What is irregular income? How much irregular income is subject to personal income tax in Vietnam?

What is irregular income in Vietnam?

Currently, the law does not define the concept of "irregular income."

In practice, "irregular income" can be understood as income from wages or salary that is not through a labor contract and is not regular.

Based on the provisions in point c, clause 2, Article 2 of Circular 111/2013/TT-BTC, irregular income may include remuneration received in forms such as:

+ Commission for selling goods, brokerage commission;

+ Participation fees in scientific or technical research projects;

+ Participation fees in projects or proposals;

+ Royalties as regulated by law concerning royalties; participation fees in teaching activities;

+ Fees for participating in cultural, artistic, sports performances; advertising service fees;

+ Other services, other remuneration.

What is irregular income? How much irregular income is subject to personal income tax in Vietnam? (Image from Internet)

How much irregular income is subject to personal income tax in Vietnam?

Based on point i, clause 1, Article 25 of Circular 111/2013/TT-BTC which stipulates Tax withholding and Tax withholding documents as follows:

Tax withholding and Tax withholding Documents

1. Tax withholding

...

i) Tax withholding for Other Cases

Organizations or individuals paying wages, remuneration, or other payments to resident individuals not under labor contracts (as instructed in point c, d, clause 2, Article 2 of this Circular) or under labor contracts less than three (03) months with a total income payment from two million (2,000,000) VND onwards per occasion must deduct tax at the rate of 10% on the income before paying it to the individuals.

In cases where individuals only have income subject to Tax withholding at the above rate but estimate that the total taxable income after family allowances do not reach the taxable limit, the individual makes a commitment (using the form issued with the guidance on tax management) to the income-paying organization as a basis for temporarily not deducting personal income tax.

Based on the recipient's commitment, the income-paying organization will not deduct the tax. At the end of the tax year, the income-paying organization is still required to compile a list and income of individuals below the deductible level (into the form issued with the guidance on tax management) and submit it to the tax authority. The individual making the commitment must be responsible for their commitment, and in case of fraud detection, they will be dealt with according to the regulations of the Tax Management Law.

Individuals making the commitment as per the guidance at this point must have taxpayer registration and a tax code at the time of commitment.

...

According to the regulation above, individuals with irregular income from two million (2,000,000) VND or more per occasion must have their income taxed at a rate of 10% before payment.

Conversely, for irregular income below 2 million VND, individuals are not liable for Tax withholding.

Except in cases where individuals solely have income subject to Tax withholding at the aforementioned rate but estimate that the total taxable income after family allowances does not reach the taxable limit, they can make a commitment (using the form issued with the guidance on tax management) to the income-paying organization as a basis for temporarily not deducting personal income tax. Provided that:

- The individual has taxpayer registration and a tax code.

- The individual takes responsibility for the content of their commitment.

Based on the recipient's commitment, the income-paying organization will not deduct tax. At the end of the tax year, the income-paying organization must still compile a list and income of individuals below the deductible level (into the form issued with the tax management guidance) and submit it to the tax authority.

What is personal income tax withholding in Vietnam?

According to Article 28 of Decree 65/2013/ND-CP, the regulation is as follows:

Tax withholding

1. Tax withholding is the act whereby organizations or individuals paying income deduct the tax payable from the taxpayer's income before paying it out.

2. Types of income subject to Tax withholding:

a) Income of non-resident individuals, including cases where they do not physically present in Vietnam;

b) Income from wages, salaries, remuneration, including brokerage remuneration;

c) Income of individuals from insurance agents, lottery agents, multi-level sales;

d) Income from capital investment;

đ) Income from capital transfer of non-resident individuals, transfer of securities;

e) Income from prizes;

g) Income from royalties;

h) Income from franchising.

3. The Ministry of Finance stipulates in detail the cases, levels, and methods of personal income Tax withholding specified in this Article.

Thus, as per the regulation mentioned above, tax withholding is where the organization or individual paying income deducts the payable tax from the taxpayer's income before paying the income.