Personal Income Tax Changes Come into Effect

Ministry of Finance guidelines on personal income tax (PIT) in Circular No. 92/2015/TT-BTC came into effect on 30 July, 2015, applying to the 2015 tax period. The revised Circular issues the new tax declaration forms required to use in monthly, quarterly, annual tax returns and other PIT related documents.

The Circular affects PIT calculation, employment and investment and rental income. Highlights of the new Circular are below.

PIT Calculation

• Taxable revenue and income must be calculated in Vietnam Dong. If revenue and income are generated from a foreign currency:
  • Taxable revenue and income received in a foreign currency must be converted into VND at the exchange rate set by the bank where an individual open an account at the time of income generation; or
  • If taxpayers do not have a bank account with any Vietnamese bank, they must convert foreign currency into VND at the buying exchange rate set by Vietcombank at the time of income generation.
  • Foreign currency without an exchange rate to VND must be converted through another currency that has exchange rate with VND.
• Unlike the previous regulations, the Circular clearly separates taxable income, non-taxable income and exempt income from the gross income earned by any individual.

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Employment Income

Taxable Income

• Living costs paid by the employer, including utilities and service expenses are taxed at the cost paid, but not more than 15 percent of the employee’s gross taxable income, excluding taxable housing, utilities and service expenses.

Non-taxable Income

• Foreigners working in Vietnam and Vietnamese workers overseas do not need to pay tax on one-off relocation payment. This stipulation now also applies for Vietnamese residing overseas on a long-term basis and returning to Vietnam.
• Contributions from employer to non-mandatory insurance products in Vietnam and overseas that does not accumulate the insurance fees such as medical insurance, accident insurance are non-taxable.
• Travel expenses for taking employees from/to work are employee’s non-taxable income under the firm’s internal policy.

Exempt Income

• Allowance or benefits provided by an employer for special occasions including weddings and funerals based on the company’s internal policies are not determined as subject to PIT up to a prescribed limit.
• Salaries or wages of Vietnamese seafarers who work for foreign carriers or Vietnamese international transport carriers are exempted from PIT subject.

Investment Income

• Under the Circular, dividends received by an individual whose company is a limited liability company are no longer subject to five percent PIT.
• Stock exchange activities are taxed at a rate of 0.1 percent on the stock price of each exchange.
• Buying or selling property is taxed at a rate of 2 percent on the buying price or selling price.
• The remittance income received from overseas Vietnamese relatives or Vietnamese citizens working or studying abroad is exempted from PIT. Now this extends to the case where the remittance income is received from overseas non-Vietnamese relatives if that income encourages money transferring activities.

Rental Income

• Rental income including the penalty cost and damage cost that an owner pays under rental contract is now subject to PIT at a flat rate of five percent on annual gross rental amount if the annual income exceeds VND 100 million.

Further Support for Your Business

Dezan Shira & Associates provides accounting and tax planning services to companies with operations in Vietnam. The firm can help companies establish a direct office in the country and can guide them through the affiliated accounting, tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact us at: vietnam@dezshira.com

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