What is tax withholding? What are the regulations on tax withholding in Vietnam?

Pursuant to the provisions of Clause 1, Article 25 of Circular 111/2013/TT-BTC and Article 20 of Circular 92/2015/TT-BTC, tax withholding is the income payer’s calculating and withholding the tax payable from the taxpayer’s income before paying the income to the tax payer.

For incomes earned by non-residents:

The organization or individual that pay taxable incomes to the non-resident shall withhold the personal income tax from the income before it is paid. The determination of tax being withheld is guided in Chapter III (from Article 17 to Article 33) of Circular 111/2013/TT-BTC.

For incomes from wages

- The income payer shall deduct tax from incomes of residents that sign labor contracts for 03 months or longer according to the progressive tax table, including the persons that sign such contracts at various places.

- The income payer shall still withhold tax from the incomes earned residents that sign labor contracts for 03 months but resign before such labor contracts expire according to the progressive tax table.

- The income payer shall withhold tax from the incomes earned by the foreigners working in Vietnam based on the duration of work in Vietnam written in the contract or letter of introduction according to the progressive tax table (if the person has worked in Vietnam for at least 183 days in the tax year) or the whole income tax table (if the person has worked in Vietnam for fewer than 183 days in the tax year).

- Insurers have the responsibility to deduct tax on accrual of life insurance premiums paid by the employer on behalf of the employee (except voluntary pension insurance) or other optional insurances with accrual of premiums provided by insurers established and operating under Vietnam’s law. The amount of tax deducted is specified in Clause 2 Article 14 of Circular 92/2015/TT-BTC.

Before paying the employee, the employer has the responsibility to deduct tax from the premiums of life insurance or other optional insurances with accrual of insurance bought by the income payer for the employee from insurers not established and operating under Vietnam’s law but permitted to sell insurance in Vietnam. The amount of tax deducted is specified in Clause 2 Article 14 of Circular 92/2015/TT-BTC.

- The determination of tax withheld from incomes from wages earned by residents is guided in Article 7 of Circular 111/2013/TT-BTC; the determination of tax withheld from incomes from wages earned by non-residents is guided in Article 18 of Circular 111/2013/TT-BTC.

What is tax withholding? What are the regulations on tax withholding in Vietnam? (Internet image) 

For incomes from operation of insurance agents, lottery agents, and network marketing agents; incomes from lease of property to enterprises and/or business organizations in Vietnam

Lottery companies, insurers and network marketing companies have the responsibility to deduct PIT before paying agents whose commission is over VND 100 million/year. The amount of tax deducted is specified in Clause 2 Article 9 of Circular 92/2015/TT-BTC.

The enterprise or business organization who leases property from a person has the responsibility to deduct VAT and PIT before paying the lessor if the amount paid to the lessor is over VND 100 million/year and the lease contract stipulates that the lessee pays tax on behalf of the lessor. The amount of tax deducted is specified in Clause 2 Article 8 of Circular 92/2015/TT-BTC.

For incomes from capital investment

The payer of incomes from capital investment as prescribed in Clause 3 Article 2 of Circular 111/2013/TT-BTC shall withhold personal income tax from incomes before they are paid to the earners, unless the persons declare tax themselves as guided in Clause 9 Article 26 of Circular 111/2013/TT-BTC. The determination of tax being withheld is guided in Article 10 of Circular 111/2013/TT-BTC.

For incomes from transferring securities

0.1% tax on the transfer price shall be withheld from every income from securities transfer before the income is paid to the transferor. Tax shall be withheld as follows:

- For securities traded at the Stock Exchange:

+ The securities company or commercial bank where the person opens the depository account shall withhold 0.1% personal income tax on the transfer price as before the income is paid to the person. The determination of tax being withheld is guided in Point b.2 Clause 2 Article 11 of this Circular.

+ The asset management company to which the person entrusts the management of securities investment portfolio shall withhold 0.1% personal income tax on the transfer price of the entrusting person according to the distribution table sent to the depository bank where the company opens its depository account.

- For securities transfer without the transaction system of the Stock Exchange:

+ For securities of a public company that has applied for securities registration at the Vietnam Securities Depository:

The securities company, commercial bank where the person opens the depository account shall withhold 0.1% personal income tax on the transfer price before initiating the procedure for transferring the securities ownership at the Vietnam Securities Depository.

+ For securities of a joint-stock company that is not a public company, issues securities and authorizes a securities company to manage the list of shareholders:

The securities company authorized to manage the list of shareholders shall withhold 0.1% personal income tax on the transfer price before initiating the procedure for transferring the securities ownership.

The person that transfers securities shall present the transfer contract to the securities company when initiating the procedure for transferring securities ownership.

For incomes earned by non-residents from transferring contributed capital

The organization or person that receives capital contribution from a non-resident shall withhold 0.1% personal income tax on the transfer price.

For incomes from winning prizes

The prize provider shall withhold personal income tax before providing prizes to the prizewinner. The determination of tax being withheld is guided in Article 15 of Circular 111/2013/TT-BTC.

For incomes from royalties and franchising

The organization or person that pay incomes from royalties or franchising shall withhold personal income tax before the income is paid to the person. The tax withheld equals the excess over 10 million VND of the income according to the transfer contract multiplied by (x) 5% tax. If the contract has a high value and is paid in instalments, when paying the first instalment the organization or person that pay incomes shall subtract 10 million VND from the payment, then withhold the amount that equals the remaining amount multiplied by 5% tax. Income tax on the next instalments shall be withheld from each instalment.

Withholding tax in other cases

The organization or person that pays a total income from 2 million VND to a resident that does not sign a labor contract (as guided in Point c and Point d Clause 2 Article 2 of Circular 111/2013/TT-BTC) or that signs a labor contract for less than 03 months shall withhold 10% tax on the income before it is paid to the person.

For the person that earns only a taxable income as stated above but the total taxable income estimated after personal deductions are made does not reach the taxable level, the person shall make and send a commitment (the form is provided in the guiding documents on tax administration) to the income payer as the basis for temporarily exempting the income from personal income tax.

Based on the commitment made the income earner, the income payer shall not withhold tax. At the end of the tax year, the income payer shall make a list of persons that earn incomes below that taxable level (the form is provided in the guiding documents on tax administration) and send it to the tax authority. The persons are responsible for the commitments they made. Any deceit discovered shall be penalized in accordance with the Law on Tax administration.

The persons that make commitments as guided in this Point shall obtain tax registration and have tax codes when the commitments are made.

Mai Thanh Loi

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