Công văn 2754/TCT-TNCN

To: Hanoi Tax Department

In response to Official Dispatch No.35115/CT-TTHT dated May 29, 2017 of Hanoi Tax Department regarding the invoice and personal income tax incurred from the contract for design consultancy service of Mr. Nguyen Tien Dung, below are opinions from the Tax General Department:

1. Regulations on incomes from wages and remunerations

- Pursuant to point c in clause 2 in Article 2 of Circular No.111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance:

“2. Incomes from wages and remunerations

Incomes from wages and remunerations are incomes paid to employees by employers, including:

…

c) Remunerations in the forms of agent commission, brokerage commission, payments for participation in science and technology researches, payments for participation in projects and schemes, royalties according to regulations of the law on royalties, payments for teaching, payments for participation in artistic performance, sports, payments for advertising, payments for other services, and other remunerations.”

- Pursuant to point i in clause 1 in Article 25 of Circular No.111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance:

“1. Tax deduction

Tax deduction means the income payer’s calculating and deducting tax payable by the taxpayer from the taxpayer’s income before paying the income to the taxpayer. To be specific:

…

i) Tax deduction in other cases

Organization or individual that pays a total income amount of at least VND 2 million to a resident without a labor contract (according to instruction in point c and d in clause 2 in Article 2 herein) or with a labor contract whose duration is shorter than three (3) months shall deduct 10% tax from the income before it is paid to such resident."

2. Regulations on incomes from business

- Pursuant to Article 1 of Circular No.92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance which provides guidelines for VAT and personal income tax incurred by residents doing business and amendments to some articles on personal income tax of the Law No.71/2014/QH13 on amendments to Tax Laws and Decree No.12/2015/ND-CP dated February 12, 2015 of the Government on guidelines for the Law on amendments to Tax Laws and Degrees on Tax:

“Article 1. Taxpayers

1. Taxpayers mentioned in Chapter I of this Circular means residents including individuals, groups of individual and households who manufacture and/or trade in goods and services in any field and sector prescribed by laws (hereinafter referred to as businessperson and businesspeople). Business fields and sectors also include:

a) Independent practice in fields and sectors covered by the practicing certificate or license as regulated by laws

…

2. Taxpayers mentioned in clause 1 in this Article shall not include businesspeople whose annual revenues are VND 100 million or lower”

- Pursuant to point a in clause 1 in Article 3 of Circular No.92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance:

“a) Businesspeople paying tax every time it is incurred include: residents who earn revenue outside Vietnam’s territory; persons who do casual business and do not have permanent business premises; persons who engages in business cooperation with other organizations in such a way that their personal revenues can be determined.”

- Pursuant to clause 1 in Article 7 of Circular No.92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance:

“1. Tax declaration principles

a) Businesspeople whose total revenue in a calendar year is higher than VND 100 million shall declare VAT and personal income tax whenever it is incurred.

…”

According to the above-mentioned regulations, "Independent practitioners must apply for business registration and pay taxes on business operation as prescribed by laws.”

- Pursuant to clause 1 in Article 6 of the Commercial Law No.36/2005/QH11 dated June 14, 2005:

“Traders include lawfully established economic organizations and individuals that conduct commercial activities in an independent and regular manner and have business registrations.”

According to the above-mentioned instructions, the person that earns income from the design consultancy service shall pay taxes in accordance with regulations applied to the independent practitioner if such person possesses a practicing certificate and has obtained tax and business registration in compliance with regulations on business registration. Independent practitioners shall declare and pay taxes in accordance with provisions of the Tax Law.

Organization that pays a remuneration amount of at least VND 2 million to a person who provides design consultancy service and possesses an independent practicing certificate but has not applied for business registration as regulated shall deduct 10% personal income tax from such remuneration before it is paid.