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THE GORVERNMENT The Socialist Republic of Vietnam
No: 05/CP Independence-freedom-Happiness
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Hanoi, January 20, 1995.
Article 1:
According to Article 1 of the Ordinance on Income Tax for high income earners (hereinafter referred to as income tax); all individuals having income must pay income tax including:
1. Vietnamese citizens working at home or doing business and working abroad.
2. Other individuals residing in Vietnam permanently, but not Vietnamese nationals.
3. foreigners deriving income from Vietnam, whether resident or not.
Article 2:
Income subjects to tax include permanent and casual incomes, excluding incomes related in Article 4 of this Decree.
1. Permanent income includes:
- All income under the form of salary, commission and retainer.
- Income from subsidies for accommodation, electricity and water. Accommodation fees are accounted partly according to real payment, but not over 15% of the total income from salary, commission and retainer.
- Bonuses in currency or goods from different sources.
- Other income earned by joining trade associations, management boards, etc.
- Individual income earned by operating production, business and service activities that are not subjects to profit tax, such as long-term consultancy services, job training, teaching, art and cultural performances.
2. Casual income:
- Gifts, presents in currency or goods sent to individuals in Vietnam from overseas organizations and individuals, in all forms.
- Income earned from technology transfer according to every contract includes: Transfer of the rights of ownership or use of industrial possessions; Transfer through purchasing and selling, supplying technical know-how, technological methods and commodity labels; Operating technological assistance and consulting services; Transfer of the use of or the right to use industrial, trade or scientific equipment.
- Income from the copyright of literature and fine art works.
- Income from construction and industrial design and other services.
- Lottery winnings.
Article 3.
Temporary tax exemption is applied to income from bank saving interest, credits, bonds and share interest.
Article 4.
Incomes which do not have to bear tax include:
1. Arising-in-Vietnam incomes, stipulated by the State of Vietnam:
- Payment for overtime work at night (excluding third-shift salary).
- Payment for the harmful influence of jobs in regions that may cause harm, such as mines, off-shore rigs, etc.
- Regional allowances and special allowances for some rural is lands and border areas.
- Seniority allowance for armed forces.
- Specific allowance for some professions: physicians of the court, surgeons.
- Allowances for State officials and other allowances from the State Budget; priority allowance for revolutionary service people before 1945.
- Business expenses.
- Payment for fixed quantities of food for some special professions.
- Social subsidies for those who enjoy social policies.
- full subsidies for redundancy of the State employees.
- Subsidies for the moving of production establishments according to State stipulations.
- Insurance compensation for insured people and professions.
- Bonuses for technological improvements and inventions, international prizes and national prizes acknowledged by the State of Vietnam.
- Bonuses in connection with appellation granted by the State such as Professor, People's Teacher, Labour Hero, Hero of the People's Armed forces, etc.
2. Income of private businesses subject to income tax in accordance with the Law on Income Tax (their income must not be included in expenses when tax bearing income is decided).
3. Permanent income of foreigners residing in Vietnam for less than 30 days within 12 consecutive months accounting from the first day they arrive in Vietnam.
Chapter II Accounting tax payable and the tax list
Article 5.
Methods for accounting income tax are based on incomes that bear tax on tax rate.
Article 6.
Permanent income that bears tax are total income of individuals stipulated in point 1, Article 2 of this Decree, accounted according to the monthly average in a year. Details as follow:
1. for Vietnamese citizens living at home or working overseas and other individuals residing in Vietnam, the average income is calculated by dividing the total income in a year by 12 months (solar calendar).
2. for foreigners residing in Vietnam for 183 days or more, the average is calculated by dividing incomes in Vietnam and income outside Vietnam by 12 months. If the declaration of the monthly income outside Vietnam is lower than that in Vietnam and this i s not proved, accounting of tax during their stay outside Vietnam will be based on the monthly income inside Vietnam. A month for accounting tax is 30 days.
3. for foreigners staying in Vietnam for 30-182 days, the average is their total arising income in Vietnam.
Article 7.
Tax rates for permanent incomes are as follows:
1. for Vietnamese citizens living in the country and other individuals residing in Vietnam, the list of partly-progressive tax, stipulated in point 1, Article 10 of the Ordinance on Income Tax, is applied. After paying tax according to this Tax list, if t he remainder is more than VND 5,000,000 (monthly) they have to pay another 30% of the sum above VND 5,000,000.
2. for Vietnamese citizens deriving income from inside and outside the country, the accounting of tax is made by dividing their total income (at home and abroad) by 12 months, and the correlative of tax stipulated in Points 1 and 2, Article 10 of the Ordi nance on Income Tax, is applied.
3. for foreigners residing in Vietnam for 183 days or more and Vietnamese citizens living and working overseas, the list of partly-progressive tax stipulated in Point 2, Article 10 of the Ordinance on Income Tax, is applied.
4. for foreigners residing in Vietnam for 30-182 days, flat tax rates of 10% of the total income, stipulated in Point 3, Article 10 of the Ordinance on Income Tax, is applied.
Article 8.
Casual income bearing tax is the incomes of an individual according to each arising income, stipulated in point 2, Article 2 of this Decree.
Income from gifts, presents belong to those who receive, including the receivers who are the owners of private businesses.
for income from technology transfer, construction and industrial design, the tax rate is accounted pursuant to the value of specific contracts, without distinction between times of payments.
Article 9.
Tax rates for casual incomes are applied according to the list of partly-progressive tax stipulated in Article 12 of the Ordinance on Income Tax. for income derived from technology transfer, gifts and presents of more than VND 2 million each, a flat rate is 5% for each total income, for incomes from lottery winnings, of more than VND 12.5 million each, a flat rate of 10% of the total is applied.
Article 10.
Incomes in foreign currency or commodities must be changed into Vietnamese dong in order to account tax. Commodities are valued pursuant to the average prices on the local market at the time incomes arise. for gifts and presents in the form of commodities from overseas, the tax rate is accounted according to the import tax of the same commodities at the time of receiving. foreign currency and gold are valued pursuant to the selling prices announced by the State Bank at the time the incomes arise. If the f oreign currency exchange rate is not yet announced by the State Bank, it is changed through the USD rate.
Chapter III Enumeration-tax payment
Article 11.
Income tax is implemented in accordance with the principle of original deduction. Organizations, individuals paying income or labour managing bodies (hereinafter referred to as delegated collection organizations) bear responsibility to deduct tax before p aying income.
- If individuals work in different places at different time of the year, income tax is deducted from the income source. At year's end, a report on tax payment must be made in the last working place in that year.
- If individuals, at the same time of the year, work and derive earning from more than one place, they must summarize and enumerate their tax payment in the place where they got the highest income, or the largest benefit.
- If individuals obtain income by joining trade association, management boards or other permanent income, apart from income derived from their main working place, they must enumerate all their income in order to pay tax in accordance with the stipulated r egulation.
- If individuals obtain income from consultancy services, training services, scientific symposiums which are not deducted at the source, they must enumerate and pay income tax to the local taxation bodies.
Article 12.
Enumeration of tax payment for permanent income: Income tax for permanent income is made up of average monthly income in a year of tax accounting and the enumeration for payment is made monthly, pursuant to the specific income in each month.
1. for Vietnamese citizens who have spent some time working overseas, the enumeration of average monthly incomes are made according to total incomes, including overseas incomes, and they must pay income tax in accordance with the respective tax list.
2. for foreigners:
- If residing in Vietnam for 30-182 days they must pay income tax in accordance with tax list stipulated in point 3, Article 10 of the Ordinance on Income Tax.
- If residing in Vietnam for 183 or more, they must enumerate and pay income tax in accordance with the list of partly-progressive tax, stipulated in point 2, Article 10 of the Ordinance on Income Tax.
- Their time of residence in Vietnam is accounted as 12 consecutive months for the first year of tax payment. from the following years, it is accounted according to the solar calendar. The day of arrival and the day of leaving are accounted to be one day.
Article 13.
Enumeration of tax payment for casual income: Tax for casual income is paid according to specific in come.
Organizations, individuals paying income are responsible to make deductions before paying wages (including the incomes of individuals from overseas transferring technology into Vietnam). Individuals delivering gifts, presents must enumerate and pay income tax instead of the receivers.
Article 14.
Tax payers are responsible for the implementation of the full enumeration of their incomes, pay all tax on time and report tax payments in accordance with the regulations of the Ministry of finance.
Article 15.
The Ministry of finance organizes the collection of income tax, and is responsible for the management, guidance and control of the delegated collection bodies to implement collection of income tax from individuals under the mode of income tax deduction at sources before paying income.
Organizations delegated to deduct income tax enjoy a commission of 0.5-1% of the collection before giving it to the State Budget, which is stipulated by the Ministry of finance.
Article 16.
Delegated collection organizations are responsible for holding the registration for enumeration, deductions and passing collected tax to the State Budget.
- To guide those who earn income bearing tax to enumerate their incomes; to take the declarations of tax payers; to make lists of enumeration for accounting tax; to summarize and set forth to Taxation bodies lists of income tax payers, tax rates, etc.
- To keep documents and dossiers relating to enumeration accountancy and payment of income tax; to report regularly to Taxation Bodies.
- To account and deduct tax, to account commission of organizations enjoying and paying collected tax to the State Budget.
- To provide bills for tax payers.
Article 17.
The organizations managing and paying incomes to foreigners are responsible to guide, complete the procedures on tax payment before carrying out procedures for foreigners. foreigners bearing income tax are responsible for enumerating to income paying orga nizations or taxation bodies their tax bearing income, time of residence in Vietnam within 30 days of their arrivals in Vietnam, and to pay full income tax before leaving Vietnam.
Chapter IV Tax reduction and exemption
Article 18.
The following cases are under consideration for reduction in or exemptions from income tax:
1. In cases of natural disasters, accidents which damage assets and income, which influences the living standards of tax payers, they are considered for exemption or reduction of income tax depending on the level of damage.
2. The Prime Minister of the Government exempts/ reduces income tax for those cases which involve the country's economic, political and social benefit.
The Ministry of finance regulates procedures on exemption and reduction of income tax stated in this Article.
Chapter V Implementation of provisions
Article 19.
Violations of the Ordinance on Income Tax are dealt with in accordance with Article 21, 22, 23, 24 of the Ordinance on Income Tax; Those who discover violations and assist Taxation Bodies in collecting tax will enjoy a commission of 10% or less of the col lected tax that is given to the State Budget, stipulated by the Ministry of finance.
Article 20.
for incomes that are specifically agreed upon, tax judgment and exemption are implemented in accordance with the document and international regulations which Vietnam enjoys or signs.
Article 21.
This Decree comes into effect from 1st June 1994 and replaces the Decree 119/HDBT dated 17th April 1994 of the Ministerial Council (the Government), Decree 16/CP dated 23rd March 1993 of the Government, Point 4, Article 7 of Decree 370/HDBT dated 9th Nove mber 1991 of the Ministerial Council, regulating compulsory payment to the State Budget by working people who have spent time abroad.
Regulations on income tax and additional collection after paying income tax promulgated before 1st June 1994 are not in force.
Organizations managing, training and employing labourers are allowed to extract at most 8% of the labourers' income to serve management, training and employment. This sum of money is managed and used in accordance with current financial regulations.
The Minister of finance provides guidance on the implementation of this Decree.
Article 22.
Minister, heads of Ministerial ranking bodies, Governmental bodies, Chair people of the People's Committees of provinces and cities under the Central management, pursuant to their functions, duties and power, carry out the implementation of this Decree.
for The Government Vice Prime Minister
PHAN VAN KHAI