How is personal income tax in Vietnam calculated?

Article 2 of the Law on Personal Income Tax 2007 clearly stipulates who must pay personal income tax; those are residents and non-residents. So how is personal income tax calculated for these people? How are the calculations? Below is the content of the above issue of Lawyer X!

Legal grounds:

Law on Tax Administration 2019
Circular 105/2020/TT-BTC
Law on personal income tax 2007
Circular 111/2013/TT-BTC
Circular 92/2015/TT-BTC.

Personal income tax is calculated from wages and salaries

Personal income tax is charged to resident individuals

Case 1: Failing to sign a labor contract or signing a labor contract of less than 3 months

Pursuant to Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC; resident individuals who do not sign a labor contract or sign a labor contract for less than 3 months with a total income of VND 2 million/time or more; tax must be deducted at the rate of 10% on income.

In other words; individuals who do not sign a labor contract or sign a labor contract for less than 3 months but earn from salary or gong each time receiving from VND 2 million or more must pay 10% tax, except for the case of making commitment 02 if eligible.

Case 2: Labor contract from 03 months or more

The tax calculation formula is as follows:

Personal income tax payable = Taxable income x Tax rate

In there:

Taxable income = Taxable income – Deductions

Taxable income = Gross income – Exemptions

The tax calculation steps are as follows:

Based on the above tax calculation formula, to calculate the payable tax amount, follow these steps:

Step 1. Determine the total taxable income

Step 2. Calculate Exemptions

Step 3. Calculate taxable income

Step 4. Calculate deductibles

Step 5. Calculate taxable income

Step 6. Calculate the amount of tax payable

After calculating taxable income, in order to determine the payable tax amount (step 6) on income from salaries and wages, taxpayers apply the partial tax calculation method, the simplified tax calculation method. according to the right object.

Employees who sign a labor contract of 3 months or more only have to pay tax when they have an income of 11 million VND/month or more (132 million VND/year) if they have no dependents.

Personal income tax is charged to non-resident individuals

Personal income tax payable on income from salaries and wages of non-residents is determined as follows:

Payable income tax = 20% x Taxable income

In which, taxable income from salaries and wages of non-residents is determined as for taxable incomes from salaries and wages of resident individuals.

Personal income tax is calculated when selling houses and land

Note: Land sale is a word often used in practice for the case of “transfer of land use rights”.

Pursuant to Article 17 of Circular 92/2015/TT-BTC; PIT when transferring real estate is determined on a case-by-case basis.

Case 1: Transfer of land use rights (no house)

• The transfer price in the contract is equal to or higher than the land price in the land price list

Personal income tax payable = 2% x Transfer price

In which, the transfer price is the price stated in the contract at the time of transfer.

• The transfer contract does not state the price or the price on the transfer contract is lower than the land price set by the Provincial People’s Committee

Personal income tax payable = 2% x (Area x Price 01m2 according to the land price list)

Case 2: Transfer of real estate (including house and land)

• The transfer price is equal to or higher than the price set by the Provincial People’s Committee

Personal income tax = 2% x Transfer price

In which, the transfer price is the price stated in the contract at the time of transfer.

• The transfer contract does not state the land price or the land price on the transfer contract is lower than the price set by the Provincial People’s Committee

Personal income tax = 2% x Transfer price

In which, the land transfer price is the price set by the provincial People’s Committee at the time of transfer in accordance with the law on land.

Case 3: Transfer of house (no land)

If the house price in the house purchase and sale contract is higher or equal to the price issued by the People’s Committee of the province, the transfer price is the price in the contract and is calculated as follows:

Personal income tax = Transfer price x 2%

• The house price in the house purchase and sale contract is lower than the price issued by the provincial People’s Committee, the personal income tax is calculated as follows:

Personal income tax = 2% x (Area x Price 01m2 x Percentage of remaining quality).

Penalties for late payment, non-payment of personal income tax

Upon receipt of the tax payment notice; but taxpayers who do not pay will not have a specific penalty; which is calculated according to the regulations on late payment interest; This content is clearly specified in Clause 1, Article 42 of Decree 125/2020/ND-CP as follows:

“first. Calculating fines for late payment a) Organizations and individuals that pay late fines for tax and invoice administrative violations will be charged a fine for late payment of fines at the rate of 0.05%/day calculated on the late payment fine.b ) The number of days of late payment of fines, including holidays and days off according to the prescribed regime, is counted from the day following the expiration of the fine payment time limit to the day immediately preceding the date the organization or individual pays the fine to the bank. state books.”
Thus, the amount of late payment of 01 day = 0.05% x Amount of late payment.

Example: Mr. A is obliged to pay personal income tax of VND 50 million; if Mr. A fails to pay by the deadline in the notice, the daily late payment amount that Mr. A must pay is VND 25,000.

Note:

– No late payment fines shall be charged in the following cases:

• During the period of postponement of the execution of the fine decision;
• During the consideration and decision on fines exemption;
• The fine amount has not yet been paid in case the fine is paid many times.
• In case an organization or individual fails to voluntarily pay fines or late payment interest to the state budget, the tax agency directly managing such organization or individual shall notify and urge the organization or individual to individuals pay fines and late payment fines according to regulations.

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