What is the Personal Income Tax Rate for Vietnamese residents and non-residents?

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

Based on Article 14 of Decree 65/2013/ND-CP (whose content was repealed by Clause 4, Article 6 of Decree 12/2015/ND-CP), the personal income tax rate applicable to Vietnamese residents and non-residents is specified as follows:

- For Vietnamese residents: the personal income tax rate is applied according to the progressive tax schedule as follows:

- For Vietnamese non-residents: the personal income tax rate for income from wages and salaries arising in Vietnam is 20%.

What is the Personal Income Tax Rate for Vietnamese residents and non-residents? (Image from the Internet)

What are the Conditions to Determine a Vietnamese resident for Personal Income Tax Purposes?

The conditions to determine an individual as a resident for personal income tax purposes are specified in Clause 1, Article 1 of Circular 111/2013/TT-BTC. Specifically, a taxpayer is determined to be a Vietnamese resident if they meet one of the following conditions:

First, the individual is present in Vietnam for 183 days or more in a calendar year or within 12 consecutive months from the first date of arrival in Vietnam, where the arrival and departure dates are counted as one (01) day.

The arrival and departure dates are based on the certification of the immigration management authority on the individual's passport (or laissez-passer) when entering and leaving Vietnam.

If an individual enters and exits on the same day, it is counted as one day of residence.

Presence in Vietnam, as per the first condition, refers to the physical presence of the individual within the territory of Vietnam.

Second, having a permanent residence in Vietnam according to one of the two following cases:

Case 1: Having a permanent residence as defined by the law on residence:

- For Vietnamese citizens: the permanent residence is the place of regular, stable, and indefinite living at a specific location and has been registered as permanent residence according to the law on residence.

- For foreigners: the permanent residence is as recorded in the Permanent Residence Card or temporary residence when registering for a Temporary Residence Card granted by the authority under the Ministry of Public Security.

Case 2: Having a rental house for residence in Vietnam according to the law on housing, with rental contracts of 183 days or more within the tax year. Specifically:

- Individuals who do not or have not established a permanent residence as described in Case 1 but have a total of 183 days or more within the tax year under rental contracts for staying, even if rented at multiple places, are determined as Vietnamese residents.

- Rental houses for residence include cases of staying at hotels, guesthouses, inns, workplaces, headquarters, etc., regardless of whether it is self-rented or rented by the employer.

If an individual has a permanent residence in Vietnam according to the provisions of this clause but is physically present in Vietnam for less than 183 days in the tax year and cannot prove residency in another country, then they are considered a Vietnamese resident in Vietnam.

Proof of residency in another country is based on a Residency Certificate. In cases where an individual belongs to a country or territory that has signed a tax treaty with Vietnam that does not provide for a Residence Certificate, they should provide a photocopy of a Passport to demonstrate the period of residence.

When Should Vietnamese residents with Income from Salaries Authorize Tax Finalization for Personal Income Tax?

According to point d.2 clause 6 Article 8 of Decree 126/2020/ND-CP, it is stipulated that Vietnamese residents with income from wages and salaries may authorize tax finalization to the organization or individual paying the income. Specifically:

- Individuals with income from wages and salaries who have signed a labor contract for 03 months or more at one location and are actually working there at the time the organization or individual paying the income performs the tax finalization, even if not working fully 12 months in the year.

In cases where an individual is an employee being transferred from an old organization to a new organization as specified in point d.1 clause 6 Article 8 of Decree 126/2020/ND-CP, the individual is entitled to authorize the new organization to finalize tax on their behalf.

Referring to point d.1 clause 6 Article 8 of Decree 126/2020/ND-CP, organizations and individuals paying income from wages and salaries have the responsibility to declare and finalize tax on behalf of the individuals who have authorized the organization to do so, regardless of whether there is withholding tax or not. If no income is paid, there is no requirement for personal income tax finalization.

In the event that an individual is an employee being transferred from an old organization to a new organization due to mergers, consolidations, divisions, separations, conversions of business types, or if the old and new organizations belong to the same system, the new organization is responsible for tax settlement on authorization of the individual for both income paid by the old organization and collecting any Individual Income Tax withholding receipts that the old organization has given to the employee (if any).

- Individuals with income from wages and salaries who have signed a labor contract for 03 months or more at one location and are actually working there at the time the organization or individual paying the income performs the tax finalization, including cases where they do not work for the full 12 months of the year; and have occasional income at other places with an average monthly amount in the year not exceeding 10 million VND and have already been deducted for personal income tax at a rate of 10%, providing that no tax finalization is requested for this portion of income.