Instructions on how to calculate personal income tax in 2015

Posted date 20/04/2016

1.730 view

Posted date 20/04/2016

1.730 view

Lecturer Vu Thi Mai Nhi

As is known, Personal Income Tax (PIT) is levied on the income of each individual, but the procedures for paying personal income tax are not only related to the individual taxpayer but also related to the organizations and individuals paying income.
- Personal income tax has a very wide tax coverage, shown in the following two points:
+ Personal income tax is levied on all personal income , regardless of whether the source of income is from business, labor or property, etc. Except for some cases that are regulated as tax exemption or tax reduction.
+ Subjects required to declare and pay personal income tax are all individuals with taxable income, including all citizens of the host country and foreigners residing or temporarily residing in Vietnam but having the number of days present, working, and having income according to the level prescribed by the Law on Personal Income Tax (present in Vietnam for 83 days or more or for 12 consecutive months).
The article only guides how to calculate personal income tax on business income and income from salaries and wages. For other types of income, please refer to Circular 111/2013/TT-BTC, Circular 156/2013/TT-BTC, Circular 92/2015/TT-BTC, the income tax law, the law amending and supplementing the laws on personal taxes and related current documents.
I. Points to note before calculating personal income tax from salaries and wages:
1. Time to calculate personal income tax
- It is the time to pay income.
(According to point b, clause 2, article 8, Circular 111/2013/TT-BTC)
For example: Salary of November 2015 paid in December 2015 is included in taxable income of December 2015.
(Refer to Clause 1, Section III of Official Dispatch No. 187/TCT-TNCN dated January 15, 2013 of the General Department of Taxation, Official Dispatch 380 cT/TTHT dated January 14, 2015)
- Personal income tax is a monthly tax, declared monthly or quarterly but settled annually.
2. Method of calculating personal income tax
- For employees signing labor contracts for 3 months or more: Calculated according to the progressive tax table.
- For employees who do not sign a contract or sign a labor contract for less than 3 months with a total income payment of 2 million VND/time or more: Deduct 10%.
- For non-resident individuals (usually foreigners): Deduction of 20% (determined by taxable income from salary, wages (x) with tax rate of 20%).
II. SPECIFIC INSTRUCTIONS ON HOW TO CALCULATE PERSONAL INCOME TAX IN 2015
1. For resident individuals with labor contracts of 3 months or more:
(Including cases of signing labor contracts for 3 months or more in many places).
- For resident individuals who sign labor contracts for 3 months or more but stop working before the end of the labor contract, the organization or individual paying the income will still deduct tax according to the progressive tax table.
(According to point b, clause 1, article 25, Circular 111/2013/TT-BTC).

Personal Income Tax

Taxable income

Tax rate

In there:
a. Taxable income

Taxable income

Deductions

· Taxable income: Is the total personal income received from the paying organization NOT including the following:
- Deductions, including:
+ Family deduction: taxpayer - 9,000,000 and dependents (must register dependent tax code) - 3,600,000/person. (Calculated monthly).
+ Compulsory insurances : Social insurance, health insurance, unemployment insurance and occupational insurance in some special fields.
+ Charitable, humanitarian and educational contributions.
- Meal allowance, lunch:
+ If the business does not organize cooking - but pays money to employees (Salary allowance): Maximum exemption of 680,000
For example: Company A's lunch allowance is 900,000/month, then 680,000 is exempted, the remaining 900,000 - 680,000 = 220,000 is included in taxable income.
For example: Company B's lunch allowance is 600,000/month, then only 600,000 is exempted (Exempted based on actual expenses).
+ If the business organizes its own cooking, buys meal vouchers, and provides meals for employees, it is exempted from all costs.
- Phone allowance: According to company regulations.
For example: Enterprise A stipulates that the phone allowance for employees is 300,000/month. When receiving this 300,000, employees are exempt from personal income tax.
- Clothing allowance:
+ In kind : Completely exempted (if there are invoices and documents according to regulations).
+ In cash: maximum 5 million/person/year
+ Enterprises paying for uniforms in cash and in kind , the maximum exemption for the cash portion is no more than 5 million/person/year. In-kind expenses are exempted in full (if there are invoices and documents as prescribed).
- Income from salary, wages for night work, overtime is paid higher than salary, wages for day work, working within working hours.
For example: Working the morning shift is paid 10,000/hour, working at night or overtime is paid 15,000/hour, then the amount of overtime received at night or overtime is 10,000 subject to personal income tax, the remaining 5,000 is not subject to tax.

- (There are also some other allowances that are also exempt from tax or not subject to personal income tax, please refer to Circular 111/2013/TT-BTC, Circular 92/2015/TT-BTC.)
b. Tax rate

Personal income tax rates on income from business, salaries and wages are applied according to the progressive tax schedule.

PROGRESSIVE TAX SCHEDULE
Level	Taxable income/month	Tax rate
1	Up to 5 million VND	5%
2	Over 5 million to 10 million	10%
3	Over 10 million to 18 million	15%
4	Over 18 million to 32 million	20%
5	Over 32 million to 52 million	25%
6	Over 52 million to 80 million	30%
7	Over 80 million	35%

For example: Mr. Vu Van Long has income from salary and wages in November 2015 as follows:
- Actual salary: 40 million VND
- In that 40 million, there is 1 million for lunch allowance.
- He pays insurance (social insurance, health insurance, unemployment insurance) on a salary of 10 million.
- Mr. Long supports an elderly mother with no income and a child under 18 years old (Registered form 02/DK-NPT-TNCN according to TT92/2015/TT-BTC for family deduction).
Mr. Long's personal income tax in November 2015 is calculated as follows:
- Mr. Long's income is 40 million, maximum meal allowance is exempted: 680,000
ð Taxable income = Total income – Tax-exempt items
= 40,000,000 – 680,000 = 39,320,000
- Mr. Long is entitled to the following deductions:
+ Self: 9,000,000
+ Dependents: 3,600,000 x 2 = 7,200,000
+ Social insurance, health insurance, unemployment insurance: 10,000,000 x (8% + 1.5% + 1%) = 1,050,000
ð Total deductions: 9,000,000 + 7,200,000 + 1,050,000 = 17,250,000
Mr. Long's taxable income will be:
Taxable income = taxable income - Deductions
= 39,320,000 – 17,250,000 = 22,070,000
· The amount of tax payable is calculated according to each level of the progressive tax schedule as follows:
- Level 1: 5 million VND x 5% = 0.25 million VND
- Level 2: (10 million VND – 5 million VND) x 10% = 0.5 million VND
- Level 3: (18 million - 10 million) x 15% = 1.2 million
- Level 4: (22.07 million VND - 18 million VND) x 20% = 0.814 million VND
ð The total personal income tax that Mr. Long must pay in November 2015 is: 0.25 million VND + 0.5 million VND + 1.2 million VND + 0.814 million VND
2. For individuals who do not sign a labor contract or have signed one but for less than 3 months.
- Deduct personal income tax for each payment of income from VND 2,000,000 or more as follows:
+ For resident individuals: Deduct 10% of total income paid/time (Regardless of having a tax code or not).
For example: In the first semester of the 2015 school year, Dai Nam University invited Mr. Hoang Dinh Thanh to be a guest lecturer to teach Financial Accounting (45 periods) with a salary of 80,000 VND/period.
- When paying Mr. Thanh's salary, Dai Nam University's accountant will deduct 10% personal income tax at source as follows:
(45 periods x 80,000) x 10% = 360,000
Attention:
- In case an individual has only one income subject to tax deduction at the above rate but the estimated total taxable income of the individual after deducting family circumstances is not enough to pay tax, the individual with income must make a commitment (Form Commitment 23/CK - TNCN) to the income paying organization as a basis for temporarily not deducting personal income tax. (The person making the commitment must have a Tax Code at the time of making the commitment).
- Based on the income recipient's commitment, the income paying organization does not deduct tax. At the end of the tax year, the income paying organization must still compile the list and income of individuals who have not reached the tax deduction level and submit it to the tax authority. The individual making the commitment must be responsible for his/her commitment. In case of detecting fraud, he/she will be handled according to the provisions of the Law on Tax Administration.

Instructions on how to calculate personal income tax in 2015

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