DECREE NO. 147/2004/NĐ-CP DETAILING THE IMPLEMENTATION OF THE INCOME TAX LAW FOR HIGH-INCOME INDIVIDUALS

 DECREE

Detailed regulations on implementation of the Income Tax Ordinance

for high-income individuals

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the High State Council's Ordinance on Income Tax for High-Income Individuals No. 35/2001/PL-UBTVQH10 dated May 19, 2001; and the High State Council's Ordinance Amending and Supplementing Certain Provisions of the Ordinance on Income Tax for High-Income Individuals No. 14/2004/PL-UBTVQH11 dated March 24, 2004;

At the proposal of the Minister of Finance,

DECREE:

PART I
SCOPE OF APPLICATION

Article 1. The subjects required to pay income tax under Article 1 of the Ordinance on Income Tax for High-Income Individuals (hereinafter referred to as the Income Tax Ordinance) include:

1. Vietnamese citizens residing in Vietnam or working abroad who have income;

2. Individuals who are not Vietnamese citizens but reside permanently in Vietnam and have income;

3. Foreigners working in Vietnam, including foreigners not residing in Vietnam but having income generated in Vietnam.

Article 2. Taxable income includes regular and non-regular income, except for the types of income specified in Article 4 of this Decree.

1. Regular income includes:

a) Wages, salaries, and other income paid on behalf of the individual such as rent, electricity, and water expenses (rent calculated based on actual payment but not exceeding 15% of total taxable income), income from participating in projects, business associations, and corporate boards; allowances, bonuses in cash and kind;

b) Income from royalties for patents, trademarks, and works; income from literary remuneration; income from scientific and technical services; information technology services; consulting, design, training, agency services; commission fees;

c) Other income outside wages and salaries from engaging in production, business, and service activities that are not subject to corporate income tax, such as income from performances, organizing performances, fashion shows, advertising, and other services.

2. Non-regular income includes:

a) Income from technology transfer, except for gifts and donations;

b) Lottery winnings and prizes from promotional activities.

Article 3. Temporary exemption from income tax applies to income from bank interest, savings interest, bond, bill, and stock interest; income from securities investment activities and gains from buying and selling securities.

Article 4. Exempted income includes:

1. Allowances prescribed by the Vietnamese government for income generated in Vietnam, including:

a) Travel allowances;

b) Hazardous and dangerous work allowances;

c) Position allowances and responsibility allowances for civil servants;

d) Regional allowances; attraction allowances; special allowances for certain islands far from the mainland and border areas with particularly difficult living conditions;

đ) Seniority allowances for military personnel, customs officers, and telegraph staff; customs and cryptographic communications;

e) Special allowances for certain professions as stipulated by law;

g) Preferential allowances for cadres engaged in revolutionary activities before 1945;

h) Other allowances from the state budget.

2. Other income generated in Vietnam includes:

a) Travel expenses;

b) Meal allowances for certain special professions according to state regulations;

c) Social welfare subsidies for beneficiaries of social policies and other subsidies from the state budget;

d) Insurance compensation for personal and property damage;

đ) Severance pay and unemployment benefits as regulated by the state;

e) Relocation allowances for production and business units including one-time relocation allowances;

g) Awards for technological improvements, inventions, international awards, national awards organized by the Vietnamese state;

h) Bonuses accompanying titles conferred by the state such as Professor, People's Teacher, Labor Hero, Hero of the People's Armed Forces, and other titles conferred by the state; bonuses or preferential treatments from the state budget;

i) Payments for social insurance and health insurance from wages and salaries of workers.

3. Income of individual household business owners subject to corporate income tax.

Chapter II
BASIS FOR TAX CALCULATION AND TAX SCHEDULE

Article 5. The basis for calculating tax is taxable income and tax rate.

Article 6. Taxable income.

1. Regular taxable income:

a) For Vietnamese citizens:

For Vietnamese citizens and other individuals residing in Vietnam: regular taxable income is the average monthly income of each individual over 5 million VND in a year. For singers, circus artists, dancers, football players, and professional athletes, 25% of their income is deducted when determining taxable income.

For Vietnamese citizens working both in Vietnam and abroad, the average monthly taxable income is determined by dividing the total income generated in Vietnam and abroad by 12 months.

b) For foreigners and Vietnamese citizens working or residing abroad:

For foreigners residing in Vietnam and Vietnamese citizens working or residing abroad, regular taxable income is the total income generated in Vietnam and abroad, averaged monthly over a year, exceeding 8 million VND.

If the declared average monthly income abroad is lower than in Vietnam without proof, then the average monthly income in Vietnam will be used to calculate the period abroad. A tax month is assumed to be 30 days.

For foreigners not residing in Vietnam, taxable income is the total income generated in Vietnam, paid for work conducted in Vietnam, regardless of where the income is received in Vietnam or abroad.

Foreigners are considered residents in Vietnam if they stay in Vietnam for 183 days or more within 12 months from the date of entry into Vietnam; they are considered non-residents if they stay in Vietnam for less than 183 days.

2. Non-regular taxable income:

a) For income from technology transfer, it is income exceeding 15 million VND per contract, regardless of the number of payments.

b) For lottery winnings income under various forms, including promotional prize winnings, where the value of each individual prize exceeds 15 million Vietnamese dong, such income shall be considered taxable.

Article 7. Machine tools for machining complete units (one operation position) and machine tools for multi-position machining to process metals.

1. The tax rate for regular income:

a) For Vietnamese citizens residing within Vietnam and other individuals permanently residing in Vietnam, a progressive tax rate shall apply as follows:

Unit of measurement: 1,000 VND

 b) For foreign nationals residing in Vietnam and Vietnamese citizens working or serving abroad, a progressive tax rate shall apply as follows:

Unit of measurement: 1,000 VND

 c) For foreign nationals not residing in Vietnam, a flat tax rate of 25% shall apply on total taxable income.

d) For Vietnamese citizens who have spent time both inside and outside Vietnam during the tax year, the average monthly income earned while in Vietnam shall be taxed according to the progressive rate specified in point a of Clause 1 of this Article, and income earned while abroad shall be taxed according to the progressive rate specified in point b of Clause 1 of this Article.

2. The tax rate for non-regular income shall be determined based on the total taxable income:

a) A tax rate of 5% applies to income from technology transfer;

b) A tax rate of 10% applies to income from lottery winnings and promotional prize winnings.

Article 8. Income received in foreign currency must be converted into Vietnamese dong at the average exchange rate published by the State Bank of Vietnam for the inter-bank foreign exchange market at the time the foreign currency income was generated, to calculate taxable income. Income in kind shall be valued at market price at the time the income was generated.

Chapter III
DECLARATION, PAYMENT OF TAX AND SETTLEMENT OF TAX

Article 9. Organizations and individuals paying income or agencies authorized to pay income (referred to as the income-paying agency) shall register, declare, pay taxes, and settle tax income according to the guidelines provided by the Tax Authority.

Article 10. Declaration and payment of income tax shall follow the principle of withholding at source. The income-paying agency has the obligation to withhold tax before paying income to the taxpayer and remit the withheld tax to the state budget.

Article 11. Individuals with taxable income are responsible for declaring and paying taxes fully and on time; annually, they must settle tax for regular income according to regulations set forth by the Ministry of Finance.

Article 12. Responsibilities, obligations, and rights of the income-paying agency include:

1. Registering, declaring, withholding, and paying taxes fully and on time into the state budget; compiling a summary declaration, calculating tax, and providing the Tax Authority with a list of taxpayers required to pay income tax;

2. Guiding taxpayers to submit declarations, declare and pay taxes, and settle income tax with the Tax Authority;

3. Keeping books and records related to declarations, tax calculations, and tax payments, implementing periodic reporting and annual tax settlement reports to the Tax Authority;

4. Calculating tax, withholding tax, determining the amount of remuneration to be paid, and remitting tax to the state budget;

5. Issuing tax receipts to individuals required to pay tax, managing, using, and settling tax receipts according to prescribed procedures;

6. The income-paying agency is entitled to retain a handling fee of 0.5% of the tax withheld from regular income and 1% of the tax withheld from non-regular income before remitting it to the state budget.

Article 13. Organizations managing and paying income to foreign nationals have the responsibility to guide and complete tax payment procedures before processing departure formalities for foreign nationals.

Foreign nationals subject to income tax must present their tax receipt before leaving Vietnam.

Article 14. Agencies including immigration management agencies, agencies issuing work permits to foreign nationals, labor management agencies, and other relevant agencies have the responsibility to provide the Tax Authority with information related to taxable income and taxpayers when requested by the Tax Authority.

Chapter IV
EXEMPTIONS AND REDUCTIONS

Article 15. Consideration for tax reduction or exemption shall be given to:

1. Cases where taxpayers suffer losses to property, income, and livelihood due to natural disasters, enemy attacks, or accidents; the extent of tax reduction or exemption shall correspond to the degree of loss but shall not exceed the amount of tax payable;

2. Special cases where the payment of tax by individuals affects national economic, political, and social interests, the Ministry of Finance shall report to the Prime Minister for a decision on tax reduction or exemption for specific cases.

The Ministry of Finance shall stipulate the procedures for considering tax reduction or exemption as provided in this Article.

Chapter V
SANCTIONS AND REWARDS

Article 16. Taxpayers, tax officials, and other organizations and individuals violating laws on high-income taxation shall be subject to sanctions according to Articles 21, 23, and 24 of the Income Tax Ordinance No. 35/2001/PL-UBTVQH10 dated May 19, 2001, of the Standing Committee of the National Assembly, depending on the nature and severity of the violation.

Article 17. Tax authorities and tax officials who successfully complete their assigned tasks, and persons who contribute to detecting violations of high-income taxation laws shall be rewarded according to general government regulations.

Chapter VI
APPEALS AND STATUTE OF LIMITATIONS

Article 18. Organizations and individuals have the right to appeal against the incorrect implementation of laws on high-income taxation affecting themselves.

Appeals must be submitted to the directly managing Tax Authority or the authority making the decision within 30 days from the date of receiving the notice of withholding, tax notice, collection order, or decision.

While awaiting resolution, the appellant must still pay the full amount of tax and penalties as notified on time.

The authority receiving the appeal has the responsibility to examine and resolve the appeal within 15 days from the date of receipt; for complex cases, the period may be extended but not beyond 30 days from the date of receipt; if the case does not fall within its jurisdiction, it must transfer the file or report to the competent authority for resolution and inform the appellant within 10 days from the date of receipt.

Article 19. In the case where the complainant disagrees with the decision on handling the complaint made by the receiving agency or if the receiving agency fails to resolve the complaint within the time limit stipulated in Article 18 of this Decree, the complainant has the right to appeal to the directly superior agency of the receiving agency.

Article 20. The Tax Authority shall be responsible for refunding the tax or fine collected incorrectly and paying compensation (if any) within fifteen days from the date of receipt of the superior agency's or competent authority's decision as prescribed by law.

Article 21. In cases where false declarations to evade taxes or tax errors are discovered and concluded, the Tax Authority shall be responsible for recovering taxes and fines or refunding taxes within five years from the date of the inspection that discovers such false declarations to evade taxes or tax errors. In cases where individuals fail to register, declare, or pay taxes, the recovery period for taxes and fines shall be calculated from the date of taxable income.

Chapter VII
IMPLEMENTING PROVISIONS

Article 22. Where an international treaty to which Vietnam is a party provides for the payment of income tax differently from this Decree, such international treaty shall apply.

Article 23. This Decree shall take effect fifteen days from the date of publication in the Official Gazette and shall replace Decree No. 78/2001/NĐ-CP dated October 23, 2001, of the Government detailing the implementation of the Ordinance on Income Tax for High-Income Individuals.

Declarations and calculations of income tax before July 1, 2004, shall be carried out in accordance with the provisions of Decree No. 78/2001/NĐ-CP dated October 23, 2001, of the Government; from July 1, 2004 onwards, this Decree shall apply.

Article 24. The Minister of Finance shall be responsible for organizing the implementation and inspecting the work of income tax throughout the country; resolving complaints and suggestions regarding income tax within his jurisdiction.

Article 25. The Ministry of Finance shall provide guidance on the implementation of this Decree;

The Ministers, Heads of ministerial-level agencies, Heads of government agencies, Chairpersons of People's Committees of provinces and centrally governed cities are responsible for implementing this Decree./.