What is the personal income tax rate for business services for Vietnamese non-residents?

What is the personal income tax rate for business services for Vietnamese non-residents?

Based on Clause 3, Article 25 of the Personal Income Tax Law 2007 prescribed as follows:

Tax on Income from Business Activities

1. Tax on income from business activities of Vietnamese non-residents is determined by the revenue from production and business activities as prescribed in Clause 2 of this Article, multiplied by the tax rate prescribed in Clause 3 of this Article.

2. Revenue is the total amount arising from the provision of goods and services, including expenses paid by the buyer on behalf of the Vietnamese non-resident that are not reimbursed.

In case the contract agreement does not include personal income tax, the taxable revenue must be converted to the total amount received by the Vietnamese non-resident in any form from providing goods and services in Vietnam, regardless of the location of the business activities.

3. The tax rate for income from business activities is prescribed for each sector and occupation as follows:

a) 1% for goods trading activities;

b) 5% for business services;

c) 2% for production, construction, transportation, and other business activities.

Thus, according to the above regulation, the income tax rate from business services is 5%.

What is the personal income tax rate for business services for Vietnamese non-residents? (Image from the Internet)

What are regulations on personal exemption when paying personal income tax in Vietnam?

Based on Article 19 of the Personal Income Tax Law 2007 amended by Clause 4, Article 1 of the Amended Personal Income Tax Law 2012, Article 1 of Resolution 954/2020/UBTVQH14 and Clause 4, Article 6 of the Amended Tax Laws 2014, specific provisions on personal exemption are as follows:

- The personal exemption is the amount deducted from taxable income before tax calculation for income from business, salary, or wages for tax-paying Vietnamese residents. The personal exemption includes the following two parts:

+ Deduction for the taxpayer is VND 11 million/month (VND 132 million/year);

+ Deduction for each dependent is VND 4.4 million/month.

- Determining the personal exemption for dependents is made following the principle that each dependent is only deducted once for a taxpayer.

- A dependent is a person whom the taxpayer has a responsibility to support, including:

+ Minor children; children with disabilities that have no working capability;

+ Individuals who do not have an income or have an income not exceeding the prescribed level, including adult children in university, college, vocational school, or professional secondary education; spouses without working capability; parents no longer of working age or unable to work; other dependents without a means of support that the taxpayer must directly support.

The Government of Vietnam prescribes income thresholds and declarations to determine dependents eligible for the personal exemption.

How to calculate tax on business income for Vietnamese non-residents?

According to Article 25 of the Personal Income Tax Law 2007, specific regulations on calculating tax from business for Vietnamese non-residents are as follows:

[1] Tax on income from business activities of Vietnamese non-residents is determined by revenue from production and business activities prescribed in Clause 2, Article 25 of the Personal Income Tax Law 2007, multiplied by the tax rate prescribed in Clause 3, Article 25 of the Personal Income Tax Law 2007.

[2] Revenue is the total amount arising from providing goods and services, including expenses incurred by the buyer on behalf of the Vietnamese non-resident that are non-reimbursable.

In cases where the contract agreement does not include personal income tax, the revenue for tax calculation must be converted to the total amount received by the Vietnamese non-resident in any form from the supply of goods and services in Vietnam, regardless of the location of the business activities.

Which Income of Vietnamese non-residents is Subject to Personal Income Tax?

According to point b, clause 1, Article 2 of Decree 65/2013/ND-CP, specific regulations on taxpayers are as follows:

Taxpayers

1. Personal income tax payers include Vietnamese residents and Vietnamese non-residents with taxable income prescribed in Article 3 of the Personal Income Tax Law and Article 3 of this Decree. The scope of determining taxable income for taxpayers is as follows:

a) For Vietnamese residents, taxable income is income arising both within and outside the territory of Vietnam, regardless of the payment location;

b) For Vietnamese non-residents, taxable income is income arising in Vietnam, regardless of the payment location.

2. A Vietnamese resident is a person who satisfies one of the following conditions:

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

An individual present in Vietnam as prescribed at this point refers to their physical presence within the territory of Vietnam.

b) Having a regular place of residence in Vietnam in one of the following cases:

- Having a registered permanent residence as per regulations on residence law;

- Having rented housing in Vietnam as per law on housing, with lease agreements totaling 183 days or more within the tax year.

In cases where individuals have a regular place of residence in Vietnam as per this point but are actually present in Vietnam for less than 183 days in the tax year and cannot prove residency in another country, then they are deemed residents in Vietnam.

3. A Vietnamese non-resident is a person not meeting the conditions prescribed in Clause 2 of this Article.

Thus, through the above regulation, the taxable income of a Vietnamese non-resident is the income arising in Vietnam, regardless of the income payment location.