Official Dispatch 8205/CTHN-TTHT Hanoi 2023 personal income tax policy

To: Mr. Van Thanh Long

(Address: Block B, Hongkong Tower, 243A De La Thanh street, Lang Thuong ward, Dong Da district, Hanoi - Tax identification number: 8462443498)

On December 5, 2022, Hanoi Tax Department received an unnumbered official dispatch dated December 2, 2022 from Mr. Van Thanh Long (hereinafter referred to as the reader) regarding difficulties with personal income tax policy. Hanoi Tax Department provides the following opinions:

- Pursuant to the Ministry of Finance’s Circular No. 111/2013/TT-BTC dated August 15, 2013, guiding the Law on Personal Income Tax and the Government’s Decree No. 65/2013/ND-CP dated June 27, 2013, detailing a number of articles of the Law on Personal Income Tax and the Law Amending and Supplementing a Number of Articles of the Law on Personal Income Tax:

+ Taxable incomes from salaries and wages are specified in Clause 2, Article 2 as follows:

“Under Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, incomes liable to personal income tax include:

...2. Incomes from salaries or wages

a) Salaries, wages and amounts of salary or wage nature in monetary or non-monetary form.

...c) Remunerations receivable as commissions for goods sale agency, brokerage commission, payments for participation in scientific and technical researches; payments for participation in projects or schemes; royalties as prescribed by the law on royalties regime; payments for teaching activities, art and cultural performances, physical training and sports activities; payments for advertising and other services and other payments.

...”

+ Tax bases for incomes from business activities and incomes from salaries or wages of resident individuals are specified in Clause 2 Article 7 as follows:

“2. Tax rate

Personal income tax rates for incomes from business activities and incomes from salaries or wages are applied according to the Partially Progressive Tax Tariff prescribed in Article 22 of the Law on Personal Income Tax, specifically:

+ Clause 1, Article 25 provides regulations on tax withholding and tax withholding documents as follows:

“1. Tax withholding

Tax withholding means that income payers calculate and withhold payable tax amounts from incomes of taxpayers before paying incomes, specifically as follows:

...b) Incomes from salaries or wages

b.1) For resident individuals who sign labor contracts of three (3) months or more, including those signing such contracts with many entities, income payers shall withhold tax according to the Partially Progressive Tax Tariff.

b.2) For resident individuals who sign labor contracts of three (3) months or more but cease their jobs before such contracts expire, income payers shall also withhold tax according to the Partially Progressive Tax Tariff.

... b. 5) To-be-withheld tax amounts for income from salaries and wages of resident individuals are determined under Article 7 of this Circular, and those of non-resident individuals, under Article 18 of this Circular.

...

i) Tax withholding in other cases

Payers of wages, remunerations or other amounts to resident individuals who do not sign labor contracts (under Points c and d, Clause 2, Article 2 of this Circular) or sign labor contracts of under three (3) months with a total income of VND two million (2,000,000) or more each time shall withhold tax at the rate of 10% of income before making payment to these individuals.

If an individual has the sole income subject to tax withholding at the above rate while his/her total taxable income after subtracting family circumstance-based deductions is not enough for tax payment as estimated, he/she shall make a commitment (according to the form enclosed with the document guiding tax administration) and send it to the income payer for use as a basis for temporarily not withholding personal income tax.

...Individuals making commitments under this Point must have made tax registration and have tax identification numbers at the time of making commitment.”

- Pursuant to Article 10 and Appendix I of the Ministry of Finance's Circular No. 40/2021/TT-BTC dated June 1, 2021, providing guidance on value-added tax, personal income tax, and tax administration for business households and business individuals:

+ Article 10 - Tax bases stipulates that:

“Article 10. Tax bases

Tax bases for business households and business individuals are taxable turnover amounts and tax rates calculated on turnover amounts.

1. Taxable turnover amounts

Turnover amounts liable to VAT and those liable to personal income tax for business households and business individuals are tax-inclusive turnover amounts (in case such amounts are liable to taxes) generated in a tax period, including sales turnover, processing remuneration, commissions, and charges for service provision from goods production and service provision activities, including also bonuses and support amounts for achievement of sales turnover targets, sales promotion, commercial discounts, payment discounts, supports in cash or in kind; price subsidies, surcharges, extra charges and additional levies generated by such households and individuals under regulations; compensations for contract breaches and other compensations (only included in personal income tax-liable turnover amounts), and other turnover amounts generated by such business households and individuals, regardless of whether such amounts have been collected or not.

...

3. Determination of payable tax amounts

Payable VAT amount = VAT-liable turnover amount x VAT rate

Payable personal income tax amount = Personal income tax-liable turnover amount x Personal income tax rate

In which:

- VAT-liable turnover amount and personal income tax-liable turnover amount shall be determined under the guidance provided in Clause 1 of this Article.

- VAT rate and personal income tax rate must comply with the guidance provided in Appendix I to this Circular.”

+ A list of business lines for determination of VAT and personal income tax based on a percentage (%) of turnover for business individuals is specified in Appendix I:

Based on the above provisions, Hanoi Tax Department has the following opinions:

1. In case the reader is an individual who is not registered for business and enters into a contract with Timevision Media and Trading Joint Stock Company to perform advertising services for the Company's products, the remuneration received from the contract mentioned above is of the nature of salary and wages as prescribed at Point c, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC. Personal income tax for individuals, in this case, shall be as follows:

            - In case the reader is a resident individual receiving salaries or wages from a labor contract for a period of three (3) months or more, the company paying the income shall withhold tax according to the Partially Progressive Tax Tariff prescribed at Point b, Clause 1, Article 25 and Clause 2, Article 7 of the Ministry of Finance's Circular No. 111/2013/TT-BTC dated August 15, 2013.

            - In case the reader is a resident individual who does not have a labor contract or has a labor contract for less than three (3) months, the company paying the income shall withhold a tax of 10% for income from VND 2,000,000/time or more before paying income to the reader as prescribed at Point i, Clause 1, Article 25 of the Ministry of Finance’s Circular No. 111/2013/TT-BTC dated August 15, 2013.

            2. In case the reader is an individual registered for business and enters into a contract with Timevision Media and Trading Joint Stock Company to perform advertising services for the Company's products, the income received by the reader from the above-mentioned contract shall be determined as income from business activities. The reader shall determine the payable tax amount according to the guidance in Article 10 and Appendix I of the Ministry of Finance’s Circular No. 40/2021/TT-BTC dated June 1, 2021, providing guidance on value-added tax, personal income tax, and tax administration for business households and business individuals.

The reader should base on the provisions of the law cited above and compare with the actual situation for proper implementation

If there are any difficulties arising in the course of implementation, please refer to Hanoi Tax Department's guiding documents on the website http://hanoLgdt.gov.vn or contact the Office for management of business households, individuals and other revenues for support and settlement.

Hanoi Tax Department hereby informs the reader for implementation./.

For the Director

The Deputy Director

NGUYEN TIEN TRUONG