What is the tax period applicable to Vietnamese residents when calculating personal income tax?

What is the tax period applicable to Vietnamese residents when calculating personal income tax?

Pursuant to Article 7 of the Law on Personal Income Tax 2007 (amended by Clause 3, Article 1 of the Law on Amendment to the Law on Personal Income Tax 2012), the tax period is regulated as follows:

Tax period

1. The tax period for Vietnamese residents is regulated as follows:

a) The annual tax period applies to income from business activities; income from salaries and wages;

b) The tax period per occurrence of income applies to income from capital investment; income from capital transfer, excluding income from securities transfer; income from real estate transfer; winnings from prizes; income from royalties; income from franchising; income from inheritance; income from gifts;

c) The tax period is per occurrence of transfer or annually for income from securities transfer.

2. The tax period for non-Vietnamese residents is calculated per occurrence of income for all taxable income.

Thus, according to the above regulations, income from salaries or wages in personal income tax is subject to the annual tax period.

What is the tax period applicable to Vietnamese residents when calculating personal income tax? (Image from the Internet)

Vietnam: When is taxable income from salaries or wages determined?

Pursuant to Article 11 of the Law on Personal Income Tax 2007 as follows:

Taxable income from salaries and wages

1. Taxable income from salaries and wages is determined by the total income specified in Clause 2, Article 3 of this Law, which the taxpayer receives during the tax period.

2. The point in time to determine taxable income from salaries and wages is when the organization or individual pays income to the taxpayer or when the taxpayer receives the income.

Specifically, this issue of taxation on income from salaries or wages is also guided by Article 27 in the Decree 65/2013/ND-CP amended by Clause 8, Article 2 of Decree 12/2015/ND-CP as follows:

Tax on income from salaries and wages

1. Taxable income from salaries and wages is determined according to Clause 2, Article 3 of this Decree.

2. The point in time to determine taxable income from salaries and wages is when the employer pays the salary or wage to the taxpayer or when the taxpayer receives the income.

In case the employer purchases life insurance (excluding voluntary pension insurance), other non-mandatory insurance with accumulated insurance premiums for employees from insurers established and operating under Vietnamese law, the employee does not need to account for it as taxable income at the time of insurance purchase. At the maturity of the contract, the insurer is responsible for withholding 10% tax on the accumulated premium amount equivalent to the part purchased by the employer for the employee from July 1, 2013.

In case the employer purchases life insurance (excluding voluntary pension insurance), other non-mandatory insurance with accumulated insurance premiums for employees from insurers not established and operating under Vietnamese law, but authorized to sell insurance in Vietnam, the employer is responsible for withholding 10% tax on the insurance premium amount purchased or contributed before paying income to the employee.

3. Taxable income from salaries and wages is determined by deducting the following deductions from taxable income:

a) Social insurance contributions, health insurance contributions, unemployment insurance contributions, professional liability insurance premiums for professions required to participate in mandatory insurance, voluntary pension fund contributions, and voluntary pension insurance purchases.

The amount contributed to the voluntary pension fund and voluntary pension insurance purchase that is deductible from the taxable income under this clause does not exceed 1,000,000 VND/month, including both the contribution by the employer for the employee and the employee's self-contribution (if any).

In case a Vietnamese resident working abroad with income from business, salaries, and wages in a foreign country has participated in mandatory insurance contributions as per the regulations of the country where he/she is contributing such insurances like social insurance, health insurance, unemployment insurance, and professional liability insurance for some professions required to participate in mandatory insurance, these insurance contributions are deductible from the taxable income while determining taxable income from business, salaries, and wages;

b) Family deductions regulated in Article 12 of this Decree;

c) Contributions to charitable funds, humanitarian funds, and study promotion funds regulated in Article 13 of this Decree.

According to the above regulations, taxable income from salaries and wages is determined at the time the organization or individual pays income to the taxpayer or at the time the taxpayer receives the income.

Meaning that taxable income from salaries arises when salary is paid or when the taxpayer receives the income.

What are 10 types of income subject to personal income tax in Vietnam?

Specifically, the types of income prescribed in Article 3 of the Law on Personal Income Tax 2007 (amended by Clauses 1 and 2, Article 2 of the Law on Amendments to Tax Laws 2014 and amended by Clause 1, Article 1 of the Law on Amendment to the Law on Personal Income Tax 2012) are defined as follows:

Group 1. Income from business, including:

- Income from production and business activities of goods and services;

- Income from independent professional activities of individuals with licenses or practice certificates as prescribed by law.

Income from business specified in this clause does not include income of individual businesses with annual revenue of 100 million VND or less.

Group 2. Income from salaries and wages, including:

- Salaries and wages and other income of the same nature;

- Allowances and subsidies, excluding the following: allowances and subsidies as per regulations for people with meritorious services; national defense and security allowances; hazardous and dangerous job allowances for specific professions or jobs in workplaces with hazardous and dangerous elements; attraction and regional allowances as stipulated by law; sudden hardship allowances, workplace accident and occupational disease allowances, one-time childbearing or adoption allowances, labor capacity reduction allowances, one-time retirement benefits, monthly survivor benefits, and other allowances as per social insurance laws; severance and unemployment allowances per the Labor Code; social protection allowances and other non-salary and non-wage allowances and subsidies as stipulated by the Government of Vietnam.

Group 3. Income from capital investment, including:

- Loan interest;

- Dividend income;

- Income from other forms of capital investment, excluding income from government bonds.

Group 4. Income from capital transfer, including:

- Income from transferring capital shares in economic organizations;

- Income from transferring securities;

- Income from capital transfers in other forms.

Group 5. Income from real estate transfer, including:

- Income from transferring the right to use land and assets attached to land;

- Income from transferring the ownership or use rights of residential houses;

- Income from transferring land lease rights, water surface lease rights;

- Other income received from real estate transfers in any form.

Group 6. Income from winning prizes, including:

- Lottery prizes;

- Prizes from promotional events;

- Prizes from betting activities;

- Prizes from games and contests with prizes and other forms of winnings.

Group 7. Income from royalties, including:

- Income from transferring or licensing the use of intellectual property rights;

- Income from technology transfer.

Group 8. Income from franchising.

Group 9. Income from inheritance that includes securities, capital shares in economic organizations or business establishments, real estate, and other assets requiring ownership or usage registration.

Group 10. Income from gifts that include securities, capital shares in economic organizations or business establishments, real estate, and other assets requiring ownership or usage registration.