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

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

Based on Clause 9, Article 2 of Circular 111/2013/TT-BTC, the types of inheritance subject to personal income tax are specified as follows:

Taxable Income

According to Article 3 of the Personal Income Tax Law and Article 3 of Decree No. 65/2013/ND-CP, the taxable personal income includes:

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9. Income from inheritance

Income from inheritance is the amount an individual receives according to a will or legal regulations on inheritance. Specifically:

a) For inheritance as securities including: stocks, stock purchase rights, bonds, treasury bills, fund certificates, and other types of securities as prescribed by the Securities Law; shares of an individual in a joint-stock company as prescribed by the Enterprise Law.

b) For inheritance as capital in economic organizations or business establishments, including: capital contribution in limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises, business premises of an individual; capital in associations, funds allowed to be established by law or the entire business premises if it is a private enterprise, business premises of an individual.

c) For inheritance as real estate including: land use rights; land use rights with attached assets; house ownership, including future housing; infrastructure and construction works on land, including future construction works; land lease rights; water surface lease rights; other income received from inheritance as real estate in any form; except income from inheritance as real estate as guided in point d, clause 1, Article 3 of this Circular.

d) For inheritance as other assets that must be registered for ownership or usage rights with State management agencies such as: cars; motorcycles, mopeds; ships, including barges, canoes, tow boats, push boats; boats, including yachts; aircraft; hunting guns, sports guns.

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Thus, there are 4 types of inheritance subject to personal income tax including:

(i) Securities;

(ii) Capital in economic organizations, business establishments;

(iii) Real estate;

(iv) Other assets that must be registered for ownership or usage rights with State management agencies.

What types of inheritance are subject to personal income tax in Vietnam? (Image from Internet)

How is personal income tax calculated on incomes from inheritance for Vietnamese residents?

According to Article 16 of Circular 111/2013/TT-BTC, the personal income tax calculation on incomes from inheritance for Vietnamese residents is determined as follows:

(1) Taxable Income

Taxable income from inheritance or gifts is the value of the inherited or gifted assets exceeding 10 million VND per receipt. The value of inherited or gifted assets is determined for each case. Specifically:

- For inheritance, gifts as securities: the value of inheritance is the value of securities at the time of registration for ownership transfer. Specifically:

+ For securities traded on the Stock Exchange: the value of securities is based on the reference price on the Stock Exchange at the time of registration for securities ownership.

+ For securities not in the above category: the value of securities is based on the book value of the issuing company of that type of security at the nearest time before the registration for securities ownership.

- For inheritance, gifts as capital contribution in economic organizations, business establishments: the income for tax calculation is the value of the capital contribution based on the book value of the company at the nearest time before registration for ownership of the capital contribution.

- For inherited or gifted real estate assets: the value of real estate is determined as follows:

+ For real estate as land use rights, the value of land use rights is based on the Land Price List issued by the provincial People's Committee at the time the individual carries out procedures for registration of real estate rights.

+ For real estate as houses and architectural works on land, the value of real estate is determined based on the regulations of the competent State authority on value classification of houses; regulations on basic construction standards and norms issued by the competent State authority; the remaining value of houses, architectural works at the time of registration for ownership.

In cases where it cannot be determined according to the above regulations, it is based on the pre-determined fee registration price by the provincial People's Committee.

- For inheritance, gifts as other assets required to be registered for ownership or usage rights with State management agencies: the value of assets is determined on the basis of the table of fees registration prices by the provincial People's Committee at the time the individual carries out procedures for registration of ownership or usage rights of the inherited gifts.

(2) Tax Rate:

The personal income tax rate for inheritance, gifts is applied according to the full tax schedule with a tax rate of 10%.

(3) Timing of Determination of Taxable Income

The time for determining taxable income from inheritance, gifts is the time the individual completes procedures for registration of ownership or usage rights of inheritance or gifts.

(4) Calculation of Payable Tax Amount:

The personal income tax payable is determined according to the following formula:

Personal Income Tax Payable = Taxable Income x 10% Tax Rate

Which entities are personal income taxpayers in Vietnam?

According to Article 2 of the Personal Income Tax Law 2007, subjects to personal income tax are Vietnamese residents with taxable income as specified in Article 3 of the Personal Income Tax Law 2007 arising within and outside the territory of Vietnam and non-Vietnamese residents with taxable income as specified in Article 3 of the Personal Income Tax Law 2007 arising within the territory of Vietnam.

- A Vietnamese resident is a person satisfying one of the following conditions:

+ Present in Vietnam for 183 days or more in a calendar year or a consecutive 12-month period from the first day of presence in Vietnam;

+ Having a regular place of residence in Vietnam, including having a registered permanent residence or a rented house to reside in Vietnam according to a rental contract with a term.

- A non-Vietnamese resident is a person who does not satisfy the condition:

+ Present in Vietnam for 183 days or more in a calendar year or a consecutive 12-month period from the first day of presence in Vietnam;

+ Having a regular place of residence in Vietnam, including having a registered permanent residence or a rented house to reside in Vietnam according to a rental contract with a term.