Personal Income Tax - PIT Passcard

VN PIT for ACCA F6

Tax Residents Condition

OR:

• 183 days in a calendar year or 12 consecutive months

• Regular accommodation

  • Vietnamese citizens: Registered permanent address

  • Foreign individual:

    • Address on temp/permanent residency card

    • Rent from 183 days a tax year

Matrix of residency status

House/Duration	Stay >= 183 days	Stay < 183 days
+ Accommodation	Tax resident	Tax resident (Unless being tax resident of other country)
- Accommodation	Tax resident	Tax non-resident

• Tax resident: worldwide income

• Tax non-resident: Vietnamese source income

Taxable Income Sources

• from business

• from salary & wage

• from capital investment, transfer

• from real estate transfer

• from winning prize

• from royalty

• from franchising

• from inheritance

• from receipt of gifts

Non-taxable employment income - State related

1. severance and unemployment

2. retirement or pension

3. allowance from social insurance fund

4. SHUI, including oversea compulsory

5. medial support for self and dependent

Taxable rental housing

• Cap 15% total taxable income

• Stay at office, allocate based on used area

• Non-taxable: FoC house built by employer in industrial, difficult, economic zones

Taxable employment income in kind

1. life, cum basis insurance. Except health, non-cum basis.

2. membership with name of individual or group of

3. driver, maid, tax consultant for personal purpose

4. others - very wide (i.e. oversea trip for spouse)

Non-taxable employment income - from employer

1. hardship allowance

2. one-off relocation of expat » VN or VN » oversea, per contract

3. employer mid-shift meals or cash under 730k

4. one annual return home ticket

5. school fee for expat in VN or VN in oversea (up-to high school)

6. uniform in kind or under 5m

7. vehicle expense during business travel

8. training fee deemed appropriate for job

9. telephone, stationary in deemed basis

10. oil, gas, mining re-allocate

11. nightshift, overtime

Non-taxable income - from others

1. compensation

2. oversea relatives’ remittance

3. scholarship

Taxable Timing

• when actually received

• capital/stock when transferred

Taxable cum voluntary life insurance

• insurer in VN: insurer withhold 10% PIT

• foreign insurer: employer withhold 10% PIT

Exchange Rate used

• buying rate of bank

• taxpayer does not possess bank account in VN, use VCB rate

Assessable income

Tax resident

• Taxable income

  • Less SHUI

  • Less voluntary pension fund (cap 1m/month)

  • Less self-deduction (11m) and dependent (4.4m)

  • Less deductible donation

Tax non-resident

• no deduction allowed

Tax period

• yearly basis

• if stay >=183 days, tax period is calendar year

• if stay < 183 days in a calendar year but >= 183 days in 12 consecutive months

  • first tax year is 12 consecutive months

  • following year will be calendar year.

Voluntary pension fund

• cap 1m/month

• remain after deducting self/employer portion is taxable

Dependent deduction

• children < 18 or disabled >=18, studying university and has income <1m per month

• spouse, (step-)parent(-in-law), caring relatives

  • above working age, income <1m per month

  • under working age, disabled, income <1m per month

Personal deduction

• monthly 11m

• for expat arriving in middle of year:

  • with DTA: count from arrival month to year end

  • without DTA: applies full year

Deductible Donation and Sponsorship

• contributed to certain qualified parties, must established under Vietnamese law

• type:

  • education

  • medical

  • disaster recovery

  • building house for poor

  • scientific research

• carry forward is not allowed

Gross income calculation

[1] annual income excluding housing

[2] average monthly income = [1] / months

[3] 15% monthly income = 15% * [2]

[4] taxable housing = MIN (actual housing, [3])

[5] monthly gross taxable income = [2] + [4]

[6] monthly gross assessable income = [5] - deductions

[7] monthly PIT payable = [6] * rate

[8] annual PIT payable = [7] * months

Net PIT calculation (exclusive housing)

• assessable income = net income - deduction

• grossed up income = assessable / rate

• PIT = grossed up income * rate

Overlapped PIT

• overlapped amount = first year payable / 12 * overlapped month

• remain second year payable = second year payable - overlapped amount

Net PIT calculation (inclusive housing)

1. net income

2. deduction

3. net income after deduction = [1] - [2]

4. grossed up income (exclusive housing) = [3] / rate

5. base income for housing comparison = [4] + [2]

6. taxable housing = MIN ([5] * 15%, actual housing)

7. grossed up income (inclusive housing) = ([3] + [6])/rate

8. PIT payable = [7] * rate

Multiple sources Net PIT calculation (exclusive housing)

step	from Company A	from Company B
annual Salary	[a] (x months)	[a] (x months)
others (bonus, allowance)	[b] (x months)	[b] (x months)
annual net income	[c] = [a] + [b]	[c] = [a] + [b]
monthly net income	[d] = [c] / months	[d] = [c] / months
deduction	[e] = 11 + 4.4 + SHUI
monthly net income after deduction	[f] = [d] - [e]	[f] = [d]
monthly grossed up income	[g1] = [f] / rate	[g2] = [f] / rate
total annual assessable income	[h] = [g1] x months + [g2] x months
monthly assessable income	[i] = [h] / 12 months
annual PIT	[pit] = [i] x rate x 12

Multiple sources Net PIT calculation (inclusive housing)

step	from Company A	from Company B
annual Salary	[a] (x months)	[a] (x months)
others (bonus, allowance)	[b] (x months)	[b] (x months)
annual net income	[c] = [a] + [b]	[c] = [a] + [b]
monthly net income	[d] = [c] / months	[d] = [c] / months
deduction	[e] = 11 + 4.4 + SHUI
monthly net income after deduction	[f] = [d] - [e]	[f] = [d]
monthly grossed up income	[g] = [f] / rate	[g2] = [f] / rate
monthly taxable housing	[ho] = MIN (15%*([g] + [e]), actual)
monthly grossed up income (+housing)	[g1] = ([f]+[ho])/rate
total annual assessable income	[h] = [g1] x months + [g2] x months
monthly assessable income	[i] = [h] / 12 months
annual PIT	[pit] = [i] x rate x 12

Net PIT inclusive housing note

• grossed up income 1st time:

  • including in base comparison housing

  • including in grossed up 2nd time

• deduction

  • including in base comparison housing

  • excluding before 1st grossed up

• grossed up each source first then divide to 12 months

Oversea tax credit

• tax resident subject tax on both foreign and Vietnam source income

• lower of oversea PIT and portion VN PIT on oversea income

• cap credit = VN PIT total income * (oversea income / total income)

Income from capital investment - Sources

• interest from loans, bonds, treasury (accrual basis)

• dividend in any form, except one-member LLC owner

• capital increase

• tax exempt: interest from

  • bank deposit

  • life insurance

  • govt bonds

• securities, capital transfer

PIT bearing

• gross of PIT: individual bears PIT

• net of PIT: employer bears PIT

Income from capital investment - dividends

Receiving dividends through shares:

• capital in LLCs:

  • transfer = (sell/receive - purchase - expense) x 20%

  • dividend = receive x 5%

• shares/securities:

  • transfer = sell x 0.1%

  • dividend = receive x 5%

Employment income as bonus shares

• income type upon transfer shares

  • income from securities/capital transfer

  • income from employment

• “Cashing shares award” is employment income

  • state in labor contract

  • if pay in cash, no transfer delay

• “Share award” nature is employment income

  • any income after award like dividend is investment income

  • transfer delay

Employment income as share options

• difference between option price and market price is taxable income

• treatment as employment income and possess with progressive table.

• delay until exercise

Income from real estate transfer

• 2% on transfer price

• exempted

  • related person in family

  • owned one house for 183+ days

• timing

  • if seller declares, time the transfer takes effect (i.e. signing date)

  • if buyer declares, time of ownership transfer

• more than 2 buyers, share PIT by ownership ratio

Tax Exemption by DTA

• tax non-resident

• exempt Vietnam source income

• must submit

Income from royalties, franchising

• transferring object/right related intellectual property, technology transfer

• declare when receiving income

• 5% of excess VND10m by contract amount

Income from prize wining

• 10% of excess VND10m

• declare on occasion basis

Income from inheritance, gifts

• 10% of excess VND10m

• declared on transferred, received time

• paid by 30 days after tax notice issued

• real estate exemption of inheritance/gift is related person in family

• inheritance capital of LLCs on book value of equity

Tax non-resident calculation

• Employment income same as resident for gross, net PIT, rate fix at 20%

• income arising in VN:

  • not present in VN: [days of VN work] / [total working day] * [global income] + [other taxable income in VN]

  • present in VN: [days of VN work] / 365 * [global income] + [other taxable income in VN]

PIT withholding, declaration, finalization

• sign 3M labor contract » deduct on progressive basis

• no sign or sign <3M labor contract and exceeding VND2m then deduct fixed 10%. estimate assessable income too low » commit to dismiss withholding

• monthly, quarterly filling, no PIT occurs, still file tax returns

• resident files quarterly direct to tax authorities if income from embassies, consulates, international entities not subject to tax deduction

• multi-source income » self-finalization

• commission for insurance, lottery agent, withhold income >VND100m » P5%/V0%

• leasing assets, withhold payment >100m » P5%/V5%

• withholding cert:

  • no & <3M labor contract: cert each transaction or per tax period

  • >3M labor contract: cert per tax period