When shall income form dividend in shares subject to personal income tax in Vietnam?

When shall income form dividend in shares subject to personal income tax in Vietnam?

Based on Clause 4, Article 10 of Circular 111/2013/TT-BTC stipulates as follows:

Basis for Tax Calculation for Income from Investment Capital

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

1. Taxable Income

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

2. The tax rate for income from investment capital applies the full tax rate schedule with a tax rate of 5%.

3. Timing for Determining Taxable Income

The timing for determining taxable income for income from investment capital is when the organization or individual pays income to the taxpayer.

For some specific cases, the timing for determining taxable income is as follows:

a) For income from the increased value of equity contribution as guided at Point d, Clause 3, Article 2 of this Circular, the timing for determining income from investment capital is when the individual actually receives the income upon dissolution of the business, conversion of operational models, division, separation, merger, amalgamation of businesses, or when capital is withdrawn.

b) For income from dividends recorded as increased capital as guided at Point g, Clause 3, Article 2 of this Circular, the timing for determining income from investment capital is the time when the individual transfers shares, withdraws capital.

c) For income from dividends paid in shares as guided at Point g, Clause 3, Article 2 of this Circular, the timing for determining income from investment capital is the time when the individual transfers shares.

d) In the case of individuals receiving income from overseas investment capital in any form, the timing for determining taxable income is the time when the individual receives the income.

4. How to Calculate Tax: Personal income tax payable = Taxable income × Tax rate 5%

Therefore, any income received from dividends will be subject to the above-mentioned tax rate, without any distinction on the amount received, as this does not involve deductions for family circumstances or tax levels like salary or wage income of laborers.

When shall income form dividend in shares subject to personal income tax in Vietnam? (Image from Internet)

How to determine the transfer price for income from capital transfer in Vietnam?

Based on Clause 1, Article 11 of Circular 111/2013/TT-BTC stipulates as follows:

Basis for Tax Calculation for Income from Capital Transfer

1. For income from capital contribution transfer

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

a) Taxable Income: Taxable income from the transfer of capital contribution is determined as the transfer price minus the purchase price of the transferred capital and reasonable expenses related to generating income from the capital transfer.

In case the enterprise accounts in foreign currency, individuals transferring capital contribution in foreign currency, the transfer price and purchase price of the transferred capital are determined in foreign currency. In case the enterprise accounts in VND, individuals transferring capital contribution in foreign currency, the transfer price must be determined in VND according to the average exchange rate on the interbank foreign currency market announced by the State Bank of Vietnam at the time of transfer.

a.1) Transfer Price

The transfer price is the amount received by the individual under the capital transfer contract.

In the case where the transfer contract does not specify a payment price or the payment price in the contract is not consistent with the market price, the tax authority has the right to impose the transfer price according to the tax management law.

Thus, taxable income includes both the transfer price which is the amount the individual receives under the capital transfer contract. In the case where the transfer contract does not specify a payment price or the payment price in the contract does not align with the market price, the tax authority has the right to impose the transfer price according to the legal provisions on tax management.

What are regulations on the PIT payable used for calculating tax reduction in Vietnam?

Based on Point b, Clause 1, Article 4 of Circular 111/2013/TT-BTC stipulates as follows:

Tax Reduction

In accordance with Article 5 of the Personal Income Tax Law, Article 5 of Decree No. 65/2013/ND-CP, taxpayers who face difficulties due to natural disasters, fires, accidents, and serious diseases affecting their ability to pay taxes are entitled to a tax reduction corresponding to the level of damage but not exceeding the tax amount payable. Specifically: as follows:

1. Determination of Tax Reduced

a) Tax reduction is considered on an annual tax period basis. Taxpayers who face difficulties from natural disasters, fires, accidents, and serious diseases in a given tax year shall be granted a tax reduction for that tax year.

b) The tax amount used as a basis for considering tax reduction is the total personal income tax that the taxpayer must pay in the tax year, including:

b.1) Personal income tax already paid or deducted for income from investment capital, income from capital transfer, income from real estate transfer, income from winnings, income from royalties, income from franchise, income from inheritance; income from gifts.

b.2) Personal income tax payable for income from business activities and income from salaries and wages.

c) The basis for determining the extent of damage eligible for tax reduction is the actual total cost to mitigate the damage minus (-) any compensation received from insurance organizations (if any) or from the organization or individual causing the accident (if any).

d) The tax reduced is determined as follows:

d.1) If the tax payable in the tax year is greater than the level of damage, the tax reduction is equal to the level of damage.

d.2) If the tax payable in the tax year is less than the level of damage, the tax reduction is equal to the tax payable.

Therefore, the tax amount payable used as a basis for considering tax reduction is the total personal income tax that the taxpayer must pay in the tax year, including the specific contents mentioned above.