Income from business currently subject to personal income tax in Vietnam

Income from business currently subject to personal income tax in Vietnam (Internet image)

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

1. Income from business currently subject to personal income tax in Vietnam

According to Clause 1, Article 2, Circular 111/2013/TT-BTC stipulates that incomes from business are incomes earned from the production and sale. To be specific:

- Incomes from production and sale of goods and services that belong to all industries such as: production, goods sale, construction, construction, restaurants, service provision including lease of houses, right to use land, water surface, and other property.

- Incomes from freelance works of individuals in the fields that are licensed or certificated as prescribed by law.

- Incomes from agriculture, forestry, salt production, and fishery that are not eligible for tax exemption according to Point e Clause 1 Article 3 of this Circular.

2. What are the regulations on personal tax reduction in Vietnam?

The taxpayers facing difficulties in paying tax due to natural disasters, accidents, or fatal diseases shall receive a tax reduction in proportion to the damage. The reduction shall not exceed the tax payable. In particular:

Determination of reduced tax:

- Tax reduction shall be considered in the tax year. The taxpayer shall receive tax reduction for the tax year in which the taxpayer suffers from natural disaster, fire, accident, or fatal disease.

- The tax payable used for calculating tax reduction is the total personal income tax payable in the tax year, including:

+ The paid or withheld personal income tax on incomes from capital investment, incomes from capital transfer, incomes from real estate transfer, incomes from winning prizes, incomes from royalties, incomes from franchising, incomes from inheritance, and incomes from gifts.

+ The personal income tax payable on incomes from business and incomes from wages, remunerations.

- The basis for calculating the damage eligible for tax reduction is the total expenditure for repairing damage minus the indemnities provided by insurers (if any) or compensations provided by the organization or individual that caused the accident (if any).

- The reduced tax is determined as follows:

+ If the tax payable in the tax year is higher than the damage level, the reduced tax is equal to the damage level.

+ If the tax payable in the tax year is lower than the damage level, the reduced tax is equal to the tax payable.

The procedure and application for tax reduction shall comply with guiding documents on tax administration.

(Article 4 of Circular 111/2013/TT-BTC)

3. Tax incurred by sole traders in Vietnam

- Sole traders shall pay personal income tax directly on their incomes; tax rates vary depending on the fields, works of the individuals.

- Revenue means the amounts earned from goods sale, goods processing, commission, payments for service provision during the tax period from manufacturing, sale of goods/services.

If a sole trader fails to determine his/her income, the competent tax authority shall calculate the income in accordance with regulations of law on tax administration.

- Tax rates:

+ Distribution, supply of goods: 0.5%;

+ Service provision, construction exclusive of building materials: 2%.

Asset lease, insurance brokerage, lottery brokerage, multi-level marketing brokerage: 5%;

+ Manufacturing, transport, services associated with goods, construction inclusive of building materials: 1.5%.

+ Other business activities: 1%

(Article 10 of the Law on Personal Income Tax 2007 (amended in 2014)

Nguyen Ngoc Que Anh

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