Is Personal Income Tax (PIT) Withholding Required When Paying Royalties to Authors Who Are Collaborators of the Company?
Which Types of Income Are Subject to Personal Income Tax (PIT) Withholding?
According to Article 28 of Decree 65/2013/ND-CP detailing income subject to PIT withholding:
- Income of non-resident individuals, including cases where they are not physically present in Vietnam.- Income from salaries, wages, remuneration, including brokerage fees.- Income of individuals from insurance agency activities, lottery agencies, and multi-level sales.- Income from capital investment.- Income from capital transfer by non-resident individuals and transfer of securities.- Prize-winning income.- Royalties income.- Franchise income.
Is PIT withheld when paying royalties to authors who are company collaborators?
Under What Circumstances Must PIT Withholding Certificates Be Provided?
According to Clause 2, Article 25 of Circular 111/2013/TT-BTC, amended by Clause 1, Clause 2, Article 20 of Circular 92/2015/TT-BTC, regulations on PIT withholding and withholding certificates are as follows:
PIT Withholding and Withholding Certificates
1. PIT Withholding
PIT withholding is the act of calculating the tax payable on income by the paying organization or individual before paying the income to the taxpayer. Specifically:
a) Income of non-resident individuals
Organizations and individuals paying taxable income to non-resident individuals must withhold PIT before paying the income. The amount of tax to be withheld is determined as guided in Chapter III (from Articles 17 to 23) of this Circular.
b) Income from salaries and wages
b.1) For resident individuals signing labor contracts of three (03) months or more, the paying organization or individual shall withhold PIT according to the partially progressive tax rate schedule, even in cases where the individual signs contracts of three (03) months or more at multiple places.
b.2) For resident individuals signing labor contracts of three (03) months or more but quitting before the end of the labor contract term, the paying organization or individual still withholds PIT according to the partially progressive tax rate schedule.
...
2. Withholding Certificates
a) Organizations and individuals paying tax-withheld income as guided in Clause 1 of this Article must issue withholding certificates at the request of the individuals whose tax was withheld. In case the individual authorizes tax finalization, no withholding certificate is issued.
b) Issuing withholding certificates in specific cases such as:
b.1) For individuals not signing labor contracts or signing labor contracts of less than three (03) months: these individuals have the right to request the paying organization or individual to issue withholding certificates for each tax withholding or a combined withholding certificate for multiple withholdings within a tax period.
........
b.2) For individuals signing labor contracts of three (03) months or more: the paying organization or individual issues one withholding certificate per tax period.
..........
Organizations and individuals paying the following types of income must provide PIT withholding certificates upon individual request:
- Income of non-resident individuals.- Income from salaries, wages.- Income from insurance agency activities, lottery agencies, multi-level sales; income from leasing assets to enterprises, economic organizations.- Income from capital investment.- Income from securities transfer.- Income from capital contribution transfer by non-resident individuals.- Prize-winning income.- Royalties and franchise income.
However, withholding certificates may not be provided if the individual authorizes tax finalization.
Is PIT Withheld When Paying Royalties to Authors Who Are Company Collaborators?
According to Clause 1, Article 3 of Decree 21/2015/ND-CP governing royalties:
Terms Explanation
1. Royalties are payments made by organizations or individuals exploiting, using a work (hereinafter referred to as the user) to the author or copyright holder when the work is exploited or used.
.....
Additionally, according to guidelines in Official Dispatch 45192/CTHN-TTHT of 2023 on PIT withholding for royalties and copyright payments:
Based on the above regulations, in case National Cultural Publishing House LLC pays royalties to authors who are collaborators of the Publishing House according to regulations on royalties policies, the mentioned remuneration is considered as income from salaries and wages as prescribed at Point c, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance. The company is responsible for withholding a 10% tax on income from two million (2,000,000) VND per occasion or more before paying it to the author.
National Cultural Publishing House LLC is requested to base on the cited legal regulations and compare them with the actual business practices to properly implement the regulations.
Royalty payments by the company to collaborators are considered remuneration from salaries and wages.
Therefore, the company must withhold PIT when paying royalties to authors who are collaborators at a rate of 10% for each income from 2,000,000 VND or more per occasion.
LawNet