Is the tipping for GrabTaxi drivers subject to personal income tax in Vietnam?

Which bonus are subject to personal income tax in Vietnam?

Based on Point e Clause 2 Article 2 of Circular 111/2013/TT-BTC, bonuses in cash or in kind, under any form, are subject to personal income tax, including stock bonuses, except for the following bonuses:

- Bonuses accompanied by titles awarded by the State, including bonuses accompanying emulation titles and commendations in accordance with the law on emulation and commendation, specifically:

+ Bonuses accompanying emulation titles such as National Emulation Fighter; Emulation Fighter at Ministry, Central Committee level, provinces, centrally affiliated cities; Basic level Emulation Fighter, Advanced Labor, Advanced Fighter.

+ Bonuses accompanying forms of commendation.

+ Bonuses accompanying titles awarded by the State.

+ Bonuses accompanying awards from Associations, organizations belonging to Political Organizations, Socio-political Organizations, Social Organizations, and Socio-professional Organizations of central and local levels, in accordance with the charter of the organization and the Law on Emulation and Commendation.

+ Bonuses accompanying Ho Chi Minh Prize, State Prize.

+ Bonuses accompanying Commemorative Medals, Badges.

+ Bonuses accompanying Certificates of Merit, Commendation Certificates.

- Bonuses accompanying national awards, international awards recognized by the State of Vietnam.

- Bonuses for technical improvements, inventions, and discoveries recognized by competent state agencies.

- Bonuses for detecting and reporting legal violations to competent state agencies.

Is the tipping for GrabTaxi drivers subject to personal income tax in Vietnam?

According to Section 1 of Official Dispatch 384/TCT-TNCN 2017 by the General Department of Taxation guiding tax policy for cooperation business activities of Grab Taxi Company, the tax obligations for cooperative drivers of Grab Taxi are guided as follows:

On Tax Obligations

...

1.3. For individuals conducting business in the form of transportation cooperation

1.3.1. Determination of taxable income

- Individuals conducting transportation businesses under a cooperation contract with Grab Taxi Company or a transportation business organization must pay value-added tax, personal income tax according to the percentage on revenue as stipulated in Point b Clause 2 Article 2 of Circular 92/2015/TT-BTC dated June 15, 2015, of the Ministry of Finance, specifically:

+ The percentage to calculate VAT on VAT-liable revenue is 3%

+ The percentage to calculate personal income tax on PIT-liable revenue is 1.5%

+ For revenue-based incentive bonuses: no VAT is calculated, individual pays PIT according to a rate of 1% on the bonus

- For the tipping: PIT is calculated at a rate of 10% on bonuses from 2 million VND per time or more.

1.3.2. On tax declaration and payment

- Grab Taxi Company is responsible for declaring and paying taxes on behalf of individuals according to regulations on revenue and income shared according to the cooperation contract.

- Transportation business organizations are responsible for declaring and paying taxes on behalf of individuals according to regulations on revenue and income shared from the cooperation contract.

Therefore, the tipping for GrabTaxi drivers is subject to personal income tax at a rate of 10% on bonuses from 2 million VND per time or more.

Is the tipping for GrabTaxi drivers subject to personal income tax in Vietnam? (Image from Internet)

How to calculate personal income tax for individual businesses in Vietnam?

Based on Article 10 of Circular 40/2021/TT-BTC, the basis for calculating personal income tax for individual businesses is defined as follows:

The tax basis for individual businesses is the taxable revenue and the tax rate applied on the revenue.

(1) Taxable Revenue

The taxable revenue for personal income tax for individual businesses is the gross sales revenue, including tax (in cases subject to tax), of total receipts from goods sold, fabrication charges, commission, service fees arising in the tax period from production, business activities including bonuses, support for achieving sales targets, promotions, commercial discounts, payment discounts, support in cash or kind; grants, surcharges, additional fees received as per regulations; compensation for contract violations and other compensations (only counted into taxable revenue for PIT); other income that individual businesses receive regardless of whether collected or not.

(2) Tax Rate on Revenue

- The tax rate on revenue includes specific PIT rates applicable to each sector, profession detailed in Appendix 1 issued with Circular 40/2021/TT-BTC.

- In cases where individuals engage in multiple sectors or professions, they must declare and calculate tax according to the tax rate on revenue applicable to each specific sector or profession. If individuals cannot determine the taxable revenue of each sector or profession or fail to determine it in line with actual business conditions, the tax agency enforces the determination of the taxable revenue for each sector or profession according to the regulations on tax administration.