Circular No. 02/2010/TT-BTC dated January 11, 2010 of the Ministry of Finance supplementing the Finance Ministry’s Circular No. 84/2008/TT-BTC of September 30, 2008, guiding a number of articles of the Law on Personal Income Tax and guiding the implementation of the Government’s Decree No. 100/2008/ND-CP of September 8, 2008, detailing a number of articles of the Law on Personal Income Tax

THE MINISTRY OF FINANCE

Circular No. 02/2010/TT-BTC of January 11, 2010, supplementing the Finance Ministry’s Circular No. 84/2008/TT-BTC of September 30, 2008, guiding a number of articles of the Law on Personal Income Tax and guiding the implementation of the Government’s Decree No. 100/2008/ND-CP of September 8, 2008, detailing a number of articles of the Law on Personal Income Tax

Pursuant to November 21, 2007 Law No. 04/2007/QH12 on Personal Income Tax and guiding documents;

Pursuant to November 29, 2006 Law No. 78/2006/QH11 on Tax Administration and guiding documents;

Pursuant to the Government’s Decree No. 100/2008/ND-CP of September 8, 2008, detailing a number of articles of the Law on Personal Income Tax;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

In furtherance of the Prime Minister’s directing opinions in the Government Office’s Official Letter No. 3045/VPCP-KTTH of June 11, 2009, and Official Letter No. 8308/VPCP-KTTH of November 23, 2009, on guidance on the implementation of the Law on Personal Income Tax;

The Ministry of Finance supplements Circular No. 84/2008/TT-BTC of September 30, 2008, as follows:

Article 1. To add the following Point 2.4 to Clause 2, Section II, Part A:

“2.4. Incomes from salaries and wages which are not accounted as taxable incomes:

2.4.1. Some amounts paid by units to or on behalf of cadres, civil servants, officers and soldiers of the armed forces under state regulations, specifically as follows:

a/ Amounts received under the regime prescribed in the Prime Minister’s Decision No. 205/2004/QD-TTg of December 10, 2004;

b/ Service allowances prescribed in the Prime Minister’s Decision No. 269/2005/QD-TTg of October 31, 2005, providing for the service allowance regime;

c/ The regime of equipment or amounts received under the regime on lump-sum amounts paid for the use of cars for working purposes prescribed in the Prime Minister’s Decision No. 59/2007/QD-TTg of May 7, 2007, promulgating the Regulation on criteria, quotas and management and use of vehicles in state agencies, public non-business units and state companies;

d/ Amounts received under the regime on public-duty houses prescribed in the Government’s Decree No. 90/2006/ND-CP of September 6, 2006, detailing and guiding the Housing Law, and the Prime Minister’s Decision No. 09/2008/QD-TTg of January 11, 2008, promulgating design principles and use criteria of public-duty houses;

Recipients and received amounts not accounted as taxable incomes under the above guidance must be compliant with current legal documents.

2.4.2. Sums of money earned by cadres, civil servants and other individuals for the following jobs: giving opinions on, appraising and examining legal documents, resolutions and political reports; participating in examination and oversight teams; receiving voters or citizens; clothing and other jobs in direct service of operations of the National Assembly Office, the Ethnic Council and Committees of the National Assembly; delegations of National Assembly deputies; the Office and Commissions of the Party Central Committee; and offices and commissions of provincial-level Party Committees.

2.4.3. Apart from received amounts which are not accounted as taxable incomes of persons defined at Points 2.4.1 and 2.4.2 above, allowances deductible from taxable incomes or presumptive expenditures excluded from taxable incomes of individuals earning incomes from salaries or wages shall be determined under the guidance in Clause 2, Section II, Part A of the Finance Ministry’s Circular No. 84/2008/TT-BTC of September 30, 2008, and Article 1 of the Finance Ministry’s Circular No. 62/2009/TT-BTC of March 27, 2009, amending and supplementing Circular No. 84/2008/TT-BTC.”

Article 2. To add the following Point 2.6 to Clause 2, Section III, Part A:

“2.6. The personal income tax exemption prescribed above applies only to individuals who transfer their sole house or residential land area with ownership or use right certificates granted by competent state management agencies.

For individuals already having houses or residential land who transfer contracts on the contribution of capital for obtaining the right to buy house bases or apartments or contracts on the purchase of house bases or apartments, incomes from such transfer are ineligible for personal income tax exemption.”

Article 3. To add the following paragraph at the end of Clause 4, Section III of Part A:

“Cases of receipt of inheritances or gifts being contracts on the contribution of capital for obtaining the right to buy house bases or apartments are not entitled to personal income tax exemption under Clauses 1 and 4 of the Government’s Decree No. 100/2008/ND-CP of September 8, 2008.”

Article 4. To add the following Point 3.3 to Clause 3, Section I, Part B:

“3.3. Reductions for compulsory insurance premiums:

3.3.1. Resident individuals earning incomes from business activities or salaries and wages who pay compulsory insurance premiums as prescribed by the Labor Code and the Law on Social Insurance will have these insurance premiums counted as a reduction deductible from taxable incomes before tax calculation. Insurance premiums paid in a year shall be deducted from taxable incomes of that year.

3.3.2. For foreigners being resident individuals in Vietnam and Vietnamese resident individuals working in foreign countries and earning incomes from business activities, salaries or wages in foreign countries who pay compulsory insurance premiums as prescribed by laws of the countries of which these resident individuals are citizens similar to Vietnam’s laws, such as social insurance, health insurance, unemployment insurance, compulsory professional liability insurance and other compulsory insurance premiums (if any), these insurance premiums are deductible from taxable incomes from business activities, salaries or wages upon calculation of personal income tax.

a/ Bases for determination of deductible insurance premiums: Individuals defined at Point 3.3.2 above must have documents proving the payment of compulsory insurance premiums under foreign laws.

Proving documents include receipts issued by insurance agencies or income payers’ certifications of insurance premiums already withheld or paid (in case income payers pay insurance premiums on behalf of their employees).

b/ Foreign and Vietnamese individuals who pay above insurance premiums in foreign countries will have these insurance premiums temporarily deducted from taxable incomes in the year (if having sufficient documents) and finalized based on the official year-end figures. If such documents are not yet available for temporary deduction in a year, these insurance premiums shall be deducted once upon tax finalization.”

Article 5. To add the following Point 3.5.3 to Point 3.5, Section II, Part B:

“3.5.3. The tax rate of 25% of taxed incomes applies to individuals earning incomes from real estate transfer if the following conditions are fully met:

a/ The transfer price stated in the transfer contract and declared in the tax declaration is not lower than the price (for land use rights) or the price for registration fee calculation  (for houses and construction works) prescribed by the provincial-level People’s Committee at the time the transfer contract becomes valid according to law.

In case the transfer price stated in the transfer contract and declared in the tax declaration is lower than the price (for land use rights) or the price for registration fee calculation (for houses and construction works) prescribed by the provincial-level People’s Committee at the time the transfer contract becomes valid according to law, the tax rate of 2% of the price prescribed by the provincial-level People’s Committee will apply.

b/ The taxpayer has lawful invoices and vouchers proving the truthfulness of the declared buying price and related expenses (expenses related to the grant of land use rights or house ownership certificates; expenses for land improvement and house renovation; construction expenses and other related expenses).

For individuals transferring contracts on the contribution of capital for obtaining the rights to buy house bases or apartments, the buying price will be determined based on documents on the payment of contributed capital and other invoices and vouchers proving related expenses. Expenses related to real estate transfer also include interests on loans borrowed from credit institutions to buy the real estate. In case only part of the capital portion has been contributed (full amount has not yet been paid under the contract), the buying price shall be determined as follows:

In case a taxpayer declares the buying price and related expenses but does not has sufficient proving invoices and vouchers or has these invoices and vouchers but tax agencies, through examination, detect that some of these invoices and vouchers are unlawful or invalid, the tax rate of 2% of the transfer price will apply.

c/ Real estate transferors declare and determine the applicable tax rate by themselves and take responsibility for the accuracy of declaration dossiers.

Tax agencies that receive tax declaration dossiers shall examine declarations and documents in the dossiers, if conditions for the application of the tax rate of 25% of taxable income are fully met, they shall accept tax calculation results of the transferors. In case of rejection of tax calculation results, they shall issue replies to transferors.

d/ In case a transferor declares for tax payment at the tax rate of 2% of the transfer price but, through examination, it is found that the transfer price stated in the contract and declared in the tax declaration is lower than the price set by the provincial-level People’s Committee, tax shall be calculated at the tax rate of 2% of the price set by the provincial-level People’s Committee.”

Article 6. To add the following Point 2.5.5 to Point 2.5, Section II, Part D:

“2.5.5. Procedures for declaration and payment of personal income tax for incomes from transfer of capital contribution contracts and house base or apartment purchase contracts:

a/ For cases of transferring capital portions contributed for obtaining the right to buy house bases or apartments or transferring house or apartment purchase contracts, the  personal income tax declaration dossier must be enclosed with a copy of the capital contribution contract or the house base or apartment purchase contract between the transferor and the house-building and -trading organizations, in replacement of a copy of the land use rights certificate or copies of title documents of the house or work on land as guided at the second em dash at Point 2.5.2, Clause 2, Section II, Part D of the Finance Ministry’s Circular No. 84/2008/TT-BTC,  and item [04] in form No. 11/KK-TNCN. Capital contribution contracts or house base or apartment purchase contracts signed between individuals and house-building or trading organizations or individuals will also be reflected in item [04] on papers on land use rights or house ownership in form No. 11/KK-TNCN.

Under the Civil Code, contracts on the transfer of real estate for which certificates of lawful ownership or use rights have been issued by competent state management agencies must be notarized. Particularly for the transfer of capital contribution contracts or house base or apartment purchase contracts, if the transfer must be approved by house-building or trading organizations or individuals as prescribed by law and it is actually approved, notarization is not required.

Individuals transferring capital contribution contracts or house base or apartment purchase contracts shall declare and pay personal income tax at district-level Tax Departments of localities where the transferred real estate exists or at/to house-building or -trading organizations or individuals (if such organizations or individuals are authorized by tax agencies to collect the tax).

b/ To facilitate tax declaration and payment by transferors of capital contribution contracts or house base or apartment purchase contracts, provincial-level Tax Departments shall base themselves on local practical situations to decide to authorize house- or infrastructure-trading organizations and individuals (including real estate trading floors) to collect personal income tax so that transferors may declare and pay personal income tax at/to these organizations or individuals. The order of and procedures for authorized collection and expenses for authorized collection comply with the Law on Tax Administration.

c/ Apart from papers included in tax declaration dossiers guided in the Finance Ministry’s Circular No. 84/2008?TT-BTC of September 30, 2009, and Circular No. 161/2009/TT-BTC of August 12, 2009, tax agencies may not require transferors to submit any other papers.”

Article 7. To add the following Clause 4 to Section II, Part D:

“4. Tax registration, withholding, declaration, payment and finalization in other cases

4.1. Tax administration (tax registration, withholding, declaration, payment and finalization) for cadres and civil servants who enjoy salary coefficients prescribed in the salary table issued together with Decision No. 128/QD-TW of December 14, 2004, of the Party Central Committee’s Secretariat, and the salary table issued together with the National Assembly Standing Committee’s Resolution No. 730/2004/NQ-UBTVQH11 of September 30, 2004; grade 3 of table 1 on senior experts’ salaries; and grades 1-2 of the salary table for military rank holders issued together with the Government’s Decree No. 204/2004/ND-CP of December 14, 2004, shall be conducted as follows:

Based on taxable incomes from salaries and wages and incomes of salary and wage nature which have been actually paid, salary and wage payers shall make family circumstance-based reductions for income earners and their dependants according to registration. On the basis of the incomes after deducting reducible amounts and the partially progressive tariffs prescribed in the Finance Ministry’s Circular No. 84/2008/TT-BTC of September 30, 2008, income payers shall withhold personal income tax and remit these amounts into the state budget according to regulations.

4.1.1. Tax registration:

Cadres and civil servants enjoying above salary grades shall make personal income tax declaration registrations with income payers or income payers shall make tax declaration registration for them. Based on tax registration declarations, income payers shall transfer dossiers to tax agencies for issuance of tax identification numbers. Tax registration dossiers and the order of and procedures for tax registration comply with the Finance Ministry’s Circular No. 84/2008/TT-BTC.

4.1.2. Tax withholding:

Salary and wage payers shall withhold personal income tax and declare and declare and remit them into the state budget according to regulations. Personal income tax shall be withheld on a monthly basis.

4.1.3. Family circumstance-based reduction:

Salary and wage payers shall base themselves on family circumstance declarations of each cadre or civil servant to determine the number of dependants eligible for family circumstance-based reductions before withholding tax.

4.1.4. Tax finalization:

Salary and wage payers shall make reports on personal income tax finalization and conduct personal income tax finalization for each cadre or civil servant under their management in case the payable tax amount is larger than the withheld tax amount or the withheld tax amount is larger than the payable tax amount and keep tax declaration and finalization dossiers instead of submitting them to tax agencies.

When conducting personal income tax finalization, if the temporarily withheld tax amount in the year is larger than the payable tax amount, salary and wage payers shall refund the excessive tax amount to each taxpayer and subtract it from the payable amount of the subsequent tax period.

When making reports on finalization of personal income tax amounts withheld in the year, income payers are not required to list cadres with the above-mentioned salary grades who are subject to tax withholding in their income payment lists.

4.1.5. Information management:

Income payers shall abide by current regulations on the management of information relating to income determination, registration, declaration, withholding, and finalization of personal income tax of cadres and civil servants prescribed in this Article and relevant laws.

4.2. Additional guidance on the finalization of personal income tax of resident individuals earning income from salaries or wages:

If a resident individual earning incomes from salaries or wages receives incomes from only one income payer and has the payable tax amount larger than the withheld tax amount, he/she may conduct tax finalization via this income payer.

The income payer shall base itself on the taxable income actually paid to the employee, registration of his/her dependants, documents proving reducible for insurance premiums (if any), humanitarian, charity and study-promotion contributions submitted by the employee to re-determine the his/her tax obligations and withhold the tax amount to be additionally paid for remittance into the state budget. The tax amounts withheld after tax finalization will be recorded in the tax finalization declarations and the detailed list of income earners.

Income payers shall manage family circumstance dossiers and documents proving payment of insurance premiums and charity, humanitarian and study promotion contributions (if any) at their units and produce or supply them at the request of tax agencies.”

Article 8. To supplement Part E as follows:

1. To add the following paragraph at the end of Clause 2:

“Individuals who are eligible for personal income tax refund but submit their tax finalization declarations late are not liable to pay a fine for the administrative violation of making late tax finalization declaration.”

2. To add the following paragraphs at the end of Clause 3:

“- In case land users, who receive transferred land before January 1, 2009, submit valid dossiers of application for grant of land use right certificates and are approved by competent agencies, personal income tax will be retrospectively collected with respect to the last transfer only; previous transfers are not subject to retrospective tax collection.

- From January 1, 2009, the effective date of the Law on Personal Income Tax, all real estate transferors, including those who have notarized contracts and those who have only handwritten papers, shall pay personal income tax for each transfer.

Article 9. Organization of implementation

1. This Circular takes effect 45 days from the date of its signing and immediately applies to incomes from real estate transfer. Particularly for individuals earning incomes from salaries or wages or business activities, this Circular applies to the 2009 tax period. Any guidances on personal income tax which are contrary to this Circular are annulled.

2. Any problems arising in the process of implementation should be reported to the Ministry of Finance (the General Department of Taxation) for study and settlement.

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN