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What is new on PIT?

 

The new PIT law was passed by the National Assembly of Vietnam in 2012 coming into effect from 1 July 2013 and amending some key regulations of the 2007 Law.

The most notable change is the increase in personal deduction for tax payer. This is another policy of the Government, together with the reduction of CIT rate, to ease the burden of the economy.

 
Who are PIT payers in Vietnam? How is PIT determined?

 

All individuals have income raised in Vietnam are regulated as PIT payers in Vietnam.

PIT is determined on the residency basis. A tax resident is a person satisfying either:

  • physical presence in Vietnam in aggregate of 183 days or more in a solar year or in a consecutive 12-month period from the first date of arrival; or
  • having permanent living registration or having living house rental contract with limited time period (90 days as current regulation).

Tax residents will be subject to PIT on their income worldwide, while non-residents are only levied on their Vietnam-sourced income.

Taxable income includes:

  • business profits of individual enterprises
  • salary, wages
  • interests, dividends
  • capital gains
  • gains from alienation of immovable properties
  • other income such as lottery prizes, royalties, inheritance, gifts with a value of more than VND 10 millions per gift[1]

The proposed progressive rates applying to income from business activities, salaries and wages range from 5% to 35% with a 5% interval.



[1] only the portion exceeding VND10 mil is taxable

 
How is the taxable income for PIT determined?

 

There are two groups of income for tax purpose:

(i) business profit, salary, wages which will be subject to progressive tax rate; and

(ii) income from investment, transfer of securities, real estates, etc which subject to flat tax rate, comprises of income from:

  • Capital investment
  • Earnings from transfer of capital, real estate
  • Lottery, promotion, gambling
  • Royalty, patent
  • Inheritance, gifts in kind of stock, capital in business entities, real estate, etc

It is noticed that only tax residents’ income is separated in this way. All non-residents’ income is subject to flat rate, in equivalent to each kind of income.

 
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