Introduction
▪ 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
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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 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: Understand concept, characteristics and role of PIT.
• LO 7-2: Recognize taxpayers of current PIT of Vietnam.
• LO 7-3: Define taxable incomes of current PIT of Vietnam.
• LO 7-4: 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
▪ 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
LO 7-1: Understand concept, characteristics and role of PIT.
Taxpayers
▪ 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 do 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.
LO 7-2: Recognize taxpayers of current PIT of 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-housing-
renting-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 do 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
▪ Taxable income generally comprises 10 main types of income:
LO 7-3: Define taxable incomes of current PIT of Vietnam.
6. Income from winning
prizes;
7. Income from royalties
(copyright/patent)
8. Income from franchise;
9. Income from inheritance;
10. Income from gifts.
1. Employment income;
2. Business income;
3. Income from capital
investment;
4. Income from capital transfer;
5. Income from real estate
transfer;
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 (≤ 5 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;
Employment Income (cont.)
aEX 7-1: A foreign expert works and resides
in Vietnam. His income as per the labor
contract includes:
- Salary 40M/month;
- Bonus 10M/month;
- Car rental: 20M/month;
- House rent: 20M/month;
Total taxable income of the expert is as
follows:
+ Taxable income from house rent:
15%*(40+10+20)=10.5M;
+ Total taxable income of the expert:
40+10+20+10.5=80.5M
EX 7-2: Mr. Nguyen Van Thanh is a CFO
of Phuong Dong JVC. His salary as per
the labor contract is 30M/month.
Phuong Dong Company agreed in the
labor contract that it pays the life
insurance premium for Mr. Thanh at
5M/month for 10 years.
Since life insurance is a non-mandatory
insurance with accumulated premiums,
the taxable income of Mr. Thanh is
calculated: 30M + 5M = 35M
Non-employment Income
▪ Business Income:
➢ Income from production and trading of goods and services;
➢ Income from independent profession;
➢ Income from acting as a lottery, insurance, multi-level marketing agent
who directly signs a contract with the lottery company, insurer, or multi-
level marketing company.
➢ Income from business cooperation with other organizations.
➢ 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 from business of individuals/households with
revenue ≤ 100 million VND/year.
Non-employment Income (cont.)
▪ Income from Capital Investment:
➢ Interest on loan which lend to organizations and individuals (except
for interest received from banks and credit institutions, interest on
life insurance contracts).
➢ Dividend (except for dividend 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 for government bonds).
Non-employment Income (cont.)
▪ Income from capital transfer includes income from transferring
contributed capital, securities and other capital transfer.
▪ 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 for
transferor who has only one house or
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 for income from transfer of real
estate between spouses, parents-children,
grandparents-grandchildren, siblings).
Non-employment Income (cont.)
▪ Income from winning prizes in excess of VND 10 million: winning on
lottery; promotion prizes; betting; casino; games and contests.
▪ Income from royalties in excess of VND 10 million according to
signed contract (patent, copyright).
▪ Income from franchise contracts in excess of VND 10 million.
▪ Income from inheritance in excess of VND 10 million: securities;
business capital; real estate (except for inheritance of real estate
between spouses, parents-children, grandparents-grandchildren,
siblings); and other assets.
▪ Income from gifts in excess of VND 10 million: stock; business
capital; real estate (except for gifts of real estate between spouses,
parents-children, grandparents-grandchildren, siblings); other assets.
PIT Exemption
1. Income from real estate transfer between spouses, parents-children,
grandparent-grandchildren, siblings.
2. Income from the transfer of house, right-to-use-land and assets-attached-
to-land of transferor who has only one house or right-to-use land.
3. Incomes from value of right-to-use-land of individuals who are allocated
land by the State without payment (or reducing payment) to State.
4. Income from inheritance, gift of real estate between husband and wife,
parents-child, grandparent-grandchildren, siblings.
5. Income of households and individuals, who directly produce agricultural
production, converting agricultural land to legalize agricultural
production.
6. Income of households and individuals who directly produce products of
agricultural, forestry, salt, aquaculture and capture fisheries.
LO 7-4: Specify PIT exemption and reduction of current PIT of Vietnam.
PIT Exemption (cont.)
7. Interest income from deposits at banks, credit institutions, income from
life insurance policies.
8. Income from Vietnamese-oversea-remittance activities.
9. Income from retirement.
10. Income from scholarships of State or of domestic, abroad organizations.
11. Income from compensation.
12. Income from charity (*).
13. Income from foreign aid as charity or humanitarian purposes.
14. Income of Vietnamese crews who work for foreign ship or Vietnam-to-
international-country-ship.
15. 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.
PIT Deductions
➢ Contributions to mandatory social, health and
unemployment insurance schemes;
➢ Contributions to local voluntary pension schemes but the
deduction shall not exceed 1 million VND/month (12 million
VND/year);
➢ Contributions to charitable, humanitarian and study
encouragement funds.
➢ Personal deductions:
+ For taxpayers: VND 9 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).
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..
LO 7-5: Explain PIT deductions of current PIT of Vietnam.
Type Annual Taxable Income (A)
(million VND)
Monthly Taxable Income (M)
(million VND)
Rate
(%)
1 A ≤ 60 M ≤ 5 5
2 60 < A ≤120 5 < M ≤ 10 10
3 120 < A ≤ 216 10 < M ≤ 18 15
4 216 < A ≤ 384 18 < M ≤ 32 20
5 384 < A ≤ 624 32 < M ≤ 52 25
6 624 < A ≤ 960 52 < M ≤ 80 30
7 A > 960 M > 80 35
PIT Rates
Residents - Employment Income
LO 7-6: Identify PIT rates of current PIT of Vietnam.
PIT Rates
Residents - Other Income
Type of Taxable Income Tax Rate
Business income
+ Sale of goods 0.5%
+ Provision of services, construction exclusive of materials 2%
+ Production, transportation, service provisions associated
with goods supply, construction inclusive of materials.
1.5%
+ Other business activities 1%
Property lease, lottery agents, insurance agents, and multi-level
marketing agents
5%
Capital investment: interest (but not bank interest)/dividends 5%
Sale of shares 0.1% of the sales proceeds
Capital assignment 20% of the net gain
Sale of real estate
25% of the net gain
or 2% of the sales proceeds
Income from copyright / franchising / royalties 5%
Income from inheritances / gifts / winning prizes 10%
PIT Rates
Non-residents
Type of Taxable Income Tax Rate
Employment income 20%
Business income
+ Sale of goods 1%
+ Service provision 5%
+ Production, construction, transportation and other
business activities
2%
Capital investment: interest (but not bank interest) /
dividends
5%
Sale of shares / Capital assignment 0.1% of the sales proceeds
Sale of real estate 2% of the sales proceeds
Income from franchising / royalties 5%
Income from inheritances / gifts/ winning prizes 10%
Calculating PIT for Residents
▪ Employment income:
PIT
Payable
= (
Taxable
Employment Incomes
- Deductions ) ×
PIT
Rate
* Time to determine taxable employment
income is the time when employers pay
income for employees or the time when
taxpayers receive income.
* Organizations that pay employment
income to residents must withhold PIT
from income before payment.
* Tax period: annual declaration. However,
temporary PIT declaration and payment
must made monthly or quarterly.
EX 7-3: In June 2015, Mrs. C earned a salary of
VND 40 million per month, paying mandatory
insurances at 10.5% of salary. Mrs. C had 2
children under the age of 18, and made no
charitable donations. The PIT incurred by Mrs.
C in June is calculated as follows:
+ Taxable income: VND 40M
+Deductions: 9 + 3.6*2 + 40*10.5% = 20.4M
+ Taxed income: (40 – 20.4) = 19.6M
+PIT payable = 5*5% + (10 - 5)*10% + (18 –
10)*15% + (19.6 – 18)*20% = VND 2.27M
LO 7-7: Calculate PIT payable for residents and nonresidents.
Calculating PIT for Residents (cont.)
▪ Business income: PIT Payable = Taxable Revenues × PIT Rate
Method: paying flat tax
1. Revenue earned above VND 100 million/year;
2. Time for registration flat revenue with tax
authorities:
* From November 20 to December 5 of the year
preceding the tax year.
* New businessperson: within 10 days from the
beginning date.
4. Flat taxpayers without using invoices of tax
authorities: tax declaration once a year; no
annual statement; quarterly payment.
5. Flat taxpayers using invoices of tax authorities:
PIT declaration and payment on the invoices
quarterly, no annual statement.
Method: paying tax whenever it is
incurred
1. Applied for residents who earn
revenue outside Vietnam; irregular
business, no permanent business
premises, or persons who engages in
business cooperation with other
organizations.
2. Revenue earned above VND 100
million/year;
3. PIT declaration and payment
whenever it is incurred, by the 30th day
of the quarter succeeding the quarter
in which taxable revenue is earned.
Calculating PIT for Residents (cont.)
▪ Business income:
EX 7-4: Mr. A started his business in
transportation service in April 2015 and
registered the flat revenue of VND 90 million
for 9 months. In this case, Mr. A has to pay PIT
on the revenue earned from April 2015. PIT
payable for Mr. A in 2015 is: 90M* 1.5% =
13.5M.
EX 7-6: In 2015, Mr. C earned a revenue of VND 40
million from a contract with Company X and VND 50
million from a contract with Company Y. The total
value of two contracts in the year was VND 90
million. In this case, Mr. C did not have to pay PIT on
the revenue earned in 2015.
EX 7-5: Ms. B has received a tax notice of 2015
from the tax authority for her sale of goods
with the flat revenue of 1,800M/year. In
November 2015, Ms. B shut down her
business. In this case, she would receive a
reduction in flat tax corresponding to the last
2 months of 2015. PIT payable for Ms. B in
2015 is: 1800/12*10* 0.5% = 7.5M
EX 7-7: Mr. D is a taxpayer providing construction
without materials, paying PIT whenever it is
incurred. In 2015 he had the following incomes:
- In March: earned a revenue of VND 100M from a
contract with Mr. Hung;
- In October: earned a revenue of VND 150M from a
contract with Company Y.
The PIT Mr. C has to pay on the revenue earned in
2015: (100 + 150)*2% = 5M
Calculating PIT for Residents (cont.)
▪ Other income:
▪ For income from capital assignment and from real estate transfer,
taxpayers can choose the second PIT calculation:
PIT Payable = Taxable Income × PIT Rate
Taxable Income from
Capital Assignment
= (
Transfer
Price
-
Purchase
Price
-
Reasonable
Expenses
) ×
CIT Rate
(20%)
▪ When to pay PIT? At the point of time when organizations or
individuals pay to taxpayers or when taxpayers receive their income.
Taxable Income from
Real Estate Transfer
= (
Transfer
Price
- Cost -
Reasonable
Expenses
) ×
CIT Rate
(25%)
Calculating PIT for Residents (cont.)
▪Other income:
EX 7-8: In 2015, Mr. Tam received
dividend of VND 20 million from
ABC Company and state bond
interest of VND 10 million. He also
got VND 150 million from sale of
VNM shares. Calculate PIT Mr. Tam
has to pay in 2015?
- Taxable income from capital
investment: 20 + 10 = 30M;
- Taxable income from capital
transfer: 150M;
- PIT payable in 2015 of Mr. Tam:
30*5% + 150*0.1% = 1.65M
EX 7-9: In December 2015, Ms. Minh earned the
following incomes:
- Lottery winning: 2 tickets, VND 500M per ticket;
- Inheritance of a car from her parents: VND 500M;
- 5,000 shares as gift from HPT, VND 0.01M per
share.
Required: Calculate PIT Ms. Minh has to pay in Dec
2015?
- PIT payable from lottery winning: (2*500 - 2*10)
*10% = 98M;
- PIT payable from inheritance: (500 – 10)*10% =
49M;
- PIT payable from gift (5,000*0.01 - 10)*10% = 4M;
- PIT payable in Dec 2015 of Ms. Minh: 98 + 49 + 4
= 151M
Calculating PIT for Residents
▪ Notes
➢ Income equal or higher than 2 million VND of
residents without labor contract or below-3-
months labor contract shall be withheld 10%
PIT on the income before payment.
➢ For residents that earn only a taxable income
as stated above but the total taxable income
estimated after personal deductions are made
does not reach the taxable level, they shall
make and send a commitment (form 02/CK-
TNCN) to income payers as the basis for
temporary exemption of PIT.
EX 7-10: WA
Construction Company
hires Mr. Hung as a
supervisor of the
AMW construction as
per a 2-month labor
contract. Mr. Hung's
wages is 7.78M /
month.
+ PIT withheld:
7.78*10% = 0.78M.
+ Amount paid for Mr.
Hung: 7.78 – 0.78 =
7M
Calculating PIT for Non-residents
▪ Formula:
➢ Taxable income including employment and non-employment income
earned by a non-resident is similar to that of a resident.
➢ PIT rate is based on the PIT rate table applied for non-residents in
the preceding slide.
➢ Organizations that pay taxable incomes to nonresidents shall
withhold the PIT from the income before payment.
PIT Payable = Taxable Income × PIT Rate
A Big Example
Mr. Nguyen Van An (Vietnamese nationality), Ho Chi Minh City residence,
working at Quoc Thai Company, had income in 2017 as follows:
- Gross salary (excluding SI, MI, UI): VND 536 million.
- Bonus for labor productivity: VND 50 million.
- Lunch allowance: VND 1 million/month.
- Noxious allowance: VND 20 million.
- Bonus for technical innovation & improvement (attached certificates): VND
150 million.
- House rent: VND 300 million.
-Winning an VND 100 million VND prize in a saving program of VietinBank.
Required: Determine Mr. An’s PIT? Assuming that Mr. An already registered
family deductions for 2 dependents and mandatory social, health &
unemployment insurance is 10.5% of gross salary.
A Big Example
Solution:
1. Employment income = 536 + 50 + (1 – 0.73)*12 = 589.24M
2. Deductions = (9*12) + (3.6*2*12) + (536*10.5%) = 250.68M
3. Taxable employment income = 589.24 – 250.68 = 338.56M
4. PIT payable from employment income = 60*5% + (120 - 60)*10%
+ (216 - 120)*15% + (338.56 - 216)*20% = 47.912M
5. PIT payable from house rent = 300*5% = 15M.
6. PIT payable from winning-prize = (100 – 10)*10% = 9M.
7. Total PIT payable = 47.912 + 15 + 9 = 71.912M.
End of Taxation VN
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