Personal income tax is an important tax for income earners. When getting a job for the first time, everyone wonders if they have to pay personal income tax or not. Not only the new workers, but this issue also attracts the attention of many people. So, in this article LSX legal firm would like to give you information related to: “Who must pay personal income tax in Vietnam 2022?”
Legal grounds
- Personal income tax Law
- Consolidation text No. 15/VBHN-VPQH
Personal Income Tax (PIT)
Currently, there is no precise and specific definition of personal income tax (PIT). However, based on the provisions of the law recorded in the Law on Personal Income Tax, Decrees and Circulars guiding, you can understand the PIT as follows:
PIT – a tax that the state uses to regulate a part of an individual’s income into the state budget for the purpose of generating revenue for the state budget and implementing social justice. PIT is a direct tax; calculated on the income of the taxpayer after deducting tax-free income as well as deductions for family circumstances.
Features of personal income tax
- Firstly, personal income tax is a direct tax.
- Personal income tax subjects to each individual’s income.
- Thirdly, personal income tax usually applied according to the principle of a partial progressive tax rate.
- Fourthly, the stability of PIT is not high and complicated.
- Lastly, sources of law governing the PIT relationship include national and international legal documents.
Persons paying personal income tax
Article 2 of the Law on Personal Income Tax 2007 (amended and supplemented in 2012) stipulates on taxpayers:
“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.”
Thus, for resident as individuals, personal income tax will calculated based on income earned worldwide (both in Vietnam and abroad). In contrast, as a non-resident individual, personal income tax only calculated on income earned in the territory of Vietnam.
A resident means a person who meets one of the following conditions
- The person has been present in Vietnam for 183 days or longer in a calendar year, or for 12 consecutive months from the day on which that person arrives in Vietnam (the date of arrival and date of departure are considered 01 day). The date of arrival and date of departure depends on the certification of the immigration agency on the passport (or laissez-passers) when that person enters and leaves Vietnam. If the person enters and leaves Vietnam within one day, its considered a day of residence.
- A person in Vietnam defined in this Point is the presence of that person in Vietnam’s territory.
- The person has a regular residence in Vietnam in one of two cases below:
1. The person has a regular residence according to legislation on the residence:
- For Vietnamese citizens: the regular residence is the place where that person regularly, stably, and indefinitely lives and has been registered as a permanent residence as prescribed by legislation on the residence.
- For foreigners: the regular residence means the permanent written in the permanent residence card, or the temporary residence when applying for the temporary residence card issued by competent authorities affiliated with the Ministry of Public Security.
2. The person rents a house in Vietnam according to legislation on housing under a contract that lasts 183 days or longer in the tax year, in particular:
- The person who has no regular residence as guided in Point b.1 Clause 1 of this Article, but has rented the house for a total of 183 days in the tax year is also considered a resident, even if that person rents houses in various areas.
- The rented houses include hotels, guesthouses, motels, offices, etc. whether they are rented by the person or their employer.
In case the person has no regular residence in Vietnam
If the person has no regular residence in Vietnam according to this Clause but actually present in Vietnam for fewer than 183 days in the tax year, and fails to prove his or her residence in any country. Then that that person shall be considered a resident of Vietnam.
The residency in another country shall be proved by the Certificate of residence. If the person belongs to a country or territory that signs tax agreements with Vietnam and does not issue the Certificate of residence, that person shall present a photocopy of the passport to prove the period of residence.
A non-resident individual is a person who does not meet the above conditions.
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Related questions
For non-residents, the tax period counted upon each time of income generation is applicable to all their taxable incomes.
Individuals 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.
Tax on income from salary or wage of a non-resident is determined to be equal to his/her income from salary or wage specified in Clause 2 of this Article multiplied by the tax rate of 20%.
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