Deductions when calculating personal income tax in Vietnam in 2024

Deductions when calculating personal income tax in Vietnam in 2024 (Internet image) 

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

1. Deductions when calculating personal income tax in Vietnam in 2024

According to Article 9 of Circular 111/2013/TT-BTC (amended by Circular 92/2015/TT-BTC, Resolution 954/2020/UBTVQH14 and Circular 79/2022/TT-BTC), the deductions are the amounts deducted from the taxable income of the person before calculating taxable income from wages, remunerations, and business in Vietnam. In particular:

(1) Personal deductions  (Personal deduction for the taxpayerr and deduction for dependants)

- Personal deduction is the amount of money deducted from the taxable income before calculating tax on incomes from business, or wages earned by the resident taxpayer.

- Levels of personal deductions

+ Deduction for the taxpayer: 11 million VND/month, 132 million VND/year.

+ Deduction for each dependant: 4.4 million VND/month.

- Calculating deduction

+ Personal deduction for the taxpayer:

++ The taxpayer that has multiple sources of income from wages and business shall calculate the personal deduction for himself in a place at a time (considered a full month).

++ The foreigner being a resident in Vietnam shall make personal deduction from January (or the month of arrival if the person comes to Vietnam for the first time) until the month in which the labor contract expires and that person leaves Vietnam in the tax year (considered a full month).

++ If the person has not made personal deduction or the deduction does not cover 12 months in the tax year, the person may make deduction for 12 months before settling tax.

+ Deduction for dependants

++ The taxpayer may make deductions for his or her dependants if the taxpayer has applied for tax registration and been issued with the tax code.

++ When registering deductions for dependants, the taxpayer shall be issued with tax codes for dependants and make preliminary deductions in the year from the registration date. The dependants that are registered before this Circular takes effect are still eligible for deductions until being issued with tax codes.

++ If the taxpayer has not made deductions for dependants in the tax year, the deductions for dependants shall be made from the month in which the custody is given when the taxpayer settles tax and registers deductions for dependants.

Deductions for other dependants, who are defined in Point d.4 Clause of Article 9 of Circular 111/2013/TT-BTC (amended by Circular 92/2015/TT-BTC), must be registered by December 31 of the tax year, otherwise the deduction for the whole tax year shall not be made.

++ The deduction for a dependant shall apply to only one taxpayer in the tax year. Where multiple taxpayers have the same dependant to provide for, they shall reach an agreement on the person that makes the deduction for such dependant.

(2) Deductions for insurance premiums and contributions to the voluntary pension fund

- Insurance premiums include premiums for social insurance, health insurance, unemployment insurance and professional liability insurance, which is compulsory for some professions.

- Contributions to the voluntary pension fund and payment for voluntary pension insurance

The contributions to the voluntary pension fund and payment for voluntary pension insurance are deducted from the taxable income. Nevertheless, the deduction shall not exceed VND 01 million/month if the employee participates in voluntary pension plans as instructed by the Ministry of Finance, including the amounts paid by the employer on behalf of the employee and the amounts paid by the employee himself/herself, even if employee participates in multiple pension funds. The basis for determination of deductible incomes is photocopies of receipts for payments issued by the voluntary pension fund or insurer.

(3) Deductible charitable donations.

- The charitable donations shall be deducted from the taxable income from business and wages before calculating the tax incurred by a resident taxpayer. To be specific:

+ Donations to the establishments that take care of disadvantaged children, the disabled, and the homeless elderly people.

 The establishments that take care of disadvantaged children, the disabled, and the homeless elderly people must be established and operated in accordance with Decree 103/2017/ND-CP.

The documents proving the donations to the establishments that take care of disadvantaged children, the disabled, and the homeless elderly people are valid notes of receipts of such establishments.

+ The contributions to charitable, humanitarian and study encouragement funds established and operated in accordance with the Decree 93/2019/ND-CP on the organization and operation of non-profit social funds, charitable funds, and other documents related to the management and use of sponsorships.

The documents proving charitable donations are valid notes of received made by the central or provincial organizations and funds.

- The charitable donations made in a tax year shall be deducted from the taxable income earned in that tax year. The donations that are not completely deducted shall be deducted from the taxable income earned in the next tax year. The maximum deduction shall not exceed the assessable income from wages and business earned in the tax year in which the charitable donations are made.

2. Basis for calculating tax on incomes from real estate transfer in Vietnam

According to Article 12 of Circular 111/2013/TT-BTC (amended by Article 17 of Circular 92/2015/TT-BTC), the basis for calculating tax on incomes from real estate transfer is the price of each transfer and tax rate. To be specific:

- Transfer price

+ The price of transfer of right to use land without constructions thereon is the price written on the transfer contract at the time of transfer.

If transfer contract does not specify the price or the price written on the transfer contract is lower than the land prices imposed by the People’s Committee of the province at that time, the land price imposed by the People’s Committee of the province at that time shall apply.

+ The price of transfer of right to use land having constructions thereon, including off-the-plan constructions, is the price written on the transfer contract at the time of transfer.

If transfer contract does not specify the land price or the land price written on the transfer contract is lower than the land prices imposed by the People’s Committee of the province at that time, the land price imposed by the People’s Committee of the province at that time shall apply.

In case of transfer of a house associated with land, the value of the house, infrastructure, and architectural works on the piece of land shall be determined according to the prices imposed by the People’s Committee of the province. If prices are not imposed by the People’s Committee of the province, regulations of the Ministry of Construction on classification of houses, standards, basic construction norms, and value of remaining constructions on land shall apply.

For off-the-plan constructions, if the contract does not specify the transfer price of the transfer price is lower than the ratio of capital contribution to total contract value multiplied by (x) land price and price imposed by the People’s Committee of the province, the transfer price shall equal the price imposed by the People’s Committee of the province multiplied by (x) ratio of capital contribution to total contract value. If the People’s Committee of the province has not imposed the unit prices, the rate of construction investment announced by the Ministry of Construction which is applicable when the transfer is made shall apply.

+ The price of transfer of right to lease land/water surface is the price written on the transfer contract at the time of transfer.

If the sublease price written on the contract is lower than the price imposed by the People’s Committee of the province when the sublease is taken, the sublease rent is based on the price list compiled by the People’s Committee of the province.

- Tax rate

Tax on real estate transfer is 2% of the transfer price or sublease price.

+ Time for taxing real estate transfer is determined as follows:

+ If the transfer contract does not require the buyer to pay tax on behalf of the seller, the taxing time is the effective date of the transfer contract as prescribed by law;

- If the transfer contract requires the buyer to pay tax on behalf of the seller, the taxing time is time of registration of the right to own or right to use the real estate. In case the person receives an off-the-plan house or land use right associated with off-the-plan constructions, the taxing time is the time the person submits tax declaration documents to the tax authority.

- Tax calculation

+ PIT on income from real estate transfer is calculated as follows:

PIT payable + Transfer price x  2% tax

+ In case the transferred real estate in under a co-ownership, the tax liability incurred by each taxpayer is proportional to their portions of real estate ownership. The basis for determining the portion of ownership is legal documents such as the initial capital contribution agreements, the testament, or the decision on division made by the court, etc. If no legitimate documents are provided, the tax liability incurred by each taxpayer shall be evenly divided.”

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