Is income from inheritance subject to personal income tax in Vietnam?

Is income from inheritance subject to personal income tax in Vietnam?

To be specific: incomes specified in Article 3 of the 2007 Personal Income Tax Law (amended by Clauses 1 and 2 of Article 2 of the 2014 Law on Amending and Supplementing Certain Laws on Taxes and further amended by Clause 1 of Article 1 of the 2012 Amended Personal Income Tax Law) are as follows:

Taxable Income

Personal income taxable income includes the following types of income, except for income exempted from tax as stipulated in Article 4 of this Law:

1. Income from business, including:

a) Income from production and business activities involving goods and services;

b) Income from independent practice of individuals who are licensed or certified according to the law.

Income from business stipulated in this clause does not include income of individuals engaged in business with annual turnover of up to 100 million VND.

2. Income from salaries and wages, including:

a) Salaries, wages, and other income of similar nature;

b) Allowances and subsidies, except for those: allowances and subsidies as stipulated by law on preferential treatment for those with meritorious service; national defense and security allowances; dangerous, hazardous allowances for professions or jobs at places with hazardous, dangerous elements; attraction allowances, regional allowances as prescribed by law; ad hoc hardship subsidies, labor accident and occupational disease allowances, one-time maternity or adoption allowances; allowances due to reduced working capacity, one-time retirement benefits, monthly survivorship and other allowances as per social insurance laws; severance allowances, job loss allowances according to the Labor Code; social protection allowances and other allowances or subsidies not in the nature of salaries and wages as stipulated by the Government of Vietnam.

3. Income from capital investment, including:

a) Interest from loans;

b) Dividends;

c) Income from capital investment under other forms, except for interest from the Government of Vietnam's bonds.

4. Income from transfer of capital, including:

a) Income from transfer of contributed capital in economic organizations;

b) Income from securities transfers;

c) Income from capital transfers under other forms.

5. Income from real estate transfer, including:

a) Income from transferring land use rights and assets attached to land;

b) Income from transferring ownership or use rights of houses;

c) Income from transferring land rental rights, water surface rental rights;

d) Other income received from real estate transfers in any form.

6. Income from winning prizes, including:

a) Winning lottery prizes;

b) Winning prizes from promotional activities;

c) Winning prizes from betting activities;

d) Winning prizes from games, competitions with prizes and other forms of winning.

7. Income from royalties, including:

a) Income from the transfer, right of use transfer of objects of intellectual property rights;

b) Income from technology transfer.

8. Income from franchising.

9. Income from inheritance that is securities, capital shares in economic organizations, business establishments, real estate, and assets required to register ownership or use rights.

10. Income from gifts that are securities, capital shares in economic organizations, business establishments, real estate, and assets required to register ownership or use rights.

The Government of Vietnam prescribes in detail and guides the execution of this Article.

Therefore, under these regulations, income from inheritance is subject to personal income tax.

To be specific, it is taxable for inheritances such as securities, capital contributions in economic organizations, business establishments, real estate, and other assets requiring ownership or use registration.

Which income from inheritance is exempt from personal income tax in Vietnam?

Based on Article 4 of Decree 65/2013/ND-CP, the provisions are as follows:

Income Exempt from Tax

1. Income from transferring real estate (including housing, future construction works as stipulated by the real estate business law) between: Spouse and spouse; biological father, mother, and biological children; adoptive father, mother, and adopted children; father-in-law, mother-in-law, and daughter-in-law; father-in-law, mother-in-law, and son-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; and siblings.

2. Income from the transfer of housing, rights to use homestead land and properties attached to homestead land of individuals where the transferor only has one house, rights for homestead land use in Vietnam.

Individuals transferring only one house, homestead land use rights in Vietnam as per this Clause must meet the following conditions:

a) At the time of transfer, the individual only owns, uses rights to one house or one parcel of land (including cases where there is a house or a construction work attached to said parcel of land);

b) The time the individual owns, uses the house, homestead land to the time of transfer is a minimum of 183 days;

c) The house, rights to use homestead land is transferred entirely;

Determination of ownership, rights to use the house, homestead land is based on ownership and usage certificates of housing, homestead land. Individuals with houses, homestead land transferred have the responsibility to declare and be solely responsible before the law for the accuracy of the declaration. In case entitled bodies detect false declarations, tax exemption shall not apply and shall be dealt with according to the law.

3. Income from the value of land use rights of individuals who are allocated land by the State without having to pay money or are reduced land levy as per law.

4. Income from inheritance, gifts which are real estate (including housing, future construction works as per real estate business law) between: Spouse and spouse; biological parent and child; adoptive parent and child; father-in-law, mother-in-law, and daughter-in-law; father-in-law, mother-in-law, and son-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; and siblings.

Accordingly, under this provision, income from inheritance exempt from personal income tax (including housing, future construction works as stipulated by real estate business law) includes:

- Housing, future construction works between:

+ Spouse and spouse;

+ Biological parent and child; adoptive parent and child;

+ Father-in-law, mother-in-law, and daughter-in-law; father-in-law, mother-in-law, and son-in-law;

+ Paternal grandparents and grandchildren; maternal grandparents and grandchildren;

+ Siblings.

Which income from inheritance is exempt from personal income tax in Vietnam? (Image from Internet)

What is the tax calculation period for personal income tax on income from inheritance in Vietnam?

According to Article 7 of the 2007 Personal Income Tax Law (amended by Clause 3 of Article 1 of the 2012 Amended Personal Income Tax Law), the tax calculation period is regulated as follows:

Tax Calculation Period

1. Tax calculation period for resident individuals is stipulated as follows:

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

b) Tax calculation period applied each time income arises for income from capital investment; income from capital transfer, excluding income from securities transfer; income from real estate transfer; income from winning prizes; income from royalties; income from franchising; income from inheritance*; income from gifts;*

c. Tax calculation period for each securities transfer or annually for income from securities transfer.

2. Tax calculation period for non-resident individuals is calculated each time income arises for all taxable income.

Therefore, under the aforementioned regulation, personal income tax on income from inheritance is calculated each time income arises.