Shall savings interest be subject to personal income tax in Vietnam?
Shall savings interest be subject to personal income tax in Vietnam?
The Ministry of Finance has just compiled comments from ministries, central authorities, and local authorities... contributing to the draft of the amended Personal Income Tax Law.
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Proposal Submission for Building the Personal Income Tax Law Project (Amended)...Download
Draft Personal Income Tax Law...Download
In its comments on the draft, the People's Committee of Can Tho City suggested that the drafting unit should research and expand the tax base. This locality proposed that only small-scale savings interest should be tax-exempt, while significant savings interest should be subject to personal income tax.
However, Ninh Thuan Province argued that interest on savings deposits, government bonds, and long-term investments should be tax-exempt to encourage savings and economic development.
In response to these proposals, the Ministry of Finance stated that it is studying the expansion of the tax base and limiting the integration of social policies into tax policies, following the direction of Resolution 07-NQ/TW of 2016. The Ministry is also referencing international experiences, such as Thailand and China, which tax bank deposit interest, while some other countries allow tax deductions on mortgage interest.
Based on Clause 1, Article 3 of Circular 111/2013/TT-BTC regulations on tax-exempt incomes are as follows:
Tax-Exempt Income Items
- As stipulated in Article 4 of the Personal Income Tax Law, Article 4 of Decree No. 65/2013/ND-CP, tax-exempt incomes include:
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g) Income from interest on deposits at credit institutions, foreign bank branches, interest from life insurance contracts; income from interest on bonds issued by the Government of Vietnam.
g.1) Tax-exempt deposit interest as stipulated in this point is the individual's income received from interest on deposits in Vietnam Dong, gold, foreign currency at credit institutions, and foreign bank branches established and operating according to the Law on Credit Institutions in forms of non-term deposits, term deposits, savings deposits, certificate of deposits, promissory notes, treasury bills, and other forms of receiving deposits on the principle of full repayment of principal, interest to the depositor under agreement.
The basis for determining tax-exempt income for interest on deposits is the savings book (or savings card), certificate of deposit, promissory note, treasury bill, and other documents according to the principle of full repayment of principal, interest to the depositor under agreement.
g.2) Interest from life insurance contracts is the interest individual receives under a life insurance purchase contract from insurers.
The basis for determining tax-exempt income against interest from life insurance contracts is the payment document from the life insurance contract.
g.3) Interest from Government of Vietnam bonds is the interest individuals receive from purchasing bonds issued by the Ministry of Finance.
The basis for determining tax-exempt income for interest from Government of Vietnam bonds is the par value, interest rate, and term on the Government bond.
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According to the current regulations, individuals receiving interest from deposits at credit institutions are tax-exempt from personal income tax. Only income from deposit interest of enterprises is subject to corporate income tax.
The proposal to tax savings interest is still under consideration and no official decision has been made. According to the Ministry of Finance, adjusting exemptions needs thorough research to align with policies, practices, and global tax reform trends.
Note: The information is for reference purposes only!
Shall savings interest be subject to personal income tax in Vietnam? (Image from the Internet)
What income is subject to personal income tax in Vietnam?
Based on Article 3 of Personal Income Tax Law 2007 (amended by Clause 1, Article 1 of Law on Amendments to the Personal Income Tax Law 2012 and Article 2 of Law on Amendments to Laws on Taxation 2014) the taxable income categories are as follows:
(1) Income from Business:
- Income from production, trading of goods, services;
- Income from independent practice of individuals holding a license or practicing certificate as per law.
Income from business as stated above does not include income of individuals with an annual revenue of VND 100 million or less.
(2) Income from Salaries or Wages:
- Salaries, wages, and payments of a salary-related nature;
- Allowances, supports except for allowances and supports as per the laws on preferential treatment for revolutionary contributors, national defense, security, hazardous and dangerous allowances in high-risk occupations or work environments, attraction allowances, area allowances as per law, sudden hardship supports, work accident or occupational disease supports, one-time childbirth or adoption benefits, one-time retirement benefits, monthly survivor benefits, and job-loss or unemployment benefits as per the Labor Code, other benefits paid by Social Insurance, and social problem solution allowances;
- Compensation received in different forms;
- Payment for joining business associations, board of directors, control boards, management boards, and organizations;
- Other benefits received by the taxpayer in cash or in kind;
- Bonuses excluding bonuses accompanied by State conferred titles, national and international awards, technical improvements, inventions recognized by State authorities, bonuses for detecting and reporting legal violations to competent state authorities.
(3) Income from Capital Investment:
- Loan interest;
- Dividend income;
- Income from other forms of capital investment except for income from interest on Government of Vietnam bonds.
(4) Income from Capital Transfer:
- Income from transferring portions of capital in economic organizations;
- Income from transferring securities;
- Income from other forms of capital transfer.
(5) Income from Real Estate Transfer:
- Income from transferring ownership or usage of land and assets attached to the land;
- Income from transferring ownership or usage rights of a house;
- Income from transferring lease rights of land, water surfaces;
- Other income earned from real estate transfers.
(6) Income from Winning Prizes:
- Lottery winnings;
- Prize winnings from promotional activities;
- Winnings from betting activities;
- Winnings from games, contests with prizes and other prize-won activities.
(7) Income from Copyrights:
- Income from transferring, transferring rights to use intellectual property rights;
- Income from technology transfer.
(8) Income from Franchising
(9) Income from Inheritance:
Is securities, capital portions in economic organizations, business establishments, real estate, and other assets registered for ownership or usage rights.
(10) Income from Gifts:
Is securities, capital portions in economic organizations, business establishments, real estate, and other assets registered for ownership or usage rights.
How to determine the personal income tax period in Vietnam?
According to Article 7 of the Personal Income Tax Law 2007 (amended by Clause 3, Article 1 of Law on Amendments to the Personal Income Tax Law 2012), the personal income tax period is determined as follows:
(1) Tax period for resident individuals is prescribed as follows:
- The tax period on an annual basis applies to income from business; income from salaries, wages;
- The tax period for each income generation applies to income from capital investment; income from capital transfer, except for income from securities transfer; real estate transfer income; prize-winning income; royalties income; franchising income; inheritance income; gift income;
- The tax period for each securities transfer or annually applies to income from securities transfers.
(2) The tax period for non-resident individuals is calculated for each occasion of income generation for all taxable income.
