VietnameseIt is necessary to define the incomes liable to personal income tax in order to calculate the taxable income. Here is the solution on what is the taxable income and what are incomes liable to personal income tax in 2023.
1. What is taxable income?
Incomes liable to personal income tax are the taxable incomes of individuals in accordance with law provisions. Tax agencies shall calculate the payable personal income tax based on these incomes.
2. Incomes liable to personal income tax in 2023
It is necessary to know what are incomes liable to personal income tax as prescribed as follows:
2.1. Incomes from business: Are those earned from production or business activities in the following domains:
- Goods production or trading or service provision in all domains and business sectors as prescribed by law;
Independent professional practice of individuals in domains and sectors for which they have obtained practice licenses or certificates as prescribed by law.
- Agricultural production, forestry, salt making, aquaculture or fishing activities that do not fully satisfy the conditions for tax exemption.
2.2. Incomes from salaries and wages: are incomes received by employees from their employers, including:
- Salaries, wages, and amounts of salary or wage nature in monetary or non-monetary form.
Allowances and subsidies, except the following: monthly preferential subsidies and allowances and lump-sum subsidies prescribed by the law on preferential treatment of persons with meritorious services...
- Remuneration receivable under the forms.
- Sums of money earned from participation in business associations, boards of directors or control boards of enterprises, project management units, management boards, professional associations and societies, and other organizations.
- Other monetary or non-monetary benefits other than salaries and wages paid by employers to taxpayers in any form.
2.3. Incomes from capital investment: Are those earned in the following forms:
- Loan interests received from providing loans to organizations, enterprises, households, business individuals, or groups of business individuals under loan contracts or agreements.
- Dividends received for equity contribution and share purchase.
Profits received for the contribution of capital to limited liability companies, partnerships, cooperatives, joint ventures, business cooperation contracts, and other business forms.
- Increased value of capital contributions received upon dissolution of enterprises, the transformation of operation models, split, merger or consolidation of enterprises or capital withdrawal.
- Income from interests of bonds, bills and other valuable papers.
- Incomes from capital investment in other forms, including contribution of capital in kind, reputation, land use rights, creations or inventions.
- Income from dividends paid in the form of stock and income from dividends paid in the form of capital increase.
2.4. Incomes from capital transfer: are incomes received by individuals, including:
- Incomes from the transfer of capital contributions in limited liability companies, partnerships, joint-stock companies, business cooperation contracts, cooperatives, people’s credit funds, economic organizations or other organizations.
- Incomes from securities transfer.
- Income from capital transfer in other forms.
2.5. Incomes from transfer of real estate: are incomes received from the transfer of real estate, including:
- Income from the transfer of land use rights.
- Income from the transfer of rights to use land and assets attached to land.
- Income from the transfer of the right to own or use houses, including houses to be formed in the future.
- Income from the transfer of the right to lease land or water surface.
- Income earned upon contribution of real estate as capital to establish enterprises or increase of production and business capital of enterprises.
Income from authorization of the management of real estate under which the authorized persons may transfer such real estate or have the rights like real estate owners.
- Other incomes received from the transfer of real estate in all forms.
2.6. Incomes from prize-winning: are prizes won in cash or in kind by individuals in the following forms:
- Lottery prizes;
- Sales promotion prizes in all forms for goods or service purchases;
- Lawful betting prizes.
- Prizes won in prized games and contests
2.7. Incomes from copyright: are those earned from assignment or licensing of rights to own or use objects of intellectual property rights in accordance with the Law on Intellectual Property; incomes from technology transfer. To be specific:
- Objects of intellectual property rights:
- Copyright, including literary, cultural or scientific works; objects of related rights, including video or audio recordings of broadcasts, satellite signals bearing encrypted programs.
- Industrial property rights, including inventions, industrial designs, layout designs of semiconductor integrated circuits, business secrets, marks, trade names and geographical indications.
- Rights to plant varieties, which are propagation materials and harvested materials.
- Objects of technology transfer, including:
- Technical know-how.
- Technical knowledge about technologies in the form of technological plans or processes, technical solutions, formulas, technical parameters, drawings, technical diagrams, computer programs or data.
- Production rationalization and technology renewal solutions
Incomes from the assignment or licensing of objects of intellectual property rights or from technology transfer as specified above include incomes from reassignment or re-licensing
2.8. Incomes from franchising: a commercial activity whereby the franchisor permits and requests the franchisee.
2.9. Incomes from inheritances: are those received by individuals under testaments or in accordance with the law on inheritance.
- Inheritances being securities, including stocks, stock purchase rights, bonds, bills, fund certificates and other kinds of securities; shares of individuals in joint-stock companies.
Inheritances being capital holdings in economic organizations or business establishments, including: capital contributions to limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises, proprietorships, associations or funds.
- Inheritances being real estate, including: land use rights, right to use land with assets attached to land, right to own houses, including houses to be formed in the future; infrastructure and construction works attached to land, including construction works to be formed in the future; right to lease land or water surface.
Inheritances being other assets which are subject to registration of ownership or use rights with state management agencies, including: Cars, motorbikes; mopeds; boats, including barges, canoes, tug boats and push boats; ships, including cruises; aircraft; hunting rifles and sporting riffles.
2.10. Incomes from gifts: are those received by individuals from domestic or foreign organizations and individuals.
- Gifts being securities, including: stocks, stock purchase rights, bonds, bills, fund certificates and other kinds of securities; shares of individuals in joint-stock companies.
- Gifts being capital holdings in economic organizations or business establishments, including: capital contributions to limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises, proprietorships, associations or funds.
- Gifts being real estate, including: land use rights, right to use land with assets attached to land, right to own houses, including houses to be formed in the future; infrastructure and construction works attached to land, including construction works to be formed in the future; right to lease land or water surface.
- Gifts being other assets which are subject to registration of ownership or use rights with state management agencies, including: Cars, motorbikes; mopeds; boats, including barges, canoes, tug boats and push boats; ships, including cruises; aircraft; hunting rifles and sporting riffles.
3. Classification of incomes liable to personal income tax and taxable income
Taxable income is the base for tax obligation, and incomes liable o personal income tax is the direct factor for payable personal income tax.
Taxable income equals to taxed income and other insurances. Accordingly, the definition of taxable income gets the broader definition.
4. Bases for personal income tax amount under incomes liable to personal income tax
4.1. Incomes from salaries and wages
- Partially Progressive Tax Tariff: Resident individuals who sign over 3 month labor contracts.
- Deduction at sources before income payment, including: 10% deduction, 20% deduction
4.2. Incomes from business
Article 3, Article 10, Circular No. 40/2021/TT-BTC guiding the determination of payable personal income tax amounts as follows:
Payable PIT amount = PIT-liable turnover amount x PIT rate
4.3. Incomes from capital investment
Article 10, Circular No. 111/2013/TT-BTC prescribes the calculation principles as follows:
Payable personal income = Tax rate of 5% x Taxed income
4.4. Incomes from capital transfer
- Define the tax amount in capital transfer:
Personal Income Tax = 20% x Taxable income
- Define the tax amount in securities transfer:
Personal Income Tax = 0.1% x Taxable income
4.5. Incomes from transfer of real estate
- Tax calculation for incomes from stock transfer.
Personal Income Tax = 2% x Transfer price
4.6. Incomes from won prizes
Article 15, Circular No. 111/2013/TT-BTC prescribes the calculation principles as follows:
Personal Income Tax = 10% x Taxable income
In which: Taxable income from inheritance or gift is the inheritance or gift value in excess of VND 10 million upon each time of income receipt by a non-resident in Vietnam.
4.7. Incomes from copyright
Article 13, Circular No. 111/2013/TT-BTC prescribes the calculation principles as follows:
Personal income tax amount = Taxed income x Tax rate of 5%
In case there are many contracts on assignment or licensing of the same intellectual property object or transfer of the same technology, taxed income is the income amount in excess of VND 10 million counted on total incomes from all of these contracts.
4.8. Incomes from franchising
Article 14, Circular No. 111/2013/TT-BTC prescribes the calculation principles as follows:
Payable personal income tax amount = Taxed income x Tax rate of 5%
Within that, If the same object of franchise is transferred under different contracts, taxed income is the income amount exceeding VND 10 million calculated on the total value of franchising contracts.
4.9. Incomes from inheritances
Article 16, Circular No. 111/2013/TT-BTC (amended by the Article 19, Circular No. 92/2015/TT-BTC) prescribes the tax bases for income from inheritances as follows:
Payable personal income tax amount = Taxed income x Taxed rate of 10%
In which, Taxed income from inheritances is the value of assets inherited or received as gifts which exceed VND 10 million upon each time of receipt.
4.10. Incomes from gifts
The tax bases for income from gifts are as follows:
Payable personal income = Tax rate of 10% x Taxed income
In which, Taxed income from gifts is the value of assets inherited or received as gifts which exceeds VND 10 million upon each time of receipt.
Here is the solution on what is the taxable income and what are incomes liable to personal income tax in 2023
