Personal Income Tax

Overview

Personal income tax (“PIT”) is a direct tax imposed on the income of individuals living, working, and doing business in the territory of Vietnam.

Provisions related to PIT present the following contents:

  1. Taxable Incomes
  2. Tax-exempted Incomes
  3. Determination of “resident individual” and “non-resident individual
  4. Basis for tax calculation and tax rate
  5. Tax declaration and payment
  6. Tax finalization
  7. Tax refund
  8. Instructions for tax declaration and tax payment

To make it easier for readers to learn and grasp the above documents, we have analyzed the cases and systematized the above contents as below.

View related documents here: Tax related regulations

1. Taxable Incomes

Taxable Incomes include:

  • Taxable incomes from wages and salaries are the total income of which employees received from employers, as stipulated in Clause 2, Article 2 of Circular No.111/2013/TT-BTC, supplemented in Article 2 of Circular No. 119/2014/TT-BTC and other amended documents, guidelines.
  • Taxable incomes other than wages and salaries include the incomes from other activities such as: doing business, capital investment, gifts, inheritance, leasing out assets, etc. as specified in Article 2 of Circular No.111/2013/TT-BTC, supplemented in Article 2 of Circular No.119/2014/TT-BTC and other amended documents, guidelines.

(For the detailed instructions read here: “4. Basis for calculating tax and tax rate)

2. Tax-exempted incomes

Tax-exempted incomes include multiple income sources, for example:    

  • Incomes from transfer of houses, land use right and property on land of the person, if the transferred asset is the only asset of its type such person has in Vietnam.
  • Interest income from deposits at credit institutions and branches of foreign banks, insurance contracts, or Government bonds.
  • Income from remittances is the amount of money the person receives from their relatives being Vietnamese people residing abroad, Vietnamese people that work or study abroad.

(View the Article 3 of Circular No.111/2013/TT-BTC and other amended documents, other guidelines for the details)

3. Determination of “resident individual” and “non-resident individual” for tax purposes

To determine an individual’s PIT obligation, the first step is to determine that individual’s tax residency status. Depending on whether an individual considered a resident or a non-resident, basis for calculating tax and Tax rate applied will be different.

A resident is a person who meets one of two following conditions:

  • Being present in Vietnam from 183 days or more in a calendar year or 12 consecutive months from the first arrival date (the date of arrival and date of departure are counted as 01 day).
  • Having a regular residence according to regulations of law on residence or having house lease contracts in Vietnam according to regulations of law on housing with aggregate term of at least 183 days in a tax year.

The descriptions and detailed instructions for two conditions given above are presented in Article 1 of Circular No.111/2013/TT-BTC

A non-resident is individual who does not meet the conditions of being a resident.

4. Basis for PIT calculation and Tax rate

4.1   Tax-resident

PIT payable

=

Assessable income

x

Tax rate

 

Assessable income & Tax rate depend on each type of taxable income as below:

No.

Taxable income

Assessable income =

Tax rate =

1

Income from wages and salaries

Taxable income from wages and salaries Deductions

(view Note 1* below)

  • Depending on the term of the labor contract, apply different tax rates. To be specific:
  • Labor contract of less than 3 months and income of more than 02 million/ month: 10%
  • Labor contract from 3 months or more: apply the partially progressive tariffs (view Note 2* below).

2

Income from business activities

Assessable revenue

(view Note 3* below)

  • Depending on the type of business, apply different tax rates. To be specific:
  • Distribution, provision of goods: 0,5%.
  • Services, construction exclusive of building materials: 2%.
  • Property leases, insurance agents, lottery agents, multi-level sales agents: 5%.
  • Manufacturing, transport, services associated with goods, construction inclusive of building materials: 1,5%.
  • Other business activities: 1%.

3

Income from capital investment

Taxable income

(view Note 4* below)

5%

4.1

Income from contributed capital transfer

Transfer price purchase price of the capital transfer related reasonable expenses

20%

4.2

Income from securities transfer

Transfer price each time

0,1%

5

Income from real estate transfer

Transfer price each time

2%

6

Income from inheritances or gifts

The income exceeds VND 10million each time

10%

7

Income from copyright, franchising

The income exceeds VND 10million each time of transfer contract

5%

Other incomes not listed in the above table may be tax-exempted incomes, read section: “2. Tax-exempted incomes

(Source: Circular No.111/2013/TT-BTC)

Note:

No. 1* Explanation for item 1 “Income from wages and salaries” in the above table:

  • Taxable incomes from wages and salaries are the total personal income earnings of employees received from employers, view section “1. Taxable incomes” for details
  • Deductions: include insurance premiums (social insurance, health insurance, unemployment insurance, professional liability insurance for certain occupations) in accordance with regulations of State Agencies; contribution to Voluntary pension funds (not exceed 01 million/ month); and family circumstance deductions. The current level of family circumstance deductions is prescribed in Resolution No.954/2020/UBTVQH14 dated June 2, 2020, specifically:

+For taxpayer: 11 million/ month;
+
Each qualified dependent: 4,4 million/ month.

No. 2* The progressive tax table (applicable to Item 1 “Income from wages and salaries” in the above table) (view Clause 2, Article 7 of Circular No.111/2013/TT-BTC for details)

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%

No. 3* Revenue subject to PIT (applicable to Item 2 “Income from business activities” in the above table)

  • Assessable revenue from business activities is total proceeds from sales, processing fee, commission, goods, and services provision arising in the tax period.
  • Assessable revenue for business individuals is the flat revenue that has been stable for a year. In cases where through the investigation, verification, examination and inspection data, the tax calculation revenue is changed from 50% or more to the flat revenue, the tax authority would redetermine the flat revenue in according with law on tax administration applied to the remaining period of the tax year.

(View the instructions in Article 2 of Circular No.92/2015/TT-BTC for details)

No. 4* Taxable income (applicable to Item 3 “Income from capital investment” in the above table)

  • The dividends earned from capital contribution to purchase of shares;
  • Profits from capital contributions to limited liability companies, joint stock companies, etc.

(View the instructions in Clause 3, Article 2 of Circular No.111/2013/TT-BTC for details)

4.2   Personal income tax for non-tax resident

PIT payable

=

Assessable income

x

Tax rate

Assessable income & Tax rate depend on each type of taxable income as below:

No.

Taxable income

Assessable income =

Tax rate =

1

Income from wages and salaries

Income subject to PIT from wages and salaries (same as for “resident” above but without deductions)

20%

2

Income from business activities

Assessable revenue

(similar to resident’s)

  • Goods sale: 1%.
  • Service provision: 5%.
  • Manufacture, construction, transportation, and other business activities: 2%.

3

Income from capital investment

Taxable income

(similar to resident’s)

5%

4

Income from transferring contributed capital

Transfer price each time

0,1%

5

Income from real estate transfer

Transfer price each time.

2%

6

Income from inheritances or gifts

The income exceeds VND 10million each time in Vietnam.

10%

7

Income from copyright, franchising

The income exceeds VND 10 million each transfer contract in Vietnam.

5%

(Source: Circular No.111/2013/TT-BTC)

5. PIT Declaration and Payment

5.1 Individual having taxable income

Income from wages and salaries 

  • If there is only 01 source of income from salaries, wages: Individuals do not have to declare and temporarily pay tax because the income-paying organization is obliged to withhold PIT and make declaration and temporary payment to tax authorities. However, by the end of the calendar year, the individual must make a tax finalization authorization file for the organization to perform PIT finalization on behalf in the year when an income is earned. In case the individual does not authorize the income-paying organization to perform tax finalization on behalf, the individual will make the tax finalization by himself/herself.
  • If there is more than 01 source of income from salaries, wages: Individuals must declare and temporarily pay tax quarterly (View detailed instructions in Article 21 of Circular No.92/2015/TT-BTC). Declare tax online at the following link https://thuedientu.gdt.gov.vn/ (Must login to view detailed procedures).

Income from leasing out assets 

  • If the estimated total rental income is not exceeding VND 100 million/year: no PIT declaration and payment.
  • If the total rental income is estimated at VND 100 million/year or more, declare and pay tax for each time the income is received. However, we can choose 01 of 02 ways:

+Declare and pay tax directly; (View detailed instructions in Article 14 of Circular No.40/2021/TT-BTC). Declare tax online at the following link https://thuedientu.gdt.gov.vn/ (Must login to view detailed procedures);
+
Request and make an agreement with the lessee to declare and pay tax on behalf of the lessor (View detailed instructions in Article 16 of Circular No.40/2021/TT-BTC).

Other sources of income

Make tax declaration whenever tax is incurred (View detailed instruction in Clause 4,5,6, Article 16 of Circular No.156/2013/TT-BTC and related supplementary laws). Declare tax online at the following link https://thuedientu.gdt.gov.vn/ (Must login to view detailed procedures).

Deadlines for submission of tax declaration dossiers on monthly or quarterly basis or upon incurrence, view detailed instruction in Article 44 of Law No.38/2019/QH14.

5.2 Income-paying organization (salaries and wages)

Periodically (monthly or quarterly), an organization paying income to individuals must declare and pay PIT on behalf of the recipients. At the end of the calendar year, the income-paying organization shall perform tax finalization for the income recipients (View detailed instructions in Clause 1, Article 26 of Circular No.111/2013/TT-BTC).

6. PIT Finalization

PIT finalization is that an individual declares all incomes from wages and salaries received in a calendar year to determine the overpaid or underpaid PIT compared to the total PIT (for salary, wages) temporarily paid in that year, then carry out the procedures for tax refund (if desired) or pay the corresponding tax to ensure compliance. Some things to note when finalizing PIT:

  • Tax declaration does not apply to non-resident individuals.
  • For non-employment income, the PIT finalization is not required.
  • Overpaid taxes that are not finalized will not be refunded or offset in the next period.
  • The deadline for paying additional PIT (if any) coincides with the deadline for submission of tax finalization dossiers. For each case summarized as below:
6.1 For Individuals

Individuals must make tax finalization on income from salaries and wages in the following ways:

  • Individuals authorize the income-paying organization to perform tax Finalization on behalf (if eligible for authorization);
  • Individuals conduct tax finalization by themselves;
  • The foreign resident who finishes his/her employment contract in Vietnam shall make a tax statement before exit. The foreign resident when returning to his/her country can also authorize the income-paying organization in Vietnam to perform PIT finalization on behalf (View item 6.2 For income-paying organization for details);
  • Individuals who want to consider tax reduction due to natural disaster, fire, accident, or fatal disease must conduct tax finalization by themselves (not authorize income-paying organization;
  • Deadline for submission of tax finalization dossiers:

+The submission of PIT finalization will be done no later than the last day of the 4th month every year (However, because April 30 and May 1 are holidays, the deadline for finalization filing will be extended to at least May 2 every year).
+
For a foreign individual who is a resident in Vietnam make tax finalization for a period of 12 consecutive months: the 90th day from the end of the 12 consecutive months.

View detailed instructions on tax declaration and finalization in Article 21 of Circular No.92/2015/TT-BTC. Finalize tax online at the following link https://thuedientu.gdt.gov.vn/ (Must login to view detailed procedures).

6.2 For income-paying organization:

Income-paying organization makes PIT finalization if authorized by wage earners. Individuals will request another organization to finalize tax on behalf in the following cases:

  • Individuals that only earn incomes from salaries or wages signs a labor contract for 03 months or more at an income-paying organization and are actually working at that organization when delegating the making of tax finalization, even if he/she has not worked for 12 months in the year, and have irregular income at others on a monthly average not exceeding VND 10 million already deducted PIT at 10% without tax finalization request for such income, can delegate to finalize tax to the income-paying organization with the income paid by such organization.
  • Foreign individuals who terminate the labor contracts in Vietnam and have not made tax finalization with Tax authority before departure, authorize income-paying organizations in Vietnam.

In case no income is paid, PIT finalization is not required. However, Ho Chi Minh taxation Department requires the official letter to inform that there is no income in the year (no specific form).

Deadline for submission of tax finalization dossiers: 

  • Annual tax Finalization: PIT finalization dossiers are filed no later than the last day of the 3rd month every year.
  • Being authorized by foreign individuals returning home: within 45 days from the date leaving Vietnam.

View detailed instructions in Article 26 of Circular No.111/2013/TT-BTC. Finalize tax online at the following link https://thuedientu.gdt.gov.vn/ (Must login to view detailed procedures).

7. Tax refund

  • In case after completing the submission of the PIT finalization dossiers, if the paid tax amounts are larger than payable tax amounts and want to be refunded in cash (not offset against the tax in the next period), organizations/individuals must carry out tax refund procedures according to detailed instructions in Article 23 of Circular No.92/2015/TT-BTC.
  • In case organizations/ individuals want to offset in the next period, the overpaid tax will be deducted from the payable tax amount of the next period without having to carry out any further procedures.

8. Instructions for tax self-declaration, tax payment and tax refund

8.1 For individuals 

Step 1: Determine whether the income is taxable or not? And temporarily calculate PIT payable. View 1. Taxable incomes  and 4. Basis for calculating PIT and Tax rate.
Step 2: Determine whether you are self-declared or not? View5. PIT Declaration and payment.
Step 3: Tax registration at https://thuedientu.gdt.gov.vn/  and submit tax registration applications. View Clause 9, Article 7 of Circular No.105/2020/TT-TBC for more information about a tax registration application.
Step 4: Determine yourself as a resident or a non-resident for tax purposes? View 3. Determination of “resident individual” and “non-resident individual”.
Step 5: Declaring and paying corresponding tax for each type of income. View 5. PIT Declaration and Payment.
Step 6: Tax finalization. View 6. PIT Finalization.
Step 7: Tax refund in cash (if any). View 7. Tax refund.

8.2 For organizations 

Step 1: Collecting or registering tax identification numbers for employees at https://thuedientu.gdt.gov.vn/  and submit tax registration applications. VIew Clause 9, Article 7 of Circular No.105/2020/TT-TBC for more information about a tax registration application 
Step 2: Declaring and paying tax periodically View 5. PIT Declaration and Payment.
Step 3: Tax Finalization. View 6. PIT Finalization.
Step 4: Tax refund in cash (if any). View 7. Tax refund.