Basis for calculating tax on incomes from capital investment in Vietnam

Basis for calculating tax on incomes from capital investment in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What are incomes from capital investment?

According to Clause 3, Article 2 of Circular 111/2013/TT-BTC (amended in Circular 92/2015/TT-BTC), incomes from capital investment are personal income in the form of:

- 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 Circular 111/2013/TT-BTC:

The tax-free interest on deposits mentioned in this Point is the income from the interest on deposits in VND, gold, or foreign currencies at credit institutions and branches of foreign banks established and operated in accordance with the  Law on credit institutions in the form of demand deposits, term deposits, savings, certificates of deposit, promissory notes, treasury bills, and other forms of deposits that the depositor should receive both principal and interest.

The basis for identifying tax-free incomes from deposits is the savings book (or saving card) certificates of deposit, exchange bills, treasury bills, and other papers that the depositor should receive both principal and interest.

- The dividends earned from capital contribution to purchase of shares.

- Profits from capital contributions to limited liability companies, partnerships, cooperatives, joint-ventures, business cooperation contracts, and other forms of business under the Law on Enterprises and the Law on Cooperatives;

Profits from capital contribution in establishment of credit institutions according to the Law on credit institutions, capital contributions to securities investment fund and other investment funds that are established and operated within the law.

Profits from capital investment of private companies and single-member limited liability companies under the ownership of individuals shall not be included in taxable income.

- The added value of capital contribution received when the enterprise is dissolved, converted, divided, split, merged, amalgamation, or upon capital withdrawal.

- Incomes from interest on bonds, treasury bills, and other valuable papers issued by Vietnamese organizations, except for the incomes defined in Point g.1 and g.3 Clause 1 Article 3 of Circular 111/2013/TT-BTC.

- The incomes from capital investment in other forms, including capital contribution in kind, by reputation, rights to use land, patents.

- Incomes from dividends paid in bonds, incomes from reinvested profit.

2. Basis for calculating tax on incomes from capital investment in Vietnam 

2.1. Basis for calculating tax on incomes from capital investment for resident in Vietnam 

Basis for calculating tax on incomes from capital investment for residentaccording to Article 10 of Circular 111/2013/TT-BTC are as follows:

The basis for calculating tax on incomes from capital investment is the assessable income and tax rates.

- Assessable income

Assessable income from capital investment is the taxable income earned by the individual according to Clause 3 Article 2 of Circular 111/2013/TT-BTC.

- The tax rate on the income from capital investment is 5% according to the whole income tax table.

- Time to calculate the assessable income

The assessable income from capital investment shall be calculated when the taxpayer is paid by the income payer.

The times to calculate assessable income in some cases:

+ The income from additional value of capital contribution guided in Point d Clause 3 Article 2 of Circular 111/2013/TT-BTC (amended in Circular 92/2015/TT-BTC) shall be calculated when the person actually receives the income when the enterprise is dissolved, converted, divided, merged, amalgamated, or when the capital is withdrawn.

+ The income from reinvested profit as guided in Point g Clause 2 Article 2 of Circular 111/2013/TT-BTC (amended in Circular 92/2015/TT-BTC) shall be calculated when the person transfers or withdraws capital.

+ The income from dividend in shares guided in Point g Clause 3 of Article 3 of Circular 111/2013/TT-BTC (amended in Circular 92/2015/TT-BTC) shall be calculated when the person transfers his shares.

+ Where the individual receives an income from outward investment in any shape or form, the assessable income shall be calculated when the person receives the income.

- Tax calculation:

2.2. Basis for calculating tax on incomes from capital investment for non-resident in Vietnam

Guidelines for calculating personal income tax from capital investment for non-resident individuals according to Article 19 of Circular 111/2013/TT-BTC are as follows:

The personal income tax on incomes from capital investment earned by a non-resident equals the total taxable income earned by the non-resident from capital investment in other organizations and individuals in Vietnam multiplied by (x) 5% tax.

The assessable income, time to calculate assessable income from capital investment earned by the non-resident are similar to those of a resident guided in Clause 1 and Clause 3 Article 10 of Circular 111/2013/TT-BTC.

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