Is interest from loans subject to personal income tax in Vietnam?

Lawnet would like to answer as follows:

1. Personal income taxpayers in Vietnam

Pursuant to Article 2 of the Law on Personal Income Tax in 2007 stipulating personal income taxpayers in Vietnam as follows:

Article 2. Taxable subject

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.

As regulations above, personal income taxpayers in Vietnam are residents and non-residents earning taxable incomes

For resident individuals, their taxable incomes are incomes earned inside and outside the Vietnamese territory, regardless of where their incomes are paid. (Clause 1.a Article 2 of the Decree 65/2013/NĐ-CP)

For non-resident individuals, their taxable incomes are incomes earned in Vietnam, regardless of where their incomes are paid.(Clause 1.b Article 2 of the Decree 65/2013/NĐ-CP)

Resident means a person who satisfies one of the following conditions:

First, 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;

Second, 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.

2. Is interest from loans subject to personal income tax in Vietnam?

Pursuant to Clause 3.a Article 2 of the Circular 111/2013/TT-BTC stipulating taxable incomes 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.

As regulations above, interest from loans, except for the interest paid by credit institutions and branches of foreign banks, is an income from capital investment. Therefore, interest from loans is subject to personal income tax in Vietnam.

3. How to calculate personal income tax on interest from loans in Vietnam?

Pursuant to Clause 4 Article 10 of the Circular 111/2013/TT-BTC stipulating calculation of personal income tax on interest from loans in Vietnam as follows:

In there:

Personal income tax payable refers to the interest that the individual receives from the loan.

The tax rate on the income from interest from loans is 5% according to the whole income tax table.

The time to calculate personal income tax from loan interest is the time when organizations and individuals pay income to the lending individuals.

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