Is personal income tax an indirect or direct tax in Vietnam?

Is personal income tax an indirect or direct tax in Vietnam?

Currently, there is no specific regulation defining the terms indirect tax and direct tax. However, these terms can be understood as follows:

- Direct tax: This is tax that the State directly collects from a portion of the taxpayer's income, meaning that the individual pays direct tax by taking a part of their income to pay the State.

- Indirect tax: This is tax collected from consumers through tax payments made by producers or businesses. This type of tax serves to regulate societal consumption.

From the above definitions, personal income tax can be understood as a type of direct tax, which is the amount the income earner must deduct from a portion of their salary, or from other sources of income into the state budget after allowances have been deducted.

Personal income tax is not levied on individuals with low income, thus ensuring fairness for all subjects and contributing to reducing the income gap between different social groups.

Pursuant to the Law on Personal Income Tax 2007 and its guiding documents, personal income tax applies to taxpayers with taxable income from the following sources:

- Income from salaries, wages, and other similar earnings (for individuals without dependents, personal income tax must be paid on total income from salaries and wages exceeding 11 million VND per month; this income has been deducted for compulsory insurance contributions and other donations such as charity, humanitarian, etc.).

- Income from business activities (household businesses, individual businesses with annual revenue exceeding 100 million VND).

- Income from capital investment.

- Income from capital transfer.

- Income from real estate transfer.

- Income from winnings.

- Income from royalties.

- Income from franchising.

- Income from inheritance.

- Income from gifts.

Is personal income tax an indirect or direct tax in Vietnam? (Image from Internet)

Who are personal income taxpayers in Vietnam?

According to Article 2 of the Law on Personal Income Tax 2007, taxpayers include:

- Taxpayers subject to personal income tax are residents with taxable income as stipulated in Article 3 of the Law on Personal Income Tax 2007 arising within and outside Vietnam territory and non-residents with taxable income as stipulated in Article 3 of the Law on Personal Income Tax 2007 arising within Vietnam territory.

- Residents are individuals meeting one of the following conditions:

+ Present in Vietnam for 183 days or more within a calendar year or 12 consecutive months from the first day present in Vietnam;

+ Having a permanent residence in Vietnam, including having a registered permanent residence or renting a house in Vietnam under a lease contract.

- Non-residents are individuals who do not meet the conditions stipulated in Clause 2, Article 2 of the Law on Personal Income Tax 2007.

When is the deadline for personal income tax submission per month in Vietnam?

According to Article 28 of Decree 65/2013/ND-CP, income payers are organized to temporarily calculate and deduct tax based on income.

Pursuant to Clause 1, Article 55 of the Law on Tax Administration 2019, it is stipulated as follows:

Tax Payment Deadline

1. In cases where taxpayers calculate the tax, the latest deadline for tax payment is the final day of the tax declaration submission deadline. In cases of supplementary tax declarations, the deadline for tax payment is the deadline for tax declaration of the erroneous tax period.

For corporate income tax, provisional payments are made quarterly, with the latest payment deadline being the 30th day of the subsequent quarter's first month.

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Additionally, according to Clause 2, Article 44 of the Law on Tax Administration 2019 regarding the deadline for filing personal income tax finalization returns:

Tax Declaration Submission Deadline

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2. The deadline for tax declaration submission for taxes calculated on an annual basis is stipulated as follows:

a) No later than the final day of the third month from the end of the calendar or fiscal year for the annual tax finalization return; no later than the final day of the first month of the calendar or fiscal year for the annual tax declaration;

b) No later than the final day of the fourth month from the end of the calendar year for individual personal income tax finalization returns;

c) No later than December 15 of the preceding year for the estimated tax declarations of household businesses; for new businesses, the deadline is 10 days from the start of business.

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Therefore, the deadlines for filing personal income tax finalization returns are divided into two timelines as follows:

- No later than the final day of the third month from the end of the calendar or fiscal year for tax finalization returns filed by companies on behalf of employees.

- No later than the final day of the fourth month from the end of the calendar year for individuals directly filing tax finalization returns.