Which incomes are taxable incomes from capital investments in Vietnam?

Which incomes are taxable incomes from capital investments in Vietnam?

Pursuant to Clause 3, Article 2 of Circular 111/2013/TT-BTC amended by Clause 6, Article 11 of Circular 92/2015/TT-BTC, taxable incomes from capital investments includes the income received in the following forms:

- Interest received from lending to organizations, enterprises, households, business individuals, or business groups under a loan contract or agreement, excluding interest received from deposits at credit institutions or foreign bank branches as guided in Item g.1, Point g, Clause 1, Article 3 of Circular 111/2013/TT-BTC.

- Dividends received from capital contributions for the purchase of shares.

- Profits received from capital contributions to a limited liability company, partnership, cooperative, joint venture, business cooperation contract and other business forms as prescribed by the Enterprise Law 2020 and the Cooperative Law 2023; profits received from capital contributions to establish a credit institution as prescribed by the Law on Credit Institutions 2024; capital contributions to Securities Investment Funds and other investment funds established and operating under law.

Does not include taxable income from capital investments for profits of sole proprietorships, single-member limited liability companies owned by individuals.

- The additional value received when dissolving enterprises, converting business models, splitting, merging, consolidating enterprises, or when withdrawing capital.

- Income received from bond interest, treasury bills, and other valuable papers issued by domestic organizations, excluding income as guided in Items g.1 and g.3, Point g, Clause 1, Article 3 of Circular 111/2013/TT-BTC.

- Income received from capital investments in other forms, including capital contributions in kind, by reputation, by land use rights, by inventions, patents.

- Income from dividends paid by shares, income from profits recorded as an increase in capital.

Taxable incomes from capital investments in Vietnam (Image from the Internet)

What are bases for calculation of tax on income from capital investment in Vietnam?

Pursuant to Article 10 of Circular 111/2013/TT-BTC, the bases for calculating personal income tax on income from capital investments is taxable income and tax rate. Specifically:

- Taxable Income

Taxable income from capital investments is the taxable income received by individuals as guided in Clause 3, Article 2 of Circular 111/2013/TT-BTC.

- The tax rate applicable to income from capital investments is a flat tax rate of 5%.

- Timing of Determining Taxable Income

The timing of determining taxable income for income from capital investments is when organizations or individuals pay income to taxpayers.

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

+ For income from the increase in capital value as guided in Point d, Clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing of determining taxable income from capital investment is the time when individuals actually receive the income upon dissolution of enterprises, conversion of business models, division, consolidation, merger, or capital withdrawal.

+ For income from profits recorded as an increase in capital as guided in Point g, Clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing of determining taxable income from capital investment is when individuals transfer capital or withdraw capital.

+ For income from dividends paid in shares as guided in Point g, Clause 3, Article 2 of Circular 111/2013/TT-BTC, the timing of determining taxable income from capital investment is when individuals transfer shares.

+ In case individuals receive income from capital investments abroad in any form, the timing of determining taxable income is when individuals receive the income.

- Method of Tax Calculation

What are the regulations on declaration of tax on incomes from capital investment when receiving shares as dividends or reinvested profit in Vietnam? 

Pursuant to Clause 9, Article 26 of Circular 111/2013/TT-BTC, the declaration of tax on incomes from capital investment when receiving shares as dividends or reinvested profit is as follows:

Individuals receiving dividends in shares or profits recorded as an increase in capital are not required to declare and pay tax from capital investments upon receipt. When transferring capital, withdrawing capital, or dissolving enterprises, individuals shall declare and pay personal income tax on income from capital transfer and income from capital investments.