What is the PIT rate on income from capital investment in Vietnam?

What incomes from capital investment are subject to personal income tax in Vietnam?

According to the provisions in Clause 3, Article 2 of Circular 111/2013/TT-BTC (amended by Clause 6, Article 11 of Circular 92/2015/TT-BTC), income from capital investment subject to tax includes personal income received in the following forms:

(1) Dividends received from share capital contributions.

(2) Profits:

+ Profits received by contributing capital to limited liability companies, partnerships, cooperatives, joint ventures, business cooperation contracts, and other forms of business as prescribed by the Law on Enterprises and the Law on Cooperatives;

+ Profits received from contributing capital to establish credit institutions as stipulated by the Law on Credit Institutions;

+ Profits from capital contributions to securities investment funds and other investment funds established and operated under legal provisions.

For profits of private enterprises and single-member limited liability companies owned by individuals, they are not considered taxable income from capital investment.

(3) The increased value of capital contributions received when dissolving enterprises, changing the operational model, dividing, splitting, merging, consolidating enterprises, or withdrawing capital.

(4) Income received from interests on bonds, treasury bills, and other valuable papers issued by domestic organizations, except income exempt from tax as guided in sub-items g.1 and g.3, point g, clause 1, Article 3 of Circular 111/2013/TT-BTC. Specifically:

Income exempt from tax

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g) Income from interest on deposits at credit institutions, branches of foreign banks, interest from life insurance contracts; income from interest on bonds the Government of Vietnam.

g.1) Tax-exempt interest on deposits as stipulated here includes personal income from interest earned on deposits in VND, gold, and foreign currency at credit institutions, branches of foreign banks established and operating under the Law on Credit Institutions, in the form of demand deposits, term deposits, savings deposits, deposit certificates, promissory notes, treasury bills, and other forms of deposits that ensure full repayment of principal and interest to the depositor as per the agreement.

The basis for determining tax-exempt income from deposit interest is a savings book (or savings card), deposit certificate, promissory note, treasury bill, and other documents that ensure full repayment of principal and interest to the depositor as agreed.

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g.3) Interest on bonds the Government of Vietnam refers to the interest an individual receives from purchasing bonds issued by the Ministry of Finance.

The basis for determining tax-exempt income from bond interest of the Government of Vietnam is the face value, interest rate, and term stated on the government bonds.

(5) Income received from capital investment in other forms, including contributions of capital investment in kind, by reputation, by land use rights, inventions, patents.

(6) Income from dividends distributed in shares, income from increased capital profits.

What is the tax rate on income from capital investment in Vietnam? (Image from the Internet)

What is the tax rate on income from capital investment in Vietnam?

For the income of resident individuals, Article 10 of Circular 111/2013/TT-BTC stipulates:

Basis for calculating tax on income from capital investment

The basis for calculating tax on income from capital investment is taxable income and the tax rate.

1. Taxable income

Taxable income from capital investment is the taxable income that an individual receives as guided in Clause 3, Article 2 of this Circular.

2. The tax rate on income from capital investment applies according to the comprehensive tax table with a tax rate of 5%.

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For the income of non-resident individuals, Article 19 of Circular 111/2013/TT-BTC stipulates:

For income from capital investment

Personal income tax on income from capital investment of non-resident individuals is determined by the total taxable income that the non-resident individual receives from capital investment in organizations or individuals in Vietnam multiplied by (×) the tax rate of 5%.

Thus, the personal income tax rate for income from capital investment for both resident and non-resident individuals is 5%. This is the comprehensive tax rate applied to all taxable income from capital investment.

How to calculate personal income tax on income from capital investment in Vietnam?

According to the provisions in Articles 10 and 19 of Circular 111/2013/TT-BTC, the personal income tax on income from capital investment is calculated using the following formula:

Personal Income Tax Payable = Taxable Income × Tax Rate 5%

Regarding the timing for determining taxable income for capital investment income, it is when organizations or individuals pay the income to the taxpayer.

Specifically, the timing for determining taxable income in some cases is as follows:

- For income from the increased value of capital contributions as guided in point d, clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing for determining income from capital investment is when the individual receives income upon dissolution of the enterprise, change of the operational model, division, separation, merger, enterprise consolidation, or withdrawal of capital.

- For income from increased capital profits as guided in point g, clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing for determining income from capital investment is when the individual transfers or withdraws capital.

- For income from dividends distributed in shares as guided in point g, clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing for determining income from capital investment is when the individual transfers the shares.

- In case an individual receives income from overseas capital investment in any form, the timing for determining taxable income is when the individual receives the income.