Circular No. 160/2009/TT-BTC dated August 12, 2009, of the Ministry of Finance guiding the exemption from personal income tax in 2009 under the Government’s Resolution No. 32/2009/QH12 of June 19, 2009

THE MINISTRY OF FINANCE

Circular No. 160/2009/TT-BTC of August 12, 2009, guiding the exemption from personal income tax in 2009 under the Government’s Resolution No. 32/2009/QH12 of June 19, 2009

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

Pursuant to Article 4 of the Government’s Resolution No. 32/2009/QH12 of June 19, 2009, on adjustment of the overall objective and some economic and state budget targets, additional issuance of government bonds in 2009 and exemption from personal income tax in 2009;

On the basis of the Prime Minister’s directing opinion in the Government Office’s Official Letter No. 5048/VPCP-KTTH of July 27, 2009, guiding the implementation of the National Assembly’s Resolution No. 32/2009/QH12 of June 19, 2009, on personal income tax;

The Ministry of Finance guides the exemption from and reduction of personal income tax under the National Assembly’s Resolution No. 32/2009/QH12 of June 19, 2009, as follows:

Article 1. Persons eligible for personal income tax exemption and exemption period

1. Persons eligible for personal income tax exemption from January 1, 2009, through December 31, 2009, include residents and non-residents having incomes from capital investment; capital transfer (including also securities transfer); copyright; and franchising.

From January 1, 2010, onwards, residents and non-residents having incomes from capital investment; capital transfer (including also securities transfer); copyright; and franchising shall pay personal income tax under regulations.

2. Persons eligible for personal income tax exemption from January 1, 2009, through June 30, 2009, include residents having incomes from business; salaries and remuneration; inheritances; and gifts.

From July 1, 2009, onwards, residents having incomes from business, salaries and remuneration, inheritances, and gifts shall pay personal income tax under regulations.

Article 2. Incomes used as a basis for determining personal income tax amounts to be exempted

Incomes used as a basis for determining personal income tax amounts to be exempted for persons defined in Article 1 of this Circular are incomes liable to personal income tax on which personal income tax in the first 6 months of 2009 is allowed to be paid later, and incomes liable to personal income tax originating in the tax-exempt period, specifically as follows:

1. For income from business:

1.1. For business individuals implementing accounting regulations with sufficient invoices and documents, able to account their turnovers and expenses and paying tax according to declaration, income used as a basis for determining the personal income tax amount to be exempted is taxable income corresponding to turnover and expenses arising in the first 6 months of 2009.

If business individuals cannot accurately determine their taxable incomes arising in the first 6 months of 2009, taxable income used as a basis for determining the personal income tax amount to be exempted shall be determined as follows:

- For those doing business for full 12 months of 2009, it is equal to 50% of the taxable income of the whole 2009.

- For those doing business for less than 12 months of 2009:

1.2. For business individuals only able to account their business turnover but not expenses and paying tax according to declaration, income used as a basis for determining the personal income tax amount to be exempted is the fixed and turnover-based income arising in the first 6 months of 2009 and the fixed percentage of taxable income.

1.3. For business individuals paying tax by the stable presumption method, the personal income tax amount to be exempted is the presumptive tax amount to be paid for the first 6 months of 2009 as notified by tax agencies.

Turnover and expenses used as a basis for determining taxable incomes of the group of business individuals defined at Points 1.1 and 1.2, Clause 1 of this Article are turnover and expenses actually arising in the first 6 months of 2009. The method of determining turnover and expenses is guided in the Ministry of Finance’s Circular No. 84/2008/TT-BTC of September 30, 2008.

2. For income from salaries and remuneration

Incomes from salaries and remuneration used as a basis for determining the personal income tax amount to be exempted is taxable income from salaries and remuneration to be paid by employing units to individuals in the first 6 months of 2009, regardless of the time of payment, specifically as follows:

2.1. If the income payer has fully paid incomes from salaries and remuneration from January to the end of June 2009 (first 6 months of 2009) to laborers (according to contracts or salary decisions) during the tax-exempt period under the guidance in Clause 2, Article 1 of this Circular, incomes used as a basis for determining tax amounts to be exempted are actually paid incomes.

2.2. If the income payer has accounted as expenses salaries and remuneration of the first 6 months of 2009 under labor contracts or has issued salary decisions but actually paid them to laborers after the tax-exempt period under the guidance in Clause 2, Article 1 of this Circular, such salaries and remuneration will be still determined as tax-exempt incomes, provided they are paid not later than December 31, 2009.

2.3. For bonuses for the whole 2009 (such as annual bonus and 13th-month bonus salary), incomes used as a basis for determining tax amounts to be exempted will be equal to 50% of these bonuses, provided these bonuses are paid not later than March 31, 2010.

Example: In 2009, Mr. A enjoyed an annual bonus of VND 10 million. He will be exempt from paying income tax on VND 5 million (50% of the annual bonus).

2.4. For quarterly bonuses, tax-exempt incomes will be bonuses of the first and second quarters of 2009 under decisions of heads of income payers, provided they are paid not later than December 31, 2009.

Example: In August 2009, Mr. B enjoyed a bonus for outstanding performance in the second quarter of 2009 under a decision of the income payer. Then he will be exempt from paying income tax on this bonus.

2.5. For such incomes as holiday, summer vacation and uniform allowances and other benefits, tax-exempt incomes are those actually paid in the tax-exempt period under the guidance in Clause 2, Article 1 of this Circular.

2.6. Salaries and remuneration of 2008 which are paid in the tax-exempt period under the guidance in Clause 2, Article 1 of this Circular, are also tax-exempt.

3. For income from capital investment:

Income used as a basis for determining the personal income tax amount to be exempted is that earned from capital investment in 2009, specifically:

- For incomes from profits and dividends from contributed shares, they are dividends and profits of 2009 divided under law.

- For incomes from loan interests, they are interests actually received in 2009 at the interest rates stated in loan contracts.

Individuals who receive incomes in advance for more than one year will be exempt from personal income tax on the portion of income of 2009.

- For income received from the added amount of the contributed capital value upon dissolution of enterprise, change of form of operation, merger, consolidation of enterprises or withdrawal of capital, it is the received added amount of the contributed capital value compared with the initial contributed capital. The time for determining the tax-exempt income is the time the income payer or the individual completes legal procedures for determining the received value of the contributed capital corresponding to the tax-exempt period under the guidance in Clause 1, Article 1 of this Circular.

4. For income from capital transfer (including also securities transfer), income used as a basis for determining the personal tax amount to be exempted is the money amount received by an individual from completed capital transfer under the guidance in Clause 2, Section II, Part B of the Ministry of Finance’s Circular No. 84/2008/TT-BTC of September 30, 2008, corresponding to the tax-exempt period under the guidance in Clause 1, Article 1 of this Circular.

5. For income from copyright or franchising, income used as a basis for determining the personal tax amount to be exempted is the money amount paid under contract corresponding to the tax-exempt period under the guidance in Clause 1, Article 1 of this Circular.

Individuals who receive incomes in advance for more than one year will be exempt from personal income tax on the portion of income of 2009.

6. For income from inheritances or gifts, the time for determining the tax-exempt income is the time an individual receiving inheritance or gifts submits a valid dossier to a competent state management agency corresponding to the tax-exempt period under the guidance in Clause 2, Article 1 of this Circular.

7. If incomes exempt from personal income tax under the guidance in Clause 1, Article 1 of this Circular are paid after 2009, such incomes must be paid not later than June 30, 2010, otherwise they will not be tax-exempt.

Article 3. Declaration and finalization of personal income tax of 2009

1. For income payers:

1.1. Monthly tax declaration: Income payers are not required to declare incomes eligible for personal income tax exemption under the guidance in Clause 2, Article 1 of this Circular if they pay these incomes after July 1, 2009. In the declaration form, the sections on income and monthly withdrawn tax amount should only reflect incomes ineligible for tax exemption and personal income tax amounts already withheld.

1.2. Declaration for finalization:

Income payers are not required to make declaration for tax finalization for tax-exempt incomes and tax amounts to be exempted for persons exempt from personal income tax under the guidance in Article 1 of this Circular, specifically:

- If paying incomes from capital investments, capital transfers, copyright or franchising, income payers are not required to make declaration for tax finalization.

- If paying incomes from salaries and remuneration, income payers are not required to make finalization for tax-exempt incomes of the first 6 months of 2009, and shall only make declaration for finalization of incomes and withheld tax amounts arising from July 1, 2009, to December 31, 2009.

Example: Company X paid in 2009 a total of VND 1 billion as salaries to its laborers, including VND 400 million eligible for exemption from personal income tax. For 2009, the company is only required to make declaration for finalization of the personal income tax on the income amount subject to personal income tax, namely VND 600 million.

In the tax finalization declaration form, the sections on general figures shall be filled in on the following principle: Declare only general figures corresponding to incomes subject to personal income tax of 2009.

2. For residents earning incomes from salaries, remuneration or from business:

2.1. Residents having incomes from salaries, remuneration or from business shall make tax finalization in the following cases:

- Having a payable tax amount arising in the last 6 months of 2009 higher than the withheld tax amount.

- Requesting tax refund or subtraction of the overpaid tax amount in the subsequent period.

2.2. Permitted reductions upon tax finalization include:

- For reductions being social insurance, health insurance, compulsory liability insurance payments, 50% of total insurance premiums paid in a lump sum for the whole year will be reduced. For insurance premiums paid on a monthly basis, the reduced amount will be based on the actually paid amount for the last 6 months of 2009.

- For family circumstance-based reductions, the reduced amount will be based on the actual reductions for the last 6 months of 2009, specifically as follows:

+ For the reduction for the income earner himself/herself, it will be VND 24 million (6 months x VND 4 million/month).

+ For reductions for dependants, they will be calculated based on the number of dependants, the number of months for which reductions are allowed, and the level of reduction per dependant a month (VND 1.6 million/person/month).

- For reductions being contributions for humanitarian, charity and learning promotion purposes, they will be based on amounts actually paid in the last 6 months of 2009.

2.3. When making tax finalization, individuals shall use declaration forms issued together with the Ministry of Finance’s Circular No. 84/2008/TT-BTC of September 30, 2008.

In the tax finalization form, some sections should be filled in as follows:

- Tax period: Specify the period from July 1, 2009, to December 31, 2009;

- Sections for determining turnover (for business individuals), income, reductions…: Reflect general figures corresponding to the tax period from July 1, 2009, to December 31, 2009.

Article 4. Organization of implementation

1. This Circular takes effect 45 days from the date of signing. Any handling measures already taken by income payers to taxpayers which are different from the guidance in this Circular shall be adjusted:

- Income payers that have withheld personal income tax amounts on tax-exempt incomes shall refund the withheld tax amounts to income earners.

- Individuals who have declared and paid into the budget tax amounts which are eligible for exemption will have such tax amounts refunded or subtracted in the subsequent tax period.

2. When paying tax-exempt incomes after June 30, 2009 (for tax-exempt incomes of the first six months of 2009) or after December 31, 2009 (for tax-exempt incomes of the whole 2009), income payers shall take responsibility for the accuracy of incomes determined to be eligible for tax exemption upon examination by tax agencies.

Those that make incorrect determination and declaration shall be handled for tax fraud under the Law on Tax Administration.

3. Residents and non-residents who have incomes liable to personal income tax but ineligible for tax exemption as defined in Article 1 of this Article shall pay personal income tax under the Law on Personal Income Tax.

4. Any problems arising in the course of implementation should be reported to the Ministry of Finance for timely settlement.-

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN