Do Investors in Vietnam who receive dividends have to pay personal income tax?
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Legal grounds
- Circular 111/2013/TT-BTC
- Decree 125/2020/ND-CP
- Decree 126/2020/ND-CP
- Enterprise Law 2020
What are dividends?
Dividends are net profits paid per share in cash or other asset classes. Net profit of a business is understood as the difference between total sales minus all expenses, including taxes. Thus, net profit is the profit of the business after taxes have been paid.
According to Article 135 of the Enterprise Law 2020, dividends paid for ordinary shares are determined based on the net profit realized and the dividend payment deducted from the company’s retained earnings. A joint-stock company may only pay dividends of ordinary shares when fully meeting the following conditions:
– The enterprise has fulfilled its tax obligations and other financial obligations as prescribed by law;
– The enterprise has set aside company funds and offset previous losses in accordance with the law and the company’s charter;
– Immediately after paying all dividends, the company still ensures to pay all due debts and other property obligations.
In addition to common stock dividends, there are preferred stock dividends.
According to Clause 3, Article 135 of the Enterprise Law 2020, dividends may be paid in cash, by shares of the company or by other assets specified in the company’s charter. If payment is made in cash, it must be made in Vietnam Dong and according to the payment methods prescribed by law.
Types of dividend payment
Including the following forms of dividend payment:
Cash dividend payment
If payment is made in cash, it must be made in Vietnam Dong and may be paid by check, wire transfer or money order sent by post to the permanent address or contact address of the shareholder.
Paying dividends in shares
When the company needs to retain profits for investment and development, they can use authorized shares or treasury shares (if any) to pay dividends. The dividend per share under this payment method is the share in lieu of money.
Note: In case of paying dividends in shares, the company is not required to carry out the procedures for offering shares as prescribed in Articles 123, 124 and 125 of the Enterprise Law 2020. The company must register to increase its charter capital. corresponding to the total par value of shares used to pay dividends within 10 days from the date of completion of dividend payment.
Pay with other assets specified in the company’s charter
This form is less common than the above two forms, however, depending on the charter of each company, there are additional forms of this dividend payment.
Do investors receiving dividends have to pay personal income tax?
Personal income tax is an amount that income earners must deduct part of their salary or from other sources of income into the state budget.
According to the provisions at Point b, Clause 3, Article 2 of Circular 111/2013/TT-BTC,
“3. Income from capital investment
Income from capital investment is personal income received in the form of:
a) Interest received from lending to organizations, businesses, households, business individuals, groups of business individuals under loan contracts or loan agreements, minus interest on deposits received from organizations; credit, foreign bank branches under the guidance in Item g.1, point g, Clause 1, Article 3 of this Circular.
b) Dividends received from capital contribution to buy shares…”
Thus, investors receiving dividends must pay personal income tax.
Personal income tax rate from dividends
Pursuant to Clause 4, Article 10 of Circular 111/2013/TT-BTC, which provides for the calculation of personal income tax on income from capital investment, then:
PIT payable = Taxable income x 5% tax rate
Do shareholders receiving dividends have to pay PIT?
According to Clause 3, Article 2 of Circular 111/2013/TT-BTC. Income from capital investment is personal income received in the form of:
“a) Interest received from lending to organizations, enterprises, households, business individuals, groups of business individuals under loan contracts or loan agreements, minus interest on deposits received from organizations credit institutions, foreign bank branches as guided in Item g.1, point g, Clause 1, Article 3 of this Circular.
b) Dividends received from capital contribution to buy shares.”
Pursuant to Clauses 2 and 4, Article 10 of Circular 111/2013/TT-BTC. PIT on dividend income is 5% on the value of dividend income.
What is the penalty for not declaring and paying taxes on time?
Article 13 of Decree 125/2020/ND-CP stipulates:
Article 13. Penalties for violations of the deadline for submitting tax declarations
- A warning will be imposed for the act of submitting tax declaration dossiers beyond the deadline from 01 day to 05 days and there are extenuating circumstances.
- A fine ranging from VND 2,000,000 to VND 5,000,000 shall be imposed for submitting tax declaration dossiers beyond the deadline from 01 day to 30 days, except for the case specified in Clause 1 of this Article.
…
If the individual commits late payment of tax, Clause 2, Article 59 of the Law on Tax Administration 2019 shall apply:
Article 59. Handling of late payment of tax
- The rate of late payment interest and the time of late payment are prescribed as follows:
a) The late payment interest rate is 0.03%/day calculated on the late payment tax amount;
b) The time for calculating late payment interest shall be counted continuously from the day following the day on which the late payment interest is incurred specified in Clause 1 of this Article to the day preceding the day on which the tax arrears, tax refund, or tax increases. additional, fixed tax, and late-transfer tax have been paid to the state budget.
From the above regulations, it is possible to determine the formula to calculate the fine for late payment of personal income tax from inheritance, gift as real estate as follows:
Fine for late payment of tax = Late tax amount x 0.03% x Number of days of late payment
Related articles:
- Procedures for personal income tax finalization in Vietnam
- Vietnamese law on corporate income tax
- Do I have to pay PIT in Vietnam when I sell securities at a loss?
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Frequently asked questions
Resident individuals with taxable income arising inside and outside the Vietnamese territory, meeting the following conditions:
– Being present in Vietnam for 183 days or more in a calendar year or counting for 12 consecutive months from the first day of presence in Vietnam;
– Having a regular place of residence in Vietnam, including having a registered place of permanent residence or having a rented house to live in in Vietnam under a fixed-term rental contract.
Non-resident individuals with taxable income arising in the territory of Vietnam
According to Point d, Clause 5, Article 7, Decree 126/2020/ND-CP
For stock dividends, if an individual receives a stock dividend, the organization will declare and pay tax on behalf of the individual.
Conclusion: So the above is Do Investors in Vietnam who receive dividends have to pay personal income tax?. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
