What are cases where a 10% PIT is withheld in Vietnam?

What incomes are subject to personal income tax withholding in Vietnam?

Pursuant to Article 28 of Decree 65/2013/ND-CP, tax withholding refers to the process where organizations and individuals paying income deduct the payable tax amount from the taxpayer's income before disbursing the income.

The following types of income are subject to tax withholding:

- Income of non-resident individuals, including in cases where the individual is not present in Vietnam;

- Income from salaries, wages, commissions, including commissions from brokerage activities;

- Income generated by individuals from activities such as insurance agency, lottery agency, and multi-level marketing;

- Income from capital investment;

- Income from capital transfer by non-resident individuals, and securities transfer;

- Income from winning prizes;

- Income from royalties;

- Income from franchising activities.

What are cases where a 10% PIT is withheld in Vietnam?

What are cases where a 10% PIT is withheld in Vietnam?

According to current regulations, cases where a 10% personal income tax is withheld include:

(1) Withholding 10% personal income tax on income from winning prizes, inheritance, and gifts for non-resident individuals.

Pursuant to Point a, Clause 1, Article 25 of Circular 111/2013/TT-BTC, organizations and individuals paying taxable income to non-resident individuals are responsible for withholding personal income tax before paying the income. The tax to be withheld is determined as guided in Chapter III (from Article 17 to Article 23) of this Circular.

Referencing Article 23 of Circular 111/2013/TT-BTC:

- Personal income tax on earnings from winning prizes, inheritance, and gifts for non-resident individuals is calculated by multiplying the taxable income by the tax rate of 10%.

Where:

+ Taxable income from winnings of non-resident individuals is the value of winnings exceeding 10 million VND per win in Vietnam (regardless of the number of payment receipts). Specifically, as guided in Clause 1, Article 15 of Circular 111/2013/TT-BTC.

+ Taxable income from receiving inheritance and gifts for non-resident individuals is the asset value of inheritance and gifts exceeding 10 million VND for each instance of income received in Vietnam. Specifically, as guided in Clause 1, Article 16 of Circular 111/2013/TT-BTC.

Thus, organizations and individuals paying income from winnings, inheritance, and gifts to non-resident individuals must withhold 10% personal income tax before paying. The withholding applies only when the income value from these items exceeds 10 million VND for each occurrence, as guided in Circular 111/2013/TT-BTC.

(2) Withholding 10% personal income tax on income from salaries and wages of resident individuals who sign labor contracts from 03 months or longer with taxable income ranging from 5 to 10 million VND/month.

Pursuant to Point b, Clause 1, Article 25 of Circular 111/2013/TT-BTC, resident individuals signing labor contracts from 03 months or longer shall have personal income tax withheld by the organization or individual paying income according to the progressive tax schedule.

According to Appendix: 01/PL-TNCN issued with Circular 111/2013/TT-BTC, taxable income from salaries and wages ranging from 5 to 10 million VND is subject to a 10% tax rate.

Where taxable income equals taxable income minus (-) deductions (personal relief; insurance contributions, voluntary retirement fund; charity, humanitarian, and educational incentives).

(3) Withholding 10% personal income tax for foreigners working in Vietnam for over 183 days in the tax year and having taxable income from 5 to 10 million VND/month.

Pursuant to Point b.3, Clause 1, Article 25 of Circular 111/2013/TT-BTC, for individuals who are foreigners working in Vietnam, the organization or individual paying income shall base on the work period in Vietnam of the taxpayer stated in the contract or document appointing them to work in Vietnam to temporarily withhold tax according to the progressive schedule (for individuals working in Vietnam from 183 days in the tax year).

In this case, the tax withholding is similar to that for resident individuals signing labor contracts from 03 months or longer.

(4) Withholding 10% personal income tax on cumulative insurance fees for non-mandatory insurance purchased by the employer for employees.

According to Point b.4, Clause 1, Article 25 of Circular 111/2013/TT-BTC (amended by Clause 1, Article 20 of Circular 92/2015/TT-BTC) and Clause 2, Article 14 of Circular 92/2015/TT-BTC, organizations or individuals paying income who purchase or contribute life insurance premiums (excluding voluntary retirement insurance) or other non-mandatory types of insurance with accumulated insurance fees for employees are subject to 10% personal income tax withholding, provided:

- For insurers established and operating under Vietnamese law:

+ Employees are not required to calculate these insurance fees into taxable income at the time of insurance purchase.

+ The insurance company shall withhold 10% tax on the accumulated amount when the insurance matures or is paid, applicable to the insurance premiums purchased by the employer from July 01, 2013.

- For insurers not established under Vietnamese law but permitted to operate in Vietnam:

+ Employers must withhold 10% personal income tax on the insurance premiums purchased or contributed before paying salaries to employees.

(5) Insurance companies and multi-level marketing companies shall withhold personal income tax at 10% on monthly taxable income of individuals earning over 20 million VND from insurance agency or multi-level marketing activities.

Based on Point c, Clause 5, Article 7 of Circular 111/2013/TT-BTC, insurance companies and multi-level marketing companies shall withhold personal income tax according to the progressive rate based on the monthly taxable income of individuals as follows:

Unit: 1,000 Vietnamese dong

Insurance companies and multi-level marketing companies have the responsibility to withhold PIT at a progressive rate based on monthly taxable income.

For individuals with taxable income exceeding 20 million VND/month, the portion of income over 20 million VND is subject to a withholding rate of 10%.

If taxable income ranges from 9 million to 20 million VND/month, it is only subject to a 5% withholding tax on the portion of income exceeding 9 million VND.

Taxable income is income after excluding tax-exempt parts, personal relief, and other deductibles (if any), as stipulated in Circular 111/2013/TT-BTC.

(6) Withholding 10% personal income tax on winnings over 10 million VND.

Under Point g, Clause 1, Article 25 and Article 15 of Circular 111/2013/TT-BTC (amended by Article 18 of Circular 92/2015/TT-BTC), reward-paying organizations are responsible for withholding PIT at a rate of 10% on taxable income before paying out winnings to individuals.

Taxable income from winning is the prize value exceeding 10 million VND for each occurrence.

This regulation applies to forms of winning such as:

- Lottery: The value exceeding 10 million VND per winning ticket in one drawing.

- Promotions in-kind: Product value exceeding 10 million VND converted into cash based on market prices.

- Betting, wagering: The entire value exceeding 10 million VND before deducting costs.

- Games or contests with prizes: Prize value exceeding 10 million VND for each payout.

(7) Withholding 10% personal income tax on wages, commissions, and other payments to resident individuals without a labor contract, or with a labor contract under three (03) months with a total income of two million (2,000,000) VND per transaction or more.

According to Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC, organizations and individuals paying wages, commissions, and other payments to resident individuals without a labor contract (as guided at Points c, d, Clause 2, Article 2 of this Circular) or with a labor contract under three (03) months having a total income of two million (2,000,000) VND per transaction or more must withhold tax at a rate of 10% on income before paying to individuals.

In cases where an individual has only one source of income subject to withholding tax at this rate, but the estimated total taxable income of the individual after deducting for family circumstances is below the taxable threshold, the individual may make a commitment to the organization paying the income so that withholding is temporarily not applied.

The income-paying organization, based on the commitment, does not withhold tax but must report the list and income of individuals to the tax authority at the end of the year.

Individuals making the commitment must register as taxpayers and have a tax code at the time of making the commitment.

Is a Certificate of tax withheld at source issued in case of tax withholding?

According to Clause 2, Article 25 of Circular 111/2013/TT-BTC:

Tax Withholding and Certificate of tax withheld at source

...

2. Certificate of tax withheld at source

a) Organizations and individuals paying income that has been withheld tax as guided in Clause 1 of this Article must issue a Certificate of tax withheld at source at the request of individuals subjected to withholding. In cases where individuals authorize tax finalization, no Certificate of tax withheld at source is issued.

b) Issuing Certificate of tax withheld at sources in several specific cases as follows:

b.1) For individuals not signing a labor contract or signing a labor contract under three (03) months: individuals have the right to request the income-paying organization or individual to issue a Certificate of tax withheld at source for each tax withholding or issue one certificate reflecting tax withheld for multiple withholdings in one tax period.

Example 15: Mr. Q signed a service contract with company X to maintain plants at the company campus once a month, from September 2013 to April 2014. Mr. Q's income is paid monthly by the company in the amount of 03 million VND. Hence, in this case, Mr. Q can request the company to issue a Certificate of tax withheld at source per month or one certificate reflecting taxes withheld from September to December 2013, and one certificate for the period from January to April 2014.

b.2) For individuals signing labor contracts from three (03) months or more: the income-paying organization or individual only issues one Certificate of tax withheld at source for a tax period.

Example 16: Mr. R signed a long-term labor contract (from September 2013 to the end of August 2014) with company Y. In this situation, if Mr. R is subject to direct tax finalization with the tax authority and requests the company to issue a Certificate of tax withheld at source, the company shall issue 1 certificate reflecting taxes withheld from September to the end of December 2013, and one certificate for the period from January to the end of August 2014.

The income-paying organization must issue a Certificate of tax withheld at source when requested by individuals unless the individual has authorized tax finalization.