Công văn 3395TCT/TNCN

To: The Tax Department of Ho Chi Minh city

In response to Official Letters No. 9299/CT-TNCN of September 14, 2004, No. 9399/CT-TH&XLDL and No. 9899/CT-TNCN of September 28, 2004 of the Tax Department of Ho Chi Minh city on a number of problems arising in the implementation of the policies on income tax on high-income earners (personal income tax), the General Department of Taxation hereby provides the following guidance:

1. Regarding 25% credit of incomes when determining taxable incomes of individuals being singers, circus artists, dancers, etc.

Subjects eligible for 25% credit of incomes, when their taxable incomes are determined according to the provisions of the Finance Ministry's Circular No. 81/2004/TT-BTC of August 13, 2004, must obtain certifications of specialized state management agencies. Concerning this matter, the General Department of Taxation has proposed the Finance Ministry to send official letters to the Culture and Information Ministry and the Physical Training and Sports Committee, and to issue documents providing specific guidance on procedures for tax declaration, payment and finalization applicable to subjects eligible for 25% credit of taxable incomes.

In the immediate future, for singers being high-income earners, the Department of Taxation should take the following measures for tax collection:

- Organizing meetings with taxpayers being famous singers and artists, with the participation of provincial/municipal Culture and Information Service, to disseminate provisions on prompt declaration for tax credit upon income arise

- Sending to each individual the tax office's notice on declaration and registration for grant of tax identification number, or inviting them to the tax office for explanation of the tax policies.

- Requesting agencies which grant performance permits or permits for publication of tapes and disks to supply lists of permitted performance programs participated by singers paid with high incomes.

2. Regarding 10% credit of personal income tax:

The 10% credit of personal income tax before an income of over VND 500,000 is paid to individuals outside income-paying agencies, i.e. payment of charges to providers of assorted services, agents, etc., shall comply with the provisions of Point 3.3, Section III of the Finance Ministry's Circular No. 81/2004/TT-BTC of August 13, 2004. In cases where income-paying agencies pay incomes to individuals being current employees, for example: non-professionals, students playing parts in films, providers of small and miscellaneous services, i.e. minor repairs of power or water systems, under short-term, seasonal, manual or unskilled labor contracts, whereby annual taxable income can be estimated at under VND 60 million (monthly income of under VND 5 million), the Department of Taxation shall guide such income-paying agencies in notifying it of their written requests for such 10% tax credit and such income-paying agencies shall temporarily not make 10% tax credit for these subjects.

3. Regarding the conversion of irregular incomes into regular incomes:

For individuals who entered into technical construction engineering contracts in March 2004 (at that time their incomes from technical construction engineering activities were irregular incomes) and settled contract values in August 2004 (as from July 2004, these incomes have been considered regular incomes), the income tax shall be calculated according to regulations effective at the time such individuals actually received incomes. More concretely, incomes actually received before July 1, 2004 shall be subject to the table of partially progressive tax rates applicable to irregular incomes, whereas incomes received as from July 1, 2004 shall temporarily be subject to temporary 10% personal income tax credit. By the end of 2004, there will be separate finalization guidance.

4. Regarding personal income tax applicable to insurance agents and sale agents:

Pursuant to the Finance Ministry's Circular No. 81/2004/TT-BTC of August 13, 2004, individuals not liable to pay business income tax and earning incomes from agency service activities shall be liable to pay personal income tax. The General Department of Taxation is currently reporting this matter to the Finance Ministry and waiting for the latter's handling instructions.

5. Regarding taxable objects:

- For individuals who win prizes in contests organized by television or radio stations, the received prize money amounts shall be considered irregular incomes, which shall be taxed at the tax rate of 10% of the whole prize amounts, each valued at VND 15 million or more.

- Individuals who earn incomes from royalties paid for use of patents or trademarks in association with technology transfer activities (technology transfer contracts contain provisions on transfer of invention patents or trademarks) shall make tax payment declarations for irregular incomes. Where they earn incomes from other copyright royalties, they shall make tax payment declarations for regular incomes.

6. Regarding the handling of violation acts:

Pursuant to the provisions of Point 1.4, Section VI of the Finance Ministry's Circular No. 81/2004/TT-BTC of August 13, 2004, if income-paying agencies fail to register and declare individuals liable to pay income tax, or do not make income tax withholdings before paying incomes to individuals, thus causing tax losses, such agencies shall, apart from paying compensations for tax losses to the state budget, be sanctioned administratively for acts of tax evasion according to the provisions of Section IV, Part B of the Finance Ministry's Circular No. 41/2004/TT-BTC of May 18, 2004, guiding the implementation of the Government's Decree No. 100/2004/ND-CP of February 25, 2004 on sanctioning of tax-related administrative violations. Tax loss compensations and fines shall not be accounted by income-paying agencies into their expenditures when determining incomes liable to business income tax.

In response to the Tax Department's Official Letters, the General Department of Taxation notifies it of the foregoing guidance.