Circular No. 02/2010/TT-BTC supplements Circular No. 84/2008/TT-BTC dated September 30, 2008, issued by the Ministry of Finance, guiding the implementation of certain provisions of the Law on Personal Income Tax and guiding the implementation of Decree No. 100/2008/NĐ-CP dated September 8, 2008, issued by the Government detailing certain provisions of the Law on Personal Income Tax.

Article 1. Supplement Point 2.4 to Clause 2, Section II, Part A as follows:

"2.4. Income from salaries and wages not included in taxable income:

2.4.1. Not included in personal income tax for income from salaries and wages of some items that civil servants, military personnel are entitled to receive or units pay on behalf of individuals according to the regulations of the State. Specifically as follows:

a) Items received according to the decision issued together with Decision No. 205/2004/QĐ-TTg dated December 10, 2004 of the Prime Minister;

b) Subsidies for service issued together with Decision No. 269/2005/QĐ-TTg dated October 31, 2005 of the Prime Minister on the subsidy for service;

c) Equipment system or items received according to the quota usage of cars for work issued together with Decision No. 59/2007/QĐ-TTg dated May 7, 2007 of the Prime Minister on the issuance of standards, quotas, and management and use of transportation means in state agencies, public institutions, and state-owned enterprises;

Article 2. Add Point 2.6 to Clause 2, Section III, Part A as follows:

"2.6. The exemption from personal income tax as provided above shall only apply to individuals transferring a single residential property or land plot for which the competent state management agency has issued a certificate of ownership or right to use.

For individuals who already have a residential property or land plot and now generate additional transfers of capital contribution contracts to acquire land plots or apartments, or transfers of purchase contracts for land plots or apartments, the income from such transfers shall not be subject to the exemption from personal income tax."

Article 3. Add the following at the end of Clause 4, Section III, Part A:

"In cases where inheritance or gifts are capital contribution contracts to acquire land plots or apartments, they shall not be exempt from personal income tax as stipulated in Clause 1 and Clause 4 of Decree No. 100/2008/NĐ-CP dated September 8, 2008 of the Government."

Article 4. Add Point 3.3 to Clause 3, Section I, Part B as follows:

"3.3. Deduction for mandatory insurance:

3.3.1. Individuals residing in Vietnam with income from business operations or salaries/wages who pay mandatory insurance premiums as prescribed by the Labor Code and the Social Insurance Law shall be allowed to deduct these insurance premiums from their taxable income before calculating personal income tax. Premiums paid in a given year shall be deducted from the taxable income of that year.

3.3.2. Foreign nationals residing in Vietnam and Vietnamese nationals residing in Vietnam but working abroad with income from business operations or salaries/wages earned outside Vietnam who participate in mandatory insurance schemes as prescribed by the country of their nationality similar to those prescribed by Vietnamese law, such as social insurance, health insurance, unemployment insurance, mandatory professional liability insurance, and other mandatory insurances (if applicable), shall be allowed to deduct these insurance premiums from their taxable income from business operations or salaries/wages when calculating personal income tax.

a) Basis for determining deductible insurance premiums: Individuals falling under Point 3.3.2 above must provide proof of payment of mandatory insurance premiums as prescribed by foreign countries.

Proof includes: receipts from insurance agencies or confirmation from income-paying entities regarding the amount of insurance premiums withheld and paid (in cases where the paying entity pays on behalf of the individual).

b) Foreign nationals and Vietnamese nationals participating in the aforementioned insurance schemes in foreign countries will be immediately temporarily deducted from their income for tax withholding purposes during the year (if proof is available) and settled according to the final amount at the end of the year; in cases where there is no proof for temporary deduction during the year, the deduction will be made once during the annual settlement of taxes."

"3.5.3. Individuals with income from the transfer of real estate shall apply a tax rate of 25% on taxable income meeting the following conditions:

a) The transfer price recorded in the transfer contract and declared on the tax return shall not be lower than the price set by the People's Committee of the province (for land use rights) or not lower than the price for stamp duty calculation set by the People's Committee of the province (for houses and construction works) at the time the transfer contract becomes effective according to the provisions of the Law.

In cases where the transfer price recorded in the transfer contract and declared on the tax return is lower than the price set by the People's Committee of the province (for land use rights) or lower than the price for stamp duty calculation set by the People's Committee of the province (for houses and construction works) at the time the transfer contract becomes effective according to the provisions of the Law, a tax rate of 2% shall be applied on the price set by the People's Committee of the province or centrally-administered city.

b) The purchase price and related costs (costs related to land use rights, house ownership; land improvement costs, house renovation costs; construction costs; other related costs) declared by the taxpayer must be supported by legal invoices and documents proving the accuracy of the purchase price and related costs declared by the taxpayer.

For individuals transferring capital contribution contracts to acquire land plots or apartments, the purchase price shall be determined based on payment vouchers for capital contributions and other supporting documents proving related costs. Related costs associated with the transfer of real estate include interest payments to financial institutions for purchasing real estate. In cases where only part of the capital has been contributed (without full payment as per the contract), the purchase price shall be determined as follows:

Purchase Price = { Total capital required by the contract - Remaining unpaid capital contribution } + Other related costs

In cases where the taxpayer declares the purchase price and related costs but does not have complete invoices and documents to prove the purchase price and costs, or provides invoices and documents but upon inspection by the tax authority, it is found that the invoices and documents are illegal or invalid, then a tax rate of 2% shall be applied on the transfer price.

c) Individuals transferring real estate shall declare and determine the applicable tax rate and bear responsibility for the accuracy of the declaration.

The tax authority receiving the tax declaration form shall be responsible for checking the declaration form and attached documents; if all conditions for applying a tax rate of 25% on taxable income are met, the tax calculation result of the transferor shall be accepted. If the tax calculation result is not accepted, the tax authority must clearly inform the transferor.

d) In cases where individuals declare and pay tax at a rate of 2% on the transfer price, but upon inspection, the transfer price recorded in the contract and declared for tax is lower than the price set by the People's Committee of the province, then the tax shall be calculated at a rate of 2% on the price set by the People's Committee of the province."

Article 6. Supplement Point 2.5.5 to Point 2.5, Section II, Part D as follows:

"2.5.5. Procedures for declaration and payment of personal income tax on the transfer of capital contribution contracts, land plot purchase contracts, and apartment purchase contracts:

a) In cases where the transfer of capital contributions results in the right to purchase a house or apartment, and in cases where the transfer of house purchase or apartment purchase contracts occurs, the individual's personal income tax declaration form will include a copy of the capital contribution contract or house purchase/apartment purchase contract signed between the individual and the construction or real estate business organization instead of submitting a copy of the land use rights certificate or proof of ownership of the house or construction on the land according to the guidance at item 2, Point 2.5.2, Clause 2, Section II, Part D of Circular No. 84/2008/TT-BTC of the Ministry of Finance, and indicator [04] in Form 11/KK-TNCN reflecting the documents regarding land use rights and house ownership should reflect the capital contribution contract or house purchase/apartment purchase contract signed between the individual and the construction or real estate business organization.

According to the Civil Code, a real estate transfer contract that has a legally recognized ownership or usage certificate issued by a competent state management agency must be notarized. However, in the case of transferring capital contribution contracts, land plot purchase contracts, or apartment purchase contracts, if the law requires the consent of the construction or real estate business organization and such consent has been obtained, notarization is not required.

Individuals transferring capital contribution contracts, land plot purchase contracts, or apartment purchase contracts shall declare and pay personal income tax at the local Tax Office where the transferred real estate is located or at the construction or real estate business organization (if that organization is authorized by the tax authority to collect taxes).

b) To facilitate individuals transferring capital contribution contracts, land plot purchase contracts, or apartment purchase contracts in declaring and paying taxes, the Tax Department will base its decision to authorize construction or real estate business organizations, infrastructure businesses (including real estate trading floors) to collect personal income tax from individuals transferring these contracts based on the actual situation in the locality. The procedures and fees for tax collection authorization shall be carried out in accordance with the Law on Tax Administration.

c) In addition to the documents in the tax declaration file already guided in Circular No. 84/2008/TT-BTC dated September 30, 2009, and Circular No. 161/2009/TT-BTC dated August 12, 2009, issued by the Ministry of Finance, the tax authority shall not require individuals transferring contracts to submit any additional documents."

Article 7. Supplement Clause 4 to Section II, Part D as follows:

"4. Regarding tax registration, withholding tax, declaration, payment, and settlement of tax for other cases.

4.1. Management of tax (tax registration, withholding tax, declaration, payment, and settlement of tax) for officials and civil servants with salary coefficients stipulated in the Salary Table attached to Decision No. 128/QD-TW dated December 14, 2004 of the Central Committee of the Communist Party of Vietnam; the Salary Table attached to Resolution No. 730/2004/NQ-UBTVQH11 dated September 30, 2004 of the Standing Committee of the National Assembly; level 3 of the high-level expert salary table, levels 1-2 of the military rank salary table attached to Decree No. 204/2004/NĐ-CP dated December 14, 2004 of the Government shall be as follows:

Based on taxable income from salaries, wages, and other income with the nature of salaries and wages actually paid, the unit directly paying salaries and wages shall implement the deduction of living expenses for the individual earning income and dependents according to the registration. On the basis of income after deducting allowable deductions and referring to the progressive tax rate table specified in Circular No. 84/2008/TT-BTC dated September 30, 2008 of the Ministry of Finance, the unit directly paying salaries and wages shall withhold personal income tax and remit it to the State budget as prescribed.

4.1.1. Tax Registration:

Officials and civil servants with the aforementioned salary levels shall declare the personal income tax registration form with the income-paying unit or the income-paying unit shall declare on their behalf. Based on the tax registration declaration form, the income-paying unit shall transfer the registration file to the tax authority for issuance of the taxpayer identification number. The tax registration file, procedures, and formalities shall be implemented according to the guidance in Circular No. 84/2008/TT-BTC of the Ministry of Finance.

4.1.2. Withholding Tax:

The unit directly paying salaries and wages is responsible for withholding personal income tax and declaring and remitting it to the State budget as prescribed; withholding of personal income tax shall be conducted monthly.

4.1.3. Deduction for Living Expenses:

The unit directly paying salaries and wages shall determine the number of dependents eligible for living expense deductions based on each official's and civil servant's declaration of living conditions before withholding tax.

4.1.4. Tax Settlement:

The unit directly paying salaries and wages shall prepare the tax settlement for personal income tax and settle on behalf of each official under its management if there is a difference between the tax payable and the tax withheld, or vice versa, and retain the tax declaration and settlement files at the income-paying unit without having to submit them to the tax authority.

If, when settling personal income tax for specific cases, the amount of tax temporarily withheld during the year exceeds the tax payable, the unit directly paying salaries and wages shall refund the excess tax or offset the excess tax against future tax liabilities.

When preparing the annual tax settlement report for withheld personal income tax, the income-paying unit does not need to list officials with the aforementioned salary levels who have tax deductions in the unit's income payment list.

4.1.5. Information Management:

The income-paying unit is responsible for managing information related to determining income, registration, declaration, withholding, and settlement of personal income tax for officials and civil servants as stipulated in this Article and relevant laws according to current regulations.

4.2. ADDITIONALLY, GUIDANCE ON THE SETTLEMENT OF PERSONAL INCOME TAX FOR RESIDENTS WITH INCOME FROM SALARIES AND WAGES IS AS FOLLOWS: A resident who receives income from salaries and wages solely from a single payer, where the tax payable exceeds the amount of tax withheld, may settle their tax through the payer of the income.

The income payer shall base on the taxable income actually paid to the employee, the registration form for dependents, and proof of insurance contributions (if any), charitable donations, and educational support provided by the employee to re-determine the employee's tax liability, immediately withholding and paying the additional tax due to the state budget. On the consolidated tax settlement declaration and detailed individual income receipt statement reflecting income and taxes already withheld after settlement.

The income payer is responsible for managing family situation files, proof of insurance contributions, charitable donations, and educational support (if any) at the unit and must present or provide them when requested by the tax authority.

Article 8. ADDITION TO PART D AS FOLLOWS:

1. ADDITION TO THE END OF CLAUSE 2:

"In cases where individuals have generated a refund of personal income tax but fail to submit the tax settlement declaration within the prescribed time limit, administrative penalties for late tax settlement declaration shall not be applied."

2. ADDITION TO THE END OF CLAUSE 3:

"- For cases where land users acquired the land before January 1, 2009, and now submit valid applications for land use right certificates which are approved by competent authorities, only one-time personal income tax will be collected for the final transfer, while previous transfers will not be subject to tax collection.

- From January 1, 2009, upon implementation of the Law on Personal Income Tax, individuals transferring real estate, whether with a notarized contract or a handwritten document, must pay personal income tax for each transfer.

Article 9. Implementation organization:

1. THIS CIRCULAR SHALL TAKE EFFECT 45 DAYS AFTER ITS DATE OF ISSUANCE AND SHALL BE APPLIED IMMEDIATELY TO INCOME FROM REAL ESTATE TRANSFERS. RESIDENTS WITH INCOME FROM SALARIES AND WAGES, OR BUSINESS OPERATIONS, SHALL APPLY IT TO THE 2009 TAX YEAR. ANY GUIDANCE CONTRARY TO THIS CIRCULAR SHALL BE ABROGATED.

2. DURING IMPLEMENTATION, IF THERE ARE ANY DIFFICULTIES, ORGANIZATIONS AND INDIVIDUALS ARE URGED TO REPORT THEM PROMPTLY TO THE MINISTRY OF FINANCE (GENERAL DEPARTMENT OF TAXATION) FOR STUDY AND RESOLUTION./.