Important points to understand about personal income tax

Tran Quang, Junior Associate - Indochine Counsel

Law No 26/2012/QH13 that took affect from 1 July and its guiding legal instruments issued in 2013 such as Decree No 65/2013/ND-CP and Circular No 111/2013/TT-BTC (Circular 111) amend and supplement a number of new policies on personal income tax in Viet Nam.

The new personal income tax threshold has increased to VND9 million per month from VND4 million. In addition, the deduction for each dependent has been raised to VND3.6 million from VND1.6 million. Consequently, a taxpayer with one dependent must contribute personal income tax (PIT) if they have an income of over VND12.6 million per month. Taxpayers are required to submit a copy of their ID cards to take advantage of the tax deduction. It is also important to note that payments to the monthly voluntary pension plan are also exempt from PIT, as is the Social Insurance Fund.

As of 1 October 2013, the taxable income is defined as the net income, including salaries, wages without tax and other monetary or non-monetary benefits paid by an employer to the employee. Due to this new tax calculation, employees must increase tax payments on non-monetary benefits other than salaries, wages or rewards.

Circular 111 determines the residential status of an individual under the circumstance that the individual has permanent residence in Viet Nam outlined in the two cases below: (a) the individual has permanent residence in accordance with the provisions of the Law on Residence, or (b) the individual leases a house to stay in Viet Nam with a contract of 183 days or more during the tax year. The residence status of individuals in other countries may be proved by a residence certificate from that country. In terms of individuals in countries or territories which have signed tax treaties with Viet Nam and do not issue residence certificates, a copy of the individual's passport must be submitted. — VNS