How much is the current PIT rate on business income in Vietnam? Proposing to increase taxable revenue for business income in Vietnam?
What is the current PIT rate on business income in Vietnam?
According to the provisions of Article 22 of the 2007 Law on Personal Income Tax in Vietnam, the partially progressive tariff applicable to taxable income from business is prescribed as follows:
Tax grade | Taxed income per year (VND million) | Taxed income per month (VND million) | Tax rate (%) |
1 | Up to 60 | Up to 5 | 5 |
2 | Between over 60 and 120 | Between over 5 and 10 | 10 |
3 | Between over 120 and 216 | Between over 10 and 18 | 15 |
4 | Between over 216 and 384 | Between over 18 and 32 | 20 |
5 | Between over 384 and 624 | Between over 32 and 52 | 25 |
6 | Between over 624 and 960 | Between over 52 and 80 | 30 |
7 | Over 960 | Over 80 | 35 |
Thus, depending on the level of income from business activities, taxpayers will calculate tax corresponding to the tax rate specified in the above tax table.
In addition, taxable income from business is specified in Article 10 of the 2007 Law on Personal Income Tax in Vietnam (amended by Clause 4, Article 2 of the 2014 Law on Amendments to Tax Laws) as follows:
- Sole traders shall pay personal income tax directly on their incomes; tax rates vary depending on the fields, works of the individuals.
- Revenue means the amounts earned from goods sale, goods processing, commission, payments for service provision during the tax period from manufacturing, sale of goods/services.
If a sole trader fails to determine his/her income, the competent tax authority shall calculate the income in accordance with regulations of law on tax administration.
- Tax rates:
+ Distribution, supply of goods: 0.5%;
+ Service provision, construction exclusive of building materials: 2%.
+ Asset lease, insurance brokerage, lottery brokerage, multi-level marketing brokerage: 5%;
+ Manufacturing, transport, services associated with goods, construction inclusive of building materials: 1.5%.
+ Other business activities: 1%.
How much is the current PIT rate on business income in Vietnam? Proposing to increase taxable revenue for business income in Vietnam?
What is the evaluation of the current situation of applying regulations on taxable revenue to business income in Vietnam?
At Item 2.1, subsection 2, Section II, Appendix 2, Report of the Government's Draft Proposal on the Law and Ordinance Development Program in 2024; Adjusting the Law and Ordinance Development Program in 2023, the Ministry of Justice gives an assessment of the current situation of applying regulations on taxable revenue to business income as follows:
According to the provisions of the 2007 Law on Personal Income Tax of Vietnam, for income from business, deductions are also applied when calculating PIT. However, for household businesses and individual businesses, this tax calculation process is complicated because the majority of household businesses and individual businesses do not follow the accounting, invoice and voucher regime. If the taxable income is taxable, the tax authority must determine the income, then determine the taxable income on the basis of family deduction to apply the progressive partial tax schedule like individuals with incomes from salary.
In order to create favorable conditions for taxpayers and reform administrative procedures, the 2014 Law on Amendments to Tax Laws amends and supplements a number of articles in the Tax Laws and tax guidance documents (effective from January 1, 2015) stipulating:
- Household businesses and individual businesses with an annual revenue of VND 100 million or less are not required to pay PIT;
- Household businesses and individual businesses with a revenue of over VND 100 million/year shall pay personal income tax at the rate fixed on revenue according to each production and business line or field.
During the implementation process, it is suggested that the level of 100 million VND/year to determine that individuals are not subject to PIT payment is not appropriate, individual businesses paying tax according to the ratio on revenue are not entitled to family circumstances deduction.
Meanwhile, from the tax period of 2020, the deduction applied to income from salaries and wages is VND 11 million/month (VND 132 million/year) for taxpayers themselves, VND 4.4 million/month for each dependent.
Proposing to increase the taxable revenue for business income in Vietnam?
Pursuant to Item 2.1, Subsection 2, Section II, Appendix 2, Report of the Government's Draft Proposal on the Law and Ordinance Development Program in 2024; to adjust the Program for making laws and ordinances in 2023, as follows:
In order to match the fluctuation of prices, consistent with the threshold of value-added taxable revenue of individual businesses that is expected to be adjusted stated in the Research and Review Report of the current Law on Value-Added Tax. Currently, it is proposed to raise the revenue level to determine who is not required to pay PIT to a higher level than that prescribed in the current PIT Law (in agreement with the threshold of income subject to value added tax of individual businesses).
The Ministry of Justice stated in the report as follows:
The adjustment of revenue level to identify individual businesses who are not subject to personal income tax payment ensures compliance with price fluctuations and current regulations on family circumstance-based deductions, consistent with the threshold of value-added taxable revenue of individual businesses. Household businesses and individuals with low revenue will not have to pay tax.
However, raising the revenue level to determine who is not required to pay personal income tax to a higher level than currently prescribed will reduce the state budget revenue.
See the entire Appendix 2 to the Government's Draft Proposal on the Law and Ordinance Development Program in 2024; Adjustment of the Law and Ordinance Development Program in 2023: here.
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