THE GOVERNMENT
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SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom – Happiness
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No: 05-CP
Hanoi, January 20, 1995
 
DECREE
DETAILING THE IMPLEMENTATION OF THE ORDINANCE ON INCOME TAX LEVIED ON HIGH INCOME EARNERS
THE GOVERNMENT
Pursuant to the Law on Organization of the Government on the 30th of September 1992;
Pursuant to the Ordinance on Income Tax Levied on High Income Earners (amended) passed by the Standing Committee of the National Assembly on the 19th of May 1994;
At the proposal of the Minister of Finance,
DECREES:
Chapter I
SCOPE OF APPLICATION

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Article 1.- As stipulated at Article 1 of the Ordinance on the Law on Income Tax Levied on High Income Earners (hereunder called income tax) all income earners have to pay income tax. These are:
1. Vietnamese citizens living in the country or on mission or working abroad;
2. Other individuals residing in Vietnam who are not nationals of Vietnam but have settled indefinitively in Vietnam;
3. Foreigners working in Vietnam, including non residents with incomes generated in Vietnam.
Article 2.- The taxable incomes include both regular and irregular incomes, except the incomes stipulated at Article 4 of this Decree.
1. The regular incomes include:
- Incomes in the form of salaries, wages and remunerations.
- Incomes in the form of subsidies for house rent, and electricity and water bills. House rent is based on the real subsidies, but this must not exceed 15% of the income from wages, salaries or remunerations.
- Bonuses in cash and in kind from various sources.
- Other incomes generated by the participation in business organizations or managerial boards...

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- Individual incomes generated by the participation in production, business and service activities outside the taxable incomes, such as consultancy services according to long-term contracts, job instruction, class giving, teaching of pre-exams courses, cultural and art performances.
2. Irregular incomes:
- Incomes in the form of presents and gifts in cash or in kind sent by organizations and individuals abroad to individuals in Vietnam in all forms.
- Incomes from technological transfer according to each contract, comprising: transfer of ownership right or the right to use industrial property: transfer through the sale and purchase or supply of technical secrets, technological plans, trade marks...; the execution of services of technological consultancy and support, transfer of the use of or the right to use industrial, commercial or scientific equipment.
- Incomes from the payment of copyright over literary and art works.
- Incomes from the designing of construction techniques, industrial technical designs, and other services.
- Lottery wins.
Article 3.- For the time being, the income tax shall not be levied on the incomes from the interests of bank deposits, saving deposits, bank-issued bonds, government-issued bonds, time bonds.
Article 4.- Non-taxable incomes:
1. The following incomes are regulated by the Vietnamese State when they are generated in Vietnam:

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- Night work allowance (excluding third-shift wage);
- Toxity and danger allowances for occupations or jobs done in noxious or dangerous conditions, such as underground mining, offshore drilling...;
- Area allowance, attraction allowance, special allowance for a number of offshore islands and border areas;
- Seniority allowances for the armed forces;
- Specialty allowances for a number of occupations, like forensic medicine and surgery;
- Allowances for civil servants, and other allowances derived from the State budget; allowances for veterans who took part in the revolutionary activities prior to 1945;
- Mission allowances;
- Allowances for the meals in a number of special occupations;
- Social allowances for the beneficiaries of social relief policies;
- Severance allowances for State officials and employees;

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- Allowances for the transfer to a production establishment by decision of the State;
- Insurance indemnities paid to the participants in life and property insurance;
- Reward for technical innovations and inventions, international prizes, and national prizes organized or recognized by the Vietnam State;
- Cash award accompanying titles conferred by the State, such as Professor, People's Teacher, Labor Hero, Hero of the People's Armed Forces...
2. Profit gained by the head of household in individual businesses already subject to profit tax under the Profit Tax (their income shall not be accounted for in the expenditures while calculating the taxable profits).
3. Regular incomes of foreigners residing in Vietnam for less than 30 days within 12 consecutive months counting from the date of their arrival in Vietnam.
Chapter II
BASES FOR TAX CALCULATION AND TAX BRACKET
Article 5.- The bases for calculating the income tax are the taxable income and the tax rate.
Article 6.- The taxable regular income is the total average income of a month in a year for an individual, as stipulated at Item 1, Article 2 of this Decree. More concretely:

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1. For Vietnamese citizens living in the country or on mission or working abroad, and other individuals having settled in Vietnam, this income is the total income for a year divided to 12 months (solar calendar).
2. For foreigners residing in Vietnam for 183 days and more, this income is the total income generated in Vietnam plus the income generated outside Vietnam divided to 12 months. In case the declared average monthly income outside Vietnam is lower than that in Vietnam and this income is unaccountable, the monthly average income in Vietnam shall be used to calculate the income during the period they are outside Vietnam. The tax month is conventionally set at 30 days.
3. For foreigners staying in Vietnam from 30 to 182 days, the taxable income is the income generated in Vietnam.
Article 7.- Following are the tax rates for the regular incomes:
1. For Vietnamese citizens in the country and other individuals having settled in Vietnam, the tax rate is the partially progressional rate, stipulated at Item 1 of Article 10 of the Ordinance on Income Tax. After payment of the tax at this rate, if the remaining income exceeds 5,000,000 Vietnamese Dong/month, they have to pay a supplementary 30% of the excess amount.
2. For Vietnamese citizens having incomes generated inside the country and outside the country, the taxable income in the tax year shall be the total income inside the country and outside the country divided to 12 months, and the tax rate shall correspond to the rate stipulated at Item 1 and Item 2 of Article 10 of the Ordinance on Income Tax.
3. For foreigners residing in Vietnam for 183 days and more, and Vietnamese citizens working or on mission abroad, the tax rate shall be the partially progressional rate stipulated at Item 2 of Article 10 of the Ordinance on Income Tax.
4. For foreigners staying in Vietnam from 30 to 182 days, the uniform tax rate is stipulated at Item 2 of Article 10 of the Ordinance on Income Tax, representing 10% of the total income.
Article 8.- The taxable irregular income is the income of each individual at each generation of income, as stipulated at Item 2 of Article 2 of this Decree.
Incomes from presents and gifts are taxed on the receivers, including the owners of private businesses.

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Taxable incomes from the transfer of technology, construction techniques and industrial technical designs, are calculated according to the value of each contract, irrespective of the times of payment.
Article 9.- The tax rate for irregular incomes is the partially progressional rate stipulated at Article 12 of the Ordinance on Income Tax. For the income from technology transfer, from presents and gifts valued at more than 2,000,000 Vietnamese Dong each time, the uniform tax rate is 5% of the total income of each generation of income. For the income from lottery wins valued at more than 12,500,000 Vietnamese Dong each time, the uniform rate is 10% of the total income from each generation of income.
Article 10.- All incomes in foreign currencies or in kind shall be converted into Vietnamese currency for tax calculation. The gifts and presents in kind are priced at the average rate on the local market at the time of the income generation. For the presents and gifts in kind sent from abroad, the taxable income is their import value priced at the time the presents are received. Foreign currencies and gold are valued at the selling price announced by the Bank at the time of income generation. In case the present is in a foreign currency for which no formal exchange rate has been announced by the Bank, it shall be converted into US dollars before being converted into Vietnamese Dong.
Chapter III
DECLARATION OF TAX RETURNS-PAYMENT OF TAX
Article 11.- Payment of income tax shall conform to the principle of deduction right at the source of income. The organization or individual that pays the income, or the labor management agency (hereafter called mandated collecting organization) has the duty to deduct the tax before disbursing the income.
- In case an individual works at different times in different places, his/her income tax shall be deducted at the source of the income, and all the incomes must be declared for a final account at the end of the year at the latest working place in the year.
- In case an individual works in the same period of the year in many places and takes his/her income from many places, he/she must combine these incomes and declare them for tax payment at the place where he/she gets the highest income, or which is most convenient for the collection.
- In case an individual derives his/her income from the participation in business associations or managerial boards, or other regular incomes besides the income at his main working place, he/she must declare his/her other incomes together with the income from the main working place, in order to pay tax according to the regulations.
- In case the incomes deriving from consultancy or training services, or from scientific workshops, seminars are not deducted from the income at the source, the income recipients must make the tax declaration, and pay the tax to the local tax agency in the locality of his working place.

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Article 12.- Declaration of tax returns for regular incomes: The income tax on regular incomes is levied on the average monthly income during the tax year, and shall be declared for advance payment based on real income per month.
1. For Vietnamese having worked some time abroad, they shall declare their average monthly income based on the total income including the incomes generated abroad, and shall pay tax according to the corresponding tax rates:
2. For foreigners:
- If they stay in Vietnam for from 30 to 182 days, their income tax shall be calculated according to the tax rate stipulated at Item 3 of Article 10 of the Ordinance on Income Tax.
- It they stay in Vietnam for 183 days and more, they shall declare their tax returns according to the partial progressional tax rate stipulated at Item 2 of Article 10 of the Ordinance on Income Tax.
- The stay of a foreigner in Vietnam is the 12 consecutive months of the first tax year. The following years are determined according to the solar calendar, the arrival and departure days being calculated as one day.
Article 13.- Tax returns declaration for irregular incomes:
The income tax for irregular incomes shall be paid for each income generation.
The organization or individual paying the income has the duty to deduct the tax before paying the income (including the income of individuals living abroad transferring technology into Vietnam). The individuals who carry presents or gifts must make the tax return declarations and pay the income tax on behalf of the recipients.
Article 14.- The tax payer must voluntarily make a full account of his incomes, pay the tax fully and on time, and make the tax accounts as prescribed by Ministry of Finance.

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Article 15.- The Ministry of Finance shall organize the collection of the income tax, has the responsibility to direct, guide, check and inspect the mandated organizations to collect the individual income tax, according to the modalities of deduction of the income tax right at their sources, before the incomes are paid to the earners.
The organizations entrusted with the deduction of income tax are entitled to remuneration representing from 0.5% (five per thousand) to 1% (one per cent) of the income tax, before remitting the tax to the State budget as prescribed by the Ministry of Finance.
Article 16.- The organizations entrusted with the collection of income tax must take the initiative in registering declaration, deducting and remitting the tax to the State budget. They have the responsibility:
- To guide the earner of taxable incomes to declare his/her income, receive the tax declaration form, draw up the inventory for tax calculation, add up the incomes, and forward to the tax agency the list of payers of income tax, the amount of tax to be paid...
- To keep the books and documents related to the tax declaration, tax calculation and payment, and carry out the regime of reporting to the tax agency.
- To calculate the tax, deduct the tax, calculate the right remuneration, and remit the tax to the State budget.
- To issue a receipt to the tax payer.
Article 17.- The organizations in charge of the management and paying incomes to foreigners have the responsibility to provide them guidance and help them to fill the procedures of paying income tax before filling the procedure of exit visas to them. All foreigners having taxable incomes have the duty to declare to the income-paying agency or the tax agency the taxable incomes, and the length of their stays in Vietnam. Thirty days at the latest after their arrival in Vietnam, they have to pay fully their income tax before leaving Vietnam.
Chapter IV
TAX REDUCTION AND EXEMPTION

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Article 18.- The following cases are eligible for reduction or exemption of income tax:
1. In case of natural calamities, enemy sabotage or accidents which cause damage to the property and income affecting the life of the tax payer, the latter is eligible for exemption or reduction of income tax, depending on the extent of the damage.
2. The Prime Minister may order exemption or reduction of income tax in a number of cases related to economic, political or social interests of the nation.
The Ministry of Finance shall define the procedures for exemption or reduction of income tax stipulated at this Article.
Chapter V
IMPLEMENTATION PROVISIONS
Article 19.- Violations of the Ordinance on Income Tax shall be dealt with according to Article 21, Article 22, Article 23 and Article 24 of the Ordinance on Income Tax. Those credited with meritorious deeds in discovering violations of the Ordinance on Income Tax or who help the tax agency to recover the evaded tax, shall receive a reward up to 10% of the recovered amount which is remitted to State Budget, as prescribed by the Ministry of Finance.
Article 20.- The incomes on which separate commitments have been made with regard to taxation and tax exemption, shall be subject to the clauses of the international documents and treaties which Vietnam has signed or acceded to.
Article 21.- This Decree takes effect as from the 1st of June 1994, and replaces Decree No.119-HDBT on the 17th of April, 1991, of the Council of Ministers (now the Government), Decree No.16-CP on the 23rd of March, 1993, of the Government; Item 4, Article 7 of Decree No.370-HDBT on the 9th of November, 1991 of the Council of Ministers (now the Government) concerning the obligatory contribution to the State budget by the persons sent to work for a given term abroad.
All the regulations on income tax and supplementary collections after payment of income tax issued prior to the 1st of June 1994 are no longer valid.

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The agencies in charge of management, training and selection of laborers are entitled to deduct not more than 8% of the income of the laborers to cover the managerial training or selection expenditures. This expenditure shall be managed and used in accordance with the financial regulations in force.
The Minister of Finance shall guide the implementation of this Decree.
Article 22.- The Ministers, the Heads of the ministerial-level agencies, the Heads of the agencies attached to the Government, the Presidents of the People's Committees of the provinces and cities directly under the Central Government shall, according to their functions, tasks and powers, organize the implementation of this Decree.
 
ON BEHALF OF THE GOVERNMENT
FOR THE PRIME MINISTER
DEPUTY PRIME MINISTER




Phan Van Khai

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