DO NON-RESIDENT INDIVIDUAL HAVE TO PAY PERSONAL INCOME TAX?

Non-resident individuals are one of the objects subjected to paying personal income tax when taxable income arising within the territory of Vietnam. Depending on each specific case, organizations and individuals paying income are responsible for deducting and paying taxes into the state budget each time they arise for taxable income paid to taxpayers; or the taxpayer is a non-resident individual who is responsible for declaring and paying tax each time income is generated for taxable income according to regulations.

So, what kind of income do non-resident individuals have to pay personal income tax on, and how are the current regulations?

1.         Who is non-resident individual?

A non-resident individual is a person who does not meet the conditions to determine a resident individual as follows:

A resident individual means a person who satisfies any of the following conditions:

–           Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of his/her presence in Vietnam;

Individuals present in Vietnam under this Point means those whose presence is in the Vietnamese territory.

–           Having a place of habitual residence in Vietnam in either of the following two cases:

+          Having a registered place of permanent residence under the law on residence;

+          Having a rented house for dwelling in Vietnam under the law on housing, under a rent contract with a term of 183 days or more in a tax year.

In case an individual has a place of permanent residence in Vietnam as prescribed in this point but he/she actually presents in Vietnam less than 183 days in tax year and he/she fail to prove that he/she is resident person of other country, so he/she will be considered as resident person in Vietnam.

2.         How must a non-resident individual pay personal income tax?

a.         Tax on income from business

Calculation formula:

Personal income tax = Turnover from production and business activities x tax rate.

Therein:

–           Turnover is the total sum of money derived from the provision of goods or services, including also expenses paid by the goods or service buyer on behalf of the non-resident but not refunded to the goods or service buyer.

If a contract between the goods or service provider and buyer does not specify personal income tax, the taxable turnover that must be converted is the total sum of money in any form earned by the non-resident from the provision of goods or services in Vietnam, regardless of places where business activities are conducted.

–           Tax rates applicable to incomes from business are specified for different production sectors or business lines as follows:

+          1% for goods trading;

+          5% for service provision;

+          2% for production, construction, transportation and other business activities.

b.         Tax on incomes from salaries or wages

Calculation formula:

PIT = taxable income from salary, wages x tax rate.

Therein:

–           The applicable tax rate is 20%.

–           Taxable income from salaries and wages is the total amount of wages and salaries that a non-resident individual receiving for performing work in Vietnam, regardless of where the income is paid.

c.         Tax on incomes from capital investment

Calculation formula:

Personal income tax = income from capital investment received from investing capital in organizations and individuals in Vietnam x tax rate.

Therein, the applicable tax rate is 5%.

>> OUTWARD INVESTMENT, WHAT SHOULD BE NOTED? https://linconlaw.vn/outward-investment-what-should-be-noted/

>> PROCEDURES FOR ISSUANCE OF ELIGIBILITY CERTIFICATE  FOR CONSTRUCTION EXECUTION CLASS II https://linconlaw.vn/procedures-for-issuance-of-eligibility-certificate-for-construction-execution-class-ii/

d.         Tax on incomes from capital transfer

Calculation formula:

Personal income tax = total amount received from the transfer of capital in Vietnamese organizations or individuals x tax rate.

Therein, the applicable tax rate is 0.1%, regardless of whether the transfer is made in Vietnam or abroad.

e.         Tax on incomes from real estate transfer

Calculation formula:

Personal income tax = real estate transfer price x tax rate.

Therein, the applicable tax rate is 2%.

f.          Tax on incomes from copyright or franchising

Calculation formula:

Personal income tax = income exceeding 10 million VND according to each transfer contract, transfer of rights to use intellectual property rights, technology transfer; each franchise contract in Vietnam x tax rate.

Therein, the applicable tax rate is 5%.

g.         Tax on incomes from won prizes, inheritances or gifts

Calculation formula:

Personal income tax = prize value for each win in Vietnam; or income from inheritance or gift is the value of the inheritance or gift exceeding 10 million VND for each prize win, generating income x tax rate.

Therein, the applicable tax rate is 10%.