Personal income tax is a mandatory direct tax. Residents and non-residents in the Vietnamese territory must pay personal income tax as prescribed by law. However, not all income will be taxable. So which incomes are subject to personal income tax? How to declare PPI from the brokerage commission? Please follow the article “Guidance for finalization of PIT from brokerage commissions” by Lawyer X for more detailed information!
Legal grounds
- Circular 111/2013/TT-BTC
What is personal income tax settlement?
Personal income tax (PIT) is an amount that income earners must deduct; in part of the salary; or from other sources of revenue into the state budget; after having been deducted certain amounts as prescribed by law.
PIT finalization is the activity of re-checking all income; and calculate the personal income tax payable based on family background and income. Finalization of personal income tax means an individual’s declaration of tax amount in a tax year; on matters of additional tax to be paid; refund the overpaid tax and offset tax in the next period.
Persons who have to make PIT finalization are those who have income to the extent that they have to pay tax; at the same time people with income from many different sources; and those whose income is in the taxable group must also make PIT finalization.
Are brokerage commissions taxable income?
The law currently does not have detailed regulations on the concept of commissions. However, commission can be broadly understood as the amount of remuneration paid by a client to an intermediary (either as an agent or as a broker) for services rendered, depending on the nature of the service rendered. nature and scope of the work. This term “commission” is often used in civil life when a person acts as an agent or intermediary between a buyer and a seller of real estate.
However, the terms commission, bonus and allowance should not be confused. Both types of income are subject to change, but earnings are fundamentally different depending on the type of worker and the amount of work. Detail:
Commission: You broker and sell a product for the company, the company deducts you 2% of the product value, this amount is the commission you get through the broker
Bonus: Money awarded by a state agency for detecting and reporting law violations to a competent state agency.
Allowance: monthly occupational accident allowance for employees suffering from occupational accidents
And according to the provisions of Point c, Clause 2, Article 2 of Circular 11/2013/TT-BTC, the commission is a taxable income, specifically as follows:
“Article 2. Taxable incomes:
Income from salary, wages
Income from wages and salaries is the income an employee receives from an employer, including:
c) Remuneration received in the form of: commissions for sales agents, brokerage commissions; money to participate in scientific and technical research projects; money to participate in projects and schemes; royalties in accordance with the law on royalties; money to participate in teaching activities; money for participation in cultural, artistic, physical training and sports performances; advertising service fees; other service fees, other remuneration.”
Commissions from distributors and brokers are considered the wages and salaries that employees receive from their employers. Therefore, sales brokerage and brokerage commissions are taxable income and if taxable, the recipient must pay income tax.
Guidance for finalization of personal income tax from brokerage commissions
Declare PIT from brokerage commission
According to the Law on Personal Income Tax, organizations and individuals that pay incomes to residents who do not sign labor contracts or sign labor contracts for less than 3 months, shall deduct at the uniform rate of 10%. income from 2 million VND or more/income payment (regardless of whether individuals have or do not have a tax code).
According to Circular 111/2013/TT-BTC guiding the Law on Personal Income Tax: “Remunerations are received in the form of: commissions for sales agents, brokerage commissions; money to participate in scientific and technical research projects; money to participate in projects and schemes; royalties in accordance with the law on royalties; money to participate in teaching activities; money for participation in cultural, artistic, physical training and sports performances; advertising service fees; other service fees, other remuneration”.
Pursuant to Clause 1, Article 25 of Circular No. 111/2013/TT-BTC guiding as follows:
“… Tax deduction for a number of other cases
Organizations and individuals that pay wages, remunerations and other expenses to resident individuals do not sign labor contracts (under the guidance at Points c, d, Clause 2, Article 2 of this Circular) or sign contracts. If the employee has a labor contract of less than three (03) months and has a total income of two million VND (2,000,000)/time or more, he/she must withhold tax at the rate of 10% of the income before paying it to the individual…”.
Therefore, according to the above regulations, from July 1, 2013, in case a resident individual pays an agency fee of VND 2 million or more, the company must pay PIT at the agreed rate of 10% of the revenue entered before paying the individual.
How is PIT from brokerage commission calculated?
For commission income, according to the provisions of Circular 111/2013/TT-BTC, there will be two cases:
Case 1
If the employee does not sign a contract or signs a contract for less than 3 months with an income of 2,000,000 VND/time or more, the organization or individual paying the commission will deduct personal income tax first. when paying to individuals at the rate of 10%.
Case 2
For resident individuals who sign labor contracts of three (03) months or more, the organization or individual paying commission income shall deduct tax according to the Partially Progressive Tariff.
Tax calculation is based on the formula:
Amount of PIT payable = Taxable income (commission) x Tax rate by progressive step
Basic salary: 15,000,000 VND
Commission: 1% x 1,000,000,000 x 2 = VND 20,000,000
Since C has no deduction or non-taxable income, Employee A’s taxable income is: VND 20,000,000
With this amount, the personal income tax rate for Mr. C’s commission is level 4 according to the partially progressive tax schedule specified in the Law on Personal Income Tax 2007.
Related articles:
- Procedures for personal income tax finalization in Vietnam
- Vietnamese law on corporate income tax
- Procedures for personal income tax finalization in Vietnam
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Frequently asked questions
Pursuant to Point c, Clause 1, Article 11 of the Circular on the time of determining the taxable income as follows:
c) Time to determine taxable income
The time of determining taxable income is the time when the capital contribution transfer contract takes effect. Particularly for the case of capital contribution with the capital contribution, the time of determining taxable income from capital transfer is the time when the individual transfers capital or withdraws capital.
Pursuant to Point a, Clause 4, Article 2 of Circular 111/2013/TT-BTC stipulating taxable incomes as follows:
Income from capital transfer means personal income received, including:
a) Income from transfer of contributed capital in limited liability companies (including single-member limited liability companies), partnerships, business cooperation contracts, cooperatives, credit funds people, economic organizations and other organizations.
Pursuant to Point d, Clause 1, Article 11 of this Circular, the tax calculation for income from the transfer of contributed capital is taxable income and the tax rates are as follows:
Personal income tax payable = Taxable income × 20% tax rate
Conclusion: So the above is Guidance for finalization of PIT from brokerage commissions in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
