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TAXATION Chapter 7 Personal Income Tax References • Law on PIT No 04/2007/QH12 dated 21 November 2007; • Law No 26/2012/QH13 dated 22/11/2012 on amendments of PIT; • Law No 71/2014/QH13 dated 26 Novem[.]
TAXATION Chapter 7: Personal Income Tax References • • • • • • • • • • • Law on PIT No.04/2007/QH12 dated 21 November 2007; Law No.26/2012/QH13 dated 22/11/2012 on amendments of PIT; Law No.71/2014/QH13 dated 26 November 2014; Decree 65/2013/ND-CP dated 27 June 2013; Decree 91/2014/ND-CP dated 01 October 2014; Decree 12/2015/ND-CP dated 12 February 2015; Circular 111/2013/TT-BTC dated 15 August 2013; Circular 119/2014/TT-BTC dated 25 August 2014; Circular 151/2014/TT-BTC dated 10 October 2014; Circular 92/2015/TT-BTC dated 15 June 2015; Circular 26/2016/TT-BLDTBXH dated 01/09/2016 Learning Outcomes • • • • LO 7-1: LO 7-2: LO 7-3: LO 7-4: Understand concept, characteristics and role of PIT Recognize taxpayers of current PIT of Vietnam Define taxable incomes of current PIT of Vietnam Specify PIT exemption and reduction of current PIT of Vietnam • LO 7-5: Explain PIT deductions of current PIT of Vietnam • LO 7-6: Identify PIT rates of current PIT of Vietnam • LO 7-7: Calculate PIT payable for residents and nonresidents Introduction LO 7-1: Understand concept, characteristics and role of PIT ▪ Concept: + PIT is a direct tax levied on taxable income of individuals in a tax period + It appeared in Europe in the 18th century, in the US and Japan in the 19th, in Asia in the 20th and in Vietnam since 1990 ▪ Characteristics: + Direct tax → create a sense of tax burden for the taxpayers + Progressive tax + Wide tax range from taxable subjects to taxpayers ▪ Role: + Regulate income among the population → ensure social justice + Contribute to overcome the regression of indirect taxes such as VAT + Create revenues for state budget Taxpayers LO 7-2: Recognize taxpayers of current PIT of Vietnam ▪ Taxpayers are residents and non-residents who have income subject to PIT, including: ✓ Individuals that have Vietnamese nationality, including those who are working or studying abroad, and earn taxable income ✓ Individuals that not have Vietnamese nationality but earn taxable income: + Foreigners that work in Vietnam + Foreigners that are not in Vietnam but have taxable income in Vietnam Residents ▪ Individuals who meet one of the following criteria: ✓ Staying in Vietnam from 183 days or more in a calendar year or 12 consecutive months from the date of first arrival ✓ Having regular accommodation in Vietnam: having registered as permanent / temporary residents or having had a term-housingrenting-contract in Vietnam (from 183 days or more) ▪ Residents are subject to Vietnamese PIT on their taxable income earned within or outside Vietnam’s territory, regardless of locations of payment and receipt ▪ Employment income is taxed on a progressive tax rates Other income is taxed at a variety of different rates Non-resident • Individuals that not meet the conditions for being residents • Non-residents are subject to Vietnamese PIT on their taxable income earned within Vietnam’s territory, regardless of the location of payment and receipt • Nonresidents are subject to PIT: ✓ at a flat tax rate of 20% on their employment income earned in Vietnam, ✓ at various other rates on their non-employment income ✓ need to be considered agreement for double taxation avoidance Taxable Income LO 7-3: Define taxable incomes of current PIT of Vietnam ▪ Taxable income generally comprises 10 main types of income: Employment income; Business income; Income from winning prizes; Income from capital investment; Income from royalties (copyright/patent…) Income from capital transfer; Income from franchise; Income from real estate transfer; Income from inheritance; 10 Income from gifts Employment Income ▪ Taxable employment income includes all cash remuneration and various benefits in-kind, except for following items not subject to PIT: a) Allowances for noxious and dangerous works; b) Allowances for difficulties, labor accident, occupational illness, childbirth or adoption, maternity leave, post-maternity recovery, reduction in work ability, pension, monthly widow’s pension, severance pay, redundancy pay, unemployment, and other benefits according to Laws on Labor and Social Insurance c) Certain benefits in kind provided on a collective basis (e.g membership fee, entertainment, healthcare); d) Flat expenditures on stationery, business trips, telephone, office clothes (≤ million VND if clothes paid in cash) specified in labor contracts, collective agreement or financial regulation of a company; e) Transportation to and from work; f) Training for employees’ improvement in skills; g) Support of an employer for an employee and their relatives in medical examination and treatment; h) Mid-shift meals (≤730,000VND if the meals paid in cash starting from Oct 15, 2016); Employment Income (cont.) ai) Once per year home leave round trip airfare for foreign employees and Vietnamese working overseas based on labor contracts and air ticket prices; j) School fees up to high school in Vietnam / overseas for children of expatriates / Vietnamese working overseas; k) Airfares for employees working on a rotation basis in a number of industries (e.g petroleum, mining); l) One-off allowance for relocation: from Vietnam for Vietnamese working overseas; to Vietnam for foreigners working in Vietnam; to Vietnam for Vietnamese residing overseas on a long term basis and returning to Vietnam to work; m) Taxable housing benefit including utilities being the lower of the actual rental paid and 15 per cent of the employee’s gross taxable income (excluding housing with utilities); therefore the amount paid higher than the taxable rental is non-taxable rental n) Employer’s contributions to certain local and overseas non-mandatory insurance schemes without accumulated premiums (e.g medical insurance, accident insurance) o) Part of night shift or overtime salary payable that is higher than the day shift or normal working hours salary stipulated by the Labor Code; ... their non-employment income ✓ need to be considered agreement for double taxation avoidance Taxable Income LO 7- 3: Define taxable incomes of current PIT of Vietnam ▪ Taxable income generally comprises... Characteristics: + Direct tax → create a sense of tax burden for the taxpayers + Progressive tax + Wide tax range from taxable subjects to taxpayers ▪ Role: + Regulate income among the population... types of income: Employment income; Business income; Income from winning prizes; Income from capital investment; Income from royalties (copyright/patent…) Income from capital transfer; Income from