Chapter.6 Individual.Income.Tax

Chapter – INDIVIDUAL INCOME TAX (PERSONAL INCOME TAX – PIT)  First Ordinance Issued in 1990  Amended and supplemented times: 1994, 1997, 1999, 2001, 2004  New Personal Income Tax Law Issued in 2007, revised in 2012 PIT Documents - Law No.04/2007/QH12 dated 21/11/2007 - Law No.26/2012/QH13 dated 22/11/2012 - Decree No.65/2013/ND-CP - Circular No.111/2013/TT-BTC - Circular No.156/2013/TT-BTC - Law No.71/2014/QH13 - Circular No.92/2015/ T-BTC - Law No.106/2016/QH13 - Circular 26/1026/TT-BLDTBXH dated 01/09/2016 Outline          Introduction of PIT; Taxable Subjects; Tax period; Taxable income; PIT exemption; PIT reduction; PIT deduction; Calculating PIT Accounting for PIT Introduction  Concept: PIT is direct tax on taxable income of individuals in a tax period  Characteristics: - Direct tax - Progressive tax Taxable Subjects  Residents have taxable income (income earned inside and outside of Vietnam)  Non-residents have taxable incomes (income earned in Vietnam) Specifically:  Individuals who have Vietnamese nationality, including those who are working abroad or study abroad  Individuals without Vietnamese nationality: - Foreigners work in Vietnam - Foreigners are not in Vietnam but have taxable income in Vietnam Taxable Subjects Residents: Either: Staying in Vietnam from 183 days or more in a calendar year or 12 consecutive months Have regular accommodation in Vietnam: have registered as temporary resident or have had a term-housing-rentingcontract in Vietnam (from 183 days or more) Non-residents: Not satisfied: Staying in Vietnam less than 183 days in a calendar year or 12 consecutive months Not having regular accommodation in Vietnam or have had a term-housing-renting-contract in Vietnam less than 183 days Tax period  For residents: by each year or by each time for which the income is earned (*)  For non-residents: each time for which the income is earned (*) 10 tapes of Taxable income Income from business; Income from salaries or wages; Income from capital investment; Income from capital transfer; Income from real estate transfer; Income from winning prizes; Income from intangible assets (copyright/patent…) Income from franchise; Income from inheritance; 10 Income from gifts Income from business  Income from production and trading of goods and services;  Income from independent professions;  Income from production, trading of agriculture, forestry and fishery (except for income of households and individuals who are direct labors in producing the products of agriculture, forestry, salt, aquaculture and capture of unprocessed fishery or only in preliminary processing; - Not including income of individual business with revenue ≤ 100 million VND/year Income from salaries or wages  Salaries, wages (except for pensions, salaries’ difference for night work, overtime);  Allowances, except for: - Revolution services; - Defense and security; - Noxious, dangerous; - Attraction; - Regional; - Special professions; - Services of high-rank-leaders; - Services of village health workers PIT Deductions  Family deductions (Family allowances)  Social insurance, health insurance, labor fee, unemployment insurance…  Donation of charity, humanitarian, studying funds  One time deduction from total income on: - For taxpayers: VND million/month (at one working place only ) - For dependents: VND 3.6 million/month/person (including children, spouse, parents, siblings, grandfather, grandmother, aunt, uncle, uncle, according to deduction statutory)  From October 15, 2016, according to Article 22 of Circular 26/1026/TT-BLDTBXH dated 01/09/2016: “mid-shift-meals not allowed to exceed VND 730,000/person/month” => It means that mid-shift-meals allowance in excess of 730,000 VND/person/ month will be subject to PIT Dependent definition  Children under the age of 18, including: biological children, legal adopted children, illegitimate children, children of wife, children of husband  Children over 18 who are unable to work  Children studying at universities, colleges with no income or average monthly income from all sources => VND 1.000.000  Individual who is in or out of working age but disabled, unable to work, no income or average monthly income 60 đến 120 > đến 10 10 >120 đến 216 > 10 đến 18 15 >216 đến 384 >18 đến 32 20 > 384 đến 624 > 32 đến 52 25 > 624 đến 960 > 52 đến 80 30 >960 > 80 35 27 Income from capital investment Tax payable = taxable income * tax rate (5%) When to pay? At the point of time when organization or individual pay to tax payers or when taxpayers receive their income INCOME FROM CAPITAL TRANSFER Transfer of capital contribution: Tax payable = Taxable income x Tax rate (20%) Taxable income = Transfer price - Purchase price Reasonable expenses Transfer of stock: Tax payable = Transfer price x tax rate (0.1%) When to pay? At the point of time when the capital transfer transactions being completed in accordance with law Income from real estate transfer Tax payable = Transfer price x Tax rate (2%), or Tax payable = (Transfer price – Cost – Legal expense) x 25% Income from right-to-use of Intangible Assets & Franchise Tax payable = Taxable income * Tax rate (5%) Taxable income is the income in excess of VND10.000.000 under the signed contract Income from winning prizes, inheritance, gifts Tax payable = Taxable income x Tax rate (10%)  Taxable income is the value of prize, inheritance asset, gift in excess of VND10.000.000 per prize/inheritance/gift  When to pay? At the point of time when organizations or individuals pay incomes to tax payers Calculate personal income tax for Non-Resident  Income from business: Tax payable = Taxable income x Tax rate, with:  Taxable income: income from goods & services, including the cost which is not refunded paid by the purchaser on behalf of non-resident  Tax rate: - 1%: merchandise trading - 2%: manufacturing, construction, transportation & others - 5%: service business Calculate personal income tax for Non-Resident  Income from salary/wages: Tax payable = Taxable income x Tax rate (20%) (income earned in Vietnam regardless of who pays)  Income from capital investment: Tax payable = taxable income x tax rate (5%) (Income received from investment activities)  Income from capital transfer: Tax payable = Transfer Price x Tax rate (0.1%) (Regardless of the transfer occuring in Vietnam or abroad) Calculating personal income tax for Non-Resident  Income from real estate transfer: Tax payable = Transfer price x Tax rate (2%)  Income from right-to-use of Intangible Assets & Franchise: Tax payable = Taxable income * Tax rate (5%) (Taxable income is the income in excess of VND10.000.000 under the signed contract)  Income from winning prizes, inheritance, gifts: Tax payable = Taxable income x Tax rate (10%) (Taxable income is the value of prize, inheritance asset, gift in excess of VND10.000.000 per prize/inheritance/gift) Example Mr Nguyen Van An (Vietnamese nationality), Ho Chi Minh City residence, working at Quốc Thái Company, had income in 2017 as follows: - Gross salary (excluding SI, MI, UI): 536,312,849 VND - Bonus as contract: 50,000,000 VND - Lunch allowance: 1,000,000 VND/month - Noxious allowance: 20,000,000 VND - Bonus for technical innovation & improvement (attached certificates): 150,000,000 VND - House rent: 300,000,000 (5% tax rate) - Winning an 100,000,000 VND prize in a saving program of VietinBank (10% tax rate) Requirement: Determine Mr An’s PIT? Assuming that Mr An already registered family deductions for dependents and Mandatory social, health & unemployment insurance is 10.5% Example Solution: Income from salary = = 536,312,849 + 50KK + (1KK – 0.73KK) x 12 = 589,552,849 Deductions = (9KK x 12) + (536,312,849 x 10.5%) + (3,6KK x x 12) = 250,712,849 Taxable income = 589,552,849 - 250,712,849 = 338,840,000 => Salary tax payable = 47.97KK (from progressive tariff) => Rent tax payable = 300 KK x 5% = 15 KK => Winning-prize tax payable = (100KK – 10KK) x 10% = 9KK So, Total PIT payable = 47.97KK + 15KK + 9KK = 71.97KK Accounting for PIT Hàng tháng, xác định số thuế TNCN phải nộp, ghi: Nợ TK 334 - Phải trả cho người lao động Có TK 3335 – Thuế TNCN phải nộp Trường hợp chi trả tiền thù lao, dịch vụ bên ngoài, ghi: Nợ TK 623, 627, 641, 642, 635   Có TK 3335 – Thuế TNCN phải nộp Có TK 111, 112 (Số tiền thực trả) Khi nộp thuế TNCN cho NN, ghi: Nợ TK 3335    Có TK 112 Chapter – INDIVIDUAL INCOME TAX END OF CHAPTER