What are regulations on personal income tax declaration for incomes from capital transfer in Vietnam?

What are regulations on personal income tax declaration for incomes from capital transfer in Vietnam?

According to Clause 4, Article 26 of Circular 111/2013/TT-BTC, personal income tax declaration for incomes from capital transfer (excluding securities transfer) is as follows:

- Resident individuals transferring capital contributions must declare tax for each transfer, regardless of whether income is generated.

- Non-resident individuals with income from transferring capital contributions in Vietnam are not required to declare tax directly to the tax authority. Instead, the organization or individual receiving the transfer shall withhold tax as guided in point e, clause 1, Article 25 of Circular 111/2013/TT-BTC and declare tax for each occurrence.

- If a company changes the list of capital-contributing members in case of capital transfer without proving that the transferor has fulfilled tax obligations, the company must declare and pay tax on behalf of the individual.

In cases where the company pays tax on behalf of the individual, the company shall complete the personal income tax declaration form on behalf of the individual.

The company declaring on behalf must add “On behalf of” before the term "Taxpayer or Legal Representative of the Taxpayer" and the declarant must sign, clearly state their name, and stamp the company's seal.

In tax calculation documents, tax receipts must accurately reflect the taxpayer as the individual transferring the capital contribution (in the case of resident individuals) or the individual receiving the capital transfer (in the case of non-resident individuals).

What are regulations on personal income tax declaration for incomes from capital transfer in Vietnam? (Image from the Internet)

What incomes are taxable incomes from capital transfer in Vietnam?

According to Clause 4, Article 2 of Circular 111/2013/TT-BTC, income subject to personal income tax from capital transfers includes:

- Income from the transfer of capital contributions in limited liability companies (including single-member limited liability companies), partnerships, business cooperation contracts, cooperatives, people's credit funds, economic organizations, and other organizations.

- Income from securities transfer, including income from transferring shares, share purchase rights, bonds, treasury bills, fund certificates, and other types of securities as specified in the Securities Law 2019; income from transferring individual shares in joint-stock companies as specified in the Enterprises Law 2020.

- Income from other forms of capital transfer.

How to calculate personal income tax for income from transferring contributed capital in Vietnam?

According to Clause 1, Article 11 of Circular 111/2013/TT-BTC, the bases for calculation of tax on incomes from transferring contributed capital is taxable income and tax rate. Specifically:

- Taxable income: Taxable income from transferring capital contributions is determined by the transfer price minus the purchase price of the transferred capital and reasonable expenses related to generating income from the capital transfer.

For enterprises accounting in foreign currency, if individuals transfer capital contributions in foreign currency, the transfer price and purchase price of the transferred capital are determined in foreign currency.

For enterprises accounting in Vietnamese Dong, if individuals transfer capital contributions in foreign currency, the transfer price must be determined in Vietnamese Dong according to the average transaction exchange rate on the interbank foreign currency market announced by the State Bank of Vietnam at the time of transfer.

+ Transfer price

The transfer price is the amount that the individual receives under the capital transfer agreement.

If the capital transfer agreement does not specify the payment price, or if the payment price stated in the agreement does not comply with the market price, the tax authority has the right to determine the transfer price according to tax management laws.

+ Purchase price

The purchase price of the transferred capital is the value of the capital contribution at the time of the capital transfer.

The value of capital contributions at the time of transfer includes: the original capital contribution value at the time of enterprise establishment, the value of additional capital contributions, the value of repurchased capital, and the value of capital from increasing profit recorded as capital increase. Specifically:

++ For initial capital contributions at the time of enterprise establishment, the value is based on accounting records, invoices, and documents.

++ For additional capital contributions, the value is based on accounting records, invoices, and documents at the time of additional capital contribution.

++ For repurchased capital, the value is determined based on the capital repurchase agreement. If the repurchase agreement lacks a payment price or the payment price stated in the agreement is not according to market price, the tax authority has the right to determine the purchase price following tax management laws.

++ For capital from increasing profit recorded as capital increase, the value is the increased profit amount.

+ Related expenses deductible in determining taxable income from capital transfer are reasonable actual costs arising directly from generating income from capital transfer, accompanied by valid invoices and documents according to regulations. Specifically:

++ Legal procedure fees necessary for the transfer.

++ Fees and charges paid to the state budget for capital transfer procedures.

++ Other direct expenses related to the capital transfer.

- Tax rate

The personal income tax rate for income from capital contributions transfer is applied at a flat rate of 20%.

- Timing for determining taxable income

The time for determining taxable income is when the capital transfer agreement takes effect. For capital contributions in the form of transferred capital, the timing is when the individual transfers or withdraws the capital.

- Tax Calculation