Circular No. 81/2004/TT-BTC guiding the implementation of Decree No. 147/2004/NĐ-CP dated July 23, 2004 of the Government detailing the implementation of the Ordinance on income tax for high-income individuals.

CIRCULAR

Guidelines for implementing Decree No. 147/2004/NĐ-CP detailing the implementation of the Income Tax Law for High-Income Individuals

Based on the Income Tax Law for High-Income Individuals No. 35/2001/PL-UBTVQH10 dated May 19, 2001; the Ordinance Amending and Supplementing Certain Articles of the Income Tax Law for High-Income Individuals No. 14/2004/PL-UBTVQH11 dated March 24, 2004;

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Based on Decree No. 147/2004/NĐ-CP dated July 23, 2004 of the Government detailing the implementation of the Income Tax Law for High-Income Individuals;

Based on Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government regarding the functions, tasks, powers, and organizational structure of the Ministry of Finance;

1. Taxpayers:

The Ministry of Finance hereby provides guidance as follows:

I. SCOPE OF APPLICATION:

The taxpayers subject to income tax for high-income individuals (hereinafter referred to as personal income tax) include:

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

1.2. Individuals who are not Vietnamese citizens but have settled permanently in Vietnam and have income (hereinafter referred to as other individuals settled in Vietnam);

1.3. Foreigners having income in Vietnam including:

- Foreigners working in enterprises, economic organizations, cultural, social organizations, representative offices, branches of foreign companies in Vietnam; independent practitioners in Vietnam;

- Foreigners who do not physically reside in Vietnam but have income generated in Vietnam.

2. Taxable income:

Taxable income includes regular and irregular income.

2.1. Regular income includes:

2.1.1. Various forms of income under the form of salaries, wages, remuneration, including overtime pay, night shift pay, 13th month salary (if applicable); allowances; social insurance substitute payments; lunch money, midday meal money (if received in cash);

2.1.2. Monthly, quarterly, annual bonuses, and unexpected bonuses given on holidays, festivals, anniversary days, from various sources and in various forms: cash, goods;

2.1.3. Income from participating in business projects, business associations, boards of directors, management councils, enterprise councils;

2.1.4. Royalty income from patents, trademarks, works; income from royalties;

2.1.5. Income of individuals not subject to corporate income tax such as: income from scientific and technical services, information technology services, consulting services, design, architecture, training; performance activities, organizing performances; advertising; sports activities; agency services; income from brokerage commissions; other services;

2.1.6. Other non-salary income paid on behalf of the individual such as rent, electricity, water bills; specifically, rent is calculated based on actual payment but does not exceed 15% of total taxable income. In cases where individuals reside at their workplace, taxable income is based on rental fees or depreciation costs calculated according to the ratio between the area used by the individual and the total area of the house, also capped at 15% of total taxable income. If the payment receipt for rent includes food and service expenses, only the actual rent amount is counted.

2.1.7. Other income that individuals receive from the payer.

The above incomes serve as the basis for determining taxable income, which is income before personal income tax deduction (pre-tax income). In cases where the actual income received does not include personal income tax (post-tax income), it must be converted into pre-tax income (conversion formula according to Appendix No. 1 attached hereto).

2.2. Irregular income includes:

2.2.1. Income from technology transfer (excluding gifts) including:

- Transfer of industrial property objects: patents, utility models, designs, trade names, geographical indications, layout-designs of integrated circuits, and trademarks protected by Vietnamese law and permitted for transfer.

- Transfer of technological secrets, knowledge in the form of technological solutions, technical solutions, production processes, preliminary design and technical design documents, formulas, technical parameters, drawings, technical diagrams, computer software (transferred under a Technology Transfer Agreement), information data about transferred technology accompanied or not accompanied by machinery and equipment.

- Transfer of rationalization proposals and technological innovation solutions.

- Implementation of various forms of support services for technology transfer so that the recipient can acquire technological capability to produce products and/or services with quality specified in the agreement, including:

+ Support in selecting technology, guiding installation of equipment, trial operation of production lines to apply transferred technology;

+ Consulting on technology management, business management consulting, guiding implementation of transferred production processes;

+ Training and enhancing professional skills and management capabilities of workers, technical staff, and managers to master transferred technology.

2.2.2. Lottery winnings in various forms, including promotional prizes.

3. Personal income tax will temporarily not be levied on income from bank deposit interest, savings deposit interest, loan interest, bond purchase interest, bill purchase interest, stock purchase interest, income from securities investment activities, and securities trading gains.

4. Non-taxable income includes:

4.1. Allowances prescribed by the Vietnamese State applicable to income generated in Vietnam:

4.1.1. Hazardous and dangerous job allowances for occupations or jobs in hazardous and dangerous environments;

4.1.2. Regional allowances, attraction allowances, special allowances for remote, harsh climate areas, new economic zones, distant islands, border regions with difficult conditions (excluding overseas allowance for foreigners);

4.1.3. Special allowances for certain professions as prescribed by the State;

4.1.4. Travel allowances applied to certain occupations or jobs requiring frequent changes in work locations and residences.

4.1.4. Subsidy for mobile work shall be applied to certain occupations or jobs that require frequent changes in workplace and residence locations;

4.1.5. Position allowances and responsibility allowances for cadres and civil servants;

4.1.6. Length-of-service allowances for armed forces, telegraph, and customs officers; security and defense allowances;

4.1.7. Preferential allowances for cadres who participated in revolutionary activities before 1945;

4.1.8. Other allowances funded from the state budget;

The amount of allowance paid in cash shall be determined according to the regulations of the competent authority and in accordance with the current financial management system. For foreigners, the allowance amount shall be based on the basic salary recorded in the contract and the allowance level prescribed by the state agency for all subjects;

4.2. Travel expenses include payments for transportation means, reasonable accommodation expenses with valid receipts, and lodging expenses under the stipulated system; if travel expenses are allocated, only the aforementioned expenses can be deducted;

4.3. Quantified meal expenses as regulated for certain jobs and special professions; meals at the workplace, lunch, and mid-shift meals (except when paid in cash);

4.4. Social assistance benefits for those receiving social policies such as war invalids, martyrs' families, those who contributed to the revolution, emergency hardship allowances, compensation for work-related accidents, occupational diseases, and social evils; other allowances from the state budget;

4.5. Insurance compensation due to participation in human and property insurance;

4.6. Severance pay and unemployment benefits as prescribed by the state;

In cases where an individual receives severance pay upon leaving one unit to transfer to another unit within the same company or multinational company's office, this provision does not apply;

4.7. Relocation allowances to production bases as prescribed by the state, including one-time relocation allowances for foreigners residing in Vietnam;

4.8. Awards for technical improvements, inventions, discoveries, international awards, national awards organized and recognized by the Vietnamese State; bonuses or other incentives from the state budget;

4.9. Bonuses accompanying titles conferred by the state such as Heroic Mothers of Vietnam, People's Armed Forces Hero, Labor Hero, Professor, People's Teacher, Distinguished Teacher, National Artist, Distinguished Artist, and other titles conferred by the state; bonuses or other incentives from the state budget;

4.10. Payments made to social insurance and health insurance from wages and salaries of workers. For foreigners who have paid the required amount abroad similar to Vietnam's social insurance and health insurance, they must present proof;

4.11. Income of individual business households and individuals subject to corporate income tax;

4.12. Benefits received from the paying entity such as training costs paid to training institutions, airfare for leave for foreign employees (taxpayers), school fees for children of foreign employees directly paid to educational institutions in Vietnam from kindergarten to high school;

II. BASIS FOR CALCULATING INCOME TAX

The basis for calculating income tax includes taxable income and tax rates;

1. Taxable income includes regular income and irregular income;

Taxable income is determined in Vietnamese Dong. In case of income in foreign currency, it must be converted into Vietnamese Dong based on the average inter-bank foreign exchange rate published by the State Bank at the time of income generation. If during inspection, it is found that the paying entity has not declared withholding tax monthly, the foreign currency exchange rate for converting income into Vietnamese Dong will be the average inter-bank foreign exchange rate published by the State Bank at the time of inspection;

In case of income in kind, taxable income is determined based on the price stated on the invoice or the market price of similar products (or equivalent) at the time of income generation;

1.1. Regular income;

1.1.1. For Vietnamese citizens and other individuals residing in Vietnam, regular taxable income is the average monthly income of each individual exceeding five million Vietnamese Dong in a year;

For singers performing various forms of music drama, opera, traditional theater, folk songs; circus artists, dancers; football players; professional athletes confirmed by the relevant state management agency, 25% of their income can be deducted when determining taxable income;

1.1.2. For Vietnamese citizens who worked both inside and outside the country in a year, the average monthly taxable income is calculated by dividing the total income generated both domestically and abroad by twelve months, or determined based on the average monthly taxable income for domestic and foreign periods;

1.1.3. For foreigners considered residents in Vietnam, regular taxable income is the total income generated in Vietnam and abroad, averaged monthly over the year exceeding eight million Vietnamese Dong;

If the reported income from abroad is lower than the income from Vietnam without proof, the average monthly income during the period in Vietnam will be used as the basis for taxation for the period abroad. A tax month is assumed to be thirty days;

1.1.4. For foreigners considered non-residents in Vietnam, taxable income is the total income generated in Vietnam, regardless of whether 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 a continuous 12-month period from the date of entry into Vietnam; they are considered non-residents if they stay in Vietnam for less than 183 days, including cases where they are not present in Vietnam but have income generated there;

1.2. Irregular income;

1.2.1. For income from technology transfer, it is the amount exceeding fifteen million Vietnamese Dong per contract, regardless of the number of payments;

1.2.2. For lottery winnings income under various forms, including promotional prize winnings, where the value of each individual winning and receiving the prize exceeds VND 15 million, such income shall be considered taxable.

2. Tax rate:

2.1. For regular income: The tax rate for regular income shall be applied according to the progressive tax rate table specified in Clause 4, Article 1 of the Ordinance Amending and Supplementing Certain Provisions of the Ordinance on Income Tax for High-Income Individuals as follows:

2.1.1. For Vietnamese citizens and other individuals residing in Vietnam:

Per month per person

2.1.3. For non-resident foreigners: A tax rate of 25% shall apply to total taxable income.

2.1.4. For Vietnamese citizens who have both domestic and foreign income during the tax year, the tax rate for the time spent in Vietnam shall be based on the tax rate table for Vietnamese citizens (Point 2.1.1 of this Section), and the time spent abroad shall be based on the tax rate table for foreigners (Point 2.1.2 of this Section).

2.2. For irregular income:

The tax rate for irregular income shall be applied to the total taxable income as follows:

2.2.1. A tax rate of 5% shall apply to taxable income from technology transfer;

2.2.2. A tax rate of 10% shall apply to taxable income from lottery winnings and promotional prize winnings.

III. DECLARATION AND PAYMENT OF TAX

1. Tax collection management:

1.1. In cases where the payer of income can be identified, the declaration and payment of personal income tax shall be carried out according to the principle of withholding at source.

Organizations and individuals paying income (referred to as the payer of income) have the obligation to withhold personal income tax before paying income to individuals. The payers of income include:

- Organizations and individuals paying salaries, wages, bonuses, remuneration, and other amounts with the nature of salaries or wages;

- Domestic agencies managing, selecting, brokering, or providing labor;

- Agencies managing, selecting, sending people to work abroad: Ministries, sectors, enterprises, etc.;

- Diplomatic agencies and organizations representing Vietnamese agencies and enterprises abroad;

- Organizations and individuals receiving technology transfers or purchasing copyrights;

- Organizations paying lottery winnings, promotional prizes, and other prizes;

- Organizations and individuals paying for service provision;

- Contractors;

- Organizations and individuals organizing private tutoring, exam preparation, sports performances, scientific seminars, and research projects;

- Publishers, magazines, newspapers, film, audio, and video producers;

- Other organizations and individuals paying income to taxpayers of personal income tax.

1.2. For cases other than those mentioned above, individuals must register, declare, and pay taxes at the tax authority.

2. Registration, issuance, and use of taxpayer identification number:

2.1. Individuals with regular income subject to taxation shall be issued a taxpayer identification number according to Decision No. 75/1998/QD-TTg dated April 4, 1998, of the Prime Minister regarding taxpayer identification numbers and current regulations on taxpayer identification numbers. The registration for issuance of the taxpayer identification number shall be conducted at the payer of income or at the tax authority:

2.1.1. Registration through the payer of income: Individuals are responsible for submitting the registration form for issuance of the taxpayer identification number to the payer of income. The payer of income will consolidate the registration forms of each individual and submit them to the tax authority in charge to process the issuance of the taxpayer identification number for each individual.

In cases where individuals pay personal income tax through multiple payers of income simultaneously, they should register at the most convenient payer to obtain the taxpayer identification number, then inform the other payers of the issued taxpayer identification number.

2.1.2. Registration at the tax authority: Individuals submit the registration form for issuance of the taxpayer identification number to the tax authority.

2.2. The taxpayer identification number issued to individuals is unique. It is used in tax declarations and settlements.

3. Declaration and payment of tax:

3.1. Tax declarants:

- Payers of income to individuals whose income reaches the level requiring tax withholding.

- Individuals registering to pay taxes at the tax authority, including cases where they authorize organizations and individuals permitted to operate tax consulting services according to the law.

3.2. Place of declaration:

3.2.1. If the payer of income has business activities managed by a certain tax authority, the personal income tax shall be declared and paid at that tax authority.

3.2.2. If the payer of income does not engage in business activities, the declaration and payment of tax shall be made at the Provincial Tax Department or the Municipal Tax Department directly under the Central Government where the office of the payer is located.

3.2.3. Individuals registering taxes at the tax authority shall declare and pay taxes at the Provincial Tax Department or the Municipal Tax Department directly under the Central Government. Individuals should contact the local tax department for guidance on registration, declaration, and tax payment, and jointly establish a Memorandum of Understanding between the two parties according to Model Form 01/TNTX attached hereto. Individuals are responsible for submitting the tax registration form according to Model Form 02a/TNTX (or Model Form 02b/TNTX) attached hereto to the tax authority to determine the monthly provisional tax payment. The deadline for submitting the tax registration form is the 25th day of the month when income is generated.

3.3. Procedures for declaration and payment of tax:

3.3.1. Declaration and payment of tax for regular income:

3.3.1.1. Declaration and payment of tax through the payer of income:

For the payer of income, the monthly declaration and provisional tax payment shall be carried out as follows:

For income-paying entities, the declaration and provisional monthly tax payment shall be carried out as follows:

- Deduct tax according to the Progressive Tax Rate Table for income payments made to individuals under the management of the income payer; individuals with stable employment contracts (indefinite term) and those with fixed-term employment contracts, temporary employment contracts. The declaration for this income shall be carried out using Form No. 03a/TNTX issued together with this Circular.

- Deduct 10% tax on total income for payments made to individuals whose income from each payment is 500,000 VND or more, arising from activities such as commission agency, brokerage (including bonuses); royalties, teaching fees; fees for the use of patents, trademarks, works; remuneration for participation in projects, business associations, boards of directors, boards of members; scientific and technical services, information technology services, consulting services, design, architecture, training, performance activities, sports activities, and other taxable payments.

For Vietnamese citizens and other individuals residing in Vietnam who are eligible for a 25% deduction when determining taxable income as stipulated in Point 1.1.1 Section II of this Circular, the income basis for deducting 10% is the income after the 25% deduction.

At the end of the month, the income payer shall prepare the Income Tax Declaration for individual regular income using Form No. 3b/TNTX issued together with this Circular to consolidate the amount of tax deducted and deposited into the tax authority's provisional collection account. When paying income, the income payer is responsible for issuing a tax deduction certificate to the individual as a basis for declaration and year-end settlement.

- For income payments made to non-resident foreigners, the income payer is responsible for deducting tax and preparing the declaration using Form No. 05/TNTX issued together with this Circular.

3.3.1.2. Declaration and Payment of Tax at the Tax Authority:

Each month, individuals submit the Personal Income Tax Declaration to the tax authority using Form No. 04/TNTX issued together with this Circular. In cases where individuals declare stable monthly income in their annual tax declaration, they submit the declaration using Form No. 04/TNTX in the first month, and do not need to submit this form in subsequent months but pay tax monthly according to the prescribed deadline, except in cases of changes in income.

In cases where the managing authority does not directly pay income but performs management, inspection, and supervision functions over organizations with individuals subject to taxation, if it ensures timely and centralized tax collection and is accepted by the tax authority, it may collect and pay taxes into the State Budget according to regulations.

3.3.2 Declaration and Payment of Tax for Non-Regular Income:

Personal Income Tax for non-regular income is paid for each occurrence of income. The income payer shall deduct tax and issue a tax receipt when making payments to the recipient.

The income payer is responsible for preparing the declaration for non-regular income tax using Form No. 06/TNKTX issued together with this Circular for the month of income generation, detailing the number of recipients, income amount, tax deducted, remuneration received, and tax payable to the State Budget.

3.4. Time limit for declaration and payment of tax:

The deadline for submitting the tax declaration form to the tax authority is no later than the 10th day of the following month, and the deadline for paying taxes into the State Budget is no later than the 25th day of the following month.

The determination of the tax payment date is carried out as follows:

In cases of tax payment through bank transfer, the tax payment date is the date confirmed by the bank or financial institution on the payment slip.

In cases of cash tax payment, the tax payment date is the date the treasury office receives the tax or the date the tax authority issues the receipt.

4. Tax Settlement:

4.1 Principles of Year-End Settlement:

- Year-end settlement for regular income is conducted annually. By the end of the year or upon expiration of the contract, the income payer and the individual must consolidate all sources of income and taxable income for the year, declare personal income tax, and submit the year-end tax settlement declaration.

- Year-end settlement at the income payer applies to individuals who have only one source of income throughout the year.

- Year-end settlement at the tax authority applies to individuals who have income from two or more sources, individuals registered to pay tax at the tax authority, and other cases.

4.2 Contents of Year-End Settlement:

4.2.1 For Vietnamese Nationals and Other Individuals Residing in Vietnam:

Individuals must aggregate all monthly income for the year (including months without income), divide by twelve to determine the average monthly taxable income as the basis for calculating the annual tax due; compare with monthly payments already made, to determine additional tax due (or excess tax refundable).

- If an individual has worked both inside and outside the country during the year, they may choose one of the following methods to calculate the tax due:

+ Aggregate domestic and foreign income to calculate the average monthly income as the basis for determining the tax due according to the corresponding tax table for time spent in Vietnam and abroad;

+ Calculate the average monthly taxable income for time spent in the country to apply the tax table for Vietnamese citizens and other individuals residing in Vietnam, and the average monthly income for time spent abroad to apply the tax table for foreigners and Vietnamese citizens working abroad.

If there are days spent both in and outside the country in a month, calculate the daily tax due based on the corresponding tax table to determine the tax due for the number of days (less than a month) spent in Vietnam or abroad. A month is considered to have thirty days.

- In cases where work and labor take place solely abroad during the tax year, the amount of tax payable shall be determined according to the Income Tax Rate Table for foreigners and Vietnamese citizens working or employed abroad. If taxes have been paid abroad and proof of payment from those countries is provided, the amount paid may be deducted but not exceeding the tax payable under Vietnam's Income Tax Rate Table; if taxes have been paid in countries that have signed Double Taxation Avoidance Agreements with Vietnam, such agreements shall govern.

4.2.2. For foreigners:

4.2.2.1. Determining the period of residence:

- Foreigners' income tax is declared and settled according to the resident status criteria. Individuals are responsible for preparing a list of days residing in Vietnam according to Form No. 13a/TNTX issued along with this Circular to determine their period of residence in Vietnam; if they have already been classified as residents in Vietnam and have worked continuously and stably for several years in Vietnam, they need not declare according to Form 13a/TNTX but only declare for the year in which they leave Vietnam.

- The period of residence for the first tax year is determined by adding up all the days present in Vietnam within a continuous twelve-month period starting from the first day of arrival in Vietnam (both the arrival and departure days are counted as one day); the second tax year (after the first year) is determined according to the Gregorian calendar. If part of the second year falls within the first tax year and the individual has income taxed as a non-resident, in the second tax year, the individual can choose to settle tax either at the rate applicable to non-residents or according to the progressive rate table for residents. If the individual was determined to be a resident in the previous year, then the subsequent year will also be considered as a resident period.

Example: Mr. X entered Vietnam for the first time and began working with income generated in Vietnam from May 1, 2004. Mr. X's first tax year is from May 1, 2004, to April 30, 2005. Assuming from May 1, 2004, to December 31, 2004, he was present in Vietnam for 150 days, and from January 1, 2005, to April 30, 2005, he was present for 32 days. In his first tax year, Mr. X spent 182 days in Vietnam, thus qualifying as a non-resident, and therefore pays income tax at a rate of 25% on income generated in Vietnam.

The second tax year is calculated according to the Gregorian calendar. Assuming from May 1, 2005, to December 31, 2005, Mr. X was present in Vietnam for 160 days, totaling 192 days in the second year (32 days + 160 days). Thus, Mr. X qualifies as a resident in Vietnam and must declare and pay tax according to the progressive rate table. The income earned over the 32 days taxed at 25% can be recalculated according to the progressive rate table.

When verifying the period of residence in Vietnam, the tax authority sends a form to confirm the period of residence (Form No. 13b/TNTX issued along with this Circular) to the police department for confirmation.

4.2.2.2. Determining the amount of tax payable:

Foreigners who are residents in Vietnam: declare the total income generated in Vietnam and outside Vietnam in the tax year to calculate the average monthly income and settle the tax payable according to Clause II of this Circular. To accurately determine taxable income abroad, individuals must provide proof of income payments from abroad, accompanied by an annual income confirmation letter according to Form No. 12/TNCN issued along with this Circular; if an individual incorrectly declares foreign income, the tax authority will cooperate with the foreign tax authority where the income is paid to verify the individual's income abroad.

- In cases where a resident in Vietnam has income abroad and has paid taxes abroad in the tax year, the amount paid abroad may be deducted. The deductible amount does not exceed the tax payable according to Vietnam's Income Tax Rate Table allocated to the income generated abroad. The allocation ratio is determined by the proportion of income generated abroad to the total taxable income.

* Example 1: In 2005, Mr. A, a resident in Vietnam, had income from employment for 8 months in Vietnam amounting to 70,000,000 VND (of which 30,000,000 VND was received in Vietnam and 40,000,000 VND was received abroad) and 4 months in Country X amounting to 50,000,000 VND. Mr. A must pay tax in Country X on the income earned in Country X at a rate of 20% as stipulated by Country X's Income Tax Law. In this case, Mr. A's declaration and deduction of tax paid in Country X in Vietnam would be as follows:

+ Mr. A's average monthly taxable income (according to Vietnam's tax law) is:

(70,000,000 VND + 50,000,000 VND) ÷ 12 months = 10,000,000 VND/month

+ The monthly tax payable (according to Vietnam's tax law) is:

(10,000,000 VND - 8,000,000 VND) × 10% = 200,000 VND

+ The tax payable for the year 2005 is:

200,000 VND × 12 months = 2,400,000 VND

+ The income tax paid in Country X in 2005 for the income generated in Country X (according to Country X's Income Tax Law) is:

50,000,000 VND × 20% = 10,000,000 VND

+ The deductible tax allocated to the income generated abroad based on the allocation ratio between income generated abroad and total taxable income in Vietnam is:

(50,000,000 VND ÷ 120,000,000 VND) × 2,400,000 VND = 1,000,000 VND

Therefore, the maximum tax deduction in Vietnam for income generated abroad is 1,000,000 VND (Mr. A has already paid 10,000,000 VND in Country X).

+ The actual income tax Mr. A needs to pay in Vietnam is:

2,400,000 VND - 1,000,000 VND = 1,400,000 VND

If Mr. A has paid 500,000 VND in Country X (assuming a tax rate of 1%), the tax Mr. A needs to pay in Vietnam is:

1,400,000 VND + (1,000,000 VND - 500,000 VND) = 1,900,000 VND

Example 2: In 2005, Mr. B had income from wages for 12 months in Vietnam amounting to 120,000,000 VND, in addition to interest income from lending money in country X amounting to 10,000,000 VND. Mr. B paid tax on this income at a rate of 20% in country X. In this case, Mr. B's declaration of tax payment and deduction of taxes paid in country X in Vietnam would be as follows:

+ Taxable income of Mr. B (according to Vietnamese tax laws) is:

120,000,000 VND : 12 months = 10,000,000 VND/month

+ The amount of personal income tax that Mr. B must pay in 2005 (according to Vietnamese tax laws) is:

(10,000,000 VND - 8,000,000 VND) x 10% x 12 months = 2,400,000 VND

+ The amount of personal income tax paid in country X in 2005 for interest income from lending money (according to the tax law of country X):

10,000,000 VND x 20% = 2,000,000 VND

+ Due to the temporary provision of Vietnamese tax law not yet imposing tax on interest income from lending money, Mr. B's interest income from lending money sourced from country X is not included in his taxable income in Vietnam, and accordingly, Mr. B cannot deduct the tax paid in country X for the interest income. Therefore, the amount of tax Mr. B must pay in Vietnam is 2,400,000 VND.

- Foreign individuals who have not resided in Vietnam and have already paid withholding tax do not need to settle their tax returns.

4.3. Procedures for settling tax returns:

4.3.1. Settling at the income disbursing agency:

- Individuals subject to tax settlement at the income disbursing agency shall prepare a power of attorney for tax return settlement according to Form No. 09/TNTX issued together with this Circular and submit it to the income disbursing agency in January of the following year or before the end of the contract (for individuals whose contracts end before December 31 and have no further income generated in the year). Based on the power of attorney for tax return settlement, the income disbursing agency will aggregate and settle the tax according to Form No. 10/TNTX issued together with this Circular, compile detailed lists of individuals according to Form No. 11/TNTX issued together with this Circular, and send them to the tax authority no later than February 28 of the following year.

- Based on the tax return declaration, the income disbursing agency must pay any outstanding tax to the State Budget no later than March 10 of the following year; if the tax paid exceeds the tax due, it can be offset against the tax due in the next period. If there is no tax due in the next period, the income disbursing agency will issue a receipt confirming the tax withheld during the year for individuals with excess tax payments so that each individual can declare the annual tax return form and request a refund of the excess tax according to the guidance at Point 5 of this Section.

4.3.2. Settling at the tax authority:

Individuals subject to tax settlement at the tax authority must submit the annual tax return declaration according to Form No. 08/TNTX issued together with this Circular to the tax authority as follows:

- Individuals with stable income from one income disbursing agency but also having income generated elsewhere may choose to submit the annual tax return declaration to the local tax authority where they primarily work or the tax authority where the most income was generated.

- Individuals with stable income from one income disbursing agency, who changed workplaces during the year, must submit the annual tax return declaration to the local tax authority where they currently work; if they no longer work at any place, they must submit the annual tax return declaration to the tax authority where they last worked in the settlement year.

- Individuals who have registered to declare and pay taxes at a specific tax authority must submit the annual tax return declaration to that tax authority.

The deadline for submitting the annual tax return declaration is no later than February 28 of the following year or no later than 30 days from the date the contract ends for individuals whose contracts end before December 31 and have no further income generated in the year.

Based on the tax return declaration, individuals must pay any outstanding tax before March 10 of the following year or no later than 30 days from the date the contract ends; if there is an excess tax payment, it will be refunded according to the guidance at Point 5 of this Section.

5. Refund of tax:

5.1. Eligibility for tax refund:

- Individuals who, upon annual tax settlement, have temporarily paid more tax than required in the year, except when the income disbursing agency has offset the excess against the tax due in the next period.

- Other cases eligible for tax refunds are determined by the competent authority according to the provisions of the law.

5.2. Documents for requesting a tax refund include:

- A tax refund application form according to Form No. 15/TNCN issued together with this Circular;

- Identity card or passport (photocopy);

- Annual tax return declaration;

- Withholding tax deduction vouchers, tax receipts (originals);

- Certificates of termination of employment such as retirement decision, termination decision, contract termination record, residency certificate... (if applicable);

- Power of attorney for tax refund (if applicable).

5.3. Time limit for tax refund:

The Tax Authority will accept the documents, review the files within seven days from the date of receiving the file; if the individual does not qualify for a tax refund, they will be notified in writing and the file returned; if the individual qualifies for a tax refund but the file is incomplete or incorrect, they will be notified in writing to supplement the file.

After receiving all necessary documents, the tax authority will check the data, determine the amount of tax refund, issue a tax refund decision for the individual, and simultaneously send the treasury office to process the refund for the individual.

The maximum time limit for processing a tax refund is 15 days from the date of receiving all necessary documents as prescribed; if verification of the documents is required, the maximum time limit is 45 days.

The number of working days for considering and processing a tax refund is calculated based on working days.

5.4. The refunded personal income tax amount shall be drawn from the Temporary Collection Account of the tax authority. The management and use of the Temporary Collection Account of the tax authority shall be carried out in accordance with specific guidelines issued by the Ministry of Finance.

6. Tax receipts for personal income tax and withholding tax certificates:

The model CTT 10B tax receipt and the model CTT 54 withholding tax certificate issued together with this Circular shall be printed, distributed, and provided to the Tax Departments by the General Department of Taxation for organizing the collection of personal income tax as prescribed.

Tax receipts for personal income tax and withholding tax certificates shall be managed according to regulations on printing, distribution, management, and use of tax stamps.

IV. RESPONSIBILITIES OF ORGANIZATIONS AND INDIVIDUALS IN THE COLLECTION AND PAYMENT OF PERSONAL INCOME TAX

1. Responsibilities of individuals subject to personal income tax:

Individuals subject to personal income tax must voluntarily register, declare their taxable income, and pay personal income tax through the income-paying entity or directly at the tax office in accordance with the provisions set forth in Section III of this Circular. Individuals who pay taxes are responsible under the law for the accuracy and honesty of the declared figures.

2. Responsibilities of the income-paying entities, organizations receiving foreign nationals, and state management agencies:

2.1. Responsibilities of the income-paying entity:

- Proactively declare and register for tax declaration with the local tax authority regarding the collection of personal income tax through withholding at its own unit; guide individuals subject to personal income tax to complete procedures for registering individual taxpayer identification numbers.

- Monthly, based on the list of individuals subject to personal income tax payment and the actual income paid to individuals, carry out withholding of personal income tax, prepare a consolidated declaration form for submission to the tax authority, and remit the tax to the State Budget.

- Maintain books and records related to the organization of personal income tax collection: taxable income, tax calculation, withholding tax, tax declaration, tax payment declaration, storage of tax receipts, calculation of the amount of remuneration received, and remittance of tax to the State Budget.

- Issue personal income tax receipts to individuals requesting them and issue withholding tax certificates to individuals to confirm the amount of personal income tax withheld by the income-paying entity. The income-paying entity shall submit an application to the tax authority for issuance of tax receipts and withholding tax certificates using Form 07/TNCN issued together with this Circular; report monthly on the use of tax receipts and withholding tax certificates to the tax authority by the 20th day of the following month or by the 20th day of the first month of the quarter if only one book of tax receipts and withholding tax certificates has been used up during the quarter, as per Form 14/TNCN issued together with this Circular.

- Implement reporting systems; settle accounts for tax payments, tax receipts, withholding tax certificates, and remuneration received with the tax authority, and present all relevant documents related to personal income tax when requested by the tax authority.

- The income-paying entity is entitled to a fee calculated as a percentage of the personal income tax withheld before remitting it to the State Budget, which can be used to cover expenses for organizing tax collection and rewarding individuals who have achieved results in organizing tax collection, at the following rates:

+ 0.5% (five thousandths) of the tax collected from regular income.

+ 1% (one percent) of the tax collected from non-regular income.

2.2. Responsibilities of organizations receiving and managing foreign nationals include guiding foreign nationals to complete final tax settlement procedures upon completion of their term of service to obtain tax receipts before proceeding with departure formalities.

2.3. Responsibilities of state management agencies, including immigration management agencies, agencies issuing work permits to foreign nationals, labor management agencies, and other relevant agencies, include providing the tax authority with information related to taxable income and taxpayers when requested by the tax authority.

3. Responsibilities of the tax authority:

- Coordinate with state management agencies and relevant agencies to promote and guide organizations and individuals, while inspecting and requiring income-paying entities operating within their jurisdiction to register and declare personal income tax through withholding at source.

- Organize the issuance of taxpayer identification numbers for tax payers.

- Guide and inspect income-paying entities in implementing registration, consolidation, declaration, tax calculation, withholding tax, and remittance of tax to the State Budget, and organize inspections for final tax settlements of personal income tax.

- Carry out issuance and final settlement of tax receipts, withholding tax certificates, tax payments, and settlement of remuneration received with income-paying entities.

- Organize the collection and final settlement of personal income tax for individuals who register to pay tax and those who file annual tax declarations at the tax office, and issue personal income tax receipts to taxpayers.

- Implement coercive measures, recovery of unpaid taxes and penalties for violations of the Personal Income Tax Ordinance, and decide on rewards for individuals who help the tax authority recover unpaid taxes.

- Implement periodic reporting systems to higher-level tax authorities.

V. TAX REDUCTION AND EXEMPTION

1. Eligibility for tax reduction and exemption:

1.1. Individuals subject to personal income tax who encounter difficulties due to natural disasters, enemy attacks, accidents causing damage to property and income, affecting their livelihood may be eligible for tax reduction or exemption for that year, depending on the extent of the damage. The amount of tax exempted or reduced shall be proportional to the ratio between the amount of damage and the taxable income for the year but shall not exceed the total tax payable for the year.

1.2. In special cases, if paying tax affects national economic, political, and social interests, tax exemption or reduction may be granted.

2. Procedures and authority for granting tax exemptions and reductions:

2.1. An individual taxpayer who requests tax exemption or reduction must submit an application form confirmed by local authorities (People's Committee of wards or communes) or the income payer to the local tax authority where the individual has registered for tax payment or where the income payer deducts taxes; the application for tax exemption or reduction must clearly state the reasons, the amount of loss, personal tax code (accompanied by relevant documents determining or appraisal reports on the damage status to assets, income, and personal impact recognized by competent authorities), the amount of tax due, and the amount requested for exemption or reduction.

2.2. The tax authority shall examine and issue a decision on tax exemption or reduction or recommend the higher-level tax authority to handle according to the following分级授权：

+ The Director of the Tax Department may decide cases of tax exemption or reduction under five million dong per year;

+ The Director General of the General Department of Taxation may decide cases of tax exemption or reduction from five million dong to one hundred million dong per year;

+ The Minister of Finance decides cases of tax exemption or reduction over one hundred million dong per year.

2.3. During the period when the authorized tax authority examines and decides on tax exemption or reduction, the taxpayer must pay the full amount of tax as stipulated by the Ordinance; once a decision on tax exemption or reduction is made, the taxpayer will be refunded the exempted or reduced tax amount either by offsetting it against the tax due in the next period or by having the income payer return the deducted tax according to regulations. In case the individual pays the tax at the tax authority, the amount will be offset against the tax due in the next period or refunded by the state budget according to regulations.

3. For cases of tax exemption or reduction as prescribed in point 1.2, Section V of this Circular, organizations and individuals requesting tax exemption or reduction must send a letter to the Ministry of Finance analyzing the reasons and economic, political, and social benefits to the country related to granting tax exemption or reduction to taxpayers. The Ministry of Finance will review the file and submit a report to the Prime Minister for consideration and decision on each specific case.

VI. VIOLATION HANDLING AND REWARD

1. Violation handling:

1.1. Individuals or organizations that fail to comply with regulations on registration procedures, declaration, settlement, record-keeping, and accounting vouchers for income tax, failing to deduct income tax as required, shall be subject to administrative penalties for tax violations;

1.2. Individuals or organizations engaging in false declarations or tax evasion, in addition to paying the full amount of income tax as required, shall be fined one to three times the amount of evaded tax; if the tax evasion is significant or they have been administratively penalized for tax violations and continue to violate or commit serious offenses, they shall be criminally prosecuted according to current laws.

1.3. Individuals or organizations that delay tax payments or fines beyond the specified payment date or tax processing decisions shall, in addition to paying the full amount of tax and fines, be subject to a daily penalty of 0.1% of the delayed payment amount for each day of delay.

Example: Income payer X reported withholding and declaring personal income tax of ten million dong on Form 03a/TNTX in May. The commission received was fifty thousand dong. The amount of tax payable to the State budget is nine million nine hundred and fifty thousand dong. The payer submitted the declaration to the tax authority on June 9th, and the tax was paid into the State budget via bank transfer on June 27th. Thus, compared to the deadline for tax payment, it was two days late, and the income payer must bear a late payment penalty of nine million nine hundred and fifty thousand dong multiplied by 0.1% multiplied by two days, which equals nineteen thousand nine hundred dong.

1.4. If an organization or individual paying income fails to declare, register, or report individuals subject to taxation, does not withhold income tax before payment, causing a loss of personal income tax revenue, in addition to compensating the State budget for the lost tax, they shall also be subject to administrative penalties for tax violations according to current laws. The compensation amount and fine shall be deducted from the income of the individual or the organization paying income, from the commission already received, and shall not be included in deductible expenses when determining corporate income tax.

1.5. Individuals or organizations that fail to pay taxes or fines as notified or decided shall be handled as follows:

1.5.1. Funds from the treasury or financial institutions where the organization or individual has accounts shall be seized to pay taxes or fines. The treasury or financial institution shall be responsible for deducting funds from the account of the organization or individual to pay taxes or fines into the State budget before recovering the debt.

1.5.2. Assets shall be seized according to the law to ensure the collection of outstanding taxes and fines.

Administrative violations of income tax and the authority to handle such violations shall be carried out according to current regulations on administrative penalties in the field of taxation.

2. Reward:

Individuals who discover tax evasion and report it to the tax authority through direct reporting, letters, documents, or applications, clearly stating the name and address of the individual or organization involved in tax evasion, shall be rewarded according to current regulations.

VII. COMPLAINTS AND STATUTE OF LIMITATIONS

1. Complaints:

1.1. Organizations and individuals have the right to complain about the implementation of the Law on Income Tax that is incorrect regarding themselves.

The complaint must be submitted to the directly managing tax authority or the decision-making body within thirty days from the date of receiving the tax notification, collection order, or decision.

While waiting for resolution, the complainant must pay the full amount of tax and fines as notified within the specified time limit.

The authority receiving the complaint has the responsibility to examine and resolve it within fifteen days from the date of receipt; for complex cases, the deadline may be extended but not exceeding thirty days from the date of receipt; if the matter is outside their jurisdiction, they must transfer the file or report to the competent authority for resolution and inform the complainant within ten days from the date of receipt.

1.2. In case the complainant disagrees with the decision of the receiving authority or if the time limit specified in point 1.1 of this Section has expired and the receiving authority has not resolved the matter, the complainant has the right to appeal to the superior authority directly overseeing the receiving authority.

2. Time limit:

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

2.2. In cases where fraud 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 detection of fraudulent tax evasion or tax errors. In cases where organizations or individuals fail to register, declare, or pay taxes, the recovery period for taxes and fines shall be calculated from the date of taxable income.

VIII. IMPLEMENTATION

1. This Circular takes effect fifteen days from the date of publication in the Official Gazette and replaces Circular No. 05/2002/TT-BTC dated January 17, 2002, issued by the Ministry of Finance guiding the implementation of Decree No. 78/2001/NĐ-CP dated October 23, 2001, of the Government detailing the implementation of the Income Tax Ordinance for High-Income Individuals and any provisions contrary to this Circular.

Declarations and calculations of income tax before July 1, 2004, shall be carried out according to the guidance provided in Circular No. 05/2002/TT-BTC dated January 17, 2002, of the Ministry of Finance, and from July 1, 2004, onwards, they shall be implemented according to the provisions of this Circular.

2. Where an international treaty to which Vietnam is a party provides for a different method of income tax payment than that stipulated in this Circular, such treaty shall apply.

3. Tax authorities at all levels shall have the duty to disseminate and guide high-income individuals and organizations and individuals paying income to strictly comply with the regulations on income tax for high-income individuals as detailed in the Ordinance, Decree, and Circulars guiding such tax.

During implementation, if there are any difficulties, organizations and individuals are requested to promptly report them to the Ministry of Finance (General Department of Taxation) for study and resolution./.