THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Independence – Freedom - Happiness
No. 05/2002/TT-BTC
Hanoi, January 17th, 2002
CIRCULAR
ON INCOME TAX OF HIGH INCOME EARNERS PROVIDING GUIDELINES FOR IMPLEMENTATION OF DECREE 78/2001/ND-CP OF THE GOVERNMENT DATED 23 OCTOBER 2001 ON IMPLEMENTATION OF THE ORDINANCE ON INCOME TAX OF HIGH INCOME EARNERS
Pursuant to the Ordinance on Income Tax of High Income Earners 35/2001/PL-UBTVQH10 of the Standing Committee of the National Assembly dated 19 May 2001;
Pursuant to Decree 78/2001/ND-CP of the Government dated 23 October 2001 on Implementation of the Ordinance on Income Tax of High Income Earners;
The Ministry of Finance provides the following guidelines:
I. SCOPE OF APPLICATION
1. Taxpayers:
Persons liable to pay income tax pursuant to article 1 of Decree 78/2001/ND-CP of the Government dated 23 October 2001 on Implementation of the Ordinance on Income Tax of High Income Earners (hereinafter referred to as Income Tax) shall comprise:
1.1 Vietnamese citizens being in Vietnam, or working or being on business trips abroad, and earning income;
1.2 Individuals who do not have Vietnamese citizenship but residing indefinitely in Vietnam, and earning income (hereinafter referred to as other individuals residing in Vietnam);

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1.3 Foreigners earning income in Vietnam, comprising:
- Foreigners working in Vietnam in Vietnamese enterprises, economic organizations, cultural or social organizations, and so forth, or in foreign enterprises, representative offices, branches of foreign companies; and individuals practising their profession independently;
- Foreigners not currently residing in Vietnam but who have income which is sourced in Vietnam, in circumstances such as income from technology transfer and copyright.
2. Taxable income:
Taxable income as stipulated in article 2.1 of Decree 78/2001/ND-CP of the Government dated 23 October 2001 shall include regular and irregular income.
2.1 Regular income shall include:
2.1.1 Items of income in the form of salaries, wages and remuneration, including payments for overtime, nightshift, and thirteenth month (if any), subsidies in lieu of salary received from social insurance funds, and allowances for lunch and mid-shift meals (if received in cash).
If a signed labour contract provides that income actually received shall exclude income tax (net income), it must be converted to income in which income tax is included to provide the basis for determining taxable income (using the formula in Appendix 1).
2.1.2 Bonuses received monthly, quarterly, annually, or irregularly on the occasion of holidays, Tet, anniversaries of the establishment of an industry, from whatever source and in whatever form, that is, in monetary form or in material kind.
2.1.3 Income received from participation in business associations, boards of management, management committees and councils of enterprises.

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2.1.4 Personal stable income as stipulated in article 1 of Decree 78/2001/ND-CP of the Government dated 23 October 2001 received from participation in business, production or service activities of various kinds which are not subject to corporate income tax, such as: design, architecture and consultancy services on the basis of long term contracts, teaching,
Intensive examination coaching, cultural and artistic performances, sporting and gymnastic activities of a professional nature.
2.1.5 Items of income paid by organizations or individuals paying income for rent for accommodation, electricity and water. In particular, rent must be calculated in accordance with the actual amount paid but shall not exceed fifteen (15) per cent of the total income from salaries, wages and remuneration. If an individual resides in the office where he works, taxable income shall be based on rent or depreciation expenses for the proportion of the area the individual uses expressed as a percentage of the whole area of the house, and this percentage shall be a maximum of fifteen (15) per cent.
2.2 Irregular income shall include:
2.2.1 Income in the form of gifts and presents in kind that are sent by organizations and individuals from abroad to individuals in Vietnam in all forms, such as sent by way of an income- paying organization such as the post office, or carried personally by persons returning to the country. Recipients of gifts may be individuals, either Vietnamese or foreigners, and owners or representatives of a private enterprise. If an item belonging to an individual is carried by that person into Vietnam and declared on the customs form when conducting immigration procedures, it shall not constitute taxable income in the form of a gift or present.
2.2.2 Income arising from transfer of technology pursuant to independent contracts, including:
- Transfers of ownership of or rights to use objects of industrial property, such as inventions, industrial designs, utility solutions, goods and commercial trademarks;
- Transfers by way of purchase and sale, or supply (with or without equipment attached) of technical know-how, technological solutions and processes, designs or design samples, formulae, drawings, preliminary outlines, charts, diagrams, technical parameters or other specialized technical know-how;
- Provision of the following support and consultancy services:
- Research, analysis, evaluation of opportunities, pre- feasibility and feasibility studies of investment projects and technology renovation;

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- Technical support, technology selection, guidance on installation of equipment, trial operation of technological lines;
- Consultancy in relation to management of technology, organization and operation of technology and production processes;
- Training, improvement of technical expertise and managerial skills of management personnel, technicians and workers (excluding forms of specialist industry training);
- Provision of services on data collection, processing and provision about markets, technology, laws, raw materials and the environment;
- Transfers of the use of or rights to use industrial, commercial or scientific equipment (except for cases of mere importation of machinery, equipment, supplies, and so forth);
- Irregular income tax shall not be payable for a transfer of technology under clause 2.2.2 in the form of a gift.
2.2.3 Income in the form of royalties for literary and artistic works.
2.2.4 Income from technical construction designs, technical industrial designs, and services such as consultancy, training and brokerage services; income from artistic performances, sporting and gymnastic activities not of a professional nature.
2.2.5 Income arising from scientific activities, such as seminars, and subjects of scientific research at all levels.
2.2.6 Winnings from lotteries distributed by the State and all forms of promotional prizes.

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3. Income in respect of interest received from bank deposits, bank savings and loans, profits from purchases of term bonds, ordinary bonds, Government bonds, shares, and income from activities of investing in securities, and the difference on purchase and sale of securities shall be temporarily exempted from income tax pursuant to article 3 of Decree 78/2001/ND-CP.
4. Types of income which are not subject to tax pursuant to article 4 of Decree 78/2001/ND-CP shall comprise:
4.1 The following types of income sourced in Vietnam as stipulated by the State of Vietnam:
4.1.1 Allowances for night work (excluding wages for nightshift);
4.1.2 Allowances for toxicity and danger applicable to trades or work with toxic or dangerous labour conditions, such as underground mines, offshore oil rigs, suspension at heights, work involving direct exposure to toxic chemicals, toxic gases, toxic dust; working in places with levels of radioactivity above permissible levels or where there are contagious diseases;
4.1.3 Allowances for responsibility as stipulated by the State;
4.1.4 Regional allowances, incentive allowances and special allowances for work in remote or unfrequented areas, areas with harsh climate, new economic zones, offshore islands and border areas with difficult conditions (excluding expatriate allowances for foreigners);
4.1.5 Allowances for seniority in the armed forces; allowances for national defence and security;
4.1.6 Special allowances for certain professions, such as forensic medicine and surgery;
4.1.7 Itinerant allowances for some industries, trades and work which require a regular change of working place and residence;

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4.1.8 Preferential allowances for officials who carried out revolutionary activities prior to 1945 and other allowances from the State Budget.
The monetary amount of allowances shall be determined in accordance with the regulations of the competent body and the current regime for financial management. With respect to foreigners, the amount of allowances shall be determined on the basis of their basic salary under their contract and the allowance co-efficient which under the regulations of the Ministry of Labour, War Invalids and Social Affairs is generally applicable to all subjects.
4.2 Other items of non-taxable income:
4.2.1 Allowances for business trips on each occasion of a business trip shall be transport costs and accommodation costs, where there are valid vouchers or residency costs in accordance with the regime. In the case of a fixed all-inclusive business trip allowance, it is only the above items which shall be non- taxable;
4.2.2 Fixed meal allowances for certain special industries and trades, lunches, bring-in lunches or on-site meals, meals between shifts (excluding cash payments);
4.2.3 Social benefits for those entitled to social security benefits, such as war invalids, sick servicemen, families of war martyrs, people who assisted the Revolution; and one-off payments for difficult situations, and subsidies to resolve social evils;
4.2.4 Insurance compensation payments in respect of personal and property insurance policies;
4.2.5 Termination allowances in accordance with the provisions in the Labour Code;
4.2.6 Allowances for relocation to production establishments in accordance with State provisions, including allowances for one-off relocation of foreigners coming to reside in Vietnam;
4.2.7 Monetary prizes for technical innovations and inventions, international awards, and national awards organized or recognized by the State (excluding monetary prizes donated by other organizations and individuals);

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4.2.8 Monetary prizes accompanying titles bestowed by the State, such as Vietnamese heroic mother, hero of the people's armed forces, workers' hero, professor, people's teacher, eminent teacher, people's artist, eminent artist, and so forth.
4.3 Monies paid for social insurance or health insurance from salaries and wages of workers.
4.4 Profits of the owner of a private business or of individuals being foreigners which are already subject to payment of tax under the Law on Corporate Income Tax.
4.5 Regular income of a foreigner who resides in Vietnam for less than thirty (30) days within a period of twelve (12) consecutive months from the date of arrival in Vietnam.
4.6 Benefits which are enjoyed because the income-paying body pays such benefits, such as expenses for staff training which are paid to the training place, airfares for holidays for foreigners to return home to visit their families, and tuition fees for the children of foreigners which are paid directly to schools in Vietnam.
II. BASIS OF TAX CALCULATION
The basis of the calculation of income tax liability shall be taxable income and tax rates.
1. With respect to regular income:
1.1 Regular taxable income shall be the total income of each individual as stipulated in article 2.1 of Decree 78/2001/ND-CP, calculated as the monthly average in a year, in particular:
1.1.1 In respect of Vietnamese citizens being in Vietnam, or working or being on business trips abroad, and other individuals who do not have Vietnamese citizenship but reside indefinitely in Vietnam: their total annual income, including income abroad, shall be divided by twelve (12) months (of the Gregorian calendar). In the case of Vietnamese citizens with a period working in Vietnam and a period working abroad, taxable income shall be the total income sourced in Vietnam and abroad.

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