Circular No. 52/TC-TCT guiding additional income tax

CIRCULAR

Guidelines for Additional Income Tax

Pursuant to Article 10 of the Income Tax Law, the State Council issued Resolution No. 282B-HĐNN 8 stipulating that the additional income tax rate is 20%, applicable to the portion of monthly taxable income exceeding six million dong for private households engaged in business activities.

To ensure uniform implementation throughout the country, the Ministry of Finance provides the following guidance:

1. Regarding the application of the additional income tax rate

In accordance with Decision No. 16 of the Politburo in mid-1988 on reforming policies and management mechanisms for production units under non-state economic sectors and Decree No. 27-HĐBT dated March 9, 1988 of the Council of Ministers on policies towards individual economies and private businesses, individual economic units and private businesses can develop in the forms of individual households, small owner households, and privately-owned industrial enterprises (referred to as private enterprises). Small owner households are economic entities where the household head is both the capital provider and the direct laborer or plays a key technical role and self-manages production and business operations, while also hiring labor. Private enterprises are enterprises established by one or more national capitalists contributing capital to organize production and business operations under the form of private enterprises, private companies, joint-stock companies, and business conglomerates without size limitations and hiring labor.

The provision of the additional income tax rate aims to regulate a portion of the income of private households with excessively high income for the state budget, thereby contributing to ensuring social equity.

Therefore, the subject of the additional income tax does not depend on the name but applies to small owner households and private enterprises that essentially have only one enterprise owner and hire labor across all economic sectors: production, construction, transportation, trade, catering, and services (excluding economic organizations operating as private enterprises under the form of private companies, joint-stock companies, and business conglomerates with multiple owners contributing capital and sharing profits).

2. Regarding the income subject to additional income tax:

According to Article 6 of the Income Tax Law, the tax base is the total annual taxable income (irrespective of primary or secondary activities, regular or irregular). Therefore, the monthly income subject to additional income tax is the average monthly taxable income from the total annual taxable income if the average monthly taxable income exceeds six million dong and is calculated specifically based on the actual operational time of each profession (whether regular or seasonal).

3. Regarding the method of collecting additional income tax:

According to Articles 13 and 14 of the Income Tax Law and Article 10 of Decree No. 353-HĐBT dated October 2, 1990 of the Council of Ministers detailing the implementation of the Business Tax Law, organizations and individuals engaged in business activities not subject to the fixed-rate income tax method must declare and pay income tax monthly and may temporarily pay income tax according to the regulations of the tax authority. At year-end, they must settle and pay income tax with the tax authority. Therefore, additional income tax should be considered and temporarily collected monthly from entities with high and relatively stable income at this level. It is necessary to avoid situations where an entity has only a few months of relatively high taxable income, making temporary payments of additional income tax during these months, but in reality, the average annual taxable income is low, requiring a refund of the temporarily paid additional income tax.