Income from Inheritance: What Does It Include? Guidelines on Calculating Personal Income Tax from Inheritance
What constitutes income from inheritance?
According to Clause 9, Article 2 of Circular 111/2013/TT-BTC, income from inheritance is the income that an individual receives according to a will or the provisions of law on inheritance. To be specific:
- For inheritance as securities, it includes:+ Shares, share purchase rights, bonds, treasury bills, fund certificates, and other securities as prescribed by the Securities Law;+ Personal shares in a joint-stock company as prescribed by the Enterprises Law.
- For inheritance as capital in economic organizations, business establishments, it includes: capital contribution in a limited liability company, cooperative, partnership, business cooperation contract; capital in a private enterprise, individual business establishment; capital in associations, funds authorized to be established under the law, or the entire business establishment if it is a private enterprise, individual business establishment.
- For inheritance as real estate, it includes:+ Land-use rights;+ Land-use rights with assets attached to the land;+ House ownership rights, including future houses;+ Infrastructure and construction works attached to the land, including future construction works;+ Land lease rights;+ Water surface lease rights;+ Other incomes received from inheritance of real estate in any form; except for income from inheritance of real estate.
- For inheritance as other assets required to register ownership or use rights with the State management agency such as: cars; motorcycles, motorbikes; ships, including barges, canoes, tugboats, pushboats; boats, including yachts; aircraft; hunting guns, sports guns.
What constitutes income from inheritance? Guidelines on calculating personal income tax from inheritance?
How to calculate personal income tax from inheritance for resident individuals?
For resident individuals, the calculation of income from inheritance is based on Article 16 of Circular 111/2013/TT-BTC, as amended by Article 19 of Circular 92/2015/TT-BTC as follows:
The formula for calculating personal income tax from inheritance for resident individuals is as follows:
Personal income tax from inheritance payable = Taxable income x Tax rate of 10%
Taxable income from receiving inheritance is the asset value received exceeding 10 million VND each time it is received.
The value of the inheritance assets is determined for each case. To be specific:
- For inheritance of securities: the value of the inheritance asset is the part of the asset value exceeding 10 million VND based on all securities codes received without deducting any costs at the time of registration of transfer of ownership. To be specific:+ For securities traded on the Stock Exchange: the value of the securities is based on the reference price on the Stock Exchange at the time of registration of ownership of the securities.+ For securities not falling into the above category: the value of the securities is based on the book value of the issuing company at the nearest financial reporting time as per accounting regulations before the registration of ownership of the securities.
- For inheritance of contributed capital in economic organizations, business establishments: taxable income is the value of the contributed capital determined based on the book value of the company at the nearest time before the registration of ownership of the contributed capital.
- For inheritance of real estate assets: the value of the real estate is determined as follows:+ For real estate as the value of land use rights, the value of the land use rights is determined based on the Land Price Table issued by the Provincial People's Committee at the time the individual completes the procedures for registering the real estate use rights.+ For real estate as house and architectural works on land, the value of the real estate is determined based on regulations of the competent State management authority on the classification of house values; basic construction standards and norms issued by the competent State management authority; the remaining value of the house, architectural works at the time of registration of ownership.
In cases where it is not possible to determine as per the above rules, it is based on the registration fee valuation table issued by the Provincial People's Committee.
- For inheritance of other assets required to register ownership or use rights with the State management agency, the value of the assets is determined based on the registration fee valuation table issued by the Provincial People's Committee at the time the individual completes the procedures for registering ownership or use rights.
In cases where an individual inherits imported assets and has to pay taxes related to asset importation, the value of the assets for the purpose of calculating personal income tax from inheritance is the registration fee valuation table issued by the Provincial People's Committee at the time of completing the registration procedures for ownership or use rights minus (-) the taxes paid at the import stage by the individual as per regulations.
- The time to determine taxable income from inheritance is the time the individual completes the procedures for registering ownership or use rights of the inheritance assets.
How to calculate personal income tax from inheritance for non-resident individuals?
For non-resident individuals, the calculation of income from inheritance is implemented according to the provisions of Article 23 of Circular 111/2013/TT-BTC regulating the calculation of personal income tax from inheritance for non-resident individuals as follows:
The formula for calculating personal income tax from inheritance for non-resident individuals is as follows:
Personal income tax from inheritance payable = Taxable income x Tax rate of 10%
- Taxable income from receiving inheritance for non-resident individuals is the value of the inheritance assets exceeding 10 million VND each time income is received in Vietnam.
Income from receiving inheritance for non-resident individuals is determined as for resident individuals.
- The time to determine taxable income is the time the individual completes the procedures for registering ownership or use rights of the assets in Vietnam.
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