Hanoi-Vietnam: From July 01, 2020, persons receving salary of under 11 million VND are not required to pay PIT

Hanoi-Vietnam: From July 01, 2020, persons receving salary of under 11 million VND are not required to pay PIT (Illustration photo)

Article 1 Resolution 954/2020/UBTVQH14 stipulates an increase in the personal deductions in Vietnam under the applicable PIT Law as follows:

- Deduction for taxpayer: 11 million VND/month (132 million VND/year), an increase of 2 million VND/month compared to the old level of 9 million VND/month (108 million VND/year)

- Deduction for each dependent: 4.4 million VND/month, an increase of 800,000 VND/month compared to the old level of 3.6 million VND/month.

From July 1, 2020, the taxable income will be specifically categorized as per the table below:

Note: Clause 2, Article 2 of Resolution 954/2020/UBTVQH14 stipulates that this Resolution shall take effect from July 1, 2020, and shall apply from the tax period of 2020. From July 1, 2020, any individual earning an income below 11 million VND/month will not be required to pay a provisional PIT monthly.

In addition, under Clause 2, Article 2 of Resolution 954/2020/UBTVQH14, individuals whose provisional tax has been paid under the personal deduction stipulated in Clause 1, Article 19 of the PIT Law No. 04/2007/QH12 as amended and supplemented by Law No. 26/2012/QH13 (9 million VND/month for taxpayer, 3.6 million VND/month for each dependent) will have their payable PIT recalculated according to the deductions specified in Resolution 954/2020/UBTVQH14 during their tax finalization for 2020.

Example: Ms. X earns an income of 20 million VND/month and has 1 dependent.

- According to the old deduction level:

Taxable income is: 20,000,000 – 9,000,000 – 3,600,000 = 7,400,000 (VND).

Tax payable by Ms. X is 7,400,000 * 10% = 740,000 (VND).

- According to the new deduction level:

Taxable income is: 20,000,000 – 11,000,000 – 4,400,000 = 4,600,000 (VND).

Tax payable by Ms. X is 4,600,000 * 5% = 230,000 (VND).

Note: in the first 6 months of 2020, Ms. X made provisional tax payments according to the old deduction with an amount of 740,000 VND/month.

Therefore, no later than March 30, 2021, when finalizing the PIT for 2020, Ms. X will be refunded the amount of: (740,000 - 230,000) * 6 = 3,060,000 (VND).

The application of the new personal deductions in Resolution 954/2020/UBTVQH14 to be more favorable to the people is a progressive point in the law. This change is the right time and aligns with the actual income of the people as well as the state budget.

Le Vy

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