Which types of income are subject to personal income tax declared separately in Vietnam?

Which types of income are subject to personal income tax declared separately in Vietnam?

According to Article 7 of the 2007 Law on Personal Income Tax, amended by Clause 3, Article 1 of the 2012 Amended Personal Income Tax Law, the tax declared separately is specified as follows:

Tax Period

1. The tax period for resident individuals is specified as follows:

a) Annual tax period applies to income from business; income from wages and salaries;

b) Tax period by each occurrence of income applies to income from capital investment; income from capital transfer, excluding income from securities transfer; income from real estate transfer; income from winnings; income from royalties; income from franchise; income from inheritance; income from gifts;

c) Tax period by each transfer or annually applies to income from securities transfer.

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

Thus, according to the aforementioned regulations, the tax declared separately applies to the following types of income:

- For resident individuals: income from capital investments; income from capital transfer, excluding income from securities transfer; income from real estate transfer; income from winnings; income from royalties; income from franchise; income from inheritance; income from gifts;

- For non-residents: all taxable income.

Which types of income are subject to personal income tax declared separately in Vietnam? (Image from Internet)

When shall a non-resident pay personal income tax in Vietnam?

Based on the provisions of Article 2 of the 2007 Law on Personal Income Tax, as follows:

Taxpayers

1. Personal income tax payers are resident individuals with taxable income as stipulated in Article 3 of this Law arising within and outside the territory of Vietnam and non-residents with taxable income as stipulated in Article 3 of this Law arising within the territory of Vietnam.

2. A resident individual is a person who meets one of the following conditions:

a) Being present in Vietnam for 183 days or more within a calendar year or for 12 consecutive months from the first day of presence in Vietnam;

b) Having a regular residence in Vietnam, including a registered permanent residence or a rental house per a term contract for residence in Vietnam.

3. A non-resident is a person who does not meet the conditions specified in Clause 2 of this Article.

Thus, as per the aforementioned regulation, it can be seen that a non-resident must pay personal income tax if they have taxable income as specified in Article 3 of the 2007 Law on Personal Income Tax arising within the territory of Vietnam.

Note: A non-resident is a person who does not meet the following conditions:

- Being present in Vietnam for 183 days or more within a calendar year or for 12 consecutive months from the first day of presence in Vietnam;

- Having a regular residence in Vietnam, including a registered permanent residence or a rental house for residence in Vietnam per a term contract.

What are regulations on tax withholding for non-residents with income in Vietnam?

According to Article 28 of Decree 65/2013/ND-CP, tax withholding is defined as the process where organizations or individuals paying income will deduct the tax obligations from the income of the taxpayer before making the payment.

For the income of non-residents, including cases of non-presence in Vietnam, tax withholding of personal income tax is required.

Based on point a, clause 1, Article 25 of Circular 111/2013/TT-BTC, organizations and individuals paying taxable income to non-residents are responsible for withholding personal income tax before making the payment.

The method to calculate the withheld personal income tax is guided in detail from Articles 17 to 23 of Chapter III Circular 111/2013/TT-BTC. Specifically, as follows:

(1) Income from Business

Withheld Personal Income Tax = Revenue × Tax Rate.

* Applicable tax rate:

- 1%: Trading goods.

- 5%: Service business.

- 2%: Manufacturing, construction, transportation, and other industries.

In cases where a non-resident has revenue from multiple sectors or industries but cannot distinctly separate the revenue from each sector, the personal income tax rate is applied at the highest rate for the actual operating field across the total revenue.

(2) Income from Wages and Salaries

Withheld Personal Income Tax = Taxable Income × 20% tax rate.

(3) Income from Capital Investment

Withheld Personal Income Tax = Total Investment Income × 5%.

(4) Income from Capital Transfer

Withheld Personal Income Tax = Transfer Price × 0.1%.

(5) Income from Real Estate Transfer

Withheld Personal Income Tax = Transfer Price × 2%.

(6) Income from Royalties

Withheld Personal Income Tax = (Income exceeding 10 million VND) × 5%.

(7) Income from Franchise

Withheld Personal Income Tax = (Income exceeding 10 million VND) × 5%.

(8) Income from Winnings, Inheritance, Gifts

Withheld Personal Income Tax = (Income exceeding 10 million VND) × 10%.

Note: non-residents are not eligible for family circumstance deductions, mandatory insurance deductions, or any other deductions. Therefore, personal income tax is calculated directly on the total taxable income without any reduction.