If the inheritance is received in a foreign country, will the foreigner working in Vietnam be subject to personal income tax?
How are residents determined?
Pursuant to Clause 1, Article 1 of Circular No. 111/2013/TT-BTC, a resident is a person that meets one of the conditions below:
- He/she has been present in Vietnam for at least 183 days in a calendar year or for 12 consecutive months from the first day of his/her presence in Vietnam (the date of arrival and date of departure are considered 01 day). The date of arrival and date of departure depends on the certification of the immigration agency on the passport (or laissez-passers) when that person enters and leaves Vietnam. If the person enters and leaves Vietnam within one day, it will be considered a day of residence.
A person in Vietnam defined in this Point is the presence of that person in Vietnam’s territory.
- He/she has a regular residence in Vietnam in one of the following cases:
+ He/she has a regular residence according to regulations of law on residence:
++ For Vietnamese citizens: a place where that person regularly, stably and indefinitely lives and has been registered as a permanent residence as prescribed by regulations of law on residence.
++ For foreigners: the permanent residence written in the permanent residence card or the temporary residence when applying for the temporary residence card issued by a competent authority affiliated to the Ministry of Public Security.
+ He/she rents a house in Vietnam according to regulations of law on housing under a contract that has a term of at least 183 days in the tax year. To be specific:
++ A person who has no regular residence defined in Point b.1 Clause 1 of this Article will be considered a resident if he/she has a total house lease period of at least 183 days in the tax year under various lease contracts, even if a he/she rents houses in different locations.
++ The rented houses can be hotels, guesthouses, motels, offices, etc. whether they are rented by the person or their employer.
If the person has a regular residence in Vietnam according to this Clause but his/her actual presence in Vietnam is shorter than 183 days in the tax year and he/she fails to prove his or her residence in any country, that person will be considered a resident of Vietnam.
The residency in another country shall be proved by the Certificate of residence. If the person is a citizen of a country or territory that has signed a tax agreement with Vietnam and does not issue the Certificate of residence, that person shall present a photocopy of the passport to prove the period of residence.
If the inheritance is received in a foreign country, will the foreigner working in Vietnam be subject to personal income tax?
Which incomes from inheritance are subject to personal income tax in Vietnam?
Pursuant to Clause 9 Article 2 of Circular No. 111/2013/TT-BTC stipulating that incomes from inheritance are subject to personal income tax, including:
- Inherited securities: shares, call options on shares, bonds, treasury bills, fund certificates, and other securities according to the Law on Securities; shares of the person in the joint-stock company according to the Law on Enterprises.
- Inherited capital in economic organizations and businesses: capital contribution to limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises and businesses of the person; capital in associations and funds established within the law, or the entire business if the private enterprise or business is under the ownership of the person.
- Inherited real estate: rights to use land, rights to use land and property thereon; ownership of houses, including future houses, infrastructure and constructions on land, including off-the-plan constructions; rights to rent land or water surface; other incomes from inheritance being real estate in any shape or form, except for incomes from the inherited real estate.
- The ownership and use rights of other inherited assets (cars, motorbikes, ships, barges, speedboats, towboats, yachts, airplanes, hunting guns, sporting guns) must be registered with state agencies.
If the inheritance is received in a foreign country, will the foreigner working in Vietnam be subject to personal income tax in Vietnam?
Pursuant to Article 2 of the 2007 Law on Personal Income Tax in Vietnam on taxpayers as follows:
Taxpayers
1. Personal income taxpayers include residents who earn taxable incomes specified in Article 3 of this Law inside and outside the Vietnamese territory and non-residents who earn taxable incomes specified in Article 3 of this Law inside the Vietnamese territory.
2. Resident means a person who satisfies one of the following conditions:
a/ Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam;
b/ Having a place of habitual residence in Vietnam, which is a registered place of permanent residence or a rented house for dwelling in Vietnam under a term rent contract.
3. Non-resident means a person who does not satisfy any of the conditions specified in Clause 2 of this Article.
At the same time, in Clause 1, Article 1 of Circular No. 111/2013/TT-BTC (amended by Article 2 of Circular No. 119/2014/TT-BTC) on the scope of determining taxable income as follows:
Taxpayers
...
Taxable income is determined as follows:
Taxable income earned by a resident is the income earned within and beyond Vietnam’s territory regardless of the place where income is paid;
Any individual who is a citizen of a country or territory that has entered into an agreement on double taxation and prevention of tax avoidance with Vietnam, and also a resident in Vietnam shall calculate personal income tax from the month that individual arrives at Vietnam (if the individual goes to Vietnam for the first time) to the month in which the labor contract expires and the individual leaves Vietnam without following procedures for consular certification to avoid double taxation according to the double taxation agreement between the two countries.
Taxable income of a non-resident is income earned in Vietnam, regardless of the place where income is paid and received.
Thus, in case a foreigner working in Vietnam receives an inheritance abroad, it is necessary to consider whether this foreigner is identified as a resident.
In case this person is a resident, the taxable income earned by a resident is the income earned within and beyond Vietnam’s territory. Then this income may be subject to personal income tax if the inherited property belongs to the incomes subject to personal income tax as prescribed in Clause 9 Article 2 of Circular No. 111/2013/TT-BTC.
In case this person is not a resident and taxable income is income earned within Vietnam’s territory. Therefore, the income from inheritance earning abroad is not subject to personal income tax in Vietnam.
LawNet