Decree No. 05/CP provides detailed regulations for the implementation of the Ordinance on Income Tax for High-Income Individuals.

DECREE OF THE GOVERNMENT

Detailed regulations for implementation of the High-Income Individuals' Income Tax Ordinance

THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;

Based on the High-Income Individuals' Income Tax Ordinance (amended) approved by the Standing Committee of the National Assembly on May 19, 1994;

At the proposal of the Minister of Finance,

DECREE:

PART I

SCOPE OF APPLICATION

Article 1. Pursuant to Article 1 of the High-Income Individuals' Income Tax Ordinance (hereinafter referred to as income tax), all individuals with income must pay income tax, including:

1. Vietnamese citizens residing in Vietnam or working abroad;

2. Other individuals who have settled in Vietnam without holding Vietnamese citizenship but have settled permanently in Vietnam;

3. Foreign nationals working in Vietnam, including foreign nationals not residing in Vietnam but having income generated in Vietnam.

Article 2. Income subject to taxation includes regular and irregular income, except for the types of income specified in Article 4 of this Decree.

1. Regular income includes:

Income in the form of salaries, wages, and remuneration.

Payments made on behalf of individuals for housing, electricity, and water expenses. For housing expenses, the actual amount paid on behalf of the individual is included, but it shall not exceed 15% of the total salary, wage, and remuneration income.

Cash and non-cash bonuses from various sources.

Income from participation in business associations, boards of directors...

Income from engaging in production and business activities, services not subject to corporate income tax such as long-term consulting services, vocational training, teaching, test preparation, cultural and artistic performances.

2. Irregular income:

Income from gifts and donations in cash or kind sent from overseas organizations and individuals to individuals in Vietnam in any form.

Income from technology transfer under individual contracts, including: Transfer of ownership or usage rights over industrial property objects; transfer through the sale and supply of technical secrets, technological plans, brand names...; provision of supporting and advisory technology services, transfer of usage or usage rights over industrial, commercial, or scientific equipment.

Income from literary and artistic copyright royalties.

Income from technical design for construction, industrial technical design and other services.

Lottery winnings.

Article 3. Temporary exemption from income tax on income from bank deposits, savings interest, bond purchases, treasury bills, and stock dividends.

Article 4. Types of income not subject to taxation:

1. The following types of income, as stipulated by the Government of Vietnam, arising from income generated in Vietnam:

Night shift allowances (excluding night shift wages);

Hazardous job allowances for occupations or jobs in hazardous environments such as mines, offshore drilling platforms...;

Regional allowances, attraction allowances, special allowances for certain remote islands and border areas;

Longevity allowances for military personnel;

Special allowances for certain professions: forensic medicine, surgery;

Allowances for civil servants and other allowances funded from the State budget; preferential allowances for cadres who participated in revolutionary activities before 1945;

Travel expenses;

Fixed meal allowances for certain special professions;

Social welfare benefits for beneficiaries of social policies;

One-time severance pay for state employees;

Relocation allowances for production units as prescribed by the State;

Insurance compensation due to participation in human and property insurance;

Awards for technical improvements, inventions, international awards, national awards organized and recognized by the Vietnamese State;

Bonuses accompanying titles conferred by the State such as Professor, People's Teacher, Labor Hero, People's Armed Forces Hero.

2. Profits of individual households that are already subject to corporate income tax (their income is not included in costs when determining taxable profit).

3. Regular income of foreigners residing in Vietnam for less than 30 days within a continuous 12-month period starting from their first day in Vietnam.

PART II

BASIS FOR TAX CALCULATION AND TAX SCHEDULE

Article 5. The basis for calculating income tax includes taxable income and tax rates;

Article 6. Regular income subject to tax is the total income of each individual as specified in Clause 1, Article 2 of this Decree, averaged monthly throughout the year, specifically:

1. Vietnamese citizens residing in Vietnam or working abroad; other individuals settled in Vietnam, calculate the total income received in a year divided by 12 months (Gregorian calendar year).

2. Foreigners residing in Vietnam for 183 days or more, divide the total income generated in Vietnam and outside Vietnam by 12 months. If the declared average monthly income abroad is lower than in Vietnam and cannot be proven, then the average monthly income in Vietnam will be used to calculate the time spent abroad. A tax month is assumed to be 30 days.

3. Foreigners residing in Vietnam from 30 to 182 days, total income generated in Vietnam.

Article 7. The tax rate for regular income is as follows:

1. Vietnamese citizens residing in Vietnam and other individuals settled in Vietnam apply the progressive tax rate table specified in Clause 1, Article 10 of the Income Tax Ordinance; after paying tax according to this table, if the remaining income exceeds 5,000,000 VND/month, an additional 30% is paid on the excess over 5,000,000 VND.

2. Vietnamese citizens with income generated both domestically and abroad; in the tax year, the total domestic and foreign income is divided by 12 months and taxed according to the corresponding tax table specified in Clauses 1 and 2 of Article 10 of the Income Tax Ordinance.

3. Foreigners residing in Vietnam for 183 days or more and Vietnamese citizens working or employed abroad apply the progressive tax rate table specified in Clause 2, Article 10 of the Income Tax Ordinance.

4. Foreigners residing in Vietnam from 30 to 182 days apply the uniform tax rate specified in Clause 3, Article 10 of the Income Tax Ordinance at 10% on total income.

Article 8. Irregular income subject to tax is the income of each individual in each occurrence of income as specified in Clause 2, Article 2 of this Decree.

Gifts and donations are counted towards the recipient named on the gift, including cases where the recipient is a private enterprise owner.

Income from technology transfer, technical design for construction, industrial technical design, taxable income shall be calculated based on the value of each contract, regardless of the number of payments made.

Article 9. The tax rate for occasional income shall be applied according to the progressive tax table specified in Article 12 of the Income Tax Ordinance. Specifically, for income from technology transfer, gifts, and donations exceeding 2,000,000 VND per occurrence, the tax shall be calculated at a uniform rate of 5% of the total income generated in one occurrence; for lottery winnings over 12,000,000 VND per occurrence, the tax shall be calculated at a uniform rate of 10% of the total income generated in each occurrence.

Article 10. Income received in foreign currency or in kind must be converted into Vietnamese Dong to serve as the basis for calculating taxes. Goods shall be valued based on the average market price in the local area at the time of income generation. For gifts and donations in kind from abroad, they shall be valued based on the import tax value at the time of receipt. Foreign currency and gold shall be valued based on the selling price announced by the Bank at the time of income generation; if the type of foreign currency has not been announced by the Bank, it shall be converted using the cross-rate with the US Dollar.

CHAPTER III

TAX REPORTING AND PAYMENT

Article 11. Income tax is implemented under the principle of withholding at source. Organizations and individuals paying income, or labor management agencies (hereinafter referred to as authorized withholding organizations), have the obligation to withhold tax before making payment.

In cases where an individual works at different places during different periods within a year, the income tax shall be withheld at source, and at the end of the year, the individual must report and settle the tax at their last place of work.

In cases where an individual works and earns income from multiple places simultaneously during the same period of a year, the individual must consolidate and report the tax at the place with the highest income or the most convenient location.

In cases where an individual earns income from participating in business associations, boards of directors, or other regular income sources outside their main workplace, they must declare their income together with their main workplace income to pay income tax according to regulations.

For cases earning income from consulting services, training services, scientific seminars, if the income tax has not been withheld at source, the recipient of the income must declare and pay the tax to the local tax authority.

Article 12. Tax reporting and payment for regular income: Income tax for regular income is calculated based on the average monthly income during the tax year and reported temporarily based on actual monthly income.

1. For Vietnamese citizens who work abroad for a period of time, the average monthly income should be declared based on the total income including income generated abroad and paid according to the corresponding tax table.

2. For foreign nationals:

If residing in Vietnam for between 30 days and 182 days, the income tax shall be paid according to the tax table stipulated in Clause 3, Article 10 of the Income Tax Ordinance.

If residing in Vietnam for 183 days or more, the tax shall be declared and paid according to the progressive tax table stipulated in Clause 2, Article 10 of the Income Tax Ordinance.

The residence period of foreigners in Vietnam is counted for the first tax year as a continuous 12-month period, subsequent years are determined according to the Gregorian calendar, arrival and departure days are counted as one day.

Article 13. Tax reporting and payment for non-regular income:

Income tax for non-regular income is paid for each occurrence of income.

Organizations and individuals paying income have the responsibility to withhold tax before making payment (including income from individuals transferring technology from abroad to Vietnam). Individuals carrying gifts and donations must declare and pay the income tax on behalf of the recipient.

Article 14. Taxpayers must voluntarily declare all income, pay taxes fully and on time, and settle the tax according to the regulations of the Ministry of Finance.

Article 15. The Ministry of Finance organizes the collection of personal income tax, bears the responsibility for directing, guiding, and inspecting authorized withholding organizations to collect personal income tax through the method of withholding tax at source before making payment.

Authorized withholding organizations are entitled to a fee ranging from 0.5% to 1% of the amount of personal income tax before it is deposited into the state budget according to the regulations of the Ministry of Finance.

Article 16. Authorized withholding organizations have the responsibility to proactively register for tax declaration, withholding, and depositing tax into the state budget.

Guide taxpayers to declare income, receive tax declarations from taxpayers, prepare tax calculation statements, compile and submit to the tax authority lists of taxpayers subject to income tax, amounts of tax due...

Maintain books and records related to tax declaration, tax calculation, and tax payment, implement reporting procedures with the tax authority.

Calculate tax, deduct the correct amount of the fee earned and deposit the tax into the state budget.

Issue receipts to taxpayers.

Article 17. Organizations managing and paying income to foreigners have the responsibility to guide and complete tax payment procedures before processing entry and exit formalities for foreigners. Foreigners subject to income tax must declare to the income payer or tax authority about taxable income and days of residence in Vietnam, no later than 30 days from the date of arrival in Vietnam, and must pay the full amount of income tax before leaving Vietnam.

PART IV

TAX REDUCTION AND EXEMPTION

Article 18. The following cases are eligible for tax reduction or exemption:

1. In cases where natural disasters, enemy attacks, accidents cause damage to property and income affecting the taxpayer's livelihood, the taxpayer may be exempted or granted tax reduction depending on the extent of the damage.

2. The Prime Minister may grant tax reduction or exemption in certain cases related to national economic, political, and social interests.

The Ministry of Finance shall specify the procedures for tax reduction and exemption in this provision.

CHAPTER V

IMPLEMENTING PROVISIONS

Article 19. Violations of the Income Tax Ordinance shall be handled in accordance with Articles 21, 22, 23, and 24 of the Income Tax Ordinance; individuals who discover violations of the Income Tax Ordinance and assist tax authorities in collecting taxes owed to the state budget may be rewarded up to 10% of the collected tax amount according to regulations issued by the Ministry of Finance.

Article 20. Income that has been separately committed regarding taxation and tax exemption shall be implemented in accordance with documents and international treaties to which Vietnam is a party.

Article 21. This Decree takes effect from June 1, 1994, and replaces Decree No. 119/HĐBT dated April 17, 1991, of the Council of Ministers (now the Government); Decree No. 16/CP dated March 23, 1993, of the Government; Clause 4, Article 7 of Decree No. 370/HĐBT dated November 9, 1991, of the Council of Ministers (now the Government) concerning the payment obligations to the state budget of individuals working abroad for a limited period.

Provisions on income tax and supplementary taxes after income tax promulgated before June 1, 1994, shall cease to be effective.

Management, training, and recruitment agencies for workers are permitted to deduct a maximum of 8% of workers' income for management, training, and recruitment purposes. The aforementioned funds shall be managed and utilized in accordance with current financial regulations.

The Minister of Finance shall guide the implementation of this Decree.

Article 22. The Minister, Heads of Ministries equivalent to Ministries, Heads of Government Agencies, Chairpersons of People's Committees of provinces and centrally governed cities shall organize the implementation of this Decree based on their functions, duties, and authorities./.