Can charity donations eligible for tax reduction when calculating personal income tax in Vietnam?
Are charity donations eligible for tax reduction when calculating personal income tax in Vietnam?
According to Article 20 of the Law on Personal Income Tax 2007 amended by Clause 4, Article 6 of the Law Amending Tax Laws 2014 stipulating reduction for charity or humanitarian donations in Vietnam:
Article 20. Reduction for charity or humanitarian donations
1. Charitable and humanitarian contributions are deductible from income before tax calculation for income from business, salary, and wages of resident individuals, including:
a) Contributions to organizations, establishments caring for and nurturing children with special difficulties, disabled people, and the elderly with no shelter;
b) Contributions to charitable funds, humanitarian funds, and educational promotion funds.
2. The organizations, establishments, and funds specified in Points a and b, Clause 1 of this Article must be permitted or recognized by a competent state agency to be established, operating for charitable, humanitarian, or educational purposes, and not for profit.
According to Clause 1, Article 7 of the Circular 111/2013/TT-BTC, with certain provisions annulled by Clause 6, Article 25 of the Circular 92/2015/TT-BTC, stipulating the bases for calculating tax on taxable incomes from business, wages in Vietnam:
Article 7. Bases for calculating tax on taxable incomes from business, wages
The bases for calculating tax on taxable incomes from business, wages.:
1. Taxable income is determined by the taxable income as guided in Article 8 of this Circular minus (-) the following deductions:
a) Family circumstance-based deductions as guided in Clause 1, Article 9 of this Circular.
b) Insurance contributions, voluntary pension fund contributions as guided in Clause 2, Article 9 of this Circular.
c) Charitable, humanitarian, educational promotion contributions as guided in Clause 3, Article 9 of this Circular.
[...]
Thus, charitable donations are one of the deductible items when calculating personal income tax from salary and wages, but must meet the conditions stipulated in Clause 3, Article 9 of the Circular 111/2013/TT-BTC
Are charity donations eligible for tax reduction when calculating personal income tax in Vietnam? (Image from the Internet)
What are subject of personal income tax?
According to Article 3 of the Law on Personal Income Tax 2007 amended by Clause 1; Clause 2, Article 2 of the Law Amending Tax Laws 2014 and Clause 1, Article 1 of the Amended Law on Personal Income Tax 2012 on taxable incomes:
[1] Income from business
- Income from production and business activities of goods and services;
- Income from independent professional activities of individuals with a practice certificate or license as prescribed by the law.
Note: Income from business does not include income of business individuals with annual revenue of VND 100 million or less.
[2] Income from salary and wages
- Salary, wages, and incomes of similar nature.
- Allowances and subsidies, except for the following:
+ Allowances and subsidies as prescribed by the law on preferential treatment for individuals with meritorious services.
+ National defense and security allowances.
+ Hazardous and dangerous allowances for occupations or jobs in places with hazardous and dangerous elements.
+ Attraction and regional allowances as prescribed by the law.
+ Unexpected difficulty allowances, labor accident, and occupational disease allowances, one-time allowances for childbirth or adoption, allowances for decreased labor ability, one-time pension, monthly survivorship pension, and other allowances as prescribed by the law on social insurance.
+ Severance and job loss allowances.
+ Social protection subsidies and other allowances that do not have the nature of salary, wages as prescribed by the Government of Vietnam.
[3] Income from capital investment
- Loan interest
- Dividend
- Income from capital investment in other forms, except for income from the interest from Government bonds
[4] Income from capital transfer
- Income from transfer of capital in economic organizations
- Income from transfer of securities
- Income from transfer of capital in other forms
[5] Income from real estate transfer
- Income from transfer of land use rights and assets attached to land
- Income from transfer of ownership or use rights of houses
- Income from transfer of land lease rights, water surface lease rights
- Other incomes from real estate transfers in all forms
[6] Income from winning prizes
- Lottery prizes
- Promotional prizes
- Betting prizes
- Prizes from games, contests with prizes, and other forms of winning prizes.
[7] Income from royalties
- Income from the transfer, transfer of the right to use objects of intellectual property rights
- Income from technology transfer
[8] Income from franchising
[9] Income from inheritance, including securities, capital in economic organizations, business establishments, real estate, and other assets requiring registration of ownership or use.
[10] Income from gifts, including securities, capital in economic organizations, business establishments, real estate, and other assets requiring registration of ownership or use.
Who are payers of personal income tax in Vietnam?
According to Article 2 of the Law on Personal Income Tax 2007 stipulating the taxpayers:
Article 2. Taxpayers
1. Taxpayers of personal income tax are resident individuals with taxable income as stipulated in Article 3 of this Law arising within and outside the territory of Vietnam and non-resident individuals with taxable income as stipulated in Article 3 of this Law arising within the territory of Vietnam.
2. Resident individuals are those who meet one of the following conditions:
a) Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months from the first day of presence in Vietnam;
b) Having a regular place of residence in Vietnam, including a registered permanent residence or a rented house in Vietnam under a term lease contract.
3. Non-resident individuals are those who do not meet the conditions specified in Clause 2 of this Article.
Thus, subjects liable to personal income tax are resident individuals with taxable income arising within and outside the territory of Vietnam and non-resident individuals with taxable income arising within the territory of Vietnam.
Resident individuals subject to personal income tax are those who meet one of the following conditions:
- Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months from the first day of presence in Vietnam;
- Having a regular place of residence in Vietnam, including a registered permanent residence or a rented house in Vietnam under a term lease contract.
Note: Non-resident individuals are those who do not meet the above conditions.
