Personal Income Tax 2 slides

7/30/2019 Personal Income Tax 2 slides

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Lecturer: Le Phuong Thao, MBA

School of Business - International University


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Objectives

,

Determine the legal documents on Personal Income Tax

Income Tax

Understand the tax bases and methods of tax

- Understand tax registration, withholding, declaration,


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Legal Documents

. ,

Personal Income Tax

. - , ,

detailing a number of articles of the Law on Personal

Circular no. 84/2008/TT-BTC of September 30, 2008,

law on PIT and guiding the implementation of the

. -


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Legal Documents

-

Circular no. 02/2010/TT-BTC of J an 11, 2010

. - ,

Circular no. 12/2011/TT-BTC of J an 26, 2011

rcuar no. - o ug ,


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Nature of Personal Income Tax

levied on income of a person for a certain

.

Contribute to the Governments revenue on r u e o soc a equ y


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PIT Taxpayers

Resident individuals who have incomes earned

,

regardless of where their incomes are paid and

received.

-earned in Vietnam, regardless of where their

incomes are aid and received.


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Resident Individuals

satisfies any of the 2 conditions:

1. e ng presen n e nam or ays or

more in a Western calendar year or 12consecutive months counting from the first

date of his/her presence in Vietnam, of which

the date of arrival is counted as one day and

the date of de arture is also counted as one

day.


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.

Vietnam in either of the following two cases:

avng a res en a oca on or w c permanen

residence has been registered pursuant to the law on

Having a leased residence to stay in Vietnam pursuant

,contract has a term of90 days or more within the tax

assessment ear, and s ecificall as follows:


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a lease contract of 90 days or more within the taxassessment year shall be deemed to be a resident

taxpayer, including a case where such person leases

a number of residences.

Leased residences to stay in Vietnam include hotels,

boarding houses, rest houses, lodgings, working

offices and office headquarters, regardless of whether

t e n v ua concerne eases or t e empoyer

leases on behalf of the employee.


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Non-resident individuals

-

satisfying the conditions stipulated above


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Illustration

on Mar 2nd 2011, stayed in the city until May 25th 2011.He came back on Aug 1st 2011 and left on Dec 31st

2011. He is:

A. Non-resident individuals

B. Resident individuals

C. None of these above

D. Both a & b are correct


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Taxable Income

1. Business Income

2. Income being salary3. Income from capital investments

4. Income from capital transfers

5. Income from real property transfers.

7. Income being royalties

8. Income from franchises

9. Income from inheritances

10. Income from receipt of a gift


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Business Income

manufacturing and business activities: Income from manufacture and business in goods and services

in all sectors and business lines

Income from independent practice by individuals in sectorsand business lines with licences or practising certificates

Income from manufacturing and business activities in

, , ,

which do not satisfy all the conditions for tax exemption


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Income Being Salary

Income being salary means income receivable by employees fromemployers in monetary or non-monetary forms, including

1. Salary and wages, and items in the nature of salary and wages.

2. Allowances and subsidies includin livin allowances receivable bemployees

3. Remuneration receivable in all forms such as brokerage commission,

payment for participation in a scientific or technological research project;payment for participation in a plan or project; royalties for writing books ornewspaper articles or for translating documents; payment for participationin teaching activities; cultural and artistic performances, sports and

.

4. Payments receivable as a result of participation in professional andbusiness associations, on corporate boards of management andins ection committees, on ro ect mana ement boards, on mana ementand corporate councils and other organizations.


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Income Being Salary

5. Other monetary or non-monetary benefits other than salary to which an

employee is entitled and which are paid to or on behalf of an employee by

the employer as follows:

,

associated services. If an individual stays in a working office, then

taxable income shall be based these above expenses allocated at a

working office.

Premiums for non compulsory insurance such as life insurance

Membership fees for individuals such as membership cards of goldclubs, tennis courts and cultural, artistic and sports clubs.

Other services for individuals in healthcare activities, entertainment,

sports and aesthetics.


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Income Being Salary

6. Other benefits which an employer pays for employees such as

expenses for holidays including public holidays, expenses for use of

consultancy services and tax declaration services; expenses for

domestic workers such as drivers, cooks and people doing other

domestic work pursuant to a contract, but excluding expenses for

stationery and telephone, working expenses and uniforms.

-. , ,

or one-off bonuses or thirteenth month Tet bonus (including bonuses in

the form of securities) Where employees are entitled to bonuses in the

,

amount of the bonus recorded in the books of account of the entity

paying the bonus.

8. n orm a owance pa n cas an or n n excee , ,

per employee per year(Circular 18/2011/TT-BTC)


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Income Being Salary

-

used as the basis for determining taxable

tax is deducted (before-tax income). Ifncome ac ua y rece ve oes no nc u e

personal income tax (after-tax income), then it

must be converted to before-tax income


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Non-taxable income

Allowances and subsidies which are deductible from salary when

determining taxable income

Allowances for people having contributed to the revolutionary cause inaccordance with the law on preferential treatment for such people

National defence and security allowances as stipulated by law.

Allowances as stipulated in the Labour Code, comprising

Allowances for toxicity and danger applicable to trades, lines of business orjobs at workplaces involving toxic or dangerous elements.

Attraction allowances for new economic zones, economic establishmentsand remote islands with specially difficult living conditions.

Regional allowances as stipulated by law for people working in remote orunfrequented areas with an unfavourable climate.


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Non-taxable income

Allowances as sti ulated in the Law on Social Insurance andLabour Code

Subsidies for one-off difficulties, subsidies for labour.

One-off subsidies on the birth or adoption of a child.

Subsidies due to reduction in ability to work.

One-off subsidy on retirement, monthly widow's subsidies.

(dd) Retrenchment or loss of work subsidies, unemployment

su s es. Other subsidies paid by the Social Insurance Fund.


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Non-taxable income

Allowances to resolve social evils in accordance with law.

Bonuses which shall be deductible upon calculating taxableincome from salary:

one ary awar s a ac e o es es owe y e a e

Monetary awards attached to national and international

awards recognized by the State of Vietnam.

Monetary awards for technical improvements, inventions andinnovations recognized by competent State authorities.

one ary awar s or e ec ng an repor ng reac es o awto competent State authorities.


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Non-taxable income

Under Circular 62/2009/TT-BTC

1. Presumptive expenditures for stationery, working mission allowances,telephone charges and working outfits shall not be accounted as taxableincomes if they are compliant with the State's current regulations.

2. One-off region transfer allowances for foreigners coming to reside in Vietnam.The deductible allowance level is based on labor contracts or agreements

between employers and employees.3.

employees who are on annual leave. Bases for determining the fares arelabor contracts and air fare rates on air tickets from Vietnam to countries ofwhich these employees are nationals or where their families live, and back.

4. Schooling fees or tuitions for foreigners' children studying in Vietnamatgeneral education schools (including elementary school, secondary

school, high school) paid by employers for their employees, which are.

Kinder garden, college, university tuitions paid by employers for foreigners'

children studying in Vietnam are taxable income of foreigners


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Non-taxable income

Other benefits eno able b em lo ees shall be

accounted as taxable incomes only whenbeneficiaries are specified.

These benefits will not be accounted as personal

taxable incomes when beneficiaries are unspecified.

House rents paid by employers for their employees: These

ren s s a e accoun e as axa e ncomes accor ng oactually paid amounts but must not exceed 15% of total

taxable incomes (exclusive of house rents).

Expenses for vehicles to transport a collective of

employees to work


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Non-taxable income

Ex enses aid for membershi cards without s ecific namesof any individuals or groups of individuals

Charges for other services for individuals in healthcare,, ,

without specific names of any individuals or groups of

individuals xpenses pa y empoyers or e r empoyees or s s

training courses relevant to employees" professions or underemployers" plans

Mid-shift meal allowance will not be accounted as a taxableincome of employees if employers directly cater mid-shiftmeals for their em lo ees.


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Non-taxable income

Ex enses aid for membershi cards without s ecific namesof any individuals or groups of individuals

Charges for other services for individuals in healthcare,, ,

without specific names of any individuals or groups of

individuals xpenses pa y empoyers or e r empoyees or s s

training courses relevant to employees" professions or underemployers" plans

Mid-shift meal allowance will not be accounted as a taxableincome of employees if employers directly cater mid-shiftmeals for their em lo ees.


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Illustration

. .

company purchased California Fitness center

.

purchase price of the membership is

A. o e ncome o s. an n

B. Ms. LanAnhs income subject to PIT

. .D. None of these above


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Tax Exempt Income

Income from real property transfers as between husband and wife; as betweenparen s an c ren nc u ng a op ve paren s an a op e c ren; as e ween

parents-in-law and children-in-law; as between grandparents and grandchildren; andas between siblings

Income from transfer of a residential house or ri ht to use residential land and theassets attached to the land by an individual who has only one sole residential house[and/or] residential land use right in Vietnam

Income from the value of a land use right of an individual to whom the State,with law

Income being receipt of an inheritance or gift of real property as between husbandand wife; as between parents and children including adoptive parents and adoptedc ren; as e ween paren s- n- aw an c ren- n- aw; as e ween gran paren sand grandchildren; and as between siblings

Income from conversion of agricultural land by a family household or individual towhom the State allocated such land for roduction


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Tax Exempt Income

Income of a family household or individual directly engaged inagricultural production, forestry, salt mining, raising animals,

cultivating crops, fishing or aquaculture where the produce has notyet been processed into other products or has only beenpre mnar y processe

Income being interest on money deposited at a bank or credit

institution, and income being interest from life insurance policies Income being foreign currency remitted by overseas Vietnamese

Income being that part of night shift or overtime salary payablewhich is hi her than the da shiftor normal workin hours salar

stipulated by the Labour Code


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Tax Exempt Income

Income being pensions paid by the Social Insurance Fund pursuant to theLaw on Social Insurance

Income being scholarships

Income being compensation payments from life and non-life insurancecontracts, compensation for labour accidents, State compensationpayments and other compensation payments payable pursuant to law shall

be tax exempt income ncome receva e rom c ar a e un s w c e a e au or es perm

to be established or which they recognize, and which are for charitable,humanitarian, or study encouragement purposes and not for profit-makingur oses

Income receivable from foreign aid sources for charitable or humanitarianpurposes in both Government and non-Government forms and approved byState authorities


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Determining Deductions

.

Deductions for contributions to charitable,

uman aran or s u y promo ona un s

Compulsory insurance premiums


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Deductions for Family Circumstances

amount deductible from taxable income prior

and income from salary of a resident individual

Noted: this deduction shall be made once time

rom e aggrega e o a o o us nessincome and income from salary


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Level of deduction

48,000,000 VND per year The level of 4 million dong per month is an average for the

whole year and used to estimate monthly

The level of 48 million dong per year is used in year end

finalization

per dependent from the month when caring

responsibili ty arises or ends


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Level of deduction

Ms. Anh is a single person. Assume she does nothave any dependent. She was unemployed in the first

6 months of 2011. From J uly 1st 2011, she earned

12mil per month. Each month, her employer calculateer mon y assessa e ncome as m m = m

,yearly assessable income

= =


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Level of deduction

Ms. Ngoc Anh gave birth to her son on 31st Mar

Apr 2011. The dependent deduction for her son is


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Principles for Assessing Deductibility for a

Each de endant ma onl be assessed for deductiononce in respect of one taxpayer within the taxassessment year.

If a taxpayer has a dependant in common with other

,registration of the dependant of only one taxpayer.

A taxpayer shall be responsible to declare the number ofhis or her dependants, and shall be legally liable for the

.


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Requirements of Dependants

Children includin ado ted and ille itimate children

Children under the age of 18 years (counting the full number ofmonths).

or exampe, was orn n uy , may e a epen an un

the end of J une 2010.

A child under the age of 18 years has the income of 1million per

.

A child over 18 years of age who is handicapped and unable

to work.

A child currently studying at a university, college, specializedsecondary school, vocational training establishment, graduate

program and does not have income or has income which does

not exceed the threshold (average 500.000 VND per month)


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,

taxpayer, or any other person whom the

above the working age (55 for women, 60 for men)

not exceed the threshold (average 500.000 VND per

month

or still of working age but handicapped, unable to

work, and does not have income or has income which

does not exceed the threshold (average 500.000 VND

per month)


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Parents of tax a ers includin Parents

Parents in law

ep paren s

for including

Brothers and sisters of the taxpayer.

Grandparents, aunts, uncles of the taxpayer. Grandchildren, nephews and nieces of the taxpayer.

Other eo le re uired b law to be directl cared for.


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Deductions for Contributions to Charitable,

Contributions to organizations and establishments caring for and raisingchildren from an especially difficulty background, and disabled people and

old and feeble people. Contributions to charitable funds established and operating under Decree

- - -organization and operation of funds for charitable, humanitarian or studypromotional purposes and for non-profit making purposes, and in

accordance with other relevant legal instruments on management and useof aid funds.

Contributions to charitable funds arising in any one year shall be deductiblefrom taxable income of that same year, and if not fully deducted within suchyear then they may not be carried forward to taxable income of the nexttax assessment year. The maximum amount of deductions shall not exceedtax assessable income from business income and income being salary of


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Deductions for Compulsory Insurance

under the Labor Code, the Law on Social,

Insurance

Social insurance

Health insurance

J ob loss insurance etc


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Progressive PIT Rates

.

es en on- res en

Business Income Progressive tax rate in

con unction with Income

1% applicable to business in goods,

5% a licable to business in services

Being Salary 2% applicable to manufacturing,

construction, transportation, and other

business activities

Income Being

Salary

Progressive tax rate in

conjunction with Business

Income

Flat rate of 20%


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.

Resident Non- resident

Income from Capital

Investment

Flat rate of 5% Flat rate of 5%

Income from Capital Transfers Income from transfer of a capital Flat rate of 0.1% on amount

contr ut on: F at rate o 20% on

income

Income from transfer of a

securities: Flat rate of 20% on

rece ve

ncome or 0.1% on trans er pr ce

Income from Real Property

Transfers

Flat rate of 25% on income Flat rate of 2% on amount

received

Income from Franchises

(after deductions of VND 10m)

(after deductions of VND 10m)

Income from Winnings or Prizes

& Income from Recei t of an

Flat rate of 10%

after deductions of VND 10m

Flat rate of 10%

after deductions of VND 10m

Inheritance or Gift


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from business and from salary after deducting for family circumstances,compulsory insurance premiums, and contributions to charitable funds


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Tax Calculation

Personal income tax payable on business income and on income

being salary shall be the total amount of tax assessed in accordance

with each income bracket and the relevant tax rate in the progressivescale, in which the amount of tax assessed in accordance with each

income bracket shall be the assessable income of that bracket

multiplied by the appropriate tax rate.

Assessable Income = Taxable Income Deductions

Tax payable = Sum of (Assessable Income of each bracket xappropriate Tax Rate)

The table in the next slide could be used as quick method for

calculation


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Tax Calculation

Quick method of calculation

Grossbasis % Tax

G


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Illustration

.

salary of 10 million dong per month. Mr. A has,

pays compulsory insurance premiums of five

per cen o s saary or soc a nsurance

and one (1) per cent of his salary for medical

insurance; and during the month he did notmake any contributions to charitable funds.


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Illustration

Mr. A has the followin deductions from taxable income

+ For relatives: 4 million

+ For dependent children: 1.6 million x 2 = 3.2 million

: =0.6 million

Total deductions are: 4 + 3.2 + 0.6 = 7.8 million Assessable income is 10 million 7.8 million = 2.2 million

Tax payable in the month is 2.2 million x 5% = 0.11 million


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Illustration

Mr. B has income being salary of 90 million

ong per mon a er e uc ng compusory

insurance premiums). Mr. B raises two childrenunder 18, and during the month he did not

make any contributions to charitable funds.


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Illustration

Mr. B has the following deductions

or re a ves: m on

For 2 dependent children: 1.6 million x 2 = 3.2 million

Assessable income is

90 million - 4 - 3.2 million = 82.8 million

Tax payable in the month is82.8 million x 35% - 9.850 million = 19.13 million


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Tax assessment period

Assessment period Types of incomeAnnual Business income and income being

salary

Each occasion (transaction) All except for Business income and

Income from salary

A licable to tax a ers bein non-resident individuals

Either annual (with registration) ortransaction (no need registration)

Income from transfer of security

Each occasion (transaction)

Except: having fixed business location (a store or counter)

apply tax assessment period as resident individuals having

income from business


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Business Income

accounting system on invoices and vouchers

Taxable income = Fixed level of turnover x Fixed taxable

income ratio

Fixed level of turnover shall be based on the declaration

of the business individual, the results of investigation bythe tax office, and the opinion of the commune or ward

level tax consultancy council.


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Business Income

turnover from the sale of goods and services but notfor expenses

Taxable income = Turnover to calculate x Fixed taxabletaxable income income ratio

Turnover to calculate taxable income shall be

determined in accordance with the accountin books

and appropriate invoices and vouchers


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Business Income

3. Business individual who full im lements the

accounting system on invoices and vouchers

Taxable income = Turnover to calculate taxable income

- Reasonable expenses

+ Other taxable income

Turnover and expenses shall be determined on the basis of

, .

Other business income means other income arising during the

business process such as fines [received] for contractual

breaches; fines [received] for late payment; bank interest,

etc


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Turnover to calculate taxable income

taxable income,

goods was transferred or the time when the goods' sale

invoice was issued.

In the case of services, the time when provision of the

services was completed or the time when the invoice for

.

Tax point will be the date of invoice if issuance before the

time of ownership transferred or service complete

T l l bl i


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1. Turnover on goods sold on installments = the selling price of thegoods as for a one-off payment [lump sum price], excluding

interest on late payments

2. Turnover on goods sold on deferred payment (credit sales) = the

-

price], excluding interest on deferred payments

Illustration: Lump sum price = 10m,

Payments made in 12 installments, 1m eachTotal payment =12m

Turnover to calculate taxable income = 10m

T t l l t t bl i


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3. Goods or services used as exchan e a ift or to outfit

employees or to reward employees: turnover shall be

fixed as the market price of the same or similar goods

or servces at t e tme o transacton

4. Goods and services used during the manufacturing or

producing such product, goods or services.

Illustration: The products of the business, tables, are

used to reward em lo ees. Sellin rice is 3m each,

and cost is 2m each. Turnover to calculate taxable

income is 3m

T t l l t t bl i


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.

including charges for labour, fuel, power,subsidiar materials and other ex enses of

processing.

6. Agent or consignee to sell goods at listed price

and earn commission: turnover shall be the

commission receivable pursuant to the agency orconsignment contract.

T t l l t t bl i


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7. Activities bein leasin out assets

If the lessee pays rent in advance for a number of years:


OR

fixed as turnover on a lump sum payment.

If the lessee pays rent in advance for a number of years but bearsall the expenses arising during use of the assets:

urnover o ca cua e axa e ncome

allocated over the number of years for which rent was paid inadvance AND

and payable for the entire period for which advance payment was

accepted.



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7. Activities being leasing out assets

Illustration: Mr. Trung leases his house for 5 years (2012-2016),

VND100million per year. The lessee pays VND500m in advance.

If the lessee pays VND500m in advance, Mr. Trung could declare his

turnover to calculate taxable income VND500m in 2012 and pay tax in 2012 with corresponding tax rate OR

VND100m each year from 2012 -2016 and pays tax each year

If the lessee pays VND500m in advance and bears all the expensesarising during the time of contract, Mr. Trung must declare his turnover

VND100m each year from 2012 -2016 AND calculate the tax for each

year AND pay tax in 2012



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. ,

be the value of the works or items of work or

were tested, accepted and handed over

9. Transportation, turnover shall be the total

monies receivable from transportation of

passengers, luggage and cargo.

Deductible expenses


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Deductible expenses

actually arise

rec y re a e o crea on o e urnover an

taxable income in the tax assessment period,

have adequate invoices and vouchers as required

by law.

Deductible expenses


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Deductible expenses

,

allowances

business household or of a member whose name is

included in the business re istration of a businessgroup.

Uniforms allowance > 5mil per annum

Deductible expenses


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Deductible expenses

goods Actually used in manufacture and business

In accordance with reasonable levels of wear and tear and actual

ex-warehouse prices fixed by the business individual or business

household itself, and for which such individual or household shallbe liable.

Not include the value of the loss of supplies, assets, capital

monies or oods unless such loss was due to a natural disaster

fire, epidemic or other event of force majeure for whichcompensation is not receivable.

for business purposes: include only that part of the expenses

representing the business use

Deductible expenses


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Deductible expenses

,

servicing fixed assets

adequate invoices, vouchers and legal papers proving

individual.

mana ed monitored and accounted for in the

accounting books of the business individual inaccordance with current regulations

Deductible expenses


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Deductible expenses

The amountor level of de reciation of fixed assets

shall be as stipulated in the regulations on

management, use and depreciation of fixed assets.

For fully depreciated assets, depreciation shall not be

allowable

Fixed assets are used for business and other

purposes: depreciated as usage portion for each

Deductible expenses


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Deductible expenses

borrowed for manufacture and business

the bank or credit institution

institution: maximum interest rate may not exceed 1.5

times the basic interest rate announced by the State

Bank at the time of the loan not include payment of interest on loans in order to

contribute capital to establish the business premises

Deductible expenses


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Deductible expenses


Illustration:

10% per year. Is the interest expense VND 30 million per

year deductible?

orrowngs m on rom a person a e n eres

rate 15% per year. The basic interest rate announced by

the State Bank at the time of the loan is 8%. How much of

interest expense is deductible?

Deductible expenses


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Deductible expenses


Illustration:

egstere capta m on.

Contributed capital VND200 million.

contributed capital: VND300 million, interest expenseVND 30 million per year.

Is the interest expense deductible?

Deductible expenses


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Deductible expenses

Taxes fees and char es and land rent which aremandatory by law and which relate to the

manufacturing, business or service activities,

Allowances for employees' business trips (excludingtravelling and residential allowances) at a maximum of

the Ministry of Finance applicable to State officialsand employees

Other expenses directly related to creation of turnoverand taxable income, and which have adequate

Taxable income being salary


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Taxable income being salary

The time for determining taxable income beingsa ary s a e e me w en e emp oyer

pays such salary to the employee.

Illustration: Em lo ees received salar of Dec 2011 in

Feb 2012. The salary is declared as taxable income ofFeb 2012

Group of business individuals


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named in the business registration, including a-

owners named in the certificate of ownership or

to as a group of business individuals), the

axa e ncome s a e a oca e o eac

individual by one of the following methods



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p

.

ratio of each individual as recorded in the

2. Pursuant to an agreement between the

individuals concerned

3. Avera e amount of income er erson if 2

above methods are inapplicable



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p

business registration and each participates in thebusiness (group of business individuals).

The business registration specifies the capitalcontribution ratio of each of these individuals as

or r. , or r. an or r. ;and suppose that the taxable income in year X is

.

person. Mr. A = 300 x 50% = 150 million

Mr. B = 300 x 30% = 90 million

Mr. C = 300 x 20% = 60 million

NON-RESIDENT INDIVIDUALS


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Tax rate 1% applicable to business in goods

5% applicable to business in services

2% applicable to manufacturing, construction,

,

the highest tax rate applicable shall be applied tothe entire turnover

NON-RESIDENT INDIVIDUALS


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Taxable income from salary are receivable by the non-

working in Vietnam, irrespective of the place were the

income is paid

Flat tax rate of20%

TAX REGISTRATION


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registration-

Individuals with taxable income

Income-paying entities : follow the circular

80/2012/TT-BTC

Individuals with taxable income: Tax registration formno. 01/DK-TNCN and a copy of ID or passport

TAX REGISTRATION


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An individual with taxable income being salary-

such entity

Individuals with other taxable income

the Tax Department where they reside

Individuals with a number of income sources

may select the place, either at the income-paying entity or

body, or at the Tax Department in the locality where they

conductbusiness.

Tax Deduction Withholding Tax


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means the income-paying entity calculates

the taxpayer before paying such income



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be made -

Income of resident individuals

Income from capital investments

Income from capital transfers and from transfers of

securities

Income from all types of prizes

ncome rom copyrg roya es

Income from copyright [royalties]



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Tax deduction in the case of income being salary

was employed on a long term and stable basis

e uc e on a mon y as s

conduct provisional deduction for family circumstances and

re istered de endents of the tax a er and then on the

basis of the residual income and the scale of progressivetax tariff, such entity shall deduct the amount of tax

ca cua e n or er o pay o e a e u ge



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where the total income to be paid is 1 million,

income-paying entity must deduct personal

income tax before paying such sums to theindividual as follows

By deducting 10% of the income in the case of an

individual who already has a tax code number.

By deducting 20% of the income in the case of any

.

Double Tax Treaties


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resident / resident establishment in bothVietnam and the foreign country, they may / will betaxed on income in both countries (i.e. DoubleTax)

Double tax treaties are applied to subjects which

Vietnam or of the Contracting State to anA reement concluded with Vietnam or of both

Double Tax Treaties


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means any person who, under the laws of that,

,State or any other criterion of similar nature, in the case of

an individual; or

a person as a pace o managemen , a regs ere

office, or is established in that State or has any othercriterion of similar nature, in the case of an organization

Double Tax Treaties


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Prevention of Double Taxation with many.

Draft agreements with additional countries are

a e scuss on s ages.

Double Tax Treaties


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In cases where there are disparities between the

laws, the provisions of the Agreements shall apply

The Agreements shall not create new tax obligations

or tax obligations that are different from or heavier

than those prescribed by the domestic tax laws

Double Tax Treaties


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Income for working in Vietnam earned by a resident

individual of a foreign country having DTT with Vietnam:

Vietnam has the right to tax

However, Vietnam will exempt for the individuals salary if

e s e sa s es a e o owng con ons:

The individual is present in Vietnamfor less than 183 days in

12 months which starts or ends in the tax year in question

The employer is not resident taxpayer in Vietnam(regardlesswhether the salary is paid directly by the employer or a

The salary is not borne / paid by a P/E of the employer in

Vietnam

Double Tax Treaties


86/93

NTB Co., a J a anese com an , set u a J oint Venture in Vietnamwith a Vietnamese company. The J Vs name is NTB Vitco.

In 2009, NTB appointed Mr. Nagakawa to represent it in

the J V. The negotiation happened from1 November 2009 to 31December 2009. Salary of Mr. Nagakawa during 2009 will be

Can Mr. Nagakawa be exempted from PIT in 2009 ?

Mr. Na akawa can be exem ted from PIT in 2009 because:

He spent only 61 days in Vietnam in 2009 NTB (employer) is not resident in Vietnam

is not considered P/E of NTB in Vietnam)

Double Tax Treaties


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In 2011, Mr. Na akawa was a ointed b NTB to work inNTB Vitco (the J V) from 1/1/2011 to 27/3/2011 for training

and implementation of the know-how in the J V.,

charge back this costs to the J V


- r. aga awa spen ays or s new o n e nam

in the year 2011. He will still satisfy the 183 days condition.However the 3rd condition (salary not paid / borne by a P/E of

e company n e nam s no sa s e ecause ac ua y eJ V will have to bear such costs. Therefore Mr. Nagakawa will

not be exempted in Vietnam in 2011.

Double Tax Treaties


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Assuming in 2011, Mr. Nagakawa was appointed by NTB to work in NTB Vitco

rom 10/2/2011 to 10/7/2011 or implementation o the know-how to a client o

NTB Vitco. His activities will be under management of NTB Vitco.

All housing/accommodation for Mr. Nagakawa during his time in Vietnam will

be borne by NTB Vitco. As the J V is newly established and is running a loss,

NTB agreed that they will bear all the salary of Mr. Nagakawa during the 5

months period he is in Vietnam. This favour will give NTB a right to receive

more v en s rom t e J V n t e uture


NO - Mr. Nagakawa satisfies all 3 conditions in form. However, the real questionis who is actually the employer of Mr. Nagakawa?. Although his salary is borne

for the J V in providing the know-how to the client, the beneficiary of his activity

is the J V, and his salary is ultimately borne by the J V (NTB agree to bear this

costs but this is in exchange for a right for more dividends later)

Double Tax Treaties Calculation


89/93

foreign country having DTT with Vietnam, the

in the taxable income of that tax resident in

e nam, u e ax pa overseas w e

credited against tax payable in Vietnam

The tax credit should not exceed the taxliabilit in Vietnam attributable to that income



90/93

Mr. Antoine a tax resident in Vietnam has nodependent has the following income in Vietnam in

year 2009: a ary or wor ng n rance n uy c o er equva en

VND 120,000,000

Salary for working in Vietnam (for other months in the year)

receve n e nam , ,

Gross interest for bank deposits in France (US$1000) = VND17,000,000

Tax on individual income in France (applicable on both

employment and interest income) is 20%

Required: calculate final tax liabilities of Mr. Antonie inVietnam



91/93

As a resident, Mr. Antonie will be subject to tax on global income(120m for working overseas + 240m for working in Vietnam(regardless of where to receive) + 17m interest)

However, as bank interest is exem ted, taxable income of Mr.Antonie in 2009 is 120 + 240 = 360m

Average taxable income = 360m / 12 months = 30m / month

Annual tax liabilities = 3,550,000 * 12 months = 42,600,000

Tax paid overseas:

On employment income (120m*20%) VND 24,000,000

On interest (17m*20%) VND 3,400,000



92/93

The tax paid overseas for employment income will be creditable totax liabilities of Mr. Antonie up to the Vietnamese tax on thatincome. The tax paid overseas for interest will not be creditedbecause bank interest is exempted from PIT in Vietnam (thereforeno cre t / e ucton ava a e or exempte ncome

Vietnamese tax on employment income:

= Total Vietnamese tax on total income * Overseas income / Totalincome

= 42,600,000 * (120,000,000 / 360,000,000) = VND14,200,000

, , , , , ,

Mr. Antonies tax liabilities = 42,600,000 14,200,000 = VND28,400,000


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