GUIDE FOR TAX OF FOREIGNERS IN VIET NAM 2022
I. LEGAL BASIS:
- Law on personal income tax 2007;
- Law on amending, supplement articles of tax laws 2014;
- Resolution 954/2020/NQ-UBTVQH14 regarding the adjustment of the personal income tax deduction for family circumstances;
- Decree 65/2013/ND-CP detailing a number of articles of the personal income tax law and the law amending and supplementing a number of articles of the law on personal income tax;
- Circular 119/2014/TT-BTC amending and supplementing a number of articles of Circular No. 156/2013/TT-BTC dated November 6, 2013, Circular No. 111/2013/TT-BTC dated August 15 2013, Circular No. 219/2013/TT-BTC dated December 31, 2013, Circular No. 08/2013/TT-BTC dated January 10, 2013, Circular No. 85/2011/TT-BTC dated January 17/ 6/2011, Circular No. 39/2014/TT-BTC dated March 31, 2014 and Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance to reform and simplify procedures tax administration.
In Vietnam, foreigners will be subject to the same taxes as Vietnamese. Accordingly, depending on the field of operation, foreigners must bear a number of taxes such as import-export tax, corporate income tax. Thus, in the case of foreign workers in Vietnam, they will be subject to personal income tax.
However, the personal income tax rate is different between resident and non-resident individuals.
Indentification of resident individuals:
Pursuant to Article 2 of Decree 65/2013/ND-CP, a so-called resident individual will fall into one of the following four cases:
(i) ) Persons present in Vietnam for 183 days or more in a calendar year or for 12 consecutive months.
The case of being present from 183 days in a calendar year means that the person must be present in Vietnam consecutively 183 days of one years, for example A consecutive lived in Vietnam in 2022.
On the contrary, if the case starts from August 2021, it will not be considered as an individual residing in Vietnam until August 2022.
(ii) Permanent resident registrant, ie permanent resident registration at the competent authority.
(iii) Rent a house for a term of 183 days or more.
(iv) Persons present in Vietnam for less than 183 days but cannot prove that they are residents of any country.
Range of taxable income:
Pursuant to Article 2 of Circular 119/2014/TT-BTC, income generated inside and outside the territory of Vietnam, regardless of the place of income payment.
For example: A is an individual residing in Vietnam and A earns income from the transfer of land in the United States, then A is obliged to pay personal income tax from the transfer of land in the United States.
* Especially: For the case of both national and territorial citizens, which have signed an Treaty with Vietnam on avoidance of double taxation and prevention of tax evasion with respect to taxes on income and as a fish. People residing in Vietnam.
This is a preferential regulation for individuals residing in Vietnam. Specifically, individuals residing in Vietnam will be entitled to family background deductions, charity and humanitarian deductions.
For family circumstances deduction, based on Article 19 of the Law on Personal Income Tax and Article 1 of Resolution 954/2020/NQ-UBTVQH14, the deduction before tax calculation includes two parts::
(i) Family circumstance deduction for taxpayers is 11 million VND/month (132 million VND/year).
(ii) Family circumstances deduction for each dependent is 4.4 million VND/month. For family circumstances deduction for each dependent, taxpayers need to apply for the deduction.
Thus, foreigners residing in Vietnam will not be subject to income tax if the income level is 11 million or less.
Tariffs are divided into two categories: Partial Progressive Tariff and Full Tariff. The partially progressive tariff means that the tax rate will be higher as income increases. Full tariff means that the tax rate for each type of income listed on the tax schedule is fixed.
First, the Partial Progressive Tariff.
Pursuant to Article 14 of Decree 63/2013/ND-CP
Article 14. Partial progressive tariff
- The partially progressive tax schedule applies to taxable incomes from business, incomes from salaries and wages.
- The partially progressive tax schedule is prescribed as follows:
|Tax bracket||Taxable income/year (million VND)||Taxable income/year (million VND)||Tax (%)|
|1||Up to 60||Up to 5||5|
|2||Above 60 to 120||Above 5 to 10||10|
|3||Above 120 to 216||Above 10 to 18||15|
|4||Above 216 to 384||Above 18 to 32||20|
|5||Above 384 to 624||Above 32 to 52||25|
|6||Above 624 to 960||Above 52 to 80||30|
|7||Above 960||Above 80||35|
Second, the Full Tariff:
Pursuant to Article 2.7 of the Law on Amending and Supplementing Tax Laws of 2014:
“2. The full tax schedule is prescribed as follows:
|Taxable income||Tax (%)|
|a) Income from capital investment||5|
|b) Income from copyrights, franchises||5|
|c) Earnings from winnings||10|
|d) Income from inheritance, gifts||10|
|đ) Incomes from capital transfer specified in Clause 1, Article 13 of this Law|
Income from capital transfer specified in Clause 1, Article 13 of this Law Income from securities transfer specified in Clause 1, Article 13 of this Law
|e) Income from real estate transfer||2|
Pursuant to Article 2.3 of Decree 65/2013/ND-CP, Non-resident individual is an individual who does not meet the conditions of a resident individual.
Range of taxable income:
Pursuant to Article 2 of Circular 119/2014/TT-BTC, taxable income of non-resident individuals is income generated in Vietnam, regardless of the place of income payment..
Example: Mr. A signs a purchase and sale contract with a Singapore company in Vietnam. Although the Singapore Company pays income from Singapore, since the Contract is signed and the goods are manufactured in Vietnam, the income from the Contract is subject to tax.
Pursuant to Articles 25 and 26 of the Law on Personal Income Tax:
|Taxable income||Tax (%)|
|a) Income from business||– 1% for goods trading activities;|
– 5% for service business;
– 2% for manufacturing, construction, transportation.
|b) Income from salary, wages||20|
|c) Income from capital investment||5|
|d) Income from capital transfer with Vietnamese people||0.1|
|e) Income from copyright, franchising from the value of over 10 million VND||5|
|f) Income from winning prizes from the value of over 10 million VND|
* Example: Winning 11 million, the tax calculation part is 01 million
|g) Income from inheritance, gifts from the value of over 10 million VND||10|
|h) Income from real estate transfer||2|
Most income generated by residents or non-residents is subject to personal income tax, with the exception of tax-exempt income. Specifically, based on Article 3 of the 2007 Personal Income Tax Law, taxable income includes:
Income from business;
- Income from wages, salaries, allowances, allowances and bonuses;
- Income from winning prizes;
- Income from inheritance;
- Income from investment;
- Income from gifts;
Specific regulations on tax-free incomes are specified in Article 4 of the Law on Personal Income Tax 2007. These can be mentioned as: income from real estate transfer from relatives, income from remittances, from charity activities…
Tax reduction regulations are applied to cases of natural disasters, accidents, and fatal diseases affecting the ability to pay tax. Specific provisions are considered in Article 5 of the Law on Personal Income Tax of 2007.
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