Circular No. 160/2009/TT-BTC guiding the exemption of personal income tax for the year 2009 pursuant to Resolution No. 32/2009/QH12 dated June 19, 2009 of the National Assembly.

CIRCULAR

Guidelines on Exemption from Personal Income Tax for the Year 2009 Pursuant to Resolution No. 32/2009/QH12 dated June 19, 2009 of the National Assembly

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Pursuant to the Law on Personal Income Tax No. 04/2007/QH12 dated November 21, 2007;

Pursuant to Article 4 of Resolution No. 32/2009/QH12 dated June 19, 2009 of the National Assembly adjusting general objectives, certain economic indicators, state budget revenues, issuance of additional government bonds in 2009, and exemption from personal income tax for the year 2009;

Pursuant to the guidance of the Prime Minister as stated in Circular No. 5048/VPCP-KTTH dated July 27, 2009 of the Government Office regarding the implementation of Resolution No. 32/2009/QH12 dated June 19, 2009 of the National Assembly on personal income tax;

The Ministry of Finance guides the implementation of exemptions and reductions of personal income tax pursuant to Resolution No. 32/2009/QH12 dated June 19, 2009 of the National Assembly as follows:

Article 1. Subjects exempted from personal income tax and the period of exemption:

1. Subjects exempted from personal income tax from January 1, 2009 to December 31, 2009 include resident individuals and non-resident individuals with income from capital investment; from transfer of capital (including securities transfer); from copyright; from franchising.

From January 1, 2010, resident individuals and non-resident individuals with income from capital investment; from transfer of capital (including securities transfer); from copyright; from franchising shall pay personal income tax according to regulations.

2. Subjects exempted from personal income tax from January 1, 2009 to June 30, 2009 include resident individuals with income from business operations; from salaries and wages; from inheritance; from gifts.

From July 1, 2009, resident individuals with income from business operations; from salaries and wages; from inheritance; from gifts shall pay personal income tax according to regulations.

Article 2. Income serving as the basis for determining the amount of personal income tax exempted:

The income serving as the basis for determining the amount of personal income tax exempted for the subjects guided in Article 1 of this Circular is the taxable income subject to personal income tax that has been deferred for the first six months of 2009 and the taxable income generated during the exemption period. Specifically, for each type of income as follows:

1. For income from business operations:

1.1. For individual businesses implementing accounting systems, invoices, and financial statements, recording revenue and expenses, and paying taxes based on declarations: the income serving as the basis for determining the amount of personal income tax exempted is the taxable income corresponding to the revenue and expenses incurred in the first six months of 2009.

In cases where individual businesses cannot accurately determine the taxable income generated in the first six months of 2009, the taxable income serving as the basis for determining the amount of personal income tax exempted shall be determined as follows:

- For individual businesses operating throughout the entire year of 2009: it is 50% of the total taxable income for the year 2009.

- For individual businesses not operating for the full twelve months of 2009:

1.2. For individual businesses only recording actual business revenue, unable to record expenses, and paying taxes based on declarations: the income serving as the basis for determining the amount of personal income tax exempted is the fixed income level determined based on the revenue generated in the first six months of 2009 and the fixed rate of taxable income.

1.3. For individual businesses paying taxes under a fixed quota method, the amount of tax exempted is the fixed quota tax payable for the first six months of 2009 as notified by the tax authority.

The revenue and expenses serving as the basis for determining the taxable income of the groups of individual businesses mentioned in Point 1.1 and 1.2, Clause 1 of this Article are the actual revenue and expenses incurred in the first six months of 2009. The method of determining revenue and expenses is carried out in accordance with Circular No. 84/2008/TT-BTC dated September 30, 2008 of the Ministry of Finance.

2. For income from salaries and wages:

The income from salaries and wages serving as the basis for determining the amount of personal income tax exempted is the taxable income from salaries and wages that the employer must pay to the individual in the first six months of 2009 regardless of the payment date; specifically as follows:

2.1. In cases where the employer has fully paid the income from salaries and wages from January to June 2009 (first six months of 2009) to employees (as stipulated in the labor contract or salary decision) within the exemption period as guided in Clause 2, Article 1 of this Circular, the income serving as the basis for determining the amount of tax exempted is the actual income paid.

2.2. In cases where the salary and wage payments for the first six months of 2009, as stipulated in the labor contract, have been recorded or salary decisions made by the payer but actually paid to employees outside the exemption period as guided in Clause 2, Article 1 of this Circular, they still qualify as exempted income. The payment deadline for the salary and wage payments for the first six months is considered exempted income no later than December 31, 2009.

2.3. For annual bonuses for the year 2009 (such as year-end bonuses, thirteenth-month salary, etc.), the income serving as the basis for determining the amount of tax exempted is 50% of these bonuses. The payment deadline for annual bonuses for 2009 is considered exempted income no later than March 31, 2010.

Example: In 2009, Mr. A received one year-end bonus of 10 million VND; thus, Mr. A will be exempted from personal income tax on an income of 5 million VND (50% of the annual bonus).

2.4. For quarterly bonuses: the exempted income is the bonus amount for the first and second quarters of 2009 as decided by the head of the paying organization. The payment deadline for the first and second quarter bonuses in 2009 is considered exempted income no later than December 31, 2009.

For example, in August 2009, if Mr. B is paid a bonus for his work performance in the second quarter of 2009 by his unit, then Mr. B will be exempted from the entire amount of personal income tax corresponding to the income from this quarterly bonus.

2.5. For other types of income such as holiday pay, vacation pay, uniform allowance, and other benefits..., the exempted income is the actual income received during the exemption period as guided by Clause 2, Article 1 of this Circular.

2.6. For salaries and wages of the year 2008 paid during the exemption period as guided by Clause 2, Article 1 of this Circular, they shall be exempted from tax.

3. Regarding income from capital investment:

The income serving as the basis for determining the amount of personal income tax exempted is the income received from capital investment activities in 2009. Specifically, as follows:

- For income from dividends and interest received from share capital contributions: it is the portion of dividends and interest distributed in 2009 according to the provisions of the law.

- For income from loan interest: it is the actual interest received in 2009 in accordance with the interest rate stipulated in the loan agreement.

In cases where individuals receive income in advance for multiple years, the corresponding income of 2009 will be exempted from personal income tax.

- For income received from the additional value of capital contributions when a business is dissolved, converted to a different operating model, merged, or consolidated, or withdrawn, it is the additional value of the capital contribution received compared to the original capital. The time point for determining the exempted income is the time when the organization pays out or the individual completes the necessary legal procedures to determine the value of the capital contribution received in accordance with the exemption period as guided by Clause 1, Article 1 of this Circular.

4. For income from transferring capital (including securities transfers): the income serving as the basis for determining the amount of tax exempted is the amount of money individuals receive from completed capital transfer transactions as guided by Clause 2, Section II, Part B of Circular No. 84/2008/TT-BTC dated September 30, 2008 issued by the Ministry of Finance, in accordance with the exemption period as guided by Clause 1, Article 1 of this Circular.

5. For income from copyright, franchise rights: the income serving as the basis for determining the amount of tax exempted is the payment amount under the contract in accordance with the exemption period as guided by Clause 1, Article 1 of this Circular.

In cases where individuals receive income in advance for multiple years, only the corresponding income of 2009 will be exempted from personal income tax.

6. For income from inheritance and gifts: the time point for determining the exempted income is the time when the individual receives the inheritance or gift and submits a valid application to the competent state management agency in accordance with the exemption period as guided by Clause 2, Article 1 of this Circular.

7. If the income subject to personal income tax exemption as guided by Clause 1, Article 1 of this Circular is paid out after 2009, the deadline for paying out the income to apply for tax exemption shall not exceed June 30, 2010. If paid out after this deadline, it will not be exempted from personal income tax.

Article 3. Declaration and settlement of personal income tax for the year 2009:

1. For entities paying income:

1.1. Monthly declaration: entities paying income are not required to declare income items exempt from personal income tax as guided in Clause 2, Article 1 of this Circular if such payments are made after July 1, 2009. On the declaration form, the items reflecting monthly income and withheld tax only reflect taxable personal income and the amount of personal income tax already withheld.

1.2. Annual settlement:

Entities paying income are not required to declare and settle tax on income items exempt from tax and the exempted tax amount for individuals eligible for exemption as guided in Article 1 of this Circular, specifically:

- If income from capital investment, capital transfer, copyright, and commercial franchising is paid; the entity paying income is not required to declare and settle tax.

- If income from wages and salaries is paid; the entity paying income is not required to settle tax on exempted income in the first six months of the year, but must declare and settle income and withheld tax from July 1, 2009 to December 31, 2009.

Example: Company X paid a total of 10 billion VND in wages to employees in 2009; of which 4 billion VND was income exempt from personal income tax. For 2009, the company only needs to declare and settle personal income tax corresponding to the taxable income amount of 6 billion VND.

The declaration of consolidated data items in the annual tax settlement form shall be carried out according to the following principle: only declare the total amount corresponding to taxable income of 2009.

2. For resident individuals with income from wages and salaries, and business operations:

2.1. Resident individuals with income from wages and salaries, and business operations must settle tax in the following cases:

- If the tax payable in the last six months of 2009 exceeds the amount of tax already withheld;

- If there is a request for tax refund or offsetting excess tax paid in the next period.

2.2. Deductions when settling tax are calculated as follows:

- For deductions related to social insurance, health insurance, and mandatory liability insurance contributions: contributions made in one lump sum for the entire year are deductible at 50% of the total amount paid; for monthly contributions, deductions are based on the actual amount paid in the last six months of 2009.

- For family situation deductions: the deduction amount is calculated based on the actual family situation deductions in the last six months of 2009, specifically as follows:

+ Regarding deductions for the individual earning income: the deduction amount is 24 million VND (6 months x 4 million VND/month).

+ Regarding deductions for dependents: the deduction amount is calculated based on the number of dependents, the number of months eligible for deduction, and the monthly deduction amount per dependent (1.6 million VND/person/month).

- For deductions related to charitable donations, humanitarian aid, and educational support: the deduction amount is calculated based on the actual expenses incurred in the last six months of 2009.

2.3. Individuals settling tax use the declaration forms issued together with Circular No. 84/2008/TT-BTC dated September 30, 2008 of the Ministry of Finance.

When declaring and settling tax, certain items are reflected as follows:

- Tax period: clearly state from July 1, 2009 to December 31, 2009;

- Items related to determining revenue (for individuals engaged in business operations), income, deductions, etc., reflect the total amounts corresponding to the tax period from July 1, 2009 to December 31, 2009.

Article 4. Implementation:

1. This Circular takes effect 45 days from the date of signature. In cases where entities paying income and taxpayers have processed differently from the guidance in this Circular before the issuance of this Circular, they are allowed to adjust accordingly:

- For organizations that have withheld tax on exempt income, they are responsible for returning the withheld tax to the income recipient.

- For individuals who have declared and paid the exempted tax into the budget, they will be refunded or offset against future tax periods.

2. Entities paying income when paying exempt income after June 30, 2009 (for exempt income in the first six months of 2009) or after December 31, 2009 (for exempt income throughout 2009) are responsible for the accuracy in determining exempt income, retaining, and presenting the basis for determining exempt income upon request for inspection by the tax authority.

In case of incorrect determination or declaration, actions will be taken against tax fraud as stipulated in the Law on Tax Administration.

3. Resident individuals and non-resident individuals with income subject to personal income tax not included in the exemptions specified in Article 1 of this Circular shall pay personal income tax in accordance with the Personal Income Tax Law.

4. Any issues arising during implementation should be promptly reported to the Ministry of Finance for timely resolution.