Resolution of Some Situations Pertaining to Personal Income Tax in Vietnam

Question 1: Do biological parents need to pay personal income tax (PIT) or any other taxes when gifting their children real estate and cash in Vietnam?

Answer: (Excerpt from Official Dispatch 6277/CT-TTHT of the Hanoi Tax Department dated February 8, 2018)

- Based on Articles 3 and 4 of the Personal Income Tax Law 04/2007/QH12:

Individuals receiving income from gifts of real estate between biological parents and children are exempt from PIT as stipulated in Article 4 of the Personal Income Tax Law.

Gifts in the form of cash do not fall under taxable personal income.

Question 2: What is the personal income tax policy for authorizing tax finalization in Vietnam?

Answer: (Excerpt from Official Dispatch 4885/CT-TTHT of the Hanoi Tax Department dated January 30, 2018)

- Based on Clause 2, Article 26 of Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance regarding tax declaration and finalization.

- Based on Article 12 of Circular 151/2014/TT-BTC dated October 10, 2014, from the Ministry of Finance amending and supplementing Clause 2, Article 26 of Circular 111/2013/TT-BTC:

Individuals earning income from salaries and wages are responsible for declaring tax finalization if additional tax is due or if there is excess tax paid that they wish to claim as a refund or carry over to the next tax declaration period, except in cases specified in Article 12 of Circular 151/2014/TT-BTC.

If an individual has income from salaries and wages under a labor contract of three (03) months or more at one unit and has additional sporadic income from other places averaging not more than 10 million VND per month, with tax deducted at source at a rate of 10%, they do not need to finalize taxes for this sporadic income and can authorize the organization or individual that pays the income to finalize taxes on their behalf.

For employees who have additional sporadic income from other sources where those units do not declare and deduct PIT from the income paid, the individual cannot authorize their company to finalize PIT on their behalf.

Question 3: Does the phone allowance paid to employees count towards taxable personal income in Vietnam?

Answer: (Excerpt from Official Dispatch 4875/CT-TTHT of the Hanoi Tax Department dated January 30, 2018)

- Based on Point (đ), Clause 2, Article 2 of Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance on taxable income from salaries and wages;

- Based on Article 4 of Circular 96/2015/TT-BTC dated June 22, 2015, guiding corporate income tax, amending and supplementing Article 6 of Circular 78/2014/TT-BTC dated June 18, 2014, from the Ministry of Finance, guiding deductible and non-deductible expenses when determining taxable income.

According to the above regulations, if the company’s payment for employee phone allowances is specifically outlined in certain documents such as labor contracts, collective labor agreements, company financial regulations, or reward regulations as stipulated by the company's board of directors, the amount is considered deductible from corporate taxable income and is not counted towards the employee’s taxable personal income.

If the phone allowance paid to employees exceeds the predetermined limit, the excess amount should be counted as taxable personal income.

Question 4: If a company and an employee mutually agree to terminate a labor contract (lasting 03 months or more), is the salary and other support payments subject to personal income tax in Vietnam?

Answer: (Excerpt from Official Dispatch 5552/CT-TTHT of the Hanoi Tax Department dated February 2, 2018)

- Based on Clause 3, Article 36 of the 2012 Labor Code dated June 18, 2012, from the National Assembly regarding mutual agreement on the termination of labor contracts.

- Based on Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance detailing the implementation of the Personal Income Tax Law, the amended Personal Income Tax Law, and Decree 65/2013/ND-CP of the Vietnamese Government detailing some articles of the Personal Income Tax Law and its amendments:

+ Clause 2, Article 2, regarding taxable income from salaries and wages.

+ Article 25, regarding tax deduction and tax deduction certificates.

- Severance pay, job loss allowances, unemployment benefits, and other allowances as stipulated by the Labor Code and Social Insurance Law are not subject to PIT.

- For taxable salaries, wages, allowances, and benefits, the company must deduct tax based on the progressive tax schedule.

- For additional financial support provided by the company to the employee after terminating the labor contract, which is outside the provisions of the Labor Code and Social Insurance Law, tax must be deducted at 10% if the amount is two million VND (2,000,000 VND) or more before payment.

Question 5: Organization A (in the UK) has a branch in Vietnam known as Organization A Vietnam. Organization A establishes Company B (UK) for business activities. In Vietnam, Company B establishes Company B Vietnam. Can employees transferred from Organization A Vietnam to Company B Vietnam authorize Company B Vietnam to finalize their PIT for 2017?

Answer: (Excerpt from Official Dispatch 6663/CT-TTHT of the Hanoi Tax Department dated February 12, 2018)

- Based on Clauses 1 and 3, Article 21 of Circular 92/2015/TT-BTC dated June 15, 2015, from the Ministry of Finance.

- Based on Clause 1, Section II of Official Dispatch 801/TCT-TNCN dated March 2, 2016, from the General Department of Taxation regarding the finalization of PIT for 2015 and the issuance of dependent tax identification numbers.

According to the above regulations, if in April 2017, individuals were transferred from Organization A Vietnam to Company B Vietnam (both under Organization A in the UK), meeting the condition of transfer between entities within the same system, these individuals are allowed to authorize Company B Vietnam to finalize PIT for 2017 for the income received from Organization A Vietnam if they are eligible for authorization.

Question 6: Does an individual need to notify the tax authority when changing from an identity card to a citizen card? What is the deadline for notification?

Answer: (Excerpt from Official Dispatch 3662/CT-TTHT of the Hanoi Tax Department dated January 23, 2018)

- Based on Article 12 of Circular 95/2016/TT-BTC dated June 28, 2016, from the Ministry of Finance guiding taxpayer registration, specifying the responsibilities, deadlines, and locations for submitting documents for changes in taxpayer registration information.

- Based on Article 1 of Circular 166/2013/TT-BTC dated November 15, 2013, from the Ministry of Finance detailing administrative penalties for tax violations, specifying the scope and subjects of administrative sanctions for tax violations.

- Based on guidance in Official Dispatch 4534/TCT-KK dated September 30, 2016, from the General Department of Taxation guiding the determination of the timing of changes in taxpayer registration information for households and individuals.

1. On changing taxpayer registration information:

For individuals with changes in information related to their citizen identification card or identity card that lead to changes in taxpayer registration information, the date of the change indicated on the citizen identification card or identity card plus specific days determines the deadline for submitting the change documents to the directly managing tax authority.

- In cities or district-level towns, not more than 07 working days for new issuance and exchange; not more than 15 working days for reissuance.

- In mountainous, highland, border, and island districts, not more than 20 working days for all cases of new issuance, exchange, and reissuance.

- In other remaining areas, not more than 15 working days for all cases of new issuance, exchange, and reissuance.

2. On penalties for administrative tax violations:

Taxpayers who delay notifying changes in taxpayer registration information beyond the stipulated deadline, regardless of intent, are subject to administrative penalties as per the Tax Administration Law and its amendments.

Question 7: Is family circumstance deduction applicable for a mother beyond working age with no income and a child studying postgraduate in the USA?

Answer: (Excerpt from Official Dispatch 5976/CT-TTHT of the Hanoi Tax Department dated February 6, 2018)

- Based on Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance:

+ Clause 2, Article 8, guiding the timing for determining taxable income.

+ Clause 1, Article 9, guiding family circumstance deductions for dependents.

According to the above guidance, an individual with a biological mother beyond working age with no income will be eligible for the family circumstance deduction. For a biological child pursuing higher education abroad, only the mother is eligible for the deduction.

Question 8: If a company pays for annual return air tickets for foreign employees, what basis is used to determine that this expense is not counted towards taxable personal income?

Answer: (Excerpt from Official Dispatch 6682/CT-TTHT of the Hanoi Tax Department dated February 12, 2018)

- Based on subpoint g.6, Point g, Clause 2, Article 2 of Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance.

According to the above guidance, if a company pays for annual return air tickets for foreign employees (to the country of their nationality or where their family resides), this expense is not counted towards taxable personal income. The basis for determining this is the labor contract and the respective air ticket payment from Vietnam to the foreign employee’s country of nationality or where their family resides, and vice versa.

Question 9: Does the program management (PMU) have to include travel expenses, accommodation, and meals funded by non-refundable aid as taxable personal income?

Answer: (Excerpt from Official Dispatch 6679/CT-TTHT of the Hanoi Tax Department dated February 12, 2018)

- Based on Article 7 of Circular 181/2013/TT-BTC dated December 3, 2013, from the Ministry of Finance, guiding tax policies and incentives for programs and projects using official development assistance (ODA) funds and concessional loans from donors regarding tax policies for individuals working on projects.

- Based on Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance:

+ Clause 2, Article 2, concerning taxable income.

+ Point i, Clause 1, Article 25, concerning tax deduction and tax deduction certificates.

+ Clause 1, Article 18, concerning income from wages and salaries of non-resident individuals.

- Based on Articles 1 and 2 of Circular 97/2010/TT-BTC dated July 6, 2010, from the Ministry of Finance on travel expense policies and conference organization policies for state agencies and public service providers.

- Based on Clause 2, Article 12 of Circular 225/2010/TT-BTC dated December 31, 2010, from the Ministry of Finance on financial management policies for non-refundable foreign aid within state budget revenue.

According to the above regulations, if the PMU pays travel, accommodation, and meal expenses for employees within and outside the PMU from non-refundable aid funds, then:

- If it complies with the donor's expense standards, these travel expenses are not considered taxable personal income.

- If travel expenses exceed the donor’s standards, the excess must be included in taxable personal income. Specifically:

+ For employees with labor contracts of 03 months or more: the excess is included as taxable personal income from wages and salaries and calculated progressively.

+ For those without labor contracts of 03 months or more: the entire travel expense, accommodation, and meal costs are included as taxable personal income. Payments exceeding two million VND (2,000,000 VND) per time must have tax deducted at 10%. For non-resident individuals, a 20% tax deduction applies according to Clause 1, Article 18 of Circular 111/2013/TT-BTC.

Question 10: Is retirement income subject to personal income tax?

Answer: (Excerpt from Official Dispatch 2231/CT-TTHT of the Hanoi Tax Department dated January 16, 2018)

- Based on Clause 1, Article 3 of Circular 111/2013/TT-BTC:

Income from pensions is tax-exempt.Question 11: Does a company that implements a commercial discount program (directly reducing on the invoice), which is not considered an agency commission or promotional bonus according to Articles 92 and 171 of the Commercial Law, need to include this discount in the taxable income for personal income tax (PIT)?

Answer: (Excerpt from Official Dispatch 6676/CT-TTHT of Hanoi Tax Department dated February 12, 2018)

- Based on Commercial Law 36/2005/QH11

- Based on Clauses 6 and 10 of Article 2, Circular 111/2013/TT-BTC,

The aforementioned commercial discount amount is not considered taxable income for PIT. The company does not need to withhold PIT when offering this discount.

Question 12: The Institute of Archaeology is conducting a national science and technology project "Vietnam History - Volume I (Prehistoric Period)" under the national scheme “Research and Compiling the History of Vietnam Series”. Individuals participating in this project include those from the Institute of Archaeology and other organizations such as Hanoi University of Social Sciences and Humanities; Ho Chi Minh City University of Social Sciences and Humanities; Institute of Geology; Southern Institute of Social Sciences, etc. Should the income earned by these individuals from participating in this project be subject to PIT?

Answer: (Excerpt from Official Dispatch 69017/CT-TTHT of Hanoi Tax Department dated October 24, 2017)

- Based on Clause 2, Article 2, Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance, guiding taxable income from salaries or wages.

According to the above provisions, if the Institute implements the Scheme “Researching the Archaeological Conservation Site of Oc Eo – Ba The, Nen Chua”; the national-level science project “Vietnam History - Volume I (Prehistoric Period)”, with funding from the state budget, the income received by individuals participating in the project is not considered taxable income for PIT. The members involved in the Scheme are those named in the list approved by the competent authority.

Question 13: Mrs. A and her husband wish to transfer a house and its land-use rights, currently the sole property of Mrs. A and her husband, with total area of 100 m². They plan to transfer the entire parcel to three other individuals. This transfer has been approved and divided by the Hanoi Department of Natural Resources and Environment's Land Registration Office. Is this transfer exempt from PIT as the sole residential property transfer?

Answer: (Excerpt from Official Dispatch 66621/CT-TTHT of Hanoi Tax Department dated October 10, 2017)

- Based on Article 3, Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance

- Based on Clause 1, Article 12, Circular 92/2015/TT-BTC dated June 15, 2015, of the Ministry of Finance, amending and supplementing Sub-item b.1.2, Item b, Clause 1, Article 3 of Circular 111/2013/TT-BTC.

According to these regulations, if Mrs. A and her husband sign three (3) contracts to transfer the total ownership of the house and land-use rights, currently the sole property with an area of 100 m², to three (3) different individuals (dividing the land into three parts), the transfer is not exempt from PIT related to the sole residential property and land-use rights transfer.

Question 14: Company A has Korean employees assigned to work in Vietnam according to a letter of appointment from the parent company in South Korea. From January through April 2017, these Korean employees received salary, paid taxes, and insurance according to Korean law. From May 1, 2017, to the present, they are paid in Vietnam, paying health insurance and PIT according to Vietnamese law, and do not receive any income in Korea. How should the procedures for finalizing the PIT for these Korean employees be handled?

Answer:

- Based on Circular 111/2013/TT-BTC dated August 15, 2013

+ Article 1 regarding taxpayers

+ Clause 1, Article 6 regarding the tax period for resident individuals

+ Point e.1, Clause 2, Article 26 regarding tax returns for resident individuals with income from salary, wages, or business.

- Based on Clause 4, Article 44 of Circular 156/2013/TT-BTC dated November 6, 2013, of the Ministry of Finance guiding the implementation of certain provisions of the Law on Tax Administration; the Law amending and supplementing certain provisions of the Law on Tax Administration and Government Decree 83/2013/ND-CP dated July 22, 2013, guiding procedures for deducting foreign tax paid in Vietnam.

Based on these regulations, for Company A's Korean employees working in Vietnam based on a letter of appointment from the parent company from March 1, 2017 (present in Vietnam for more than 183 days in 2017), these Korean employees are considered resident individuals in Vietnam for 2017 under the Law on PIT; taxable income includes income generated within and outside Vietnamese territory regardless of payment and receipt location under the provisions of Article 1, Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance.

If foreign resident individuals have income generated in Japan, and the paying entity in Japan has withheld PIT, the amount of PIT paid in Japan can be deducted following Point e.1, Clause 2, Article 26, Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance and must comply with foreign tax deduction procedures payable in Vietnam as prescribed in Clause 4, Article 44, Circular 156/2013/TT-BTC dated November 6, 2013, of the Ministry of Finance.

Regarding the finalization of PIT for 2017, Hanoi Tax Department has issued Official Dispatch 5749/CT-TNCN dated February 5, 2018, on finalizing PIT for 2017 and issuing tax codes for dependents. The Company is advised to review and implement accordingly.

**Question 15: The content on the PIT deduction certificate at item [14] states: “Income from salary and contract termination allowance.”

The content on the income confirmation letter: The bank separates income into salary income and contract termination allowance. Is this way of recording on the PIT deduction certificate and the income confirmation letter correct?**

Answer: (Excerpt from Official Dispatch 2733/CT-TTHT of Hanoi Tax Department dated January 18, 2018)

- Based on Clause 1, Article 16, Circular 156/2013/TT-BTC dated November 6, 2013, of the Ministry of Finance

- Based on Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance

+ Clause 2, Article 2 regulating taxable income from salaries and wages;

+ Article 25 regulating tax withholding and PIT deduction certificates.

According to these provisions, if the bank and the employee agree to terminate the labor contract (three months or more), and the bank pays salary and other support and allowances to the employee:

+ Termination allowances, job loss allowances, unemployment allowances, and other allowances according to the Labor Code and Social Insurance Law are non-taxable PIT items.

+ Salaries, wages, and related allowances are subject to PIT. The bank shall withhold PIT according to the progressive tax rate schedule and issue PIT deduction certificates as required by the employee.

The contents in the income confirmation letter are subject to mutual agreement between the bank and the employee, ensuring conformity with related regulations.

Question 16: What documents are required for registering family deduction for a non-working age mother-in-law?

Answer:

- Based on Clause 1, Article 9, Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance

According to these regulations, if the taxpayer registers for family deduction for a dependent who is a mother-in-law beyond the working age and has an average monthly income from all sources not exceeding one (1) million VND, the documents to prove the dependent includes: a photocopy of the ID card, and legal documents to establish the relationship between the dependent and the taxpayer such as a photocopy of the household registration (if sharing the same household registration), or birth certificate.

If Mr. Luu Tien Dung registers for the family deduction for a dependent mother-in-law beyond the working age from December 2017, it is not mandatory to have confirmation from the commune-level People's Committee where the dependent resides.

The taxpayer can claim deductions for the dependent from the month the obligation to provide care arises when finalizing tax returns and registering the family deduction for the dependent.

The taxpayer must commit and be legally responsible for the dependent's non-income or average monthly income from all sources not exceeding one (1) million VND.

Question 17: Are visa costs for foreign employees paid by the company included in taxable income for PIT?

Answer:

- Based on Article 1 of Law No. 26/2016/QH13 dated November 22, 2012, amending and supplementing several provisions of the PIT Law.

- Based on Clause 2, Article 3 of Decree 65/2013/ND-CP dated June 27, 2013, of the Government, detailing several provisions of the PIT Law and the Law amending and supplementing several provisions of the PIT Law.

- Based on Clause 2, Article 2, Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance on taxable income.

- Based on Official Dispatch 3867/TCT-TNCN dated August 25, 2017, from the General Department of Taxation.

If the company pays costs for temporary residence cards and visas for foreign employees on their behalf, these costs are included in the taxable income for PIT from salaries and wages and must be declared and paid accordingly.

Question 18: Are service contract costs for obtaining work permits for foreign employees in Vietnam paid by the Company included in the employees' taxable income for PIT?

Answer: Based on guidance in Official Dispatch 3867/TCT-TNCN dated August 25, 2017, from the General Department of Taxation.

If Company X hires foreign employees, the company is responsible for applying for work permits for these employees, so the costs for work permits paid by the company are not included in the employees' taxable income for PIT.

Question 19: If Unit A terminates the labor contract with an employee and pays severance allowances according to regulations, are these allowances included in the taxable income from salaries and wages of the employee?

Answer: Based on Point b, Clause 2, Article 2 of Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance

Severance pay, job loss allowances, unemployment benefits, and other allowances according to the Labor Code and Social Insurance Law are non-taxable PIT income.

Question 20: At the end of the year, Company A pays additional financial support to employees who have terminated their labor contracts (outside of Labor Code and Social Insurance Law regulations) based on their work duration within the year. Is this support included in taxable income for PIT?

Answer: Based on Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance

For additional financial support paid by the company to employees (outside of Labor Code and Social Insurance Law regulations) after the termination of labor contracts, if the amount is two million VND (2,000,000) or more, the company must withhold 10% PIT before paying.

Question 21: If an individual is sent by the company for on-the-job training overseas, having a permanent residence in Vietnam but present in Vietnam less than 183 days in a tax year, is this individual considered a resident or non-resident in Vietnam?

Answer: Based on Official Dispatch 4936/TCT-TNCN dated October 25, 2017, from the General Department of Taxation

An individual who is a resident abroad can be determined as a non-resident in Vietnam if they provide evidence of residency abroad according to foreign regulation and must declare taxable income in Vietnam solely based on the full tax rate.

If no proof of foreign residency is provided, the individual is considered a resident in Vietnam. The individual must declare the income generated in Vietnam and income received outside Vietnamese territory (if any) according to the progressive tax rate schedule.

Question 22: What is the tax rate for individuals (both residents and non-residents) on income from transferring futures contracts in the derivatives market?

Answer: Based on Official Dispatch 11133/BTC-CST dated August 21, 2017, from the Ministry of Finance regarding tax policy for income from transferring futures contracts in the derivatives market.

Individuals (both residents and non-residents) with income from transferring futures contracts in the derivatives market are subject to a tax rate of 0.1% on the transfer price of securities per transaction.

Question 23: If Company A signs a contract with an individual or group of individuals without business registration for seasonal work such as pipe installation, maintenance, repair of water supply and drainage systems, or green landscaping maintenance, is the company required to request individual invoices from the tax authorities when making payments according to the contract to record the costs?

Answer:

- Based on Clause 2, Article 2; Clause 1, Article 25 of Circular 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance

- Based on Clause 1, Article 13 of Circular 39/2010/TT-BTC dated March 31, 2014, of the Ministry of Finance

The company is responsible for withholding PIT according to the full tax rate: 10% before paying the individual, regardless of whether the individual represents a group of individuals.

Question 24: From January 1, 2015, is the cost of non-mandatory insurance without accumulated insurance fees paid by the employer for employees included in the employees' taxable income for PIT?

Answer: Based on Clause 3, Article 11 of Circular 92/2015/TT-BTC dated June 15, 2015, of the Ministry of Finance

The cost of non-mandatory insurance without accumulated insurance fees paid by the employer for employees does not count towards the employees' taxable income for PIT.

Question 25: When does the income-paying agency perform taxpayer registration for individuals earning salary, wages, and taxpayer registration for the dependents of such individuals?

Answer: Based on Clause 5, Article 6 of Circular 95/2016/TT-BTC

The income-paying agency shall perform taxpayer registration for individuals earning salary and wages and taxpayer registration for the dependents of such individuals no later than 10 (ten) working days before the deadline for submitting the personal income tax finalization dossier.

Question 26: For inheritance and gifts in the form of non-traded securities on the Stock Exchange, what is the value of the securities that serves as the tax base?

Answer: Based on Article 19 of Circular 92/2015/TT-BTC dated June 15, 2015 of BTC

The value of the securities is based on the book value in the accounting records of the issuing company of such securities at the time of preparing the most recent financial statements in accordance with accounting law before the registration of securities ownership.

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE