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Official Gazette

Monday, December 11, 2017

Methods of tax calculation

Updated: 00:00’ - 02/01/2014

I’m an Indian. I come to Vietnam for the first time to work under a definite-term contract from June 1, 2014, to December 31, 2015. I will rent house to reside in Vietnam during this time. Am I a resident individual in Vietnam?

According to Vietnamese law, you will be considered as a resident individual if you satisfy any of the following conditions:

1. Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of your presence in Vietnam, of which the date of arrival is counted as one day and the date of departure is also counted as one day. The date of arrival and date of departure are determined based on the immigration management agency’s certifications on your passport (or laissez-passer) upon your arrival at and departure from Vietnam. In case your entry and exit are on the same day, this day is counted as one day of residence.

2. Having a place of habitual residence in Vietnam in either of the following cases:

- Having a place of habitual residence stated in your card of permanent residence or having a place of temporary residence at the time of making registration for grant of a temporary residence card with a competent agency of the Ministry of Public Security.  

- Having rented a house for residence in Vietnam in accordance with the housing law under a rent contract with a term of 183 days or more in a tax year. If you have not yet found any or have no place of habitual residence but have rented houses under rent contracts for 183 days or more in a tax year even in case you rent houses in several places, you will also be considered a resident individual.

Houses rented for residence include hotels, guest houses, inns and working offices, regardless of whether such houses are rented by taxpayers themselves or by employers for their employees.

Under my labor contract, I enjoy a monthly salary of VND 35 million. I neither register deductions based on family circumstances for my dependants nor pay any insurance premiums or make charity, humanitarian or study promotion contributions… How much personal income tax amount will I pay?

According to the Law on Personal Income Tax, the payable personal income tax amount of a resident individual is determined as follows:

First, the taxpayer may have family circumstance-based deduction for himself made from January or from the month he comes to Vietnam to the month when his labor contract terminates and he leaves Vietnam in a tax year, for individuals present in Vietnam for the first time. Deduction for a taxpayer himself is VND 9 million/month, or VND 108 million/year.

Second, in a year, if the taxpayer is present in Vietnam for 183 days or more, the tax year is the calendar year. If he is present in Vietnam for less than 183 days in a calendar year but his period of presence in Vietnam is 183 days or more if counted in 12 consecutive months from the first day of his presence in Vietnam, the first tax period is 12 consecutive months from the first day of his presence in Vietnam. From the second year on, the tax year will be the calendar year.

In your case, the first tax year will be counted from June 1, 2014, to May 31, 2015:

- Total taxable income in the first tax year:

VND 35 million x 12 months = VND 420 million

- Deductions based on family circumstances: VND 9 million x 12 months = VND 108 million

- Taxed income: VND 420 million - VND 108 million = VND 312 million

- According to the Partially Progressive Tax Tariff(*), payable personal income tax amount in the first tax year: VND 60 million x 5% + (VND 120 million - VND 60 million) x 10% + (VND 216 million - VND 120 million) x 15% + (VND 312 million – VND 216 million) x 20% = VND 42.6 million

The second tax year (from January 1, 2015, through December 31, 2015):

- Taxable income generated in 2015:

VND 35 million x 12 months = VND 420 million

- Deductions based on family circumstances: VND 9 million x 12 months = VND 108 million

- Taxed income in 2015: VND 42.6 million

However, as tax for the first five months (January 2015 to May 2015) of the second tax year has already been paid in the first tax year, the coincidentally calculated amount to be deducted is: (VND 42.6 million/12 months) x 5 months = VND 17.75 million

- Remaining personal income tax amount to be paid in 2015:

VND 42.6 million - VND 17.75 million = VND 24.85 million

Total payable personal income tax amount: VND 67.45 million.-

 

(*) The Partially Progressive Tax Tariff prescribed in Article 22 of the Law on Personal Income Tax:

Tax grade

 

Taxed income per year
(VND million)

 

Taxed income per month
(VND million)

 

Tax rate (%)

 

1

Up to 60

Up to 5

5

2

Between over 60 and 120

Between over 5 and 10

10

3

Between over 120 and 216

Between over 10 and 18

15

4

Between over 216 and 384

Between over 18 and 32

20

5

Between over 384 and 624

Between over 32 and 52

25

6

Between over 624 and 960

Between over 52 and 80

30

7

Over 960

Over 80

35

 


VNL_KH1 

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