What are direct taxes and indirect taxes according to laws of Vietnam?

What are direct taxes and indirect taxes according to laws of Vietnam?

It is noted that direct taxes and indirect taxes are not specifically defined in general terms; however, law dictionaries explain direct taxes and indirect taxes as follows:

[1] Direct Taxes: These are taxes directly collected by the State into the budget from a portion of the income of taxpayers, meaning individuals paying direct taxes allocate part of their income to the State.

Direct taxes are not an independent type of tax within the tax system. They are identified through determining who actually bears the tax. Taxpayers are simultaneously the ones bearing the tax. Types of direct taxes include corporate income tax, personal income tax,... (paragraph 28 Article 1 Amended Health Insurance Law 2014)

[2] Indirect Taxes: These are taxes levied on consumers through the tax payments of producers, traders.

This type of tax regulates societal consumption.

It is a tax added to the price of goods or services. The purpose of indirect taxes is to target consumption. The taxpayer is the entity engaged in production and business activities. Taxpayers do not bear the tax, hence it is called indirect tax. Indirect taxes are easier to adjust upwards than direct taxes, so the general trend in countries is to value indirect taxes more than direct taxes.

For example, environmental protection tax under the Law on Environmental Protection Tax 2010 is a typical indirect tax. Other types of indirect taxes include:

- Value Added Tax: Law on Value Added Tax 2008

- Excise Tax: Law on Excise Tax 2008

- Export and Import Duties: Law on Export and Import Duties 2016

- Severance Tax Tax: Law on Severance Tax Tax 2009

What are direct taxes and indirect taxes according to laws of Vietnam? (Image from the Internet)

The personal income taxe is direct tax, who are the taxpayers?

Based on Article 2 Personal Income Tax Law 2007 regulations on taxpayers are as follows:

Taxpayers

1. Taxpayers of personal income tax are residents who have taxable income stipulated in Article 3 of this Law arising in and outside the territory of Vietnam, and non-residents who have taxable income stipulated in Article 3 of this Law arising in the territory of Vietnam.

2. A resident is an individual who meets one of the following conditions:

a) Being present in Vietnam for 183 days or more counted within a calendar year or within 12 consecutive months from the first day of presence in Vietnam;

b) Having a regular residence in Vietnam, including having a registered permanent residence or having a rented house to stay in Vietnam under a lease contract with a term.

3. A non-resident is an individual who does not meet the condition stipulated in paragraph 2 of this Article.

Thus, if direct taxes are personal income taxes, then the taxpayers are residents who meet one of the conditions:

[1] Being present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day of presence in Vietnam;

[2] Having a regular residence in Vietnam, including having a registered permanent residence or renting a house to stay in Vietnam under a lease contract.

Vietnam: What types of income are exempt from personal income tax (which is a direct tax)?

Based on Article 4 Personal Income Tax Law 2007 (amended by paragraph 3 Article 2 2014 Law Amending Tax Laws; amended by paragraph 2 Article 1 2012 Amended Personal Income Tax Law), the following types of income will be exempt from direct taxes which are personal income taxes:

- Income from real estate transfers between husband and wife; biological parents and biological children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; grandparents and grandchildren; siblings.

- Income from the transfer of ownership of a single residential house or homestead land and assets attached to it, in case the individual only owns one such property.

- Income from the value of land use rights granted by the State to individuals.

- Income from inheritance or gifts being real estate between husband and wife; biological parents and biological children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; grandparents and grandchildren; siblings.

- Income of households, individuals directly involved in agricultural production, forestry, fishing or salt production that has not undergone industrial processing to other products or only preliminary processing.

- Income from the conversion of agricultural land of households or individuals granted by the State for production.

- Income from interest on deposits at credit institutions, interest from life insurance contracts.

- Income from remittances.

- Overtime wages paid higher than day wage rate or regular working hours as prescribed by law.

- Pensions paid by the social insurance fund; pensions paid by the voluntary pension fund monthly.

- Income from scholarships, including:

+ Scholarships from the state budget;

+ Scholarships from domestic and foreign organizations under their scholarship support programs.

- Income from life or non-life insurance contracts, compensation for labor accidents, state compensation, and other compensations as prescribed by law.

- Income from charity funds established or recognized by authorized state agencies operating for charity, humanitarian purposes, not for profit.

- Income from foreign aid for charity, humanitarian purposes approved by authorized state bodies in governmental and non-governmental forms.

- Income from wages and salaries of Vietnamese seafarers working for foreign shipping companies or Vietnamese shipping companies engaged in international transportation.

- Income of individuals who own ships, individuals with the right to use ships, and individuals working on ships from direct supply of goods and services serving offshore fishing and exploitation activities.