CHAPTER 8

PERSONAL INCOME TAX

 LECTURE OBJECTIVES
1. Understand the concept and purpose of
Personal Income Tax (PIT).
2. Identify different categories of taxable and
exempted income.
3. Learn the tax obligations for residents and
non-residents.
4. Understand the process of tax calculation,
deductions, and filing requirements.
5. Gain awareness of penalties for non-
compliance and the importance of timely tax
filings.
CHAPTER CONTENT

Concept, characteristics, and role of personal income tax

Taxpayers

Basis and calculation of personal income tax

Personal income tax incentives

Declaration payment and deduction of corporate

income tax
CONCEPT, CHARACTERISTICS AND ROLE OF
PERSONAL INCOME TAX

Concept:
Personal Income Tax (PIT) is
a direct tax imposed on
individuals' incomes, either
monthly or annually. It aims
to regulate income
distribution among social
classes, contributing to
social equity and increasing
the State budget.
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CONCEPT, CHARACTERISTICS AND ROLE OF
PERSONAL INCOME TAX

Concept:
PIT is a direct tax levied on
individuals' actual earnings.
It helps adjust the disparity
in income levels across
different groups and serves
as a significant revenue
source for the government.

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 CONCEPT, CHARACTERISTICS AND ROLE OF PERSONAL
INCOME TAX

Characteristics:

 Direct tax: Calculated directly on taxable income, leading to

a perceived tax burden.
 Wide scope: Applicable to both domestic and foreign
income sources.
 Progressive taxation: Applies a graduated rate system,
taking individual circumstances into account. 6
 CONCEPT, CHARACTERISTICS AND ROLE OF PERSONAL
INCOME TAX

History of Personal Income Tax:

 Introduced in the Netherlands in 1797.

 Adopted in Japan in the late 19th century, in South Korea in

1948, and in Thailand in 1939.
 Currently, it is a widespread tax system globally,
significantly contributing to state budgets in developed
countries. 7
 CONCEPT, CHARACTERISTICS AND ROLE OF PERSONAL
INCOME TAX

Role of Personal Income Tax:

 Ensures equitable income distribution by taxing higher
incomes more heavily.
 Addresses the regressive nature of indirect taxes.

 Provides a stable source of government revenue, especially

in developed economies.
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 SCOPE OF APPLICATION

Taxpayers

Individuals in Vietnam are subject to Personal Income Tax

(PIT) in Vietnam, based upon their tax residency status.
Employment income is generally subject to varying
progressive rates, with other income subject to fixed tax
rates.

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 SCOPE OF APPLICATION

Taxpayers

Tax Residency:
Vietnam Tax Residents are taxable in Vietnam on their
worldwide income, whilst Non-Tax Residents are only
taxable in Vietnam on their Vietnamese sourced income.

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 SCOPE OF APPLICATION
Taxpayers
A Tax Resident is an individual that satisfies one of the
following:

a) Resides in Vietnam for 183 days or more within 12

consecutive months from the first day of arrival, or in a
calendar year.

b) Holds a temporary or permanent residence card for

Vietnam, or
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c) Leases a property for a term of 183 days or more in

Vietnam in the assessment period
 SCOPE OF APPLICATION

Taxpayers

If the above tests are not met, then an individual will be

treated as Non-Tax Resident in Vietnam. However, care still
needs to be taken as there are circumstances where an
individual may still be deemed a tax resident in Vietnam if
they cannot prove they are Tax Resident in another
country.
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 TAX BASIS

Taxable income
• Income from business activities;
• Wages received from employers;
• Capital investment;
• Capital transfer;
• Property transfer;
• Prizes;
• Royalties;
• Commercial franchising;
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• Inheritances
• Gifts
 TAX BASIS

Tax Assessment Period

• For residents: Annual or as income arises.

• For non-residents: Assessed at the time of
income generation.

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 TAX BASIS

• Tax residents are subject to Vietnamese personal income

tax (PIT) on their worldwide taxable income, wherever it
is paid or received. Employment income is taxed on a
progressive tax rates basis. Non-employment income is
taxed at a variety of different rates.
• Non-residents are subject to PIT at a flat tax rate on the
income received as a result of working in Vietnam/on
Vietnam-related income in the tax year, and at various
other rates on their non-employment income. However,
this will need to be considered in light of the provisions of 15

any double taxation agreement (DTA) that might apply.

 TAX CALCULATION

Taxable income subject to this schedule is the income

of a resident individual, derived from wages and
salaries, after deducting family relief, mandatory
insurance contributions, and contributions to
charitable, humanitarian, and educational funds.

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 TAX CALCULATION

Tax residents: Employment income

Tax Payable by Income Bracket = Taxable Income of Each Bracket

× Corresponding Tax Rate for That Bracket
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 TAX CALCULATION

Tax residents: Employment income

Income Deductions
Deductions include mandatory insurance contributions and
family relief, which help reduce taxable income.

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 TAX CALCULATION

Income Deductions

Family Relief Deductions:

 11 million VND/month for taxpayers.
 4.4 million VND/month per dependent.

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 TAX CALCULATION

Income Deductions
Compulsory Insurances:

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 TAX CALCULATION

Income Deductions

Deductible Contributions:
 Charity and Humanitarian contributions: Donations to
approved charities or educational funds can be deducted
from taxable income.

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 TAX CALCULATION

Notes:
For individuals who enter into Service Contracts regulated by
Civil Laws in Vietnam for short term activities (providing
services/products, implementing projects), PIT will not be
applied on the progressive scale. Instead, payments exceeding
VND 2,000,000 in a month will require 10% PIT (for Tax
Residents) to be withheld and remitted by the paying entity
(the company) as a pre-payment of PIT for the individuals.

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 TAX CALCULATION

Tax residents: Non-employment income

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Tax Payable = Taxable Income × Corresponding Tax Rate
 TAX CALCULATION

Tax residents: Business income*

Tax Payable = Taxable Income × Tax Rate of each type

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 TAX CALCULATION

Tax residents: Business income*

Individuals earning business income from VND 100 million

per calendar year and below shall not be subject to PIT on
their business income. 25
 TAX CALCULATION

Tax non-residents income

Tax Payable = Taxable Income × Tax Rate of each type 26

 TAX CALCULATION

Non-Taxable Benefits & Income

Although the definition of taxable income is broad, there are

certain defined benefits that are excluded from taxation
(non-taxable allowances). These allowances require
supporting vouchers or company’s policies depending on
each type of allowance.

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 TAX CALCULATION

Non-Taxable Benefits & Income

Once per year round-trip airfares for expatriate employees
returning home, or Vietnamese working abroad returning
 School fees (excluding tertiary) for children of expatriate
employees or for Vietnamese working abroad
 Mid-shift meals (subject to a cap if provided in cash and cap
amount of non-tax in case direct payment to employees is
VND 730,000 per month)
 One-off relocation costs for expatriates coming to Vietnam
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for employment, and for Vietnamese working abroad.

 TAX CALCULATION

Non-Taxable Benefits & Income

 Uniforms (subject to a cap if provided in cash and cap
amount of non-tax in case direct payment to employees is
VND 5,000,000 per year).
 Benefits provided in kind on a collective basis (e.g.,
memberships) where an individual is not identified as
beneficiary.

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 TAX CALCULATION

Non-Taxable Benefits & Income

Interest earned on deposits with banks and credit
institutions.
Payments from life and non-life insurance policies.
Retirement pensions paid from the Social Insurance Fund
Transfers of property between direct family members.
 Inheritances and gifts from direct family members.
 Monthly retirement pensions from voluntary insurance
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schemes.
 Income from winnings at Casinos.
 TAX FILING AND DECLARATION

Taxpayers must register, declare, and pay taxes to the tax

authority. The timeline depends on residency status and
income type.

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 TAX FILING AND DECLARATION

Tax Years & Finalisations

 Individuals are subject to a calendar year as their
standard tax year. Employers are required to withhold
PIT from employee salaries and remit monthly or
quarterly.
 Other taxes are generally required to be withheld at
source (i.e., dividends), or self-declared on an events
basis.
 Individuals will need to determine whether they will
need to undertake an annual tax finalisation to ensure
that their tax finalisation matters are in hand where
necessary by the deadline of PIT finalisation.
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 TAX FILING AND DECLARATION

Tax Years & Finalisations

 If an individual only has income from a single employer
during the year, or other income in limited circumstances,
then they can authorise their employer to finalise on
their behalf by the last day of the 3rd month from tax
year end (i.e., 31 March)
 If an individual wishes to claim a tax refund, a tax credit
for future years, or has a tax liability to the tax
authorities, then they must complete a tax finalisation by
the last day of the 4th month from the tax year end (i.e.,
30 April).
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 TAX FILING AND DECLARATION

Tax Years & Finalisations

 Individuals with simple tax matters, and who do not owe

any taxes to the authorities, do not need to finalise.
However, this may have an impact on future years if their
tax affairs become complicated, therefore all taxpayers
are encouraged to finalise their taxes each year.

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 TAX FILING AND DECLARATION

Tax Years & Finalisations

 Individuals with simple tax matters, and who do not owe

any taxes to the authorities, do not need to finalise.
However, this may have an impact on future years if their
tax affairs become complicated, therefore all taxpayers
are encouraged to finalise their taxes each year.

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 TAX FILING AND DECLARATION

Penalties for Non-Compliance

Fines and interest on unpaid taxes.

Possible legal action for tax evasion.

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 SUMMARY

 PIT concept: Personal Income Tax is a direct tax levied on individual

incomes, aimed at regulating income distribution and contributing to
state revenue.
 Taxpayers: Differentiates between residents (taxed on global
income) and non-residents (taxed on Vietnam-sourced income).
 Taxable Income: Includes wages, business income, investment
income, and other sources. Some income types, like inheritance
within direct family or scholarships, may be exempt.
 Deductions: Mandatory insurance contributions, family relief, and
approved charitable contributions can reduce taxable income.
 Tax Rates: Progressive tax rates ranging from 5% to 35%, based on
income brackets.

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 QUESTIONS

1. What is the concept and purpose of Personal Income Tax?

2. Who are the taxpayers of Personal Income Tax?
3. Explain the difference between residents and non-residents.
4. What is taxable income?List the types of taxable income
under Personal Income Tax.
5. What types of income are exempt from Personal Income
Tax?
6. What is the role of Personal Income Tax in society and for
the state budget?

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 EXERCISES

Mr. An is a resident of Vietnam and earns a monthly salary of 20 million VND.

He also receives a bonus of 60 million VND during the year.
He has two dependents. Calculate Mr. An's annual taxable income and tax
payable, considering:
- Deductions: Family relief (11 million VND/month for Mr. An and 4.4 million
VND/month per dependent).
- Mandatory Insurance Contributions: Social insurance, health insurance, and
unemployment insurance contributions total 10.5% of his monthly salary.

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