Vietnam: What are the grounds for calculating personal income tax? Is receiving dividends in shares subject to personal income tax?
What are the grounds for calculating personal income tax in Vietnam?
Pursuant to Article 10 of Circular 111/2013 / TT-BTC stipulating the basis for calculating tax on income from capital investment is taxable income and tax rate, specifically:
- Assessable income
Assessable income from capital investment is the taxable income earned by the individual according to Clause 3 Article 2 of this Circular.
-The tax rate on the income from capital investment is 5% according to the whole income tax table.
- Time to calculate the assessable income
The assessable income from capital investment shall be calculated when the taxpayer is paid by the income payer.
The times to calculate assessable income in some cases:
+ The income from additional value of capital contribution guided in Point d Clause 3 Article 2 of this Circular shall be calculated when the person actually receives the income when the enterprise is dissolved, converted, divided, merged, amalgamated, or when the capital is withdrawn.
+ The income from reinvested profit as guided in Point g Clause 2 Article 2 of this Circular shall be calculated when the person transfers or withdraws capital.
+ The income from dividend in shares guided in Point g Clause 3 of this Article 3 shall be calculated when the person transfers his shares.
+ Where the individual receives an income from outward investment in any shape or form, the assessable income shall be calculated when the person receives the income.
- Tax calculation
Personal income tax payable = Assessable income × 5% tax
Thus, shareholders when receiving dividends paid in shares do not have to declare and pay personal income tax from capital investment when receiving, instead when shareholders make a transfer of new shares, they must declare personal income tax.
Vietnam: What are the grounds for calculating personal income tax? Is receiving dividends in shares subject to personal income tax?
Is receiving dividends in shares subject to personal income tax in Vietnam?
Pursuant to Point g Clause 3 Article 2 of Circular 111/2013/TT-BTC (amended by Clause 6 Article 11 of Circular 92/2015/TT-BTC) as follows:
Article 2. Taxable incomes
...
3. Incomes from capital investment
Incomes from capital investment are personal income in the form of:
a) Interest on the loans given to other organizations, enterprises, business households, business individuals and groups of business individuals according to loan contracts or agreements, except for the interests paid by credit institutions and branches of foreign banks according to Point g.1 Clause 1 Article 3 of this Circular.
b) The dividends earned from capital contribution to purchase of shares.
c) Profits from capital contributions to limited liability companies, partnerships, cooperatives, joint-ventures, business cooperation contracts, and other forms of business under the Law on Enterprises and the Law on Cooperatives; profits from capital contribution in establishment of credit institutions according to the Law on credit institutions, capital contributions to securities investment fund and other investment funds that are established and operated within the law.
Profits from capital investment of private companies and single-member limited liability companies under the ownership of individuals shall not be included in taxable income.
d) The added value of capital contribution received when the enterprise is dissolved, converted, divided, split, merged, amalgamation, or upon capital withdrawal.
dd) Incomes from interest on bonds, treasury bills, and other valuable papers issued by Vietnamese organizations, except for the incomes defined in Point g.1 and g.3 Clause 1 Article 3 of this Circular.
e) The incomes from capital investment in other forms, including capital contribution in kind, by reputation, rights to use land, patents.
g) Incomes from dividends paid in bonds, incomes from reinvested profit.
Thus, individuals receiving income from dividends paid in shares are subject to personal income tax.
What revenues are subject to personal income tax in Vietnam?
Pursuant to Clause 1, Article 2 of Circular 111/2013 / TT-BTC stipulates that income subject to personal income tax includes:
- Incomes from business
Incomes from business are incomes earned from the production and sale. To be specific:
+ Incomes from production and sale of goods and services that belong to all industries such as: production, goods sale, construction, construction, restaurants, service provision including lease of houses, right to use land, water surface, and other property.
+ Incomes from freelance works of individuals in the fields that are licensed or certificated as prescribed by law.
+ Incomes from agriculture, forestry, salt production, and fishery that are not eligible for tax exemption according to Point e Clause 1 Article 3 of this Circular.
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