Nội dung toàn văn Circular No. 81/2004/TT-BTC of August 13, 2004 guiding the implementation of The Governments Decree No.147/2004/ND-CP of July 23, 2004 detailing the implementation of the ordinance on income tax on high-income earners
THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Hanoi, August 13, 2004
GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE NO.147/2004/ND-CP OF JULY 23, 2004 DETAILING THE IMPLEMENTATION OF THE ORDINANCE ON INCOME TAX ON HIGH-INCOME EARNERS
Pursuant to May 19, 2001 Ordinance No. 35/2001/PL-UBTVQH10 on Income Tax on High-Income Earners; and March 24, 2004 Ordinance No. 14/2004/PL-UBTVQH11 amending and supplementing a number of articles of the Ordinance on Income Tax on High-Income Earners;
Pursuant to the Government’s Decree No. 147/2004/ND-CP of July 23, 2004 detailing the implementation of the Ordinance on Income Tax on High-Income Earners;
Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003 defining the functions, tasks, powers and organizational structure of the Finance Ministry;
The Finance Ministry hereby guides the implementation as follows:
I. SCOPE OF APPLICATION
Payers of income tax on high-income earners (hereinafter called personal income tax for short) include:
1.1. Vietnamese citizens who live at home or travel overseas for working missions or labor and earn income;
1.2. Individuals of non-Vietnamese nationality, who, however, indefinitely reside in Vietnam and earn income (hereinafter referred to as other individuals living in Vietnam);
1.3. Foreigners who earn income in Vietnam, including:
- Foreigners working in Vietnam-based enterprises; economic, cultural and social organizations; representative offices and branches of foreign companies; and individuals independently practicing their occupations in Vietnam.
- Foreigners, who, though being not present in Vietnam, still have income generated in Vietnam.
2. Taxable incomes:
Taxable incomes include regular and irregular incomes.
2.1. Regular incomes include:
2.1.1. Incomes in forms of wage, salary and remuneration, including extra-hour wage, night- shift and extra-month (thirteenth month) wage (if any); subsidies; wage-substitute allowance from social insurance fund; lunch allowance and mid-shift meal allowance (if paid in cash);
2.1.2. Monthly, quarterly and annual bonuses, extraordinary bonuses paid on the occasions of public holidays, Tet (lunar new year) holidays, service/branch founding anniversaries, and rewards from other sources, in cash or in kind.
2.1.3. Incomes earned from participation in projects, business societies, managing boards, management boards or enterprise councils;
2.1.4. Copyright royalties for use of patents, trademarks or works; incomes being authors’ emoluments;
2.1.5. Personal incomes not subject to enterprise income tax, such as incomes from the provision of scientific, technical, informatics, consultancy, designing, architectural or training services; incomes from performances or organization of performances; incomes from advertisement; incomes from physical training and sport activities; incomes from agency service; incomes being brokerage commissions, and incomes from other services;
2.1.6. Incomes other than wages or salaries, which are paid for income tax payers, such as house rents, electricity and water charges; particularly, house rents shall be calculated according to the actually-paid amounts, which must not exceed 15% of the total taxable income. In cases where individuals live at working offices, the determination of their taxable income shall be based on house rents or depreciation costs which shall be calculated according to the proportion between the personally-used house area and the entire house area, being equal to 15% of the total taxable income at most. In cases where the receipts of house rent payment also cover meal and service charges, the actually-paid amounts shall be calculated only according to the house rents.
2.1.7. Other incomes paid to individuals by income-paying agencies.
The above-mentioned incomes which serve as basis for determining the taxable income are those earned before deducting the personal income tax (pretax incomes). In cases where the net incomes do not cover personal income tax (after-tax incomes), such incomes must be converted into pretax incomes (according to the formula provided for in Appendix 1 to this Circular*).
2.2. Irregular incomes include:
2.2.1. Incomes from technology transfer (excluding gifts and donations), that covers:
- Transfer of industrial property objects such as inventions, utility solutions, industrial designs, goods’ appellations origins, semi-conductor integrated circuits layout designs and trademarks during the time they are protected by Vietnamese laws and allowed for transfer.
- Transfer of technological know-hows and knowledge in form of technological plans, technical solutions, technological processes, preliminary designs and technical designs, formulas, technical parameters, drawings, technical diagrams, computer software (under technology-transfer contracts), or information and data on transferred technologies with or without accompanying machinery and equipment.
- Transfer of solutions to production rationalization and technological renovation.
- Provision of services in support of technology transfer for the transferees to be technologically capable of creating products and/or services with quality determined in the contracts, including:
+ Supports for selection of technologies, instructions on equipment installation and trial operation of equipment chains, aimed to apply transferred technologies;
+ Provision of technological management consultancy and business management consultancy, and instruction on performance of transferred technological processes;
+ Training and raising of professional and managerial qualifications of workers, technical and managerial personnel so that they can firmly grasp the transferred technologies.
2.2.2. Lottery prizes in any form, including sale promotion prizes.
3. Income tax shall temporarily not be imposed on income amounts being bank deposit interests, savings interests, interests on capital loans, bills, bonds, promissory notes and/or stocks; and incomes from securities investment activities, securities purchase-sale margin.
4. Incomes not subject to income tax include:
4.1. Allowances defined by the State of Vietnam for application to incomes generated in Vietnam:
4.1.1. Noxiousness and hazardousness allowances, for occupations or jobs exposed to noxiousness and/or hazards;
4.1.2. Region-based allowance; allurement allowance, special allowance for remote and far-flung areas, areas with bad climate, new economic zones, remote islands and border regions meeting with difficulties (excluding allowances for foreigners living far from their home countries);
4.1.3. Specific allowances for a number of branches and occupations under the State’s regulations;
4.1.4. Itinerancy allowances for a number of occupations or jobs requiring frequent change of work places or residential places;
4.1.5. Position or responsibility allowance for officials and State employees;
4.1.6. Seniority allowance for armed forces, cipher and customs officers; security and defense allowances;
4.1.7. Preferential allowance for pre-1945 revolutionary activists;
4.1.8. Other allowances of State budget origin;
The levels of pecuniary allowances shall be determined according to regulations of competent authorities and comply with current financial management regime. For foreigners, the allowance amounts shall be determined according to their basic wages inscribed in contracts and the allowance levels prescribed by competent State agencies for all subjects.
4.2. Working trip allowance, being money amounts paid for travel and accommodation, evidenced by regular vouchers, and stay duration allowance under the prescribed regime; in case of package allocation of working trip allowance, the above-mentioned money amounts shall be deducted only;
4.3. Food ration expenses under the prescribed regime for a number of special jobs and occupations; expenses for on-spot meals, lunches and mid-shift meals (except for cases where they are paid in cash);
4.4. Social subsidies for social-policy beneficiaries such as war invalids and diseased soldiers, families of war martyrs and people with meritorious services to the revolution; unexpected difficulty subsidy, subsidy or compensation for labor accidents, occupational diseases, or for the settlement of social vices; other subsidies from the State budget;
4.5. Insurance indemnities for participation in human and property insurance;
4.6. Severance allowance, job-loss allowance under the State-prescribed regime.
For individuals who enjoy severance allowance at one unit for being transferred to another unit within the same company or office of a transnational company, this provision shall not apply.
4.7. Allowance for transfer to production establishments under State regulations, including lump-sum regional transfer allowance for foreigners to reside in Vietnam.
4.8. Pecuniary rewards for technical improvements, innovations, inventions, international prizes and national prizes organized and recognized by the State of Vietnam;
4.9. Pecuniary rewards accompanying the State-conferred titles such as Vietnam Heroine Mother, People’s Armed Force Hero, Labor Hero, Professor, People’s Teacher, Emeritus Teacher, People’s Artist, Emeritus Artist and other titles conferred by the State; pecuniary rewards or other entitlements of State budget origin;
4.10. Social insurance and medical insurance premiums deducted from wages or salaries of laborers. For foreigners who have already paid in foreign countries compulsory money amounts similar to Vietnam’s social insurance or medical insurance premiums, they must produce the proving vouchers.
4.11. Incomes of individual business household owners or individuals already subject to enterprise income tax.
4.12. Benefits paid by income-paying agencies such as personnel-training expenses paid to training bodies, airfares paid for foreigners (being taxpayers) on leave, school tuitions for foreigners’ children paid directly to educational establishments in Vietnam at all educational levels, from preschool to senior high school.
II. TAX CALCULATION BASES
Bases for tax calculation are taxable incomes and tax rates.
1. Taxable incomes include regular incomes and irregular incomes
Taxable incomes shall be determined in Vietnam dong. Where incomes are in foreign currency(ies) they must be converted into Vietnam dong at the average transaction exchange rates on the inter-bank foreign currency market, announced by the State Bank at the time the incomes are generated. In cases where income-paying agencies are detected through inspections as having not declared and withheld monthly personal income tax, the exchange rate for conversion of incomes into Vietnam dong shall be the average transaction exchange rate on the inter-bank market, announced by the State Bank at the time of inspection.
For incomes in kind, the taxable incomes shall be determined according to prices inscribed in invoices or market prices of products of the same kind (or equivalent) at the time such incomes are generated.
1.1. Regular incomes:
1.1.1. For Vietnamese citizens and other individuals permanently residing in Vietnam, the taxable regular income is the total money amount actually received by each individual and calculated on a year’s monthly average, which is over VND 5 million.
Particularly for singers such as vocalists performing arts like music-song opera, reformed drama, classic opera, folk opera or folk songs; circus artists and dancers; footballers, and professional athletes, if they are certified by specialized State management agencies, they shall enjoy the 25% deduction of their incomes when determining taxable incomes.
1.1.2. For Vietnamese citizens who work both at home and overseas in a year, their average monthly taxable incomes shall be determined by the total incomes generated at home and overseas divided by 12 months, or determined by the average monthly taxable incomes calculated separately for the working duration at home and working duration overseas.
1.1.3. For foreigners considered having permanently resided in Vietnam, their taxable regular income is the total of incomes generated in Vietnam and incomes generated overseas and calculated on a year’s monthly average, which is over VND 8 million.
In cases where the declared income generated overseas is lower than that generated in Vietnam, which cannot be proved, the monthly average income generated in Vietnam shall serve as basis for tax calculation for the overseas stay duration. The conventional tax calculation month has 30 days.
1.1.4. For foreigners considered as not residing in Vietnam, their taxable income is the total of incomes generated in Vietnam, irrespective of whether they receive such incomes in Vietnam or overseas.
Foreigners shall be considered having permanently resided in Vietnam if they stay in Vietnam for 183 days or more in 12 consecutive months after arriving in Vietnam; and shall be considered as not residing in Vietnam if they stay in Vietnam for less than 183 days, including cases where they are not present in Vietnam but have incomes generated in Vietnam.
1.2. Irregular incomes:
1.2.1. For incomes from technology transfer, the taxable income is an income amount valued at over VND 15 million, calculated for each contract, irrespective of the number of payments.
1.2.2. For incomes being lottery prizes in any form, including sale promotion prizes, the taxable income is an income amount valued at over VND 15 million, calculated for each time of prize winning and receiving.
2. Tax rates:
2.1. For regular incomes: Tax rates for regular incomes shall apply according to the partially-progressive tax table provided for in Clause 4, Article 1 of the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Income Tax on High-Income Earners as follows:
2.1.1. For Vietnamese citizens and other individuals residing in Vietnam:
Unit: VND 1,000
Monthly average income/person
Tax rates (%)
Up to 5,000
Between over 5,000 and 15,000
Between over 15,000 and 25,000
Between over 25,000 and 40,000
2.1.2. For foreigners residing in Vietnam and Vietnamese citizens laboring or working overseas:
Unit: VND 1,000
Monthly average income/person
Tax rates (%)
Up to 8,000
Between over 8,000 and 20,000
Between over 20,000 and 50,000
Between over 50,000 and 80,000
Income tax on regular incomes shall be calculated according to the partially-progressive method.
2.1.3. For foreigners not residing in Vietnam: The tax rate of 25% of the total taxable income shall apply.
2.1.4. For Vietnamese citizens, who in a tax calculation year have incomes generated both at home and overseas, the tax rates applicable to their stay duration in Vietnam shall comply with the tax table prescribed for Vietnamese citizens (Point 2.1.1 of this Section), while their overseas stay duration shall be subject to the tax table prescribed for foreigners (Point 2.1.2 of this Section).
2.2. For irregular incomes:
The tax rate for irregular incomes shall be applicable to the total taxable income:
2.2.1. The tax rate of 5% shall apply to taxable income from technology transfer;
2.2.2. The tax rate of 10% shall apply to taxable income from lottery prizes or sale promotion prizes.
III. TAX DECLARATION, COLLECTION AND PAYMENT
1. Organization and management of tax collection:
1.1. For cases where income-paying agencies are identified, the personal income tax declaration and payment shall be effected on the principle of withholding at source.
Income-paying organizations and individuals (called income-paying agencies for short) are obliged to withhold personal income tax for remittance into the State budget before paying incomes to individuals. Income-paying agencies include:
- Organizations and individuals paying wages, salaries, bonuses, remunerations and other money amounts of wage or salary nature;
- Agencies managing, recruiting, brokering or supplying laborers at home;
- Agencies managing and recruiting laborers to work overseas: ministries, branches, enterprises, etc.;
- Diplomatic missions and representative offices of Vietnamese agencies and enterprises overseas;
- Organizations and individuals being technology or copyright transferees;
- Organizations paying lottery prizes, sale promotion prizes and other prizes;
- Organizations and individuals paying for service provision;
- Organizations and individuals that organize extra classes, tutoring for examinations, performances, physical training and sport competitions, symposiums or scientific research;
- Publishers, magazines, newspapers, as well as film-, video and audio tape and disk- producers;
- Other organizations and individuals that pay incomes to people subject to personal income tax.
1.2. For cases other than those mentioned above, individuals shall themselves make tax registration, declaration and payment at tax offices.
2. Registration, granting and use of tax identification numbers:
2.1. Individuals earning regular incomes up to the taxable income level shall be granted tax identification numbers according to the provisions of the Prime Minister’s Decision No.75/1998/QD-TTg of April 4, 1998 defining taxpayers’ identification numbers and current documents guiding tax identification numbers. The registration for granting of tax identification numbers shall be made at the income-paying agencies or at tax offices.
2.1.1. Registration through income-paying agencies: Individuals shall have to submit declarations of registration for granting of tax identification numbers with income-paying agencies. Income-paying agencies shall have to sum up the registration declarations of individuals and submit them to the tax-managing agencies for completion of the procedures to grant tax identification numbers to individuals.
In cases where individuals pay their personal income tax concurrently through many income-paying organizations, they shall register with one income-paying unit that is the most convenient for them in order to be granted tax identification numbers, and have to notify the granted tax identification numbers to other income-paying agencies.
2.1.2. Registration at tax offices: Individuals shall submit declarations of registration for granting of tax identification numbers to tax offices.
2.2. Tax identification numbers granted to individuals are unique. They shall be used for tax declaration, payment and settlement.
3. Tax declaration and payment:
3.1. Tax declaration subjects:
- Agencies that pay incomes to individuals whose incomes are up to the level subject to tax withholding.
- Individuals who register tax payment at tax offices, including authorized organizations or individuals that are licensed to provide tax consultancy service under law provisions.
3.2. Tax declaration places:
3.2.1. Income-paying agencies conducting production and business activities shall declare and pay personal income tax at the tax agencies that manage their production and business activities.
3.2.2. Income-paying agencies not conducting production and business activities shall declare and pay tax at the Tax Departments of the provinces or centrally-run cities where they are headquartered.
3.2.3. Individuals registering tax payment at tax offices shall declare and pay tax at the Tax Departments of the provinces or centrally-run cities. Individuals shall contact provincial/municipal Tax Departments for instructions on tax registration and declaration and, together with the latter, make a memorandum of understanding between the two parties according to Form 01/TNTX issued together with this Circular (*). Individuals shall have to submit tax registration declarations made according to Form 02a/TNTX (or Form 02b/TNTX) issued together with this Circular (*) to tax offices in order to determine the monthly tax amounts temporarily paid. Registration declarations must be submitted by the 25th of the month when incomes are generated at the latest.
3.3. Tax declaration and payment procedures:
3.3.1. Declaration and payment of tax on regular incomes:
184.108.40.206. Tax declaration and payment through income-paying agencies:
For income-paying agencies, the monthly tax declaration and temporary payment shall be effected as follows:
- To withhold tax according to the partially- progressive tax rate table for incomes paid to individuals under their respective management; individuals that sign stable (indefinite) labor contracts and individuals that sign definite labor contracts or seasonal labor contracts. The declarations of these incomes shall be made according to Form 03a/TNTX issued together with this Circular (*).
- To withhold a tax amount equal to 10% of the total incomes paid to individuals, which is VND 500,000 each time of payment or more, provided that these income amounts are generated from commissioned agency activities or brokerage activities (including bonuses); emoluments and teaching remunerations; copyright royalties for the use of inventions, trademarks or works; remunerations for participation in projects, business societies, managing boards or members’ councils; and incomes from the provision of scientific and technical, informatics, consultancy, designing, architectural or training services; incomes from performance activities, physical training and sport activities and other incomes subject to income tax.
Particularly for individuals being Vietnamese citizens and other individuals permanently residing in Vietnam, who enjoy the 25% deduction of their incomes, when determining taxable incomes as prescribed at Point 1.1.1, Section II of this Circular, the income amounts serving as basis for the 10% tax-withholding shall be those already subtracted 25%.
By the end of every month, income-paying agencies shall make income tax declarations for individuals’ regular incomes according to Form 3b/TNTX issued together with this Circular (*) so as to sum up the already withheld tax amounts and remit them into the temporary collection accounts of tax offices. When paying incomes, income-paying agencies shall have to issue tax-withholding vouchers to individuals, which shall serve as basis for year-end tax declaration and settlement.
- For income amounts paid to individual foreigners not residing in Vietnam, income-paying agencies shall have to withhold tax money and make declarations according to Form 05/TNTX issued together with this Circular(*).
220.127.116.11. Tax declaration and payment at tax offices:
Monthly, individuals shall submit to tax offices personal income tax declarations, made according Form 04/TNTX(*). In cases where individuals determine their stable monthly incomes in the year-beginning tax declarations, they shall, in the first month, submit declarations made according to Form 04/TNTX, and in the subsequent months pay monthly tax amounts according to the prescribed time-limit, without having to submit these declarations, except for cases of a change in their incomes.
In cases where the managing agencies don’t pay incomes directly but, according to their functions and tasks, manage, inspect and supervise activities of organizations having individual taxpayers, if they can assure the concentrated and timely tax collection and get the consents of the tax offices, they may collect and remit tax into State budget under regulations.
3.3.2. Tax declaration and payment for irregular incomes:
Personal income tax on irregular incomes shall be paid for each time when incomes are generated. Income-paying agencies shall withhold tax money and issue tax receipts when paying incomes to their earners.
Income-paying agencies shall have to make declarations of irregular income tax payment according to Form 06/TNKTX issued together with this Circular, for the month when incomes are generated, which shall detail the number of taxpayers, their income amounts, the withheld tax amounts, the remuneration amounts they are entitled to and the tax amounts remittable to the State budget.
3.4. Tax declaration and remittance time-limit:
Tax declarations must be submitted to tax offices by the 10, and tax amounts must be remitted into the State budget by the 25, of the month following the month when incomes are generated, at the latest.
The date of income tax remittance shall be determined as follows:
In cases where tax amounts are remitted via bank account transfer, the tax- remittance date shall be the date when concerned banks or credit institutions sign for certification in the money remittance receipts.
In cases where tax amounts are remitted in cash, the tax-remittance date shall be the date when the treasuries receive tax money or when tax offices issue receipts.
4. Final tax settlement:
4.1. Final tax settlement principles:
- The final settlement of tax on regular incomes shall be effected according to calendar year. By the year-end or upon the expiry of contracts, income-paying agencies and individuals shall sum up all sources of incomes and taxable incomes in the year subject to income tax declaration, then submit the final tax settlement reports;
- The final settlement of income tax at income-paying agencies shall apply to individuals who, in a year, earn incomes from only one agency.
- The final settlement of tax at tax offices shall apply to individuals, who, in a year, earn incomes from two agencies or more; and individuals who register tax payment at tax offices and other cases.
4.2. Contents of final tax settlement:
4.2.1. For Vietnamese citizens and other individuals permanently residing in Vietnam:
Individuals shall add up their incomes of all the year’s months (including months when no incomes are generated), and divide the total amount by 12 months to calculate the monthly average taxable income, which shall serve as basis for determination of the payable tax amount for the whole year; they then compare this amount with the amounts already paid monthly in order to determine the payable tax arrears (or excessive tax amount to be reimbursed).
- Individuals who, in a year, work both at home and overseas, may choose one of the two following tax calculation methods to determine their payable tax amounts:
+ To add up their incomes generated at home and overseas in order to calculate the monthly average income, which shall serve as basis for determination of the payable tax amount according to the corresponding tax rate tables, for the working duration at home and overseas;
+ To determine the monthly average income of the stay duration at home so as to apply the tax rate table prescribed for Vietnamese citizens and other individuals residing in Vietnam, and the monthly average income of the stay duration overseas so as to apply the tax rate table prescribed for foreigners and Vietnamese citizens laboring and working overseas.
If in a month, individuals stay both at home and overseas, they shall calculate the average tax amount payable for one day according to the corresponding tax rate table so as to determine the total tax amount payable for all the days (less than one month) in Vietnam or overseas. The total number of days in a month shall be rounded to 30.
- In cases where during the tax calculation year they work or labor only overseas, their payable tax amounts shall be calculated according to the tax rate table applicable to foreigners and Vietnamese citizens laboring and working overseas. If they have paid income tax overseas and acquire tax payment vouchers in foreign countries, they shall be entitled to subtract the already paid tax amount, which, however, must not exceed the tax amount payable according to Vietnam’s tax rate table; in cases where they have paid income tax in the countries that have signed with Vietnam agreements on avoidance of double taxation, the provisions of such agreements shall apply.
4.2.2. For foreigners:
18.104.22.168. Determining stay duration:
- Income tax on foreigners shall be declared and settled according to criterion of residents. Individuals shall have to make inventories on the number of days they reside in Vietnam according to Form 13a/TNTX issued together with this Circular (*) so as to determine their stay duration in Vietnam; in cases where they are determined as residents in Vietnam and work stably and constantly for a few years in Vietnam, they shall not make declarations according to Form 13a/TNTX but declare only the years with month(s) during which they leave Vietnam.
- The stay duration for the first tax calculation year shall be determined by adding up all the days when concerned individuals are present in Vietnam within 12 consecutive months, counting from the first day of their arrival in Vietnam (days of arrival and departure shall be calculated as one day); the second tax calculation year (following the first year) shall be determined according to the calendar year. If a duration of the second year belongs to the first tax calculation year, for which income earners have calculated tax in the capacity of non-residents, but in the second tax calculation year they become residents, they may choose the method of settling tax according to tax rates applicable to non-residents or according to the partially-progressive tax rate table applicable to residents. In cases where in the preceding year individuals were determined as residents, they shall also be considered residents in the subsequent year.
Example: Mr. X came to Vietnam for the first time and has been working and earning incomes in Vietnam since May 1, 2004. The first tax calculation year for Mr. X shall be counted from May 1, 2004 to April 30, 2005. Suppose that from May 1, 2004 to December 31, 2004, Mr. X stays in Vietnam for 150 days, and from January 1, 2005 to April 30, 2005 he stays in Vietnam for 32 days. So, in the first tax calculation year, Mr. X’s stay duration in Vietnam is 182 days, that means he is considered non-residents in Vietnam and therefore pay income tax at the tax rate of 25% of his incomes generated in Vietnam.
The second tax calculation year shall be counted according to the calendar year. Suppose that from May 1, 2005 to December 31, 2005 Mr. X stays in Vietnam for 160 days. The total number of days in the second year during which Mr. X stays in Vietnam, therefore, shall be 32 days + 160 days = 192 days. So, Mr. X is considered residents in Vietnam and has to declare and pay income tax according to the partially-progressive tax rate table. For incomes of the 32 days that have been subjected to the tax rate of 25%, Mr. X may request final tax settlement according to the partially-progressive tax rate table.
When needing to verify taxpayers’ stay duration in Vietnam, tax offices shall send stay duration-verification tickets (made according to Form 13b/TNTX issued together with this Circular*) to the police offices for verification.
22.214.171.124. Determination of payable tax amount:
For foreigners being residents in Vietnam: To declare the total of their incomes generated in Vietnam and incomes generated overseas in the tax calculation year in order to calculate the monthly average income and settle the payable income tax amount according to the provisions in Section II of this Circular.
To have bases for the accurate determination of their taxable incomes overseas, individuals must produce vouchers of income payment overseas together with letters of certification of their annual incomes made according to Form 12/TNCN issued together with this Circular (*); in cases where individuals inaccurately declare their incomes generated overseas, Vietnamese tax offices shall coordinate with tax offices of the foreign countries where incomes are paid in determining individuals’ incomes generated overseas.
- In cases where individuals being residents in Vietnam earn incomes overseas in the tax calculation year and have paid income tax in foreign countries, they shall be entitled to deduct the tax amount already paid overseas. The deducted tax amount must not exceed the amount payable according to Vietnam’s tax table, to be calculated proportionally to the incomes generated overseas. That proportion shall be determined as equal to the proportion between the income amount generated overseas and the total taxable income amount.
* Example 1: In 2005, Mr. A is a resident in Vietnam and earns an income of VND 70,000,000 (including VND 30,000,000 received in Vietnam and VND 40,000,000 received overseas) from his 8-month wages in Vietnam, and another income of VND 50,000,000 for 4 months working in country X. Mr. A has to pay income tax in country X for his incomes generated in this country, at the tax rate of 20% as prescribed by tax laws of country X. In this case, the income tax declaration for payment and deduction of the tax amount already paid in country X for Mr. A in Vietnam shall be as follows:
+ Mr. A’s taxable monthly average income (under Vietnam’s tax legislation) is:
(VND 70,000,000 + VND 50,000,000) : 12 months = VND 10,000,000/month
+ The payable monthly income tax amount (under Vietnam’s tax legislation is:
(VND 10,000,000 – VND 8,000,000) x 10% = VND 200,000
+ The tax amount payable for 2005 is:
VND 200,000 x 12 months = VND 2,400,000
+ The income tax amount already paid in country X in 2005 for incomes generated in this country (under country X’s tax legislation) is:
VND 50,000,000 x 20% = VND 10,000,000
+ The to be-deducted tax amount calculated proportionally to the incomes generated overseas according to the proportion between the incomes generated overseas and the total income amount liable to income tax in Vietnam is:
(VND 50,000,000/ VND 120,000,000) x VND 2,400,000 = VND 1,000,000
So, the maximum tax amount to be deducted in Vietnam for the incomes generated overseas is VND 1,000,000 (Mr. A has paid a tax amount of VND 10,000,000 overseas).
+ The actual income tax amount payable by Mr. A in Vietnam is:
VND 2,400,000 – VND 1,000,000 = VND 1,400,000
In cases where Mr. A has already paid tax overseas with an amount of VND 500,000 instead of VND 10,000,000 (at the supposed tax rate of 1%), the tax amount payable by Mr. A in Vietnam shall be:
VND 1,400,000 + (VND 1,000,000 – VND 500,000) = VND 1,900,000
* Example 2: In 2005, Mr. B earns an income of VND 120,000,000 from his wages for 12 months in Vietnam and another income of VND 10,000,000 from his loan interests in country X. Mr. B has paid income tax for this income in country X at the tax rate of 20%. In this case, the tax declaration and payment as well as deduction of the paid tax amount for Mr. B in Vietnam shall be as follows:
+ Mr. B’s taxable income (under Vietnam’s tax legislation) is:
VND 120,000,000 : 12 months = VND 10,000,000/month
+ The income tax amount payable by Mr. B in 2005 (under Vietnam’s tax legislation) is:
(VND 10,000,000 – VND 8,000,000) x 10% x 12 months = VND 2,400,000
+ The income tax amount already paid in country X in 2005 for the income from loan interests (under country X’s tax legislation) is:
VND 10,000,000 x 20% = VND 2,000,000
+ As Vietnam’s tax legislation prescribes the temporary non-payment of income tax for incomes from loan interests, Mr. B’s income from loan interests generated in country X shall not be accounted into his taxable income in Vietnam and correspondingly, Mr. B shall not enjoy the deduction of the tax amount paid in country X for his income from loan interests. Hence, the income tax amount payable by Mr. B in Vietnam shall be VND 2,400,000.
- Foreigners not residing in Vietnam and having paid income tax by mode of tax withholding at source shall not be subject to final tax settlement.
4.3. Final tax settlement procedures:
4.3.1. Final tax settlement at income-paying agencies:
- Individuals subject to final tax settlement at income-paying agencies shall make authorization papers for final settlement of personal income tax according to Form 09/TNTX issued together with this Circular (*) and submit them to income-paying agencies by January of the year following the final tax settlement year or before the expiry of their contracts (for individuals having contracts ending before December 31 and expecting no more incomes generated in the year). Basing themselves on the written authorization for final settlement of personal income tax, the income-paying agencies shall make final tax settlement sum-ups according to Form 10/TNTX issued together with this Circular (*) and send them to tax offices by the 28th of February of the following year at the latest.
- On the basis of final tax settlement declarations, income-paying agencies shall have to remit tax arrears into the State budget by the 10th of March of the following year at the latest; in cases where the remitted tax amount is bigger than the remittable tax amount, the difference shall be cleared against the amount remittable in the subsequent period. In cases where no income tax is remittable in the subsequent period, income-paying agencies shall issue receipts certifying tax amounts already withheld in the year for individuals that have paid tax in excess so that such individuals may fill in the separate annual tax declaration forms to be submitted to tax offices, which shall reimburse tax money under the guidance at Point 5 of this Section.
4.3.2. Final tax settlement at tax offices:
Individuals subject to final tax settlement at tax offices shall have to submit the annual final tax settlement declarations made according to Form 08/TNTX issued together with this Circular(*) to tax offices as follows:
- Individuals who earn not only stable incomes from one income-paying agency but also other incomes from other places may submit the annual final tax settlement declarations to tax offices of the localities where they are headquartered or where most of their incomes are generated.
- Individuals who earn stable incomes from one income-paying agency but change their working places in a year shall submit the annual final tax settlement declarations to tax offices of the localities where they are working; in cases where they no longer work for any agency, they shall submit the annual declarations of final tax settlement at tax offices of the localities where they work last in the tax settlement year.
- Individuals shall submit annual declarations of final tax settlement at tax offices where they have registered tax declaration and payment.
The declarations of final tax settlement of a year must be submitted by February 28 of the following year at the latest or within 30 days after the end of the contracts, for individuals whose contracts end before December 31 and who expect no more incomes generated in the year;
On the basis of final tax settlement declarations, individuals must pay tax arrears before March 10 of the following year or within 30 days after the end of the contracts; if they have paid tax in excess, the excessive tax amount shall be reimbursed to them under the guidance at Point 5 of this Section.
5. Tax reimbursement:
5.1. Subjects entitled to personal income tax reimbursement include:
- Individuals, who, as shown by the annual final tax settlement, have temporarily paid income tax amounts larger than the payable amounts, except for cases where the income-paying agencies have already cleared their income tax amounts against the amounts payable in the subsequent period.
- Other cases where tax shall be reimbursed under handling decisions of competent agencies as prescribed by law.
5.2. A dossier of application for tax reimbursement includes:
- The application for tax reimbursement made according to Form 15/TNCN, issued together with this Circular (*);
- The people’s identity card or passport (copies);
- The final tax settlement declaration;
- The income tax withholding voucher and income tax payment receipt (originals);
- The documents certifying the termination of working period such as: retirement decision, severance decision, contract liquidation record, stay duration inventory… (if any).
- The authorization letter, in case of authorization for tax reimbursement (if any).
5.3. Tax reimbursement time-limit:
Tax offices shall receive dossiers and examine them; within seven days as from the date of receiving the dossiers, if individuals are not entitled to tax reimbursement, tax offices shall reply them in writing and return the dossiers; if they are entitled to tax reimbursement but their dossiers are incomplete and/or invalid, tax offices shall notify them in writing and request them to supplement the dossiers.
After receiving complete dossiers, tax offices shall examine data and determine the to be-reimbursed tax amounts, issue decisions on tax reimbursement for concerned subjects, and at the same time send them to the Treasury for the completion of procedures for tax reimbursement to individuals.
The time-limit for tax reimbursement shall be 15 days at most as from the date of receiving complete dossiers as prescribed; in cases where dossiers need to be verified, this time-limit shall be 45 days at most.
The number of days for consideration of personal income tax reimbursement shall be calculated according to workdays.
5.4. The money for personal income tax reimbursement shall be withdrawn from the temporary tax-collection accounts of tax offices. The management and use of these accounts shall comply with separate guidance of the Finance Ministry.
6. Income tax payment receipts and income tax withholding vouchers:
The income tax payment receipts, Form CTT 10B, and income-tax withholding vouchers, Form CTT 54, issued together with this Circular(*) shall be printed, distributed and granted to the provincial/municipal Tax Departments for organization of tax collection under regulations.
Income tax payment receipts and income tax withholding vouchers shall be managed according to regulations on printing, distribution and use management of tax prints.
IV. RESPONSIBILITIES OF ORGANIZATIONS AND INDIVIDUALS IN INCOME TAX COLLECTION AND PAYMENT
1. Responsibilities of individuals having taxable incomes:
Individuals having taxable incomes shall have to voluntarily register and declare taxable incomes, and pay income tax through income-paying agencies or directly at tax offices under the guidance in Section III of this Circular. Individual taxpayers shall be held responsible before law for the accuracy and truthfulness of declared data.
2. Responsibilities of income-paying agencies, organizations receiving and managing foreigners and State management agencies:
2.1. Income-paying agencies shall have the following responsibilities, obligations and interests:
- To take initiative in declaring and registering with local tax offices the collection of personal income tax by mode of withholding at their respective units; to provide guidance for taxable income earners to fill in the procedures for registration of personal income tax codes.
- Monthly, on the basis of the list of individuals subject to income tax and the actual income amounts paid to individuals, to withhold income tax money, make income tax declaration and payment sum-ups to be submitted to tax offices and remit tax money into the State budget.
- To keep books and vouchers related to the organization of income tax collection, i.e. taxable income, tax calculation, tax withholding, tax declaration, tax collection and payment declaration, management of tax receipts, calculation of remunerations and remittance of tax money into the State budget.
- To issue income tax payment receipts to individuals that have demand therefor and issue income tax withholding vouchers to individuals so as to certify the income tax amount already withheld by income-paying agencies. Income-paying agencies shall file applications, made according to Form 07/TNCN issued together with this Circular(*), to tax offices, requesting the issuance of tax payment receipts and tax withholding vouchers; and report on the use of receipts and vouchers each month to tax offices by the 20th of the following month or by the 20th of the first month of the following quarter, if in a quarter only one receipt or voucher book has been used, according to Form 14/TNCN issued together with this Circular(*).
- To comply with the reporting regime; to effect the settlement and final settlement of tax money, tax payment receipts, tax withholding vouchers and remunerations with tax offices, and produce all documents related to income tax when requested by tax offices.
- Income-paying agencies shall enjoy a remuneration to be calculated over the withheld income tax amount before remitting it into the State budget in order to offset expenses for organization of tax collection and reward individuals with achievements in organization of tax collection according to the following rates:
+ 0.5% (five thousandth) for income tax amount collected on regular incomes.
+ 1% (one per cent) for income tax amount collected on the irregular incomes.
2.2. Organizations receiving and managing foreigners shall have to provide guidance for foreigners upon the end of their working terms to complete the income tax settlement procedures in order to be issued tax payment receipts before filling in the exit procedures.
2.3. State management agencies, including entry-exit management agencies, agencies issuing work permits to foreigners, labor management agencies and other relevant agencies shall have to provide tax offices with information related to taxable incomes and taxpayers when so requested by the latter.
3. Responsibilities of tax offices:
- To coordinate with the State management agencies and concerned agencies in propagating and guiding organizations and individuals, and at the same time inspect and request income-paying organizations and individuals based in their respective localities to register and declare income tax by mode of withholding at source.
- To organize the granting of tax identification numbers to taxpayers;
- To guide and inspect income-paying agencies in the observance of the regime of tax registration, declaration, calculation, withholding and remittance into the State budget and organize the inspection of final settlement of personal income tax.
- To issue and settle tax payment receipts and income tax withholding vouchers, conduct settlement and final settlement of tax money as well as final settlement of remunerations with income-paying agencies.
- To organize the collection and final settlement of income tax for individuals who register tax payment and who submit annual tax declarations at tax offices, and issue income tax payment receipts to taxpayers.
- To take coercive measures, retrospectively collect tax money and fines on acts of violating the Ordinance on Income Tax; to decide on pecuniary rewards for people who detect violations or help tax offices to retrospectively collect tax money.
- To periodically report to superior tax authorities.
V. TAX REDUCTION AND EXEMPTION
1. Subjects of tax reduction and exemption:
1.1. Individual taxpayers who meet with difficulties caused by natural calamities, enemy sabotage or accidents, which damage their properties or incomes and thereby affect their life, shall be considered for tax reduction or exemption in the year, depending on the extent of the damage. The reduced or exempted tax amount shall be equal to the proportion between the lost money amount and the taxable income in the year and must not exceed the tax amount payable for the whole year.
1.2. In particular cases, if tax payment by individuals affects the national economic, political and social interests, such individuals shall enjoy tax reduction or exemption.
2. Procedures and competence for consideration of tax exemption or reduction:
2.1. Taxpayers shall individually file applications for tax reduction or exemption with certification by local administrations (commune/ward People’s Committees) or by income-paying agencies to tax offices of the localities where they register tax payment or to income-paying agencies that withhold tax; applications for tax reduction or exemption must state clearly the reasons therefor, the lost money amount, individual tax identification numbers (accompanying vouchers determining or records evaluating circumstances that cause damage to their properties and/or incomes, and thereby affecting them, which are certified by competent agencies), the payable tax amount and tax amounts requested for reduction or exemption;
2.2. Tax offices shall examine the applications and issue decisions on tax reduction or exemption or propose the superior tax authorities to decide thereon according to the following decentralization of responsibility:
+ The directors of the provincial/municipal Tax Departments shall decide on cases where the exempted/reduced tax amount is under VND 5 million/year;
+ The general director of the General Department of Tax shall decide on cases where the exempted/reduced tax amount is between VND 5 million and VND 100 million/year;
+ The Minister of Finance shall decide on cases where the exempted/reduced tax amount is over VND 100 million/year.
2.3. Pending the issuance of tax exemption or reduction decisions by the competent tax authorities, taxpayers shall still have to fully pay tax amounts according to the Ordinance; when tax exemption/reduction decisions are issued, taxpayers shall be entitled to reimbursement of the reduced/exempted tax amounts, which shall be cleared against their payable tax amounts in the subsequent period or refunded to them directly under regulations. In cases where individuals pay income tax at tax offices, the reduced/exempted tax amounts shall be cleared against their payable tax amounts in the subsequent period or refunded to them by the State budget under regulations.
3. For cases of tax exemption or reduction according to the provisions at Point 1.2, Section V of this Circular, organizations and individuals shall send written requests for tax exemption or reduction to the Finance Ministry, clearly analyzing the reasons therefor as well as the national economic, political and social interests related to tax exemption or reduction for taxpayers. The Finance Ministry shall examine dossiers and report them to the Prime Minister for consideration and decision on a case-by-case basis.
VI. HANDLING OF VIOLATIONS AND COMMENDATION
1. Handling of violations:
1.1. Individuals and organizations that fail to strictly comply with the regulations on the procedures for income tax registration, declaration, final settlement, accounting book and voucher compilation, or fail to withhold tax amounts under regulations shall be sanctioned for administrative violations in the field of tax.
1.2. Individuals and organizations that commit act of false tax declaration or tax evasion shall, apart from fully paying the prescribed income tax amounts, be subject to fines equal to one or three times the evaded tax amounts; if they evade tax with a large amount or have been administratively sanctioned for tax-related violations but relapse into violations or commit other serious violations, they shall be examined for penal liability under current law provisions.
1.3. Individuals and organizations that pay tax money or fines after the prescribed time-limit or the deadline stated in the tax-handling decisions shall, apart from fully paying tax and fine amounts, be subject to a fine equal to 0.1% of the delayed tax amount for each day of late payment;
Example: In May, income-paying agency X has deducted and declared according to Form 03a/TNTX a personal income tax amount of VND 10 million. That agency enjoys a remuneration of 0.5% of the collected tax amount, being VND 50,000. The tax amount remittable to the State budget, therefore, is VND 9,950,000. The agency already sent the written declaration to the tax office on June 9 and remitted tax money into the State budget according to the date inscribed in the receipt of payment via account transfer, which is June 27. Hence, compared to the prescribed time-limit, the income-paying agency remitted tax money 2 days later and shall be subject to a fine, which shall be VND 9,950,000 x 0.1% x 2 days = VND 19,900.
1.4. In cases where income-paying individuals or organizations commit acts of failing to declare, register or list individuals liable to income tax, or failing to withhold income tax amounts before paying incomes, thus causing personal income tax losses, they shall, apart from paying compensation to the State budget for the lost tax amount, be subject to tax-related administrative sanctions under current law provisions. The to be-compensated tax amounts and payable fine amounts shall be covered by the personal incomes, revenues and remuneration of income-paying agencies and shall not be accounted into expenses when determining incomes subjects to enterprise income tax.
1.5. Individuals or organizations that fail to pay tax and fines according to notices or tax-handling decisions shall be handled as follows:
1.5.1. Their money available at treasuries or credit institutions shall be deducted for tax or fine payment. Treasuries and credit institutions shall have to deduct money from deposit accounts of organizations and individuals at treasuries or credit institutions for tax or fine remittance into the State budget before recovering debts;
1.5.2. Their properties shall be inventoried under law provisions for assurance of the full collection of tax and fine amounts.
The handling of administrative violations regarding income tax and competence for handling violations shall comply with current regulations on sanctioning of administrative violations in the tax domain.
Individuals who detect cases of income tax evasion and notify such to tax offices in form of direct reporting, official dispatches, letters or applications, clearly stating the names and addresses of individuals or organizations committing acts of tax evasion, shall be commended/rewarded by tax authorities according to current regulations.
VII. COMPLAINT AND STATUTE OF LIMITATIONS
1.1. Organizations and individuals have the right to complain about the improper application of the Ordinance on Income Tax on High-Income Earners to them.
Complaints must be sent to tax offices directly managing them or having issued handling decisions within 30 days as from the date of receiving tax notices, collection orders or handling decisions.
Pending the settlement of their complaints, complainants shall still have to fully pay on time the notified tax or fine amounts.
Complaint-receiving agencies shall have to consider and settle complaints within 15 days after receiving them; for complicated cases, this time-limit may be prolonged but shall not exceed 30 days as from the date of receiving complaints; if the cases fall beyond their handling competence, they shall have to transfer the dossiers or report such to the competent agencies for handling and notify the complainants thereof within 10 days as from the date of receiving the complaints.
1.2. In cases where complainants disagree with decisions of the complaint-receiving agencies or past the time-limit defined at Point 1.1 of this Section, the complaint-receiving agencies have not handled them, the complainants may further lodge their complaints to the immediately superior agency of the complaint-receiving agency.
2. Statute of limitations:
2.1. Tax offices shall have to reimburse tax or fine money which has been improperly collected and refund compensation amounts (if any) within 15 days as from the date of receiving handling decisions from their superior agencies or competent agencies under law provisions.
2.2. In cases where they detect and conclude that there’s a false declaration for tax evasion or tax errors, tax offices shall have to retrospectively collect tax or fine money or reimburse tax money for 5 years prior to the inspection and detection of false tax declaration or tax errors. In cases where organizations or individuals fail to register, declare or pay tax, the time limit for retrospective collection of tax and fine money, the fine amount shall be calculated as from the time the taxable income is generated.
VIII. ORGANIZATION OF IMPLEMENTATION
1. This Circular takes effect 15 days after its publication in the Official Gazette and replaces the Finance Ministry’s Circular No. 05/2002/TT-BTC of January 17, 2002 guiding the implemen-tation of the Government’s Decree No.78/2001/ND-CP of October 23, 2001 detailing the implementation of the Ordinance on Income Tax on High-Income Earners and the regulations contrary to the provisions of this Circular.
The income tax declaration and calculation before July 1, 2004 shall comply with the guidance provided for in the Finance Ministry’s Circular No.05/2002/TT-BTC of January 17, 2002; from July 1, 2004 onwards, the provisions of this Circular shall apply.
2. In cases where international agreements which Vietnam has signed or acceded to contain provisions different from those of this Circular, the provisions of such international agreements shall apply.
3. Tax authorities at all levels shall have to popularize among and guide individuals being tax payers as well as income-paying organizations and individuals to strictly implement the provisions of the Ordinance, the Decree and circulars guiding income tax on high-income earners.
Organizations and individuals are requested to report any problems arising in the course of implementation to the Finance Ministry (the General Department of Tax) for study and settlement.
FOR THE FINANCE MINISTER
(*) Appendices and forms are not printed herein