Recently, the Prime Minister promulgated two new Decisions on personal income tax exemption and a new Circular to implement these Decisions. So, in what cases personal income tax is exempted?
BASIC KNOWLEDGE ON PERSONAL INCOME TAX
According to the Personal Income Tax Law, personal income taxpayers include residents who earn taxable incomes. Basically, incomes liable to personal income tax include the following kinds of income:
- Incomes from goods production or trading or service provision; incomes from independent professional activities of individuals possessing practice licenses or certificates in accordance with law;
- Incomes from salaries and wages;
- Incomes from capital investment;
- Incomes from capital transfer;
- Incomes from transfer of real estate;
- Incomes from won prizes;
- Incomes from copyright;
- Incomes from commercial franchising;
- Incomes from inheritances;
- Incomes from gifts.
The Law on Personal Income Tax stipulates cases in which personal income tax is exempted, including: retirement pensions paid by the social insurance, incomes from the value of land use rights of individuals who are allocated land by the state, incomes from foreign exchange remittances, wages paid for night shift or overtime work, which are higher than those paid for day shifts or prescribed working hours in accordance with law, etc.
NEW CASES IN WHICH PERSONAL INCOME TAX IS EXEMPTED
On February 22nd, 2016, the Prime Minister issued Decision No. 06/2016/QD-TTg and Decision No. 07/2016/QD-TTg regulating the issue of personal income tax exemption. Accordingly, there will be two additional cases in which personal income tax is exempted:
- Foreign experts who implement foreign non-governmental aid programs or projects in Vietnam.
- Vietnamese individuals employed under contracts to work at Vietnam-based representative agencies of international organizations under the United Nations system. Vietnamese individuals employed on a part time basis at Vietnam-based representative agencies of international organizations under the United Nations system are not eligible for tax exemption.
PROCEDURES FOR APPLICATION OF PERSONAL INCOME TAX EXEMPTION DOSSIERS
On June 28th, 2016, the Ministry of Finance issued two circulars: Circular No. 96/2016/TT-BTC and Circular No. 97/2016/TT-BTC to guide the implementation of Decision 06 and Decision 07 mentioned above. Accordingly, procedures and time limit for submission of tax exemption dossiers of two new subjects listed above shall be implemented as follows: a. The case of tax exemption for foreign experts. The dossier comprises:
- Certification of foreign specialists and application for income tax exemption by the Line Agency or the owner of Foreign non-governmental Aid. This certification and application shall be made according to form No. 01/XNCG-DNMT.
- A copy of the decision approving the Foreign non-governmental aid program or project in Vietnam.
- A copy of the program or project Document approved by a competent Vietnamese agency.
- A copy of the contract signed between the foreign expert and the Foreign non-governmental organization or the Line Agency or the owner of Foreign non-governmental Aid.
Deadline for submission of tax exemption dossiers: Within 30 days after the contract with foreign experts takes effect, the Line agency or the owner of Foreign non-governmental Aid shall send the tax exemption dossier to the tax agency. Place for submission of dossiers:
- If foreign experts sign contracts with the Line agencies, tax exemption dossiers shall be submitted to the Tax Departments of provinces or centrally-run cities where the Line agencies are headquartered.
- If foreign experts sign contracts with the remaining subjects, tax exemption dossiers shall be submitted to the place where the owner of Foreign non-governmental Aid is located.
- The case of tax exemption for Vietnamese individuals employed under contracts to work at Vietnam-based representative agencies of international organizations under the United Nations system. The dossier is made in 2 copies, including:
- Diplomatic notes of the Vietnam-based representative agencies of international organizations under the United Nations system and the list of Vietnamese staff members who shall be exempted from personal income tax according to form No. 01/DSMT-UN.
- A copy of the labor contract.
Deadline for submission:
- For an international organization under the United Nations system that has just set up an office in Vietnam, it must submit tax exemption dossiers within 30 days since the head of this organization submits the letter of authorization to the competent representative of Vietnam.
- For an international organization under the United Nations system that has set up an office in Vietnam before this Circular takes effect but has not submitted personal income tax exemption dossiers, it shall send the dossiers within 30 days from the date this Circular comes into force.
- For an international organization under the United Nations system in Vietnam that has recruited or terminated labor contracts with Vietnamese employees, the tax exemption dossiers for changed Vietnamese employees shall be submitted before the 20th day of the next month following the month in which changes occur.
Place for submission of dossiers: Representative offices of international organizations under the United Nations system in Vietnam shall send tax exemption dossiers to the Ministry of Foreign Affairs (Directorate of State Protocol).
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