Phần B: Thông tư 84/2008/TT-BTC Căn cứ tính thuế đối với cá nhân cư trú

Part B.

TAX BASES FOR RESIDENT INDIVIDUALS

I. TAX BASES FOR INCOMES FROM BUSINESS ACTIVITIES AND INCOMES FROM SALARIES OR WAGES

Tax bases for incomes from business activities and incomes from salaries or wages are taxed income and tax rate.

Taxed incomes are taxable incomes minus the following amounts:

- Compulsory social insurance premiums under law, including social insurance, health insurance, professional liability insurance for some professions subject to compulsory insurance and other compulsory insurance premiums under law.

- Reductions based on family circumstances.

- Contributions to charity funds, humanitarian funds and study promotion funds.

Taxable incomes of individuals who earn taxable incomes from both business activities and salaries or wages will be the total of taxable incomes from business activities and taxable incomes from salaries or wages.

1. Taxable incomes from business activities

Taxable incomes from business activities are determined to be turnover minus reasonable expenses directly related to the generation of taxable incomes in a tax period.

For individuals who earn incomes from both business activities and capital investment or transfer or real estate transfer (except real estate being fixed assets used for business purposes), incomes from copyrights, commercial franchising, inheritances or gifts, these incomes will not be calculated as incomes from business activities but these individuals shall pay personal income tax for each separate income under this Circular’s guidance.

Taxable income from business activities for each specific case is determined as follows:

1.1. For business individuals who fail to conduct accounting using invoices and documents on tax payment by the presumptive method, their incomes liable to personal income tax shall be determined according to the following formula:

Assessed turnover shall be determined on the basis of declarations of business individuals, results of investigation by tax offices and advices of commune or ward tax consultancy councils.

1.2. For business individuals who can account only goods or service sales turnover and cannot account and determine expenses, their incomes liable to personal income tax shall be determined according to the following formula:

In which, turnover for calculation of taxable income shall be determined according to invoice- and document-based accounting books and consistent with turnover used for value-added tax calculation.

The General Department of Taxation shall specify the taxable income-turnover ratio for application to business individuals who cannot account expenses or fail to conduct cost-accounting.

1.3. For business individuals who fully conduct the invoice- and document-based accounting, their taxable incomes shall be determined according to the following formula:

In which:

- Turnover and expenses shall be determined according to invoice- and document-based accounting books. For business individuals who are subject to value-added tax, their turnover serving as a basis for determination of taxable income must be consistent with turnover used for value-added tax calculation.

- Other taxable incomes are those earned in business activities, such as fines for contract breaches or late payment; bank interests during the period of payment; interests on sale of goods on deferred or installment payment; proceeds from sale of fixed assets, discarded materials or faulty products.

1.3.1. Turnover for calculation of taxable incomes

Turnover for calculation of taxable incomes from business activities means the total of sales, processing remuneration, commissions, goods or service provision charges generated in a tax period, including also price subsidies and surcharges enjoyed by business individuals, regardless of whether such turnover has been collected or not.

a. The time of determination of turnover for calculation of taxable incomes is determined as follows:

- For goods, it is the time of transfer of goods ownership or the time of making goods sale invoices.

- For services, it is the time of completion of services or the time of making service provision invoices.

In case invoices are made before the time of transfer of goods ownership (or completion of services), the time of determination of turnover is the time of making invoices or vice versa.

b. In some cases, turnover for calculation of taxable incomes is determined as follows:

- For goods sold on installment payment, it is determined based on selling prices of goods sold on lump-sum payment exclusive of deferred payment interest;

- For goods or services sold on deferred payment, it is selling prices of goods or services sold on lump-sum payment exclusive of deferred payment interest.

In case the installment or deferred payment under a purchase and sale contract is made through many tax periods, turnover is the sum of money receivable from the purchaser in a tax period exclusive of installment or deferred payment interest within the time limit stated in the contract.

The determination of expenses upon determination of taxable incomes for goods sold on installment or deferred payment must comply with the principle that expenses must correspond with turnover.

- For goods or services made by business individuals for exchange, donation, presentation as gifts, equipping or giving as bonuses to laborers, turnover is determined based on selling prices of the same or equivalent goods or services on the market at the time of exchange, donation, presentation as gifts, equipping or giving as bonuses to laborers.

- For goods or services made by business individuals for use in their production or business activities, turnover is expenses for making such goods or services.

- For goods processing activities, turnover is total sum of money earned from processing activities, covering remuneration, costs of fuel, power and auxiliary materials and other expenses for the goods processing.

- For commissioned sale agents that sell consigned goods at prices fixed by their principals being business individuals, turnover is commissions enjoyable under agency or goods consignment contracts.

- For lease of assets, turnover is rent periodically paid by the lessee under the lease contract.

In case the lessee pays rent in advance for many years, turnover for calculation of taxable incomes may be allocated to the number of years of advance rent payment or determined based on lump-sum rent.

In case the lessee pays rent in advance for many years and bears all costs arising in the course of asset use, turnover for calculation of taxable incomes case be allocated to the number of years of advance rent payment but the lesser shall promptly calculate the tax amount payable for each year and pay tax for the whole duration for which the rent is collected in advance.

- For construction and installation activities, turnover is the value of the work or work item or work volume to be tested for handover. In case the construction and installation contractor is not the material, machinery and equipment supply contractor, turnover for tax calculation is the sum of money earned from construction and installation activities exclusive of the value of materials, machinery and equipment.

- For transport activities, turnover is total sum of money earned from the transportation of passengers, luggage or cargoes.

1.3.2. Deductible reasonable expenses for calculation of taxable incomes

Deductible reasonable expenses are those actually paid and directly related to the generation of turnover and taxable incomes in a tax period and accompanied with invoices and vouchers under law.

Reasonable expenses are determined as follows:

a. Salaries, wages, allowances, subsidies, remunerations and other payments to laborers under labor contracts or collective labor agreements under the Labor Code.

Salaries or wages exclude those of individuals who are heads of business households or members of business groups named in their business registrations.

Working outfit or attire allowance to be paid to laborers must not exceed VND 1,000,000/ year.

b. Expenses for raw materials, materials, fuels, energy and goods actually used for the production and trading of goods or provision of services related to the generation of turnover and taxable incomes in a period, which shall be calculated according to their reasonable consumption rates and actual ex-warehousing prices determined by business households or individuals themselves, for which they shall take responsibility before law.

The value of lost supplies, assets, capital or goods is not allowed to be accounted as a reasonable expense, except losses caused by natural disasters, fires, epidemics, diseases and other force majeure circumstances ineligible for compensation.

For supplies and goods used for both personal consumption and business activities, only the value of parts used for business activities may be accounted as expenses.

c. Expenses for depreciation, regular repair and maintenance of fixed assets used for the production and trading of goods or provision of services:

- Fixed assets of which depreciation may be accounted as a reasonable expense must satisfy the following conditions:

+ They are used for production or business.

+ They are accompanied with sufficient invoices, vouchers and other lawful papers evidencing that they are owned by business individuals.

+ They are managed, monitored and accounted in accounting books of business individuals under current management and cost-accounting regulations.

- The fixed asset depreciation level is accounted as a reasonable expense under regulations on management, use and depreciation of fixed assets.

- Fully depreciated fixed assets which are further used for production or business may not be further depreciated.

For fixed assets used for both business purpose and another purpose, deductible depreciation expenses shall be based on the extent of their utility for business activities and their common use level.

d. Paid interests on loans for goods production and trading or service provision activities directly related to the generation of turnover and taxable incomes.

Loan interest rates are actual interest rates specified in contracts for borrowing loans from banks or credit institutions. If loans are borrowed from entities other than banks and credit institutions, loan interests shall be paid based on loan contracts but must not be 1.5 times higher than the prime interest rate announced by the State Bank of Vietnam at the time of loan provision.

Paid loan interests are exclusive of interests paid on loans contributed as capital to setting up establishments of business individuals.

e. Management expenses

- Payment of electricity, water and telephone charges; purchase of stationery; hiring of auditors; legal consultancy and designing service charges; asset insurance premiums; charges for technical services and other services provided from outside.

- Expenses for acquisition of assets other than fixed assets, covering purchase and use of technical documents, invention patents, technology transfer licenses and trademarks, which are gradually allocated to business expenses.

- Rents for fixed assets operating under rent contracts. In case fixed asset rent is paid in lump sum in advance for many years, such rent shall be gradually allocated to production or business expenses according to the number of years of fixed asset use.

- Charges for services purchased or hired from outside in direct service of activities of producing and trading in goods or providing services, which are evidenced by vouchers and invoices under regulations.

- Expenses for sale of goods and services, covering preservation, packaging, transportation, loading and unloading, warehousing and warranty of products and goods.

f. Taxes, charges, fees, land rents payable under law for goods production and trading or service provision activities, including:

- License tax, export tax, import tax, excise tax, royalty tax, agricultural land use tax, house and land tax, land rent.

- Value-added tax allowed by law to be accounted as expenses.

- Charges and fees actually remitted by business establishments into the state budget under the law on charges and fees.

g. Working mission allowances for laborers (excluding travel and accommodation expenses) which must not exceed twice the prescribed allowance level for state employees and servants as guided by the Ministry of Finance.

h. Other expenses directly related to the generation of turnover and taxable incomes accompanied with vouchers and invoices under regulations.

2. Taxable incomes from salaries or wages

2.1. Taxable incomes from salaries or wages are determined to be total salary, wage or remuneration amounts and other income amounts of salary or wage nature received by taxpayers in a tax period under the guidance in Clause 2, Section II, Part A of this Circular.

2.2. Time of determination of taxable incomes

Time of determination of taxable incomes from salaries or wages is the time when employers pay salaries or wages to their employees.

3. Determination of reductions

3.1. Reduction based on family circumstances

Under Article 19 of the Law on Personal Income Tax and Article 12 of Decree No. 100/2008/ND-CP, the reduction based on family circumstances shall be effected as follows:

3.1.1. Reduction based on family circumstances is a sum of money deductible from taxable incomes from business activities, salaries or wages of a taxpayer being a resident individual before tax calculation.

Resident individuals who earn incomes from both business activities and salaries or wages will enjoy the reduction based on family circumstances made only once from their total taxable incomes from business activities and salaries or wages.

3.1.2. Levels of reduction based on family circumstances

a. Reduction for a taxpayer himself/herself is VND 4 million/month or VND 48 million/ year. The reduction level of VND 4 million/ month is an average for the whole year, regardless of whether there are some months in the tax year in which he/she earns no income or earns less than VND 4 million/month.

b. Reduction for each dependant of a taxpayer, which is VND 1.6 million/month given from the month in which the taxpayer’s obligation to nurture the dependant arises.

3.1.3. Principles for calculation of family circumstance-based reduction for dependants

- Only taxpayers who have made tax registrations and been granted tax identification numbers may get family circumstance-based reduction for their dependants. Particularly for the tax year of 2009, taxpayers without tax declarations may temporarily be entitled to family circumstance-based reduction if they have registered for family circumstance-based reduction and complete dossiers evidencing their dependants under the guidance at Point 3.1.7, Clause 3, Section I, Part B of this Circular.

- The family circumstance-based reduction for dependants shall be effected on the principle that each dependant may be counted only once for tax reduction for a taxpayer in a tax year. Reduction for dependants shall be given from the month in which taxpayers’ obligation to nurture these dependants arises.

In case several taxpayers are jointly obliged to nurture a dependant, they shall reach agreement on registration of this dependant for family circumstance-based reduction for one among them.

- Taxpayers shall declare the number of their dependants for whom reduction is to be given and be held responsible before law for the truthfulness of their declarations.

3.1.4. Dependants of a taxpayer include:

a. His/her blood, adopted and out-of-wedlock children, specifically:

- Children under 18 years old (fully calculated in month).

Example: A child of Mr. Nguyen Van A was born in July 1992. In this case, this child is counted as a dependant until the end of June 2010.

- Disabled children of 18 years or older and incapable of working.

- Children who are studying at universities, colleges, professional secondary schools or job-training schools and have no income or have incomes not exceeding the level specified at Point 3.1.5 below.

b. Spouse of the taxpayer who is beyond working age or is of working age prescribed by law but disabled and incapable of working or has no income or has incomes not exceeding the level specified at Point 3.1.5 below.

c. Blood parents or parents-in-law of the taxpayer who is beyond working age or is of working age prescribed by law but disabled and incapable of working or has no income or has incomes not exceeding the level specified at Point 3.1.5 below.

d. Other helpless individuals who are beyond working age or are of working age prescribed by law but disabled and incapable of working or has no income or has incomes not exceeding the level specified at Point 3.1.5 below, and whom the taxpayer is obliged to directly nurture, including:

- Blood siblings of the taxpayer.

- Paternal and maternal grandparents, aunts and uncles of the taxpayer.

- Blood nieces and nephews of the taxpayer (children of his/her blood siblings).

- Other persons whom the taxpayer is obliged to directly nurture under law.

3.1.5. The income level serving as a basis for identifying dependants to be counted for reduction is an average monthly income of VND 500,000 or less in a year from all income sources.

3.1.6. Disabled persons who are incapable of working under the above guidance are those governed by the law on disabled people, specifically:

Disabled persons who are incapable of working are those with disabilities or insufficient bodily functions which render them incapable of directly conducting production or business activities or those with inborn defects or deformities which render them incapable of serving themselves and are certified by a health agency of district or higher level or stated in their declarations with the commune-level People’s Committee’s certification of their disability and working incapability level.

3.1.7. Dossiers evidencing dependants

a. For children:

- For an under-18 child, one of the following papers is required: a copy of his/her birth certificate or a copy of the household registration book.

- For a child aged 18 years or older and disabled and incapable of working, the following papers are required:

+ A copy of his/her birth certificate or the household registration book.

+ A copy of certification of a health agency of district or higher level or declaration with the commune-level People’s Committee’s certification of the child’s disability and working incapability level.

- For a child who is studying at a university, college, professional secondary school or vocational training school (including those studying overseas), the following papers are required:

+ A copy of his/her birth certificate or the household registration book.

+ A copy of his/her student card or declaration with his/her school’s certification or other papers proving that he/she is studying at that university, college, professional secondary school or vocational training school.

For adopted or out-of-wedlock children, in addition to birth certificates, there must also be copies of competent state agencies’ decisions on recognition of child adoption or decisions on recognition of father, mother or child acknowledgement.

b. For spouses:

- For a wife or husband who is beyond working age, one of the following papers is required: a copy of the household registration book or the marriage certificate.

- For a wife or husband who is of working age, in addition to the above papers, there must also be a copy of the certification of a health agency of district or higher level or this dependant’s declaration with the commune-level People’s Committee’s certification of his/ her disability and working incapability level.

c. For blood parents or siblings:

- For a parent or sibling who is beyond working age, one of the following papers is required: A copy of the household registration book or copies of other relevant papers showing the familial relation between the dependant and the taxpayer (blood father, mother, brother or sister of the taxpayer).

- For a parent or sibling who is of working age, in addition to the above papers, there must also be a copy of the certification of a health agency of district or higher level or this dependant’s declaration with the commune-level People’s Committee’s certification of his/ her disability and working incapability level.

d. For paternal or maternal grandparents, aunts, uncles, blood nieces and nephews, there must be lawful papers showing the familial relation between the dependant and the taxpayer (paternal or maternal grandfather, grandmother, aunt or uncle or blood niece or nephew) and this dependant’s declaration with the certification of the taxpayer’s responsibility to nurture this dependant by the People’s Committee of the commune where the taxpayer resides.

Lawful papers specified above are any legal documents identifying the familial relation between the taxpayer and the dependant, such as copy of the household registration book (if they are named in the same household registration book), copies of birth certificates, etc., showing this relation.

For dependants who are of working age, in addition to the above papers, there must also be a copy of the certification of a health agency of district or higher level or the dependant’s declaration with the commune-level People’s Committee’s certification of his/her disability and working incapability level.

e. If papers included in a dossier guided above are copies, they must be notarized or certified by the commune-level People’s Committee. If they are neither notarized nor certified, original papers must be produced together with copies to tax offices for checking and comparison.

f. Resident individuals being foreigners who have no dossiers under the above case-by-case guidance are required to produce similar legal documents to evidence their dependants.

3.1.8. Declaration for reduction for dependants

Taxpayers that earn incomes of VND 4 million/month or less from business activities, salaries or wages are not required to declare their dependants.

Taxpayers that earn incomes of more than VND 4 million/month from business activities, salaries or wages and nurture dependants shall declare these dependants for family circumstance-based reduction under the following guidance:

a. For taxpayers earning incomes from salaries or wages:

- At the beginning of the year, January 30 at the latest, a taxpayer shall make two declarations of his/her dependants eligible for family circumstance-based reduction according to a set form and send them to the income-paying agency. In the year, for any change in the registration of dependants at the beginning of the year, the taxpayer shall, within 30 days after the change (increase or decrease in the number of dependants) occurs, make two declarations for registration of change in dependants according to a set form and send them to the income-paying agency.

If the taxpayer enters into a labor contract (or receives an employment decision) after January 30, the deadline for registration of dependants is the last day of the month in which the labor contract is entered into or the employment decision is issued.

- Taxpayers that register their dependants for family circumstance-based reduction shall submit complete dossiers evidencing these dependants made under the guidance at Point 3.1.7 above to tax offices directly managing their income-paying agencies.

- Deadline and time limits for submitting dossiers evidencing dependants are as follows:

+ For cases in which registrations for family circumstance-based reduction are made at the beginning of 2009, the deadline for dossier submission is June 30, 2009.

+ For cases in which registrations for family circumstance-based reduction are made after January 30, 2009, the time limit for dossier submission is three months from the date of reduction registration.

+ For cases in which there is an increase or decrease in the number of registered dependants, the time limit for dossier submission is three months from the date of registration of such increase or decrease.

Past the above dossier submission deadline or time limits, if taxpayers fail to submit dossiers to evidence their dependants, they will not be entitled to reduction for dependants and adjustment of their payable tax amounts.

- Income-paying agencies shall:

+ Receive taxpayers’ registrations of dependants eligible for reduction.

+ Monthly, effect family circumstance-based reduction for dependants already registered by taxpayers before calculating tax amounts to be temporarily deducted.

+ Transfer one registration for reduction for a taxpayer’s dependant to the tax offices directly managing them. The deadline for transfer is February 20 of the year in which reduction is effected. If a registration for reduction is made after January 30 of the year in which reduction is effected or a registration of change in dependants is made, the deadline for transfer of the registration to the tax office directly managing the income-paying agency is the 20th day of the month following the month in which the registration is received.

b. For taxpayers earning incomes from business activities

- They shall make declarations of their dependants for family circumstance-based reduction together with declarations for temporary tax payment applicable to business individuals who pay tax according to declarations or with tax returns applicable to business individuals who pay tax by the presumptive method.

- Those declare their dependants for family circumstance-based reduction in declarations specified above at the beginning of 2009 shall make complete dossiers to evidence their dependants under the guidance at Point 3.1.7, Clause 3, Section I, Part B of this Circular and submit them to district-level Tax Departments directly managing business individuals before June 30, 2009.

- In case there is an increase or a decrease in the number of dependants or business activities have just started, dossiers evidencing dependants must be submitted within three months after these dependants are stated in tax declarations.

- Past the above dossier submission deadline or time limit, it taxpayers fail to submit dossiers to evidence their dependants, they will not be entitled to reduction for their dependants and adjustment of their payable tax amounts. For business individuals that pay presumptive tax amounts, these presumptive tax amounts shall be readjusted.

3.1.9. A taxpayer shall submit a dossier to evidence a dependant only once throughout the duration for which he/she enjoys reduction, including the case in which the taxpayer changes his/her working office or place of business.

Taxpayers that earn incomes from both business activities and salaries or wages can choose and register either kind of income for which the temporary family circumstance-based reduction is given for their dependants under the above guidance. A taxpayer with many dependants for whom the registered temporary reduction cannot be fully given for either kind of income, temporary reduction shall be given for both kinds of income.

3.2. Reduction for charity, humanitarian or study promotion donations

3.2.1. Charity, humanitarian or study promotion donations which are deductible from taxable incomes of taxpayers who are resident individuals and earn incomes from business activities, salaries or wages before tax calculation include:

a. Contributions to organizations or establishments that care for or nurture children in special plights, disabled people and helpless elderly people. These organizations or establishments must be established and operate under the Government’s Decree No. 68/2008/ND-CP of May 30, 2008, specifying conditions and procedures for the establishment, organization, operation and dissolution of social relief establish-ments. Documents evidencing contributions to organizations or establishments that care for or nurture children in special plights, disabled people and helpless elderly people are these organizations’ or establishments’ lawful receipts.

b. Contributions to charity funds, humanitarian funds or study promotion funds established and operating under the Government’s Decree No. 148/2007/ND-CP of September 25, 2007, on the organization and operation of social funds and charity funds operating for charity, humanitarian or study promotion purposes and not for profit purposes, and other relevant documents on the management and use of financial aid.

Documents evidencing charity, humanitarian or study promotion donations must be lawful receipts issued by central or provincial-level organizations or funds.

3.2.2. Charity, humanitarian or study promotion donations made in a year shall be counted for a reduction deductible from taxable incomes of that year. In case the reduction for these donations cannot be fully given in the year, these donations are not allowed to be carried forward for deduction from taxable incomes of the subsequent tax year. The maximum reduction must not exceed taxed incomes from salaries or wages and incomes from business activities of the year in which charity or humanitarian donations are made.

4. Tax rates

Personal income tax rates for incomes from business activities, salaries or wages are applied according to the partially progressive tariff under Article 22 of the Law on Personal Income Tax, specifically:

Taxed incomes subject to this tariff are incomes of resident individuals earning taxable incomes from business activities and from salaries or wages after subtracting the family circumstance-based reduction, compulsory insurance premiums, and charity, humanitarian or study promotion donations.

5. Methods of tax calculation

Personal income tax on incomes from business activities, salaries or wages is the total tax amount calculated according to each grade of income and corresponding tax rate in the partially progressive tariff, in which the tax amount calculated according to each grade of income is determined to be taxed income within that grade of income multiplied by (x) the corresponding tax rate.

Example: Mr. A is a resident individual who earns in a month an income of VND 10 million from salaries or wages and is obliged to nurture two under-18 children. In the month, he has to pay a compulsory insurance premium equal to 5% and a health insurance premium equal to 1% of his salary, but he makes no charity, humanitarian or study promotion donation.

Mr. A’s personal income tax to be temporarily paid in the month is determined as follows:

- Mr. A enjoys the following reductions deductible from his taxable income:

+ Reduction for himself: VND 4 million;

+ Reduction for his two dependants (two children): VND 1.6 million x 2 = VND 3.2 million;

+ Social insurance and health insurance: VND 10 million x 6% = VND 0.6 million.

Total reductions: 4 + 3.2 + 0.6 = VND 7.8 million.

- His taxed income subject to the application of the partially progressive tariff for calculation of the payable tax amount is: VND 10 million - VND 7.8 million = VND 2.2 million.

- After reductions are deducted under regulations, Mr. A’s taxed income falls into grade 1 of the partially progressive tariff and his total payable tax amount in the month is:

VND 2.2 million x 5% = VND 0.11 million.

Example: Mr. B earns in a month an income of VND 90 million from salaries or wages (after subtracting compulsory insurance premiums) and is obliged to nurture two under-18 children. In the month, he makes no charity, humanitarian or study promotion donation.

a. Mr. B’s personal income tax to be temporarily paid in the month is determined as follows:

- Mr. B enjoys the following reductions:

+ Reduction for himself: VND 4 million;

+ Reduction for his two dependants: VND 1.6 million x 2 = VND 3.2 million;

- His taxed income subject to the application of the partially progressive tariff for calculation of payable tax amount is: VND 90 million - VND 4 million - VND 3.2 million = VND 82.8 million.

- His payable tax amount is calculated as follows:

+ Grade 1: Taxed income up to VND 5 million subject to the tax rate of 5%:

VND 5 million x 5% = VND 0.25 million

+ Grade 2: Taxed income of between over VND 5 million and 10 million subject to the tax rate of 10%:

(VND 10 million - VND 5 million) x 10% = VND 0.5 million

+ Grade 3: Taxed income of between over VND 10 million and 18 million subject to the tax rate of 15%:

(VND 18 million - VND 10 million) x 15% = VND 1.2 million

+ Grade 4: Taxed income of between over VND 18 million and 32 million subject to the tax rate of 20%:

(VND 32 million - VND 18 million) x 20% = VND 2.8 million

+ Grade 5: Taxed income of between over

VND 32 million and 52 million subject to the tax rate of 25%:

(VND 52 million - VND 32 million) x 25% = VND 5 million

+ Grade 6: Taxed income of between over VND 52 million and 80 million subject to the tax rate of 30%:

(VND 80 million - VND 52 million) x 30% = VND 8.4 million

+ Grade 7: Taxed income of between over VND 80 million and 82.8 million subject to the tax rate of 35%:

(VND 82.8 million - VND 80 million) x 35% = VND 0.98 million

Mr. B, with an income of VND 90 million in a month, shall temporarily pay in the month, according to the partially progressive tariff, the following personal income tax amount:

(0.25 + 0.5 + 1.2 + 2.8 + 5 + 8.4 + 0.98) = VND 19.13 million

To facilitate the calculation, a simplified method of calculation specified in an appendix to this Circular may be applied.

6. If many persons are named in the same business registration, including the case of lease of a house or business space in which many persons are named in the certificate of house ownership or land use rights (collectively referred to as a group of business individuals), after taxable incomes from business activities are determined under the guidance in Clause 1, Section I, Part B of this Circular, taxable income of each individual is divided by one of the following methods:

6.1. According to the contributed capital portion of each individual stated in the business registration; or,

6.2. Under the agreement among these individuals; or,

6.3. According to per-capita average income amount in case the business registration does not state contributed capital portions or contains no agreement on division of incomes among individuals.

On the basis of taxable income of each individual jointly conducting business activities determined on the above division principle, each individual will enjoy family circumstance-based reduction and reductions for charity, humanitarian and study promotion donations and compulsory insurance premiums before his/her own taxed income and payable personal income tax amount are determined.

Example: Mr. A, Mr. B and Mr. C are all named in the same business registration and jointly conduct business activities (in a group of business individuals).

- In case the business registration clearly states the contributed capital portion of each individual: Mr. A: 50%, Mr. B: 30% and Mr. C: 20%; and assume that the personal income tax-liable income in the year X is VND 300 million and each individual has two dependants and makes no charity donation in the year. The personal income tax amount payable by each individual is determined as follows:

- Step 1: To determine the taxable income of each individual:

Mr. A: VND 300 million x 50% = VND 150 million

Mr. B: VND 300 million x 30% = VND 90 million

Mr. C: VND 300 million x 20% = VND 60 million

- Step 2: To determine the taxed income of each individual:

Mr. A: VND 150 million - [(VND 4 million x 12 months) + (VND 1.6 million x 2 dependants x 12 months)] = VND 63.6 million

Mr. B: VND 90 million - [(VND 4 million x 12 months) + (VND 1.6 million x 2 dependants x 12 months)] = VND 3.6 million

Mr. C: VND 60 million - [(VND 4 million x 12 months) + (VND 1.6 million x 2 dependants x 12 months)] = VND -26.4 million

So, Mr. C’s income in the year X is below the personal income tax-liable level.

- Step 3: To determine payable personal income tax amounts of individuals with tax-liable incomes:

According to the partially progressive tariff:

Mr. A: (VND 60 million x 5%) + (VND 3.6 million x 10%) = VND 3.36 million

Mr. B: VND 3.6 million x 5% = VND 180,000.

II. TAX BASES FOR OTHER INCOMES

1. For incomes from capital investment

Tax bases for incomes from capital investment are taxed income and tax rate.

1.1. Taxed income

Taxed income from capital investment is taxable income received by an individual under the guidance in Clause 3, Section II, Part A of this Circular.

1.2. Tax rate for incomes from capital investment is 5% as specified in the whole income
tariff.

1.3. Time of determination of taxed income

Time of determination of taxed income for income from capital investment is the time when an organization or individual pays income to the taxpayer.

For incomes from capital investment specified at Points 3.4 and 3.7, Clause 3, Section II, Part A of this Circular, the time of determination of taxed income is the time when an individual actually receives income from increased value of capital contribution or the time of share certificate transfer.

In case an individual earns incomes from overseas capital investment in any form, the time of determination of taxed income is the time when he/she receives incomes.

1.4. Tax calculation method

2. For incomes from capital transfer

2.1. For incomes from transfer of contributed capital amounts

Tax bases for incomes from transfer of contributed capital amounts are taxed income and tax rate.

2.1.1. Taxed income: taxed income from the transfer of a contributed capital amount is taxable income determined to be the transfer price minus (-) the purchase price of the contributed capital amount and expenses related to the generation of capital transfer income.

a. Transfer prices

Transfer price means a sum of money received by an individual under a capital transfer contract.

In case the transfer contract does not state a payment price or the payment price stated in the contract is inconsistent with the market price, the tax office may assess the transfer price in accordance with the Law on Tax Administration and guiding documents.

b. Purchase prices

The purchase price of a contributed capital amount is determined on a cases-by-cases basis as follows:

- In case of transfer of a contributed capital amount for enterprise foundation, the purchase price is the value of the capital amount at the time of capital contribution. The value of the contributed capital shall be determined based on accounting books, invoices and vouchers.

- For acquisitioned capital amounts, the purchase price is the value of that capital amount at the time of acquisition. The purchase price shall be determined based on die contract on acquisition of contributed capital.

c. Related expenses to be subtracted upon determination of taxable incomes from capital transfer are actually paid expenses related to the generation of capital transfer incomes with lawful invoices and vouchers, including:

- Expenses for completion of legal procedures necessary for the transfer;

- Charges and fees paid by the transferor into the state budget upon carrying out transfer procedures;

- Other expenses directly related to the capital transfer with lawful invoices and vouchers.

2.1.2. Tax rate

The personal income tax rate for incomes from transfer of contributed capital is 20% as specified in the whole income tariff.

2.1.3. Time of determination of taxed incomes

Time of determination of a taxed income is the time when a capital transfer transaction is completed under law.

Time of completion of a capital transfer transaction specified in this Clause is the time when parties to transaction carry out procedures for declaring the transfer of ownership to the business registration office or the enterprise managing the contributed capital.

2.1.4. Tax calculation method

2.2. For incomes from securities transfer

Tax bases for incomes from securities transfer are taxed income and tax rate.

2.2.1. Taxed incomes: A taxed income from a securities transfer is determined to be the securities sale price minus (-) the purchase price and expenses for the transfer.

a. The securities sale price is determined as follows:

- For listed securities: The securities sale price is the actual transfer price on the securities market at the time of sale. The market price at the time of sale is the order-matching price disclosed by the Stock Exchange or the Securities Trading Center.

- For securities of unlisted public companies which have registered for trading at the Securities Trading Center, the securities sale price is the actual transfer price at the Securities Trading Center.

- For securities of companies not falling into the above cases, the securities sale price is the transfer price stated in the transfer contract or recorded in accounting books of the unit whose securities are transferred at the time of sale.

If the contract does not state a transfer price or states a transfer price lower than that recorded in accounting books of the unit whose securities are transferred at the time of sale, the securities sale price shall be determined according to accounting books of the securities-issuing company at the time of sale.

b. The securities purchase price is determined as follows:

- For listed securities: The securities purchase price is the purchase price actually paid at the Stock Exchange or the Securities Trading Center.

- For securities of unlisted public companies which have registered for trading at the Securities Trading Center, the securities purchase price is the purchase price actually paid at the Securities Trading Center.

- For securities purchased through auction, the purchase price is the winning bid.

- For securities not falling into the above cases, the securities purchase price is the price stated in the transfer contract or recorded in accounting books of the unit holding securities at the time of purchase.

If the price stated in the contract is higher than that recorded in accounting books of the unit holding securities at the time of purchase, the securities purchase price shall be determined according to accounting books of the unit holding securities at the time of purchase.

c. Reasonable expenses to be subtracted upon determination of taxable incomes from securities transfer are those actually paid for securities transfer activities with invoices and vouchers under regulations, including:

- Expenses for completion of legal procedures necessary for the transfer;

- Charges and fees paid by the transferor into the state budget upon carrying out transfer procedures;

- Securities depository charge prescribed by the State Securities Commission and charge receipts of securities companies;

- Securities entrustment charge based on receipts of entrusted unit.

- Other expenses evidenced by vouchers.

2.2.2. Tax rates and calculation methods

a. For securities-transferring individuals who register for tax payment under the whole income tariff at the tax rate of 20%

Individuals who may apply the tax rate of 20% for securities transfer must satisfy the following requirements:

- They register for application of the tax payment method according to a set form with tax offices directly managing securities companies at which they register to conduct trading or with district-level Tax Departments in localities where they reside. The registration deadlines are as follows:

+ In 2009, securities-trading individuals shall make registration right at the beginning of the year and no later than March 31, 2009.

+ From 2010 on, securities-trading individuals shall make registration for tax payment in a year no later than December 31 of the previous year.

- They make tax registration and are granted tax identification numbers.

- They conduct the invoice- and voucher-based accounting and can determine taxed incomes from securities transfer under regulations.

- The tax rate of 20% shall be applied to the total volume of securities of various kinds traded in a calendar year.

The method of calculation of the payable personal income tax amount is as follows:

Securities-transferring individuals who have registered for tax payment at the tax rate of 20% shall still temporarily pay the tax at the tax rate of 0.1% of securities transfer price upon each time of transfer.

b. For securities-transferring individuals who do not register for tax payment under the whole income tariff at the tax rate of 20%, the tax rate of 0.1% of securities transfer price upon each time of transfer shall apply.

The method of calculation of the payable tax amount is as follows:

2.2.3. Time of determination of taxed incomes

Time of determination of taxed incomes from securities transfer is specified as follows:

a. For listed securities, it is the time when the Securities Trading Center or the Stock Exchange discloses exercise prices.

b. For unlisted securities which have been registered for trading at the Securities Trading Center, it is the time when the Securities Trading Center discloses exercise prices.

c. For securities not falling into the above cases, it is the time when securities transfer contracts take effect. For securities transfers without securities transfer contracts, the time of tax calculation is the time of registration of change of securities owners’ names.

3. For incomes from real estate transfer

Tax bases for incomes from real estate transfer are taxed income and tax rate.

3.1.1. Taxed income is determined to be the land use rights transfer price minus (-) the cost price and related reasonable expenses.

3.1.2. Land use rights transfer prices

Land use rights transfer prices are actual prices stated in transfer contracts at the time of transfer.

In case actual prices are unidentifiable or prices stated in transfer contracts are lower than land prices stipulated by provincial-level People’s Committees at the time of transfer, transfer prices shall be determined according to land price brackets set by provincial-level People’s Committees.

3.1.3. Cost prices: Land use rights transfer cost prices are determined in some specific cases as follows:

a. For transfer of rights to use land areas allocated by the State with the collection of land use levy or land rent, cost prices are based on receipts of land use levy or land rent amounts collected by the State.

b. For land use rights transferred from organizations and individuals, cost prices are based on transfer contracts and lawful vouchers of monetary payment for receipt of land use rights or land lease right (if any).

Lawful vouchers of monetary payment are receipts of land-selling organizations, via-bank money transfer vouchers or receipts of payment between individuals.

c. In case of land use rights auction, cost prices are payable amounts according to winning bids.

d. In case cost prices at the time of purchase are unidentifiable or incorrectly identified, personal income tax shall be calculated at the tax rate of 2% of transfer price.

3.1.4. Related expenses to be subtracted upon determination of incomes from land use rights transfer are expenses related to the transfer and actually paid with lawful invoices and vouchers, including:

a. Charges and fees prescribed by law, related to the grant of land use rights and already paid by transferors into the state budget;

b. Expenses for land revamp and ground leveling (if any);

c. Other expenses directly related to the transfer of land use rights, such as expenses for completion of legal procedures for transfer or for hired ‘measurement services.

3.2. Taxed incomes from transfer of land use rights associated with infrastructure or construction works on land.

3.2.1. Taxed incomes: A taxed income is determined to be the transfer price minus (-) the cost price of the transferred real estate and related reasonable expenses.

3.2.2. Transfer prices

Transfer prices are actual prices stated in transfer contracts at the time of transfer.

In case actual prices are unidentifiable or prices stated in transfer contracts are lower than the market price at the time of transfer, transfer prices are determined to be:

a. The value of transferred land, which is determined according to the land price bracket set by the provincial-level People’s Committee at the time of transfer;

b. The value of houses, infrastructure works and architectures attached to land, which is determined as follows:

- Under the Construction Ministry’s regulations on house value classification.

- Based on capital construction standards and norms promulgated by the Construction Ministry.

- Based on the actual residual value of works on land.

In case provincial-level People’s Committees have promulgated tables of registration fee rates, the value of houses or infrastructure works on land shall be calculated according to these tables.

3.2.3. Cost prices

Cost prices are determined based on prices stated in transfer contracts at the time of purchase.

In case the land use rights cost price and house value are unidentifiable or prices stated in purchase contracts are higher than actual prices at the time of purchase, personal income tax shall be calculated at the tax rate of 2% of transfer price.

3.2.4. Related expenses to be subtracted upon determination of incomes are expenses related to the transfer actually paid with lawful invoices and vouchers, including:

a. Charges and fees prescribed by law, related to the grant of land use rights and already paid by transferors into the state budget;

b. Expenses for land revamp and ground leveling;

c. Expenses for building, renovation, upgrading and repair of infrastructure and construction works on land;

d. Other expenses directly related to the transfer, such as expenses for completion of legal procedures for transfer or for hired measurement services.

3.3. Taxed incomes from transfer of the right to own or use residential houses

3.3.1. Taxed incomes: A taxed income is determined to be the sale price minus (-) the purchase price and related reasonable expenses.

3.3.2. Sale prices are actual transfer prices determined according to market prices and stated in transfer contracts.

In case sale prices stated in transfer contracts are lower than market prices at the time of transfer, residential house transfer prices shall be determined under the Construction Ministry’s regulations on house classification or registration fee rates promulgated by provincial-level People’s Committees.

3.3.3. Purchase prices shall be determined based on prices stated in purchase contracts.

In case purchase prices are unidentifiable or purchase prices stated in contracts are higher than actual prices at the time of purchase, personal income tax shall be calculated at the tax rate of 2% of transfer price.

3.3.4. Related expenses to be subtracted are actually paid expenses for transfer with lawful invoices and vouchers, including:

a. Charges and fees prescribed by law, related to the grant of right to own houses and already paid by transferors into the state budget;

b. Expenses for house repair, renovation and upgrading;

c. Other expenses directly related to the transfer.

3.4. Taxed incomes from transfer of the right to lease land or water surface

A taxed income from transfer of the right to lease land or water surface is determined to be the sublease rate minus (-) the lease rate and related expenses.

3.4.1. Sublease rates:

Sublease rates are determined to be actual rates stated in lease contracts at the time of transfer of the right to lease land or water surface.

In case sublease unit rates stated in contracts are lower than lease rates prescribed by provincial-level People’s Committees by the time of sublease, sublease rates shall be determined according to lease rate brackets set by provincial-level People’s Committees.

3.4.2. Lease rates shall be determined based on lease contracts.

In case lease rates are unidentifiable or lease rates stated in contracts are higher than actual rates at the time of lease, personal income tax shall be calculated at the tax rate of 2% of transfer price.

3.4.3. Related expenses to be subtracted upon determination of taxed incomes are actually paid expenses for transfer of the right with lawful invoices and vouchers, including:

a. Charges and fees prescribed by law, related to the right to lease land or water surface, and already paid by the right transferor into the state budget;

b. Expenses for land or water surface revamp;

c. Other expenses directly related to the transfer of the right to lease land or water surface.

3.5. Tax rates and tax calculation methods

3.5.1. Tax rates

The personal income tax rate applicable to incomes from real estate transfer is 25% of taxed income.

In case cost prices and related expenses, which serve as a basis for determining taxed incomes, are unidentifiable, the tax rate of 2% of transfer price shall be applied.

3.5.2. Tax calculation methods

a. In case taxed incomes are identifiable, personal income tax on incomes from real estate transfer is determined as follows:

b. In case cost prices (purchase prices) of transferred real estate and related expenses, which serve as a basis for determining taxed incomes, are unidentifiable, personal income tax is determined as follows:

3.6. Time of determination of taxed incomes

Time of determination of taxed incomes from real estate transfer is the time when the real estate transfer contract takes effect under law.

3.7. For transfer of a real estate under joint ownership, the tax shall be calculated separately for each co-owner. Taxed income of each individual shall be determined based on total income from the real estate transfer and the proportional division of the income to co-owners. The proportional division of income shall be based on such lawful documents as agreement on start-up capital contribution, testaments or court rulings on division, etc. In case there is no such lawful document, the income shall be equally divided.

4. For incomes from copyright

Tax bases for incomes from copyright royalties are taxed income and tax rate.

4.1. Taxed incomes

A taxed income from a copyright royalty is an income amount in excess of VND 10 million under an assignment or licensing contract, regardless of the number of payment installments or times when a taxpayer receives sums of money for the assignment or licensing of an intellectual property object or the technology transfer.

In case there are many contracts on assignment or licensing of the same intellectual property object or transfer of the same technology, taxed income is the income amount in excess of VND 10 million counted on total incomes from all of these contracts.

In case the object of an assignment or licensing is under joint ownership, taxed income shall be divided to each co-owner. The proportional division of income shall be based on the ownership or use right certificate issued by a competent state agency.

4.2. The personal income tax rate for incomes from copyright is 5% as specified in the whole income tariff.

4.3. Time of determination of taxed incomes

Time of determination of a taxed income from copyright is the time when the copyright royalty is paid.

4.4. Tax calculation method

5. For incomes from commercial franchising

Tax bases for incomes from commercial franchising are taxed income and tax rate.

5.1. Taxed income:

A taxed income from commercial franchising is an income amount in excess of VND 10 million under a commercial franchising contract, regardless of the number of payment installments or times when a taxpayer receives sums of money for franchising.

In case there are many contracts on commercial franchising of the same object of commercial rights, taxed income is the income amount in excess of VND 10 million counted on total incomes from all of these contracts.

5.2. Tax rate

The personal income tax rate for incomes from commercial franchising is 5% as specified in the whole income tariff.

5.3. Time of determination of taxed incomes

Time of determination of a taxed income from commercial franchising is the time when the commercial franchising charge is paid by the franchisee to the franchisor.

5.4. Tax calculation method

6. For incomes from won prizes

Tax bases for incomes from won prizes are taxed income and tax rate.

6.1. Taxed incomes

A taxed income from a won prize is the value of the won prize in excess of VND 10 million received by a taxpayer upon each time of prize winning, regardless of the number of times of prize money receipt.

In case there are many prize winners for the same prize, the taxed income shall be divided to each winner. Prize winners shall produce legal evidence of the prize winning. If no legal evidence can be produced, the income from the won prize shall be calculated for an individual. For an individual who wins many prizes in a game, his/ her taxed income shall be calculated on the total value of these prizes.

A taxed income for some prized games is specified as follows:

- For lottery prizes, it is the whole monetary prize value in excess of VND 10 million received after a prize-winner picking round without subtracting any expense.

- For sales promotion prizes in kind, it is the value of the sales promotion product in excess of VND 10 million which is monetized at the market price at the time of receipt without subtracting any expense.

- For betting or casino prizes of various kinds, it is the whole prize value in excess of VND 10 million received by the bet maker without subtracting any expense.

- For prizes of prized games or contests, it is calculated upon each time of prize receipt. The prize value is the whole prize money in excess of VND 10 million received by a participant without subtracting any expense.

6.2. The personal income tax rate for incomes from won prizes is 10% as specified in the whole income tariff.

6.3. Time of determination of taxed incomes

Time of determination of a taxed income from a won prize is the time when the organizer pays or gives the prize to the winner.

6.4. Tax calculation method

7. For incomes from inheritances or gifts

Tax bases for incomes from inheritances or gifts are taxed income and tax rate.

7.1. Taxed incomes

A taxed income from inheritance or gift is the value of an inherited asset or a received gift in excess of VND 10 million upon each time of inheritance or receipt. The value of inherited assets or received gifts shall be determined for each case, specifically as follows:

7.1.1. For inheritances or gifts being real estate, the real estate value shall be determined as follows:

a. For real estate being land use rights, their value shall be determined based on land price brackets set by provincial-level People’s Committees at the time when inheriting individuals carry out procedures for transfer of real estate use rights.

b. For real estate being residential houses and architectures on land, their value shall be determined based on competent state management agencies’ regulations on classification of house values; regulations on capital construction standards and norms promulgated by competent state management agencies; and the residual value of houses and architectures.

In case the real estate value cannot be determined under the above regulations, registration fee rates prescribed by provincial-level People’s Committees shall be based on.

7.1.2. For inheritances or gifts being automobiles, motorbikes, ships and boats, the asset value shall be determined based on tables of registration fee rates prescribed by provincial-level People’s Committees by the time when individuals inherit assets or receive gifts.

7.1.3. For inheritances or gifts being capital holdings in economic organizations or business establishments, the inheritance or gift value is the value of capital holdings based on accounting books, invoices and vouchers at the time of inheritance or gift receipt. In case there is no accounting book, invoice or voucher serving as a basis for determining the capital holding value, that value shall be determined according to market prices at the time of inheritance or gift receipt.

7.1.4. For inheritances or gifts being securities: Income for calculation of tax on securities is the value of securities at the time of ownership transfer, specifically as follows:

a. For listed securities: Their value shall be based on their prices quoted at the Stock Exchange or the Securities Trading Center on the date of inheritance or gift receipt or the day preceding that date.

b. For securities of unlisted public companies which have registered for trading at the Securities Trading Center: Their value shall be based on prices quoted at the Securities Trading Center on the date of inheritances or gift receipt or the day preceding that date.

c. For securities other than those specified above: Their value shall be based on the value recorded in accounting books of their issuing companies on the date of inheritance or receipt of gifts being securities.

7.2. Tax rate: The personal income tax rate for inheritances or gifts is 10% as specified in the whole income tariff.

7.3. Time of determination of taxed incomes

7.3.1. For incomes from inheritances: Time of determination of taxed incomes from inheritances is the time when inheriting taxpayers carry out procedures for transferring ownership or the right to use assets.

7.3.2. For incomes from gifts: Time of determination of taxed incomes from gifts is the time when organizations or individuals present these gifts to taxpayers. In case of gifts from overseas, time of determination of taxed incomes is the time when taxpayers receive these gifts.

7.4. Method of calculation of payable tax amounts

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