| THE NATIONAL ASSEMBLY ------- | SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------- |
| No. 04/2007/QH12 | Hanoi, November 21, 2007 |
LAW
ON PERSONAL INCOME TAX
Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam, which was amended and supplemented under Resolution No. 51/2001/QH10;
The National Assembly promulgates the Law on Personal Income Tax.
Chapter I
GENERAL PROVISIONS
Article 1. Scope of regulation
This Law provides for personal income taxpayers, taxable incomes, incomes eligible for personal income tax exemption or reduction, and personal income tax bases.
Article 2. Taxpayers
1. Personal income taxpayers include residents who earn taxable incomes specified in Article 3 of this Law inside and outside the Vietnamese territory and non-residents who earn taxable incomes specified in Article 3 of this Law inside the Vietnamese territory.
2. Resident means a person who satisfies one of the following conditions:
a/ Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam;
b/ Having a place of habitual residence in Vietnam, which is a registered place of permanent residence or a rented house for dwelling in Vietnam under a term rent contract.
3. Non-resident means a person who does not satisfy any of the conditions specified in Clause 2 of this Article.
Article 3. Taxable incomes
Incomes liable to personal income tax include the following kinds of income, except for incomes eligible for tax exemption specified in Article 4 of this Law:
1. Incomes from business activities, including:
a/ Incomes from goods production or trading or service provision;
b/ Incomes from independent professional activities of individuals possessing practice licenses or certificates in accordance with law.
2. Incomes from salaries and wages, including:
a/ Salaries, wages and amounts of similar nature;
b/ Allowances, except for those paid under legal provisions on preferential treatment of persons with meritorious services; defense or security allowances; hazard or danger allowances for persons working in branches, occupations or jobs at places where exist hazardous or dangerous elements; allowances for attraction of laborers to work in certain branches or in certain regions specified by law; allowances for sudden difficulties, allowances for laborers having labor accident or suffering from occupational disease, lump-sum maternity or child adoption allowances; allowances for working capacity loss, lump-sum retirement allowances, monthly survivorship allowances, severance and job loss allowances specified in the Labor Code, other allowances paid by the Social Insurance, and allowances for combat of social evils;
c/ Remuneration of all kinds;
d/ Sums of money earned for participation in business associations, boards of directors, control boards, management boards and other organizations;
e/ Other monetary or non-monetary benefits received by taxpayers;
f/ Bonuses, rewards, except for rewards accompanying honorary titles conferred by the State or international or national prizes; rewards for technical renovations, creations or inventions recognized by competent state agencies; rewards for detection and reporting of illegal acts to competent state agencies.
3. Incomes from capital investment, including:
a/ Interests;
b/ Dividends;
c/ Incomes from capital investment in other forms, except for government bond interests.
4. Incomes from capital transfer, including:
a/ Incomes from transfer of capital holdings in economic organizations;
b/ Incomes from transfer of securities;
c/ Incomes from transfer of capital in other forms.
5. Incomes from transfer of real estate, including:
a/ Incomes from transfer of rights to use land and assets attached to land;
b/ Incomes from transfer of right to own or use residential houses;
c/ Incomes from transfer of right to lease land or water surface;
d/ Other incomes earned from transfer of real estate.
6. Incomes from won prizes, including:
a/ Lottery winnings;
b/ Sales promotion winnings;
c/ Betting or casino winnings;
d/ Winnings in prized games and contests and other forms of winning.
7. Incomes from copyright, including:
a/ Incomes from assignment or licensing of intellectual property objects;
b/ Incomes from technology transfer.
8. Incomes from commercial franchising.
9. Incomes from inheritances that are securities, capital holdings in economic organizations or business establishments, real estate and other assets subject to ownership or use registration.
10. Incomes from gifts that are securities, capital holdings in economic organizations or business establishments, real estate and other assets subject to ownership or use registration.
The Government shall detail and guide the implementation of this Article.
Article 4. Tax-exempt incomes
1. Incomes from transfer of real estate between spouses; parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.
2. Incomes from transfer of residential houses, rights to use residential land and assets attached to residential land received by individuals who have only one residential house or land plot each.
3. Incomes from the value of land use rights of individuals who are allocated land by the State.
4. Incomes from receipt of inheritances or gifts that are real estate between spouses, parents and their children; adoptive parents and their adopted children; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law; grandparents and their grandchildren; or among blood siblings.
5. Incomes of households and individuals directly engaged in agricultural or forest production, salt making, aquaculture, fishing and trading of aquatic resources not yet processed into other products or preliminarily processed aquatic products.
6. Incomes from conversion of agricultural land allocated by the State to households and individuals for production.
7. Incomes from interests on deposits at credit institutions or interests from life insurance policies.
8. Incomes from foreign exchange remittances.
9. Wages paid for night shift or overtime work, which are higher than those paid for day shifts or prescribed working hours in accordance with law.
10. Retirement pensions paid by the Social Insurance.
11. Incomes from scholarships, including:
a/ Scholarships granted from the state budget;
b/ Scholarships granted by domestic and foreign organizations under their study promotion programs.
12. Incomes from indemnities paid under life insurance policies, non-life insurance policies, compensations for labor accidents, compensations paid by the State and other compensations as provided for by law.
13. Incomes received from charity funds licensed or recognized by competent state agencies and operating for charity, humanitarian or non-profit purposes.
14. Incomes received from governmental or non-governmental foreign aid for charity or humanitarian purposes approved by competent state agencies.
Article 5. Tax reduction
Taxpayers who face difficulties caused by natural disasters, fires, accidents or severe diseases and affecting their tax payment ability may be considered for tax reduction corresponding to the extent of damage they suffer from but not exceeding payable tax amounts.
Article 6. Conversion of taxable incomes into Vietnam dong
1. A taxable income received in a foreign currency must be converted into Vietnam dong at the average exchange transaction rate on the inter-bank foreign exchange market announced by the State Bank at the time of income generation.
2. A taxable income received in the form of a product or service must be converted into Vietnam dong at the market price of that product or service or of products or services of the same or similar type at the time of income generation.
Article 7. Tax period
1. For residents, tax period is specified as follows:
a/ Annual tax period, which is applicable to incomes from business, salaries and wages.
b/ Tax period upon each time of income generation, which is applicable to incomes from capital investment; incomes from capital transfer, except for incomes from securities transfer; incomes from real estate transfer; incomes from prizes; incomes from copyright; incomes from commercial franchising; incomes from inheritances; and gifts.
c/ Tax period upon each transfer or annual tax period, which is applicable to securities transfer. Individuals who apply the annual tax period shall register with tax offices at the beginning of the year.
2. For non-residents, the tax period counted upon each time of income generation is applicable to all their taxable incomes.
Article 8. Tax administration and tax refund
1. Tax registration, declaration, withholding, payment, finalization and refund, handling of violations of the tax law, and tax administration measures comply with legal provisions on tax administration.
2. Individuals are entitled to tax refund in the following cases:
a/ Their paid tax amounts are larger than payable tax amounts;
b/ They have paid tax but their taxed incomes do not reach a tax-liable level;
c/ Other cases decided by competent state agencies.
Article 9. Application of treaties
If a treaty to which the Socialist Republic of Vietnam is a contracting party contains provisions on personal income tax different from the provisions of this Law, the provisions of that treaty prevail.
Chapter II
TAX BASES FOR RESIDENTS
Section 1. DETERMINATION OF TAXABLE INCOMES AND TAXED INCOMES
Article 10. Taxable incomes from business
1. A taxable income from business is determined to be equal to turnover minus reasonable expenses related to the generation of the taxable income from business in a tax period.
2. Turnover means the total of sales, processing remuneration, commissions, goods or service provision charges generated in a tax period from goods production and trading or service provision.
The time of determination of turnover is the time of transfer of ownership of goods or completion of services or the time of making goods sale or service provision invoices.
3. Reasonable expenses related to the generation of taxable incomes from business in a tax period include:
a/ Salaries, wages, remuneration and other payments to laborers;
b/ Expenses for raw materials, fuels, materials, energy and goods used for production or business, charges for services purchased from outside;
c/ Expenses for depreciation, regular repair and maintenance of fixed assets used for production or business;
d/ Paid interests;
e/ Management expenses;
f/ Taxes, charges and fees payable under law and allowed to be accounted as expenses;
g/ Other expenses related to the generation of incomes.
4. The determination of turnover and expenses is based on accounting norms, standards, regulations, documents and books prescribed by law.
5. If many persons jointly conduct business activities under the same business registration, taxable income of each of them is determined according to one of the following principles:
a/ In proportion to their capital contributions stated in the business registration;
b/ Under their agreement stated in the business registration;
c/ According to the average per-capita income in case the business registration neither states their capital contributions nor contains any agreement on income division among them.
6. For business individuals who fail to strictly comply with regulations on accounting, invoices and documents and cannot measure turnover, expenses and taxable income, competent tax offices shall predetermine turnover and the ratio of taxable income in order to determine taxable income suitable to each industry or business line under the law on tax administration.
Article 11. Taxable incomes from salaries or wages
1. A taxable income from salary or wage is determined to be equal to the total of incomes specified in Clause 2, Article 3 of this Law and earned by a taxpayer in a tax period.
2. Time of determination of a taxable income from salary or wage is the time when an organization or individual pays income to a taxpayer or when a taxpayer receives income.
Article 12. Taxable incomes from capital investment
1. A taxable income from capital investment is the total of incomes from capital investment specified in Clause 3, Article 3 of this Law and earned by a taxpayer in a tax period.
2. Time of determination of a taxable income from capital investment is the time when an organization or individual pays income to a taxpayer or when a taxpayer receives income.
Article 13. Taxable incomes from capital transfer
1. A taxable income from capital transfer is determined to be equal to the selling price minus the buying price and reasonable expenses related to the generation of income from capital transfer.
2. If the buying price and expenses related to the securities transfer are unidentifiable, taxable income is determined to be the selling price of securities.
3. Time of determination of a taxable income from capital transfer is the time when the capital transfer transaction is completed in accordance with law.
The Government shall detail and guide the implementation of this Article.
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