Is scholarship subject to personal income tax in Vietnam?

Is scholarship subject to personal income tax in Vietnam?

Based on the provisions of Article 4 of Decree 65/2013/ND-CP (supplemented by Clause 6, Article 2 of Decree 12/2015/ND-CP):

Tax-exempt Income

1. Income from the transfer of real estate (including housing, and construction works to be formed in the future as prescribed by the law on real estate business) between: husband and wife; biological father, biological mother, and biological children; adoptive father, adoptive 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 paternal grandchildren; maternal grandparents and maternal grandchildren; siblings.

2. Income from the transfer of housing rights and land-use rights (homestead land) of individuals in cases where the transferor only has a single house or land-use right in Vietnam.

Individuals who transfer a single house or land-use right in Vietnam as prescribed in this Clause must meet the following conditions:

a) At the time of transfer, the individual only has ownership, use rights of a single house or land parcel (including cases where there is a house or construction works affixed to that land parcel);

b) The individual must own, use the house, homestead land for at least 183 days before the transfer;

c) The house or land-use rights must be transferred in full;

Ownership and use rights of the house, homestead land are based on the certificate of ownership and use rights. Individuals transferring the house or land-use right are responsible for declaring and accounting for the accuracy of their declaration to the law. If the competent authority detects incorrect declarations, they will not be exempt from tax and will be handled according to the law.

3. Income from the value of land-use rights of individuals assigned land by the State without charge or with reduced land levy as prescribed by law.

4. Income from inheritance or gifts which are real estate (including housing, and construction works to be formed in the future as prescribed by the law on real estate business) between: husband and wife; biological father, biological mother, and biological children; adoptive father, adoptive 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 paternal grandchildren; maternal grandparents and maternal grandchildren; siblings.

5. Income of households and individuals directly engaging in agricultural, forestry, salt-making, and aquaculture that has not been processed into other products or only through ordinary preliminary processing.

Households and individuals directly engaged in production as prescribed in this Clause must meet the following conditions:

a) Have lawful land-use rights, water surface use rights for production and directly participate in agricultural, forestry, salt-making, and aquaculture production labor. For aquaculture, they must have ownership or use rights of boats, ships, fishing vessels, and directly participate in fishing;

b) Reside in the locality where agricultural, forestry, salt-making, and aquaculture activities take place as prescribed by law on residence.

6. Income from the conversion of agricultural land of households and individuals assigned by the State for production.

7. Income from interest on deposits in banks, credit institutions, and life insurance contract interest.

8. Income from remittances.

9. Portion of salary, wages for night work, overtime paid higher than the regular salary, wages for daytime work according to the law.

10. Pensions paid by the Social Insurance Fund according to the provisions of the Law on Social Insurance, monthly pensions received from a voluntary pension fund. Individuals residing, working in Vietnam are exempt from tax on pensions paid by foreign sources.

11. Income from scholarships, including:

a) Scholarships received from the state budget;

b) Scholarships received from domestic and foreign organizations (including living allowances) according to the scholarship support program of that organization.

12. Compensation for life insurance, non-life insurance, health insurance, compensation for occupational accidents, state compensation, and other compensation according to the law.

13. Income received from charitable funds permitted or recognized by the competent state authority, operating for charitable, humanitarian purposes, not for profit.

14. Income received from foreign aid for charitable, humanitarian purposes in the form of the Government of Vietnam and non-governmental organizations approved by the competent state authority.

The Ministry of Finance shall prescribe procedures and dossiers for determining tax-exempt income as stipulated in this Article.

15. Income from salaries, wages of Vietnamese sailors received for working for foreign shipping companies or Vietnamese international shipping companies.

16. Income of individual shipowners, individuals with the right to use the ship and individuals working on the ship obtained from providing goods, services directly serving offshore fishing activities.

Thus, based on the above regulations, income from scholarships will be exempt from personal income tax, including scholarships received from the state budget and scholarships received from domestic and foreign organizations (including living allowances) according to the scholarship support program of that organization.

Is scholarship subject to personal income tax in Vietnam?​ (Image from the Internet)

When are students in Vietnam required to pay personal income tax?

The types of income in Article 3 of the Personal Income Tax Law 2007 (amended by Clause 1 and Clause 2, Article 2 of the Law Amending the Tax Laws 2014 and further amended by Clause 1, Article 1 of the Amended Personal Income Tax Law 2012) are taxable income:

Taxable Income

Taxable personal income includes the following types of income, excluding tax-exempt income specified in Article 4 of this Law:

1. Income from business, including:

a) Income from production, business activities of goods, services;

b) Income from independent practice of individuals with licenses or practice certificates as prescribed by law.

Income from business specified at this Clause does not include income of individuals doing business with annual revenue of 100 million VND or less.

2. Income from salaries, wages, including:

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

b) Allowances, subsidies, except for the following allowances, subsidies: allowances, subsidies as prescribed by law on preferential treatment for people with meritorious services; defense, security allowances; hazardous, dangerous allowances for industry, occupation or work at workplaces having elements of hazard, danger; attraction allowances, regional allowances as prescribed by law; sudden hardship allowances, occupational accident allowances, occupational disease allowances, one-time allowances upon childbirth or child adoption, allowances due to decrease in working capacity, one-time retirement allowances, monthly survivor allowance and other grants as prescribed by the law on social insurance; severance pay, job loss allowances as prescribed by the Labor Code; social protection subsidies and other allowances, subsidies without wage, salary nature as prescribed by the Government of Vietnam.

3. Income from capital investments, including:

a) Interest on loans;

b) Stock dividends;

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

4. Income from capital transfer, including:

a) Income from transferring capital investment in economic organizations;

b) Income from transferring securities;

c) Income from transferring capital in other forms.

5. Income from real estate transfer, including:

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

b) Income from transferring ownership or land-use rights;

c) Income from transferring land lease rights or water surface;

d) Other incomes received from real estate transfer in any form.

6. Income from the prize, including:

a) Lottery winnings;

b) Prizes in the form of promotions;

c) Prizes in the form of betting and gambling;

d) Prizes in artistic, sports competitions, and other forms of prize.

7. Income from copyright, including:

a) Income from transferring, licensing the right to use intellectual property objects;

b) Income from transferring technology.

8. Income from franchising.

9. Income from inheritance, which is securities, capital in economic organizations, business establishments, real estate, and other tangible assets subject to ownership or use rights registration.

10. Income from gifts, which are securities, capital in economic organizations, business establishments, real estate, and other tangible assets subject to ownership or use rights registration.

The Government of Vietnam stipulates and guides the detailed implementation of this Article.

Therefore, students falling under any of the above-mentioned 10 categories will have to pay personal income tax if arising from those activities.

*Note: This applies to Vietnamese students and even foreign students if they have taxable income as mentioned above.

What are regulations on personal income tax reduction?

Pursuant to Article 5 of the Personal Income Tax Law 2007:

Tax Reduction

Taxpayers who encounter difficulties due to natural disasters, fires, accidents, and serious diseases that affect their tax payment ability shall be considered for tax reduction corresponding to the extent of the damage but not exceeding the payable tax amount.

Therefore, taxpayers in difficulty when encountering the following cases shall be considered for tax reduction, including:

[1] Natural disasters

[2] Fires

[3] Accidents

[4] Serious diseases

>>> In case the tax payment ability is affected, taxpayers shall be considered for tax reduction corresponding to the extent of the damage but not exceeding the payable tax amount.