income tax in Vietnam? Which income is exempt from personal income tax in Vietnam? (Image from the Internet)

Which income is exempt from personal income tax in Vietnam?

According to Article 4 of The Law on Personal Income Tax 2007 supplemented by clause 3, Article 2 of The Law on Amendments to Tax Laws 2014 and amended by Clause 2, Article 1 of Law on Personal Income Tax Amendments 2012 which specifies tax-exempt personal incomes as follows:

- Income from real estate transfers between husband and wife; biological parents and their children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; grandparents and grandchildren; and siblings.

- Income from transferring residential houses, homestead land use rights and assets attached to such land in cases where the individual possesses only one residential house or one homestead land plot.

- Income from land use rights granted by the State.

- Income from inheritance or gifts of real estate between husband and wife; biological parents and their children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; grandparents and grandchildren; and siblings.

- Income of households and individuals directly engaged in agricultural production, forestry, salt-making, aquaculture, and fishing which has not been processed into other products or only preliminarily processed.

- Income from the conversion of agricultural land allotted by the State for production.

- Income from interest on deposits at credit institutions, interest from life insurance contracts.

- Income from remittances.

- Wages paid for working at night or overtime that are higher than those paid for daytime working or working during hours as prescribed by law.

- Pensions paid by the Social Insurance Fund; pensions paid monthly by voluntary pension funds.

- Income from scholarships, including:

+ Scholarships from the state budget;

+ Scholarships from organizations within or outside the country under the education support programs of those organizations.

- Income from compensation for life insurance contracts, non-life insurance, compensation for occupational accidents, state compensation, and other compensations as prescribed by law.

- Income from charitable funds approved or recognized by a competent state agency for the purpose of charity and humanitarian activities and not for profit.

- Income from foreign aid for charity and humanitarian purposes in forms approved by competent state agencies.

- Income from salaries and wages of Vietnamese seafarers working for foreign shipping lines or Vietnamese shipping lines on international routes.

- Income of individuals who are ship owners, individuals with the right to use the ship, and individuals working on the ship from providing goods and services directly for offshore fishing and catching activities.

What are regulations on the personal income tax calculation period in Vietnam?

According to Article 7 of The Law on Personal Income Tax 2007 as amended by clause 3, Article 1 of Personal Income Tax Amendment Law 2012, the tax calculation period is regulated as follows:

- The tax calculation period for resident individuals is regulated as follows:

+ An annual tax calculation period applies to income from business; salary, wages;

+ A tax calculation period per income occurrence applies to income from investment in capital; capital transfer, excluding securities transfer; real estate transfer; winnings; copyrights; franchising; inheritance; gifts;

+ A tax calculation period per transfer or annually for income from securities transfer.

- The tax calculation period for non-resident individuals is calculated per income occurrence for all taxable incomes.