Personal Income Tax (“PIT”) is tax obligation of individuals who arise incomes. However, the way of PIT calculation under regulations of law corresponding to each type of income is different.
Through this article, BLawyers Vietnam will summarize how to process PIT calculation for each type of income as prescribed.
INDEX
1. PIT calculation on incomes from salaries, wages 1
2. PIT calculation on incomes from business activities 3
3. PIT calculation on incomes from transferring contributed capital, transferring securities 5
4. PIT calculation on income from winning prizes, receiving inheritances, and receiving gifts 6
5. PIT calculation on income from real estate transfer 7
6. PIT calculation on income from franchising, copyright 7
7. PIT calculation on income from capital investment 8
- PIT calculation on incomes from salaries, wages
Individuals who are the employees working for the employers, having incomes from salaries, wages or equivalents to wages under Article 2.2 of Circular No. 111/2013/TT-BTC, is obliged to pay PIT.
- For residents
PIT amount = Assessable income x Tax rate (under the progressive tax table) |
In which:
- Assessable income = Taxable income – Deductions
Taxable income includes incomes from salaries, wages and those of nature of wages and salaries that employees receive from employers under Article 2.2 of Circular No. 111/2013/TT-BTC.
The prescribed deductions include:
- Family deduction: VND 11 million/month (or VND 132 million/year) for taxpayer and VND 4.4 million/person/month (or VND 52.8 million/person/year) for dependent.
- Deductions for insurance premiums, voluntary retirement funds.
- Deductions for charitable, humanitarian and academic donations.
- Tax rates under the progressive tax table
| Level | Assessable income/year (million VND) | Assessable income/month (million VND) | Tax rate (%) |
| 1 | Up to 60 | Up to 5 | 5 |
| 2 | Over 60 to 120 | Over 5 to 10 | 10 |
| 3 | Over 120 to 216 | Over 10 to 18 | 15 |
| 4 | Over 216 to 384 | Over 18 to 32 | 20 |
| 5 | Over 384 to 624 | Over 32 to 52 | 25 |
| 6 | Over 624 to 960 | Over 52 to 80 | 30 |
| 7 | Over 960 | Over 80 | 35 |
- For non–residents
PIT amount = Taxable income x Tax rate of 20% |
In which:
- Taxable income includes incomes from salaries, wages and those of nature of wages and salaries that employees receive from employers under Article 2.2 of Circular No. 111/2013/TT-BTC for working in Vietnam, regardless of where income is paid.
Of note, the expats who have both worked in Vietnam and abroad but cannot separate the income generated in Vietnam be applied the following formula:
- For expats who are not present in Vietnam:
| Total income generated in Vietnam | = | Number of working days for works in Vietnam | x | Income from global wages and salaries (before tax) | + | Other taxable income (before tax) arising in Vietnam |
| Total number of working days in the year |
- For expats who are present in Vietnam
| Total income generated in Vietnam | = | Number of days presenting in Vietnam | x | Income from global wages and salaries (before tax) | + | Other taxable income (before tax) arising in Vietnam |
| 365 days |
- Tax rate of 20%
- PIT calculation on incomes from business activities
Business households and individuals who have incomes from business and production activities must pay taxes for each sector, production and business lines (regardless of whether or not there is business registration) under Article 2.1 of Circular No. 111/2013/TT-BTC, except for tax-exempt incomes.
Of note, business households and individuals who have revenues of VND 100,000,000/year or less, must not pay tax on business activities.
- For residents
The residents shall calculate and pay tax under 3 following methods:
- Periodic declaration: means a method of declaring, calculating tax on a proportion of actual revenue earned per month or quarter applied for business households and individuals who have the large-scale or who chooses to pay tax by this method.
- Separate declaration: is the method of declaring and calculating tax on a proportion of actual revenue earned separately applied for business individual who have casual business operation and do not have fixed business locations.
- Presumptive tax: is the method of calculating tax on a fixed tax amount determined by tax authority for business households and individuals that are not in implementing the above two methods.
Of note, for individuals who have income from property leasing in Vietnam, there are separate regulations on the method of PIT calculation.
Accordingly, the tax amount is calculated on a proportion of revenue (for the method of periodic declaration and separate declaration) under the following formula:
PIT amount = PIT taxable revenue x PIT rate
VAT amount = VAT taxable revenue x VAT rate
In which:
- PIT and VAT taxable revenue is revenue including such taxes incurred during the tax period from the production and trading of goods and services (regardless of whether the money has been collected or not collected).
- PIT and VAT rate corresponding to each sector and industry under the tax rate listed in Appendix I of Circular No. 40/2021/TT-BTC.
- For non-residents
The non-residents will calculate PIT on a proportion of revenue generated in Vietnam on each revenue generation.
Accordingly, the PIT amount is calculated under the following formula:
PIT amount = Taxable revenue x Tax rate
In which:
- Taxable revenue is the entire amount from the provision of goods and services incurred in Vietnam including expenses paid by the buyer on behalf of non-residents that are not refunded.
- Tax rate:
- Goods trading: 1%
- Service provision: 5%
- Production, construction, transportation and other business activities: 2%.
- PIT calculation on incomes from transferring contributed capital, transferring securities
Individuals earning incomes from transferring contributed capital in economic organizations (i.e., limited liability company, partnership, business cooperation contract, cooperative, people’s credit fund, economic organization, others organization) or transferring securities (i.e., transferring shares, call options on shares, bonds, treasury bills, fund certificates, and other securities) must pay PIT in accordance with laws.
- For residents
a.1. For income from transferring contributed capital
PIT amount = Assessable Income x Tax rate of 20% |
In which:
- Assessable income = Transfer price – Purchase price of transferred capital – Relevant reasonable expenses
Accordingly, the transfer price is the amount that an individual receives under the capital transfer contract and the purchase price of the transferred capital is the value of contributed capital at the time of transferring capital.
- Tax rate of 20%
a.2. For income from transferring securities
PIT amount = Assessable income x Tax rate of 0,1% |
In which:
- Assessable income is the securities transfer price each time.
Accordingly, the securities transfer price is determined as follows:
- For securities of public companies that are traded at the Stock Exchange is the transaction price at the Stock Exchange; or
- For securities not falling into the above cases: the transfer price is the price stated in the transfer contract or the actual transfer price or the price according to the accounting books at the time of making the latest financial statement before time of transfer.
- Tax rate of 0.1%
- For non-residents
b.1. For income from capital transfer
PIT amount = Assessable income x Tax rate of 0,1% |
In which:
- Assessable income is the total amount that non-residents receive from the transfer of capital at Vietnamese organizations and individuals, not excluding any expenses including the cost price.
- Tax rate of 0.1% regardless of whether the transfer made in Vietnam or abroad.
- PIT calculation on income from winning prizes, receiving inheritances, and receiving gifts
Residents earning incomes from winning prizes, receiving inheritances, receiving gifts under Article 2.6 and Article 2.10 of Circular No. 111/2013/TT-BTC or non-residents having such incomes arising in Vietnam are obliged to calculate and pay PIT as prescribed, except for tax-exempt incomes.
Accordingly, the PIT amount is calculated under the following formula:
PIT amount = Assessable income x Tax rate of 10% |
In which:
- Assessable income is determined:
- For income from winning prizes: assessable income is the prize value in excess of 10 million VND that taxpayers receive for each winning time, regardless of the number of times the prize is received.
- For income from inheritance, gift: assessable income from inheritance, gift is the value of property received as inheritance or gift in excess of 10 million VND each time.
- Tax rate of 10%
- PIT calculation on income from real estate transfer
Individuals have income from real estate transfer in the forms specified in Article 2.5 of Circular No. 111/3013/TT-BTC are obliged to calculate and pay PIT as prescribed, except for tax-exempt incomes.
Accordingly, PIT amount is calculated under the following formula:
PIT amount = Transfer price x Tax rate of 2%
In which:
- The transfer price for the transfer of land use rights, land lease or water surface lease is the price stated on the transfer contract at the time of transfer.
- Tax rate of 2%.
- PIT calculation on income from franchising, copyright
Resident individuals with incomes arising from franchises, copyrights according to Articles 2.7 and Article 2.8 of Circular No. 111/2013/TT-BTC or non-residents with such incomes arising in Vietnam are obligated to calculate and pay PIT as prescribed.
Accordingly, the PIT amount is calculated under the following formula:
PIT amount = Assessable income x Tax rate of 5% |
In which:
- Assessable income:
- For income from franchising: assessable income is the income more than 10 million VND under the franchise contract, regardless of the number of payments or the number of payments received by the taxpayer.
If the same object of commercial rights, but the transfer is made into many contracts, the assessable income is the excess of 10 million VND on the total franchise contracts.
- For income from royalties: assessable income from royalties is the income more than VND 10 million under the transfer contract, regardless of the number of payments or the number of payments received by the taxpayer, obtained when transferring, transferring the right to use objects of intellectual property rights, transferring technology.
- Tax rate of 5%
- PIT calculation on income from capital investment
Residents who have incomes from capital investments inside and outside Vietnam and non-residents whose incomes are generated in Vietnam under Article 2.3 of Circular No. 111/2013/TT-BTC are obliged to calculate and pay PIT as prescribed, except for tax-exempt incomes:
Accordingly, the PIT amount is calculated under the following formula:
PIT amount = Assessable income x Tax rate of 5% |
In which:
- Assessable income are incomes from capital investment that an individual receives in forms as prescribed.
- Tax rate of 5%.
Writer: Thu Tran & Tuyen Pham
For further information, please contact:
Minh Ngo Nhat, Managing Partner, BLawyers
minh.ngo@blawyersvn.com
