Chapter.6 Individual.Income.Tax

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 & Franchis[r]

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 - Decree 126/2020/ND-CP, effected from 5/12/2020 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 - Progressive rate: For individuals who sign labor contract of or more than months - Fixed rate: For individuals who not sign labor contract or sign labor contract of less than months with a total income of VND million (2,000,000) or more Then, individuals must be deducted 10% of the income before get paid  For non-residents: each time for which the income is earned PIT Payable = Taxable income X 20% 10 types 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 Income from salaries or wages  Subsidizing, except for: - National devotees (monthly and one-time subsidization); - National soldiers, veterans, defenser, State staff in international-job, young volunteers who already fulfilled their tasks (monthly and one-time subsidization); - time pension, monthly subsidization for partiotic martyr; - Unemployment benefit; - Social insurance; - Subsidization of solving with “social problems”; - Life-difficuty; - Occupational accidents, occupational sickness; - One-time childbirth or adoption; - Reducing working capacity; - One-time subsidization for Vietnamese who live long–time in foreign country return to work in Vietnam Income from salaries or wages Non taxable income on: - Support of employer for employee and their relatives in medical examination and treatment - Income from staying-in-Stated-house - Income from evaluating, examinating legal documents - Travel expense (chi trả công tác phí), Tuition fee - Food cooking, food ordering, food coupons for shift, lunch (1) - Round-trip air tickets for foreign laborers working in Vietnam or Vietnamese laborers working abroad - Telephone (2), uniform (3), Gasoline & travel expenses (4) - Over-time (5); Housing rent (6) - Income from State-budget-associations and organizations - Rotating, transferring foreign laborers working in Vietnam in oil and gas, mining industry as in labor contract Income from salaries or wages Non taxable income on: (1) Food cooking, food ordering, food coupons for shift, lunch: Not exceeding VND 730,000 / person / month => The excess of VND 730,000 / person / month will be subject to PIT (2) Telephone: Example: A Company officially stated that it supported VND 500K / month for officers to use phone - Mr A used up VND 450K => Not Taxable - Mr B used VND 550K and was fully paid by the Company => Mr B is subject to the PIT of VND 50K (3) Uniform: - Non-cash: Not taxable; - In cash: maximum VND 5KK / person / year Any difference exceeding 5KK will be subject to PIT Income from salaries or wages Non taxable income on: (4) Gasoline & travel expenses: -If serving as business trips: not taxable; -If stated as allowance on a labor contract: it is taxable (5) Over-time: The amount is higher than normal hours will be exempted Example: The wage for working time of Ms Hong is 12KK/month (calculated for 20 days & hours / day) => The hourly wage is 12KK / 20 / = 75K VND/h Ms Hong works an extra hour on holiday and is paid 300% of her normal hour => Income earned = 75K x 300% = 225K So, - The 225K - 75K = 150K is not taxable - The remaining 75K is taxable income Income from salaries or wages Non taxable income on: (6) Housing rent: Tax exemption of excess of 15% In January 2020, Mr Phuc has a total income of VND 10KK => 15% of the total taxable income is VND 1.5KK - Suppose that the rent is paid by the Company of VND 1KK => 1KK is taxable income - Suppose that the rent is paid by the Company of VND 2KK => ~ 0.5KK is not taxable income ~ 1.5KK is taxable income Income from capital investment  Interest on loan which lend to organizations and individuals (except of banks and credit institutions, interest on life insurance contracts)  Dividend (except of proprietorship and one-member limited liability companies)  Income from capital investment including contribution by properties, reputation, right-to-use of land, copyright  The increasing value of capital due to dissolution, reorganization, merger,… of enterprise  Interest on bonds, trusted-bills (except of government bonds) Income from capital transfer  Income from transferring contributed capital  Income from transferring of securities  Income from other capital transferring Income from real estate transfer  Income from transfer of right-to-use-land and assets-attached-to-land such as house; infrastructure and construction; assets attached to land of agricultural, forestry and fishery  Income from the transfer of right-to-own or right-to-use of house (except of transferor who has only one house, right-to-use land)  Income from transfer of right-to-lease of land, surface of water  Income from the transfer of right-to-own or right-to-use of house, including Income from real-estate capital contribution in to establish an enterprise, or increase business capital of enterprise  Income from the authorization of real estate management  Income from other transfer of real-estate (except income from transfer of real estate between spouses, parents-children, grandparents-grandchildren, siblings) Income from winning prizes  Winning on lottery  Winning on promotion prizes  Winning on legal betting  Winning on casino  Winning on games, contests Income from right-to-use of intangible assets Income from right-to-use of intangible assets according to signed contract (patent, copyright, trademark, goodwill…) Income from franchise Income from franchise contracts Income from inheritance  Inheritance of securities  Inheritance of business capital  Inheritance of real estate (except for inheritance of real estate between spouses, parents-children, grandparents-grandchildren, siblings)  Inheritance of other assets 10 Income from gifts  Gifts are stock  Gifts are business capital  Gifts are real estate (except for gifts of real estate between spouses, parents-children, grandparentsgrandchildren, siblings)  Gifts are other assets PIT exemption Income from real estate transfer between spouses, parentschildren, grandparent-grandchildren, siblings Income from the transfer of house, right-to-use-land and assetsattached-to-land of transferor who has only one house, right-to-use land Incomes from value of right-to-use-land of individuals who are allocated land by the State without payment (or reducing payment) to State Income from inheritance, gift of real estate between husband and wife, parents-child, grandparent-grandchildren, siblings Income of households and individuals, who directly produce agricultural production, converting agricultural land to legalize agricultural production Income of households and individuals who directly produce products of agricultural, forestry, salt, aquaculture and capture fisheries PIT exemption Interest income from deposits at banks, credit institutions; income from life insurance policies Income from Vietnamese-oversea-remittance activities Income from difference of salary, of night wage, of overtime 10 Income from retirement 11 Income from scholarships of State or of domestic, abroad organizations 12 Income from compensation 13 Income from charity (*) 14 Income from foreign aid as charity or humanitarian purposes 15 Income of Vietnamese crews who work for foreign ship or Vietnam-to-international-country-ship 16 Income of ship-owner or individual who has right-to-use ships and individuals who work on ship to deliver goods and services directly to offshore-catching-fish activities PIT reduction  In difficulties caused by natural disaster, fires, accidents, dangerous diseases  Considering tax reduction by authorities according to calendar year  According to Decree 126/2020/ND-CP effected from December 5, 2020: After declaring tax return, if the amount of tax payable of an individual is 50,000 VND or less will be tax exemption Calculating PIT for Resident Tax Payable = (Taxable Income - Deductions) x Tax Rate 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 11 million/month (at one working place only) - For dependents: VND 4.4 million/month/person (including children, spouse, parents, siblings, grandfather, grandmother, aunt, 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 <= VND 1.000.000 Progressive Rate Type Taxable income/year Taxable income/month (VND 1.000.000) (VND 1.000.000) Rate (%) Đến 60 Đến 5 > 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 30 Progressive Rate 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 2019 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 = (11KK x 12) + (536,312,849 x 10.5%) + (4,4KK x x 12) = 293,912,849 Taxable income = 589,552,849 - 293,912,849 = 295,640,000 => Salary tax payable = 39.328KK (from progressive tariff) => Rent tax payable = 300 KK x 5% = 15 KK => Winning-prize tax payable = (100KK – 10KK) x 10% = 9KK => Total PIT payable = 39.328KK + 15KK + 9KK = 63.328KK 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 các TK 623, 627, 641, 642, 635 Có TK 3335 – Thuế TNCN phải nộp Có TK 111, 112 Khi nộp thuế TNCN cho NN, ghi: Nợ TK 3335 Có TK 112 QUY ĐỊNH MỚI CẦN BIẾT Thêm nhiều khoản thu nhập tính đóng BHXH Theo quy định Luật bảo hiểm xã hội 2014 và hướng dẫn Điều 30 Thông tư 59/2015/TT-BLĐTBXH thì: Tiền lương tháng đóng BHXH bắt buộc = Mức lương + Phụ cấp lương - Từ ngày 01/01/2018: Tiền lương tháng đóng BHXH bắt buộc = Mức lương + Phụ cấp lương + Các khoản bổ sung Lưu ý: Khoản bổ sung phải xác định mức tiền cụ thể cùng với mức lương thỏa thuận hợp đồng lao động và trả thường xuyên kỳ trả lương Thêm đối tượng bắt buộc tham gia BHXH  Kể từ ngày 01/01/2018, đối tượng là người lao động làm việc theo hợp đồng lao động có thời hạn từ đủ 01 tháng đến 03 tháng chính thức phải tham gia BHXH bắt buộc  Đồng thời, từ ngày này, người lao động là công dân nước ngoài vào làm việc Việt Nam có giấy phép lao động chứng hành nghề giấy phép hành nghề quan có thẩm quyền Việt Nam cấp tham gia BHXH bắt buộc theo quy định Chính phủ XỬ LÝ VI PHẠM BHXH – ÁP DỤNG TỪ 01/01/2018  Phạt tù người có nghĩa vụ không đóng BHXH cho NLĐ  Phạt đến 12 năm tù vi phạm quy định sử dụng NLĐ 16 tuổi  Kéo dài số năm đóng BHXH để hưởng mức lương hưu tối đa Chapter – INDIVIDUAL INCOME TAX END OF CHAPTER