PERSONAL INCOME TAX FROM RECEIVING DIVIDENDS, FOR FOREIGN INVESTORS AS NON-RESIDENT, HOW TO PAY?

Vietnam is becoming an attractive securities market for investors, including foreign investors, with significant growth in recent years. However, one of the important factors that foreign investors need to pay attention to is the issue of personal income tax applied to profits from stock transactions. In particular, how is the personal income tax from receiving dividends regulated, reference to the article below.

1.         Who must pay personal income tax for receiving devidends?

Personal income tax payer include resident and non-resident individuals who earn taxable incomes.  Scope to define taxable income of taxpayers shall be as follows:

–           For resident individuals, their taxable incomes are incomes earned inside and outside the Vietnamese territory, regardless of where their incomes are paid;

–           For non-resident individuals, their taxable incomes are incomes earned in Vietnam, regardless of where their incomes are paid.

a.         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.

b.         A non-resident individual means a person who does not satisfy any of the conditions specified above.

2.         Dividend income is taxable income of foreign individuals

According to current regulations on personal income tax, share income (including dividends) is taxable income, belonging to the group of income from capital investment. Specifically, income from taxable capital investment of individuals includes the following types of income:

–           Loan interest;

–           Dividend income;

–           Income received from capital contribution to limited liability companies, partnerships, cooperatives, joint ventures, business cooperation contracts and other forms of business according to the provisions of the Enterprise Law and the Law on Cooperatives; Income received from contributing capital to establish a credit institution according to the provisions of the Law on Credit Institutions; capital contribution to Securities Investment Funds and other investment funds established and operating in accordance with the provisions of law.

However, profits from private enterprises and single-member limited liability companies owned by individuals will not be included in taxable income from capital investment.

3.         Personal income tax rate from receiving dividends from foreign investors

Personal income tax on income from capital investment is determined according to the following formula:

Personal income tax payable = Taxable income × Tax rate.

In there:

–           Taxable income is the total taxable income that an individual receives from capital investment in an organization or individual in Vietnam.

–           The applicable tax rate is 5%.

>> SHAREHOLDERS, GENERAL SHAREHOLDERS OF A PUBLIC COMPANY https://linconlaw.vn/shareholders-general-shareholders-of-a-public-company/

>> PREMATURE WITHDRAWAL OF DEPOSIT, CAN  INTEREST STILL BE RECEIVED IN FULL? https://linconlaw.vn/premature-withdrawal-of-deposit-can-interest-still-be-received-in-full/

4.         Time to calculate personal income tax

The time to determine taxable income is the time when organizations and individuals pay income to taxpayers.

Note: For income from dividends paid in shares, the time to determine income from capital investment is the time when individuals transfer shares.