Some highlights in personal income tax statute
Source: 29-JUL-2008 Intellasia | 25/Jul/2008 Tuoi Tre
Jul 29, 2008 - 7:00:00 AM The finance ministry has submitted the prime minister a decree on implementing the Law on Personal Income Tax. Nguyen Van Phung, vice director of the finance ministry's tax policy department, member of the decree drafting member, said that "the decree in general still closely follows the law's contents. However, in order to ensure simple, transparent and proper principles, the decree specifies some contents such as taxable incomes from business, salary, wage, as well as requirements on tax exemption and reduction.

There are 10 kinds of taxable incomes. Among the 10 kinds, as for incomes from salary, wage, the decree will clarify incomes in cash and non-cash incomes such as payment for house lease, electricity bills, payment of insurance for employees that must be included into taxable incomes of persons.

One of the most concerns in the decree on implementing the Law on Personal Income Tax is tax deduction based on family situation. Whether is this fair?

Tax deduction based on family situation is a sensitive issue and is very difficult to manage in the reality. However, in order to ensure equality, prevent tax avoidance, the decree regulates that individuals that directly involve in agriculture production and are exempted from tax are required to have land or water-face use right certificates and must residential certificates. In case tax payers meet natural disasters, fire, accidents that significantly impact capacity of tax payment, they must have authorised state agencies certify their situations.

In case tax payers must feed dependents, the taxable amount will be the regulated taxable income plus 1.6 million dong a month per dependent.

Do those who pay corporate income tax have to pay personal income tax? Do household businesses have to pay personal income tax or corporate income tax?

Owners of limited liability companies still have to pay personal income tax. Because after fulfilling all obligations to the government, profits shared to individuals are generated, those owners have to pay personal income tax. However owners of private businesses do not have to pay personal income tax because they must pay corporate income tax. As for household businesses that have not followed accounting, document mechanisms and cannot identify revenue and costs, the tax agency will fix revenue and taxable income rates.

In order to avoid frauds in tax payment, the decree clearly regulates responsibilities of specific agencies. In case there is any sign of fraud, the tax agency is liable to cooperate with relevant agencies to inspect family situations of individuals to identify taxable incomes.

While all our transactions are now in cash, how can we manage incomes of high-income earners such as singers, doctors, lawyers?

In order to manage such high income earners, the decree requires income payers such as music show organisers, lawyer offices and others to deduct personal income tax of high income earners when incomes are paid. Expenses of those companies are incomes of singers, lawyers. As for doctors, local tax agencies will supervise their incomes. However in order to ensure fairness, it is required self-awareness of tax payers and awareness of the whole society.

How will securities transfer be taxed? How to ensure that investors are deducted losses before tax is calculated?

Taxable incomes for securities transfer is based on market prices for listed shares or book-entry prices for unlisted shares. Taxable incomes from securities transfer include transfer of rights to buy shares, expenses related to securities transfer and losses from share transfer of previous years [the number of years to calculate losses is five years at most].

The tax rate for securities transfer is 20% on taxable incomes of the whole year. In case tax payers do not follow the state accounting mechanism or do not register securities transfer from the start of the year, the tax rate is 0.1% on securities transfer prices for each transaction.