Shall employees who receive incomes from bonus shares pay personal income tax in Vietnam?

Shall employees who receive incomes from bonus shares pay personal income tax in Vietnam?

Based on Clause 11, Article 26 of Circular 111/2013/TT-BTC stipulates:

Tax Declaration and Finalization

...

11. Declaration of tax from wages, salaries for income from stock bonuses.

Individuals receiving stock bonuses from their employer are not required to pay tax from wages and salaries at the time of receipt. When the individual transfers the stock bonus, tax declaration is made for income from the transfer and for income from wages and salaries.

Thus, according to the above provisions, employees receiving incomes from bonus shares will be subject to PIT. However, employees will not immediately be subject to PIT at the time of receiving the bonus, but rather when they transfer the stocks, they will be liable for PIT on the profit gained from the transfer.

Shall employees who receive incomes from bonus shares pay personal income tax in Vietnam? (Image from the Internet)

How do employees declare PIT when receiving incomes from bonus shares in Vietnam?

Based on d1, point d, clause 5, Article 7 of Decree 126/2020/ND-CP stipulates:

Tax Declaration Dossier

...

5. Organizations and individuals declaring tax on behalf of, and paying tax for taxpayers must comply fully with tax declaration and payment requirements like the taxpayers as stipulated in this Decree, including:

...

d) Organizations declare and pay tax on behalf of individuals receiving dividends in the form of securities; individuals as existing shareholders receiving stock bonuses; individuals credited with capital increase due to interests being added to capital; individuals contributing capital with real estate, capital contributions, or securities. The time of declaring and paying taxes on behalf occurs when the individual enters into securities transfer of the same category, transfer of capital, withdrawal of capital. To be specific: as follows:

d.1) For individuals receiving dividends in the form of securities; individuals as existing shareholders receiving stock bonuses, the organization is responsible for declaring and paying tax on behalf of the individual for income from capital investment when the individual transfers securities of the same category as follows:

For securities through the trading system on the Stock Exchange, the organization declaring and paying taxes on their behalf is the securities company, commercial bank where the individual opens a depository account, the fund management company where the individual entrusts their investment portfolio.

For securities not traded through the Stock Exchange, the organization declaring and paying taxes on behalf shall be as follows: securities of a public company registered centrally at the Securities Depository Center, the organization declaring and paying taxes on behalf is the securities company, commercial bank where the individual opens the securities depository account; securities of a joint-stock company that is not a public company but issues securities entrusted to a securities company managing the list of shareholders, the organization declaring and paying taxes on behalf is the securities company authorized to manage the list of shareholders; for securities not covered in these cases, the issuer of securities shall declare and pay taxes on behalf.

...

According to the above regulations, when an employee receives stock bonuses from the company, the company must take responsibility for declaring and paying taxes on behalf of the employee as per legal requirements.

What are regulations on the PIT calculation period in Vietnam?

According to the provisions of Article 7 of the Personal Income Tax Law 2007 (amended and supplemented by Clause 3, Article 1 of the Law on Amendments to the Personal Income Tax 2012), the PIT calculation period is determined as follows:

(1) For resident individuals

- The tax calculation period is annual for income from business; and income from wages and salaries;

- The tax calculation period per occurrence applies to income from capital investment; income from capital transfers, except for income from securities transfer; income from real estate transfers; income from winning prizes; income from copyrights; income from franchise; income from inheritance; income from gifts;

- The tax calculation period per occurrence or annually for income from securities transfer.

Additionally, the annual tax calculation period applies to income from business and income from wages and salaries guided by Article 6 of Circular 111/2013/TT-BTC for resident individuals as follows:

+ Annual tax calculation period: applies to income from business and income from wages and salaries.

In the calendar year, if an individual is present in Vietnam for 183 days or more, the tax calculation period is the calendar year.

If in the calendar year an individual is present in Vietnam for less than 183 days but is present for a continuous period of 12 months from the first day of presence in Vietnam which is 183 days or more, the first tax calculation period is determined as 12 continuous months from the first day of presence in Vietnam. From the second year, the tax calculation period is based on the calendar year.

+ Tax calculation period per income occurrence: applies to income from capital investment, capital transfer, real estate transfer, winning prizes, copyrights, franchise, inheritance, gifts.

+ Tax calculation period per occurrence or annually applies to income from securities transfer.

(2) For non-resident individuals

The tax calculation period for non-resident individuals is calculated per occurrence of income.

In the case of non-resident business individuals having a fixed place of business like a shop or stall, the tax calculation period applies like resident individuals with income from business.