Vietnam: What does taxable income from royalties include?

Vietnam: What does taxable income from royalties include?

Pursuant to Clause 7, Article 2 of Circular 111/2013/TT-BTC, taxable income from royalties is the income received when transferring or assigning property rights, usage rights to objects of intellectual property rights, according to the provisions of the Intellectual Property Law 2005; income from technology transfer as stipulated by the Technology Transfer Law 2017. Specifically as follows:

- The objects of intellectual property rights are regulated in Article 3 of the Intellectual Property Law 2005 and related guidance documents, including:

+ Objects of copyright include literary, artistic, and scientific works; objects related to copyright particularly include: video recordings, audio recordings of broadcast programs, satellite signals carrying encrypted programs.

+ Objects of industrial property rights include inventions, industrial designs, layout designs of semiconductor integrated circuits, trade secrets, trademarks, trade names, and geographical indications.

+ Objects of plant variety rights are reproductive materials and harvested materials.

- Objects of technology transfer are regulated in Article 7 of the Technology Transfer Law 2017, including:

+ Transfer of technical know-how.

+ Transfer of technical knowledge about technology in the form of technology options, technological processes, technical solutions, formulas, technical parameters, drawings, technical diagrams, computer programs, data information.

+ Transfer of solutions to rationalize production, technological innovations.

Income from the transfer or assignment of the above-mentioned intellectual property objects and technology transfers also includes cases of reselling.

Vietnam: What does taxable income from royalties include? (Image from the Internet)

How to calculate personal income tax from royalties in Vietnam?

Based on Clause 4, Article 13 of Circular 111/2013/TT-BTC, the method for calculating personal income tax from royalties is as follows:

Where:

- Taxable Income:

Taxable income from royalties is the portion of income exceeding VND 10 million according to the transfer contract, regardless of the number of payment times or the number of times the tax payer receives money when transferring, assigning usage rights to objects of intellectual property rights, or technology transfer.

In cases where the same object of intellectual property rights or technology transfer has multiple contracts with the same user, the taxable income is the portion of income exceeding VND 10 million calculated on the total of the transfer contracts or usage rights.

For objects that are co-owned, the taxable income is allocated to each individual owner. The allocation ratio is based on the ownership or usage right certificates from the competent state authority.

- The personal income tax rate for income from royalties applies according to the full taxation schedule at a tax rate of 5%.

What are regulations on tax deduction for income from royalties in Vietnam?

Pursuant to Point h, Clause 1, Article 25 of Circular 111/2013/TT-BTC, regulations on tax deduction for income from royalties are as follows:

Organizations and individuals paying income from royalties are responsible for tax deduction before paying income to individuals.

The withheld tax amount is determined by the portion of income exceeding VND 10 million per transfer contract multiplied by the tax rate of 5%.

For large-value contracts with multiple payments, in the first payment, the income payer deducts VND 10 million from the payment amount, and the remaining amount must be multiplied by the tax rate of 5% to withhold tax.

Subsequent payments will have income tax withheld on the total payment amount of each installment.

What are regulations on personal income tax on income from royalties of non-residents in Vietnam?

Pursuant to Clause 1, Article 22 of Circular 111/2013/TT-BTC, regulations on personal income tax on income from royalties of non-residents are as follows:

- The tax for royalties received by non-residents is determined by the portion of income exceeding VND 10 million per transfer contract of intellectual property rights objects, technology transfer in Vietnam multiplied by the tax rate of 5%.

income from royalties is determined according to the guidelines in Clause 1, Article 13 of Circular 111/2013/TT-BTC.

- The time to determine income from royalties is when the organization or individual pays income from transfer royalties to the non-resident tax payer.