Association of Chartered Certified Accountants

Paper F6: Taxation

June 2018 Intake

Revision - Personal Income Tax

ANSWERS
1 Who is liable to pay PIT
Individuals earning PIT-taxable income, including:
 Resident individual having income both within and outside the territory of Vietnam,
irrespective of where the income is paid.
 Non-resident individual having income in Vietnam, irrespective of where the income is
paid
2 How a residency of an individual is determined
Having a regular residential location in Vietnam in one of the following cases:
 The person has a regular residence according to legislation on residence:
o Vietnamese citizen: the regular residence is the place where that person
regularly, stably, and indefinitely lives and has been registered as permanent
residence as prescribed by legislation on residence
o Foreigner: the regular residence is the permanent written in the permanent
residence card, or the temporary residence when applying for the temporary
residence card issued by competent authorities affiliated to the Ministry of Public
Security
 The person rents a house in Vietnam according to legislation on housing under a
contract that lasts 183 days or longer in the tax year, in particular
o The person has no regular residence but has rented the house for totally 183
days in the tax year is also considered a resident, even that person rents houses
in various areas
o The rented houses include hotels, guesthouses, motels, offices, etc. whether they
are rented by the person or their employer
If the person has no regular residence in Vietnam according to this Clause but actually is
present in Vietnam for fewer than 183 days in the tax year, and fails to prove his or her
residence in any country, that person shall be considered a resident of Vietnam
The residency in another country shall be proved by the Certificate of residence. If the
person belongs to a country or territory that signs tax agreements with Vietnam and does
not issue the Certificate of residence, that person shall present a photocopy of the
passport to prove the period of residence

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

3 What are the differences in the tax treatment of a resident individual and a non-
resident individual?
Resident Non-resident
Taxable income World-wide income Income sourced from Vietnam (regardless
of whether paid in Vietnam or outside
Vietnam)
Deductions Insurance N/A
(for income Charity contribution
being salary)
Family Circumstances
Double tax relief Can claim Cannot claim
Tax rate
Income being Progressive tax rate in flat tax rate of 20%.
Salary conjunction with business
income
Business See question 1.14 Flat rate of 1%, 2% & 5%
income
Income from Flat tax rate of 5% Flat tax rate of 5%
Capital
Investments
Income from income from transfer of a Flat tax rate of 0.1% on amount received
Capital capital contribution: Flat tax
Transfers rate of 20% on income
Income from transfers of
securities: flat rate 0.1% on
transfer price
Income from Flat rate 2% on transfer Flat tax rate of 2% on amount received
Real Property price
Transfers
Royalties and Flat tax rate of 5% for Flat tax rate of 5% for income higher than
Franchises income higher than 10 10 millions
millions
Winnings or Flat tax rate of 10% for Flat tax rate of 10% for income higher
Prizes, and income higher than 10 than 10 millions
Receipt of an millions
Inheritance or
Gift

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

4 What are exempt incomes?

 Income from real property transfers as between husband and wife; as between
parents and children including adoptive parents and adopted children; as between
parents-in-law and children-in-law; grandparents and grandchildren; between
siblings.
 Income from transfer of a residential house or right to use residential land and the
assets attached to the land by an individual who has only one sole residential house
[and/or] residential land use right in Vietnam (owner for 180 days or more)
 Income from the value of a land use right of an individual to whom the State allocated
such land without payment of, or with reduced land use fees in accordance with law
 Income being receipt of an inheritance or gift of real property as between husband
and wife; parents and children including adoptive parents and adopted children;
parents-in-law and children-in-law; grandparents and grandchildren; siblings.
 Income from conversion of agricultural land by a family household or individual to
whom the State allocated such land for production
 Income of a family household or individual directly engaged in agricultural production,
forestry, salt mining, raising animals, cultivating crops, fishing or aquaculture where
the produce has not yet been processed into other products or has only been
preliminarily processed
 Income being interest on money deposited at a bank or credit institution, & from life
insurance policies
 Income being foreign currency remitted by overseas Vietnamese
 Income being scholarships
 Income being compensation payments from life and non-life insurance contracts,
compensation for labour accidents, State compensation payments and other
compensation payments payable pursuant to law shall be tax exempt income
 Income receivable from charitable funds which the State authorities permit to be
established or which they recognize, and which are for charitable, humanitarian, or
study encouragement purposes and not for profit-making purposes
 Income receivable from foreign aid sources for charitable or humanitarian purposes
in both Government and non-Government forms and approved by State authorities
5 What are the non-taxable incomes in income being salary
a. Allowance: Per-diem, Meal allowance, uniform, mobile, petrol, other allowances
(responsibility, industry, areas, relocation to extremely difficult areas or sovereignty
over sea and islands, long term overseas Vietnamese resident back to work in
Vietnam..),
b. Bonus: attached with recognition accepted or granted by competent authority
c. Payment from SHUI: Maternity leave, unemployment payment, pension, support for
baby delivering
d. Hybrid: Overtime, Share, Housing allowance (note HA include house rent, electricity,
water supply & associate services)
e. For resident foreigner leaving in Vietnam or Vietnamese leaving overseas: one time
relocation, one return air ticket/year, study fee for children from kindergarten to high
school

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

f. Collaborative staff: club, employee family affairs, transportation to work (this point
include for specific individual)
g. Others benefit in kind paid by the OPI: optional insurance without accrual of
premiums (not include life insurance or the same, voluntary pension insurance &
fund which is till taxable), training relevant to the job, support for serious sick for
family member
6 Principles for assessing deductibility for a dependant
 Each dependant may only be assessed for deduction once in respect of one taxpayer
within the tax assessment year.
 If a taxpayer has a dependant in common with other taxpayers, then all such
taxpayers must agree on registration of the dependant of only one taxpayer.
 A taxpayer shall be responsible to declare the number of his or her dependants, and
shall be legally liable for the accuracy of the declaration.
7 Who are called dependants for the claiming of family circumstances purposes
 Children, including adopted and illegitimate children:
o Children under the age of 18 years (counting the full number of months).
o A child over 18 years of age who is handicapped and unable to work.
o A child currently studying at a university, college, specialized secondary school or
vocational training establishment and who does not have income or who has
income which does not exceed the threshold (1 million dong/month).
 A spouse of the taxpayer who is above the working age, or still of working age as
stipulated by law but who is handicapped, unable to work, and does not have income
or has income which does not exceed the threshold.
 A parent or parent-in-law of the taxpayer who is above the working age, or still of
working age as stipulated by law but who is handicapped, unable to work, and does
not have income or has income which does not exceed the threshold.
 Any other person above the working age, or still of working age as stipulated by law
but who is handicapped, unable to work, feeble, does not have income or has income
which does not exceed the threshold, and whom the taxpayer must directly rear or
care for
8 Principles for Deductions for contributions to charitable, humanitarian or study
promotional funds
 Contributions to organizations and establishments caring for and raising children
from an especially difficulty background, and disabled people and old and feeble
people.
 Contributions to charitable funds established and operating pursuant to Decree 148-
2007-ND-CP on organization and operation of funds for charitable, humanitarian or
study promotional purposes and for non-profit making purposes
 Contributions to charitable funds arising in any one year shall be deductible from
taxable income of that same year, and if not fully deducted within such year then they
may not be carried forward to taxable income of the next tax assessment year.
 The maximum amount of deductions shall not exceed tax assessable income from
business income and income being salary of the year in which such contributions
were made.
9 Template for calculation of taxable income on income being salary for resident

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

USD GBP

Salary X

Bonus X

Taxable benefit in kind (exl. housing all.) X

Taxable benefit in cash X

Total taxable income X X

Housing all (min of 15% total taxable income & X

actual housing)

Conversion to VND x Ex.rate X X

Notes:
 Only one conversion point to VND
 Each column for each kind of currency
 All income in gross
10 Template for calculation of assessable income on income being salary for resident
when payment on net basic (without HA)
VND

Salary/Bonus X

Benefit paid by employer X

Total Taxable income(net) X

Deductions (X)

Net after deduction X

Gross up X
11 Template for calculation of assessable income on income being salary for resident
when payment on net basic (with HA)
 Step 1: Calculation of Housing allowance
VND

Salary/Bonus X

Benefit paid by employer X

Total Taxable income(net) (b4 HA) X

Deductions (X)

Net after deduction X

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

Gross up X

Add back deduction (to calculate total taxable X

income)

Total taxable income X

HA = lower of 15% Total taxable income and actual incurred

(W1)

 Step 2: Calculation of assessable income

Salary/Bonus X

Benefit paid by employer X

Housing allowance (in-kind) (W1) X

Total Taxable income(net) X

Deductions (X)

Net after deduction X

Gross up X
Notes:
 If an individual having two sources of income from two separate entity, take only total
taxable income (exl. HA in kind) of the entity paying HA for 15% comparison
purposes
 If If an individual having two sources of income from two organisation but same
entity, Take both total taxable income (exl. HA in kind) for 15% comparison purposes
 For the exam purposes, if the question mention net income, please state assumption
net means net of tax only (individual still pay the SHUI by himself) unless state
otherwise
 Deductions to be deducted before grossing up are all kind of deductions
12 What if a resident having income in both Vietnam and overseas
Then the resident will entitle to Double Tax Relief (DTR) which is lower between tax in
Vietnam & tax in overseas for overseas income
Tax in Vietnam for overseas income is calculated based on the average tax principle
which is = (Total tax liability/Total taxable income) x income in overseas
13 How Business income is determined
13.1 Tax calculation methods applied by businesspeople paying flat tax
13.1.1 Principle:
If the revenue subject to personal income tax (PIT) earned by the businessperson who
pays flat tax in the year is VND 100 million/year or lower, the person shall not pay VAT
and PIT.
100 millions is protated if individual does not do the busines for the whole year.
Businesspeople who do business as a group or household and earns a revenue of VND

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

100 million/year or lower considered that the revenue is earned by only 01 representative
of the group or household in the tax year.
In case a businessperson fails to determine the revenue or the revenue is not practical,
the tax authority is entitled to impose
13.1.2 Tax rates
 Distribution, provision of goods shall incur 1% VAT and 0.5% PIT.
 Service provisions and construction exclusive of building materials shall incur 5%
VAT and 2% PIT.
 Manufacture, transport, provision of services associated with goods, construction
inclusive of building materials shall incur 3% VAT and 1.5% PIT.
 Other business lines shall incur 2% VAT and 1% PIT.
 The businessperson who involves in multiple business lines shall declare and
calculate tax according to the rates applied to each of the business lines. If cannot
then tax authority can impose revenue for each of the business line
13.1.3 Determination of tax payable
VAT payable = Revenue subject to VAT x VAT rate
PIT payable = Revenue subject to PIT x PIT rate
13.2 Tax calculation methods applied by businesspeople paying tax on occasion
13.2.1 principles:
 include: residents who earn revenue outside Vietnam’s territory; persons who do
casual business and do not have permanent business premises; persons who
engages in business cooperation with other organizations in a way that their personal
revenues can be determined.
 If the total revenue from business in the calendar year earned by a businessperson
who pays tax whenever it is incurred is VND 100 million or lower, such
businessperson shall not pay VAT and PIT.
13.2.2 Tax rate (same as above)
13.2.3 Determination of tax payable
VAT payable = Revenue subject to VAT x VAT rate
PIT payable = Revenue subject to PIT x PIT rate
13.3 Tax accounting method applied by persons leasing property
13.3.1 principles:
 Persons leasing property) are those who earn revenue from the lease of their
property, including: housing, premises, stores, workshops, warehouses, depots
exclusive of accommodation services; lease of means of transport, machinery and
equipment without operators; lease of other property without associated services.
 If the total revenue from lease contracts earned in the calendar year is VND 100
million or lower, the lessor shall not pay VAT and PIT. If the lessee pays a lump-sum
of rent in advance for many years, the taxpayer shall not pay VAT and PIT if the
annual revenue, which equals (=) lump-sum revenue divided by (:) the number years,
is VND 100 million or lower.
 Businesspeople who have a co-ownership of a piece of property for lease and earn a
revenue of VND 100 million/year or lower: considered that the revenue is earned by

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

only 01 representative of the group or household in the tax year.

13.3.2 Tax rate
 and payable
VAT rate on property lease is 5%
PIT rate on property lease is 5%
13.3.3 Determination of tax payable
VAT payable = Revenue subject to VAT x rate
PIT payable = Revenue subject to PIT x rate
13.4 Tax calculation method applied by persons who directly sign lottery, insurance,
multi-level marketing agent contracts
13.4.1 principles:
 The person who directly signs the lottery, insurance, or multi-level marketing agent
contract is the person who directly signs an agent contract with the lottery company,
insurer, or multi-level marketing company to sell goods/services at prices fixed by the
company and receive commission
 If the total commission, bonuses in any shape or form, subsidies and other revenues
received by the agent in the year is VND 100 million or lower, the person shall not
pay PIT.
13.4.2 PIT rate and payable
PIT rate
Rate of PIT incurred by lottery agents, insurance agents, and multi-level
marketing agents is 5%.
PIT payable = Revenue subject to PIT x 5% PIT
14 How to identify tax assessment period
 For resident
Assessment period Type of income

Annual Business income & income being salary (not

all)

Each occasion (transaction) All except the ones mentioned above

Either annual or transaction Business income

 For non-resident individuals

On each occasion when income arises for all taxable income unless having fixed
business location (a store or counter) the same tax assessment period shall apply as
applies to a resident individual with income from business.
15 Who are called income paying entities?
 Economic organizations, business households and business individuals including
branches and subsidiary entities.
 All level State administrative bodies.
 Political organizations, socio-political organizations and socio-occupational
organizations.

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 Association of Chartered Certified Accountants
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June 2018 Intake

 Professional units.
 International and foreign organizations.
 Project management boards, and representative offices of foreign organizations.
 Other income-paying units.
16 What is the mechanism of withholding for each kind of incomes
kind of income When to withhold basic rate

income being salary Tax shall be withheld on on the basis of the Apply progressive
of an individual with a monthly basis. amount of salary and tax rate
a labour contract salary nature & family
and who was circumstances
employed on a long
term and stable
basis:

Business income: When payment is made Total income 5%

persons who directly
sign lottery,
insurance, multi-
level marketing
agent contracts

Income from capital When pay income or income or dividend flat 5%

investments dividends to an multiplied by the tax
individual investor rate

Income from transfer when payment is made Value of securities transfer price
of securities transferred multiplied by the tax
rate of 0.1%.

Income from When payment of part of the income multiplied by the tax
copyright and exceed 10 million is which exceeds ten rate of 5%.
franchising made million dong on each
franchise contract

Income from prizes : When payment of Part of the value which multiplied by the tax
exceed 10 million is exceeds ten million rate of 10%.
made dong

Non-resident when payment is made assessable income and Various

individual the tax rate applicable
to each item of income

Other cases deducting personal salary, remuneration or Deducting 10% of

income tax before other sums to an the income for
paying sums to the individual providing resident individual
individual services without a for amount above
labour contract such as threshold (2m)
royalties for writing
For temporary staff,
books or newspapers
if the individual
or for translating
commit having no
documents, payment

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 Association of Chartered Certified Accountants
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June 2018 Intake

kind of income When to withhold basic rate

for teaching, or for other income,
sitting on a board of applying the
management, payment progressive rate for
for scientific or withholding
technical services, for
Deducting 20% for
cultural or sporting
non-resident
activities, for
individual
construction design
consultancy services or
for legal consultancy
services, where the
total income to be paid
is five hundred
thousand dong or more
on each occasion
17 Tax administration
Please read Circular 14/VBHN-BTC (2017)

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 Association of Chartered Certified Accountants
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June 2018 Intake

PIT – Additional Questions

1 Question 1
1. Transfer a flat
No tax as transfer from him to father is tax exempted
2. Win lottery
1st winning
 Tax payable on the first receipt on 1 Jun: since the amount of payment is 8m while
the first 10m is tax exempt, therefore no tax to be paid nor withheld at this stage
 Tax payable on the second receipt on 7 July: (the first 2m will be tax exempt since it
is amount unused among the first 10m) = (22m – 2m) x 10% = 2m VND
 Tax payable on the third receipt on 5 Aug: (whole amount to be taxed) = (52m – 8m –
22m) x 10% = 2.2 m VND
 Total tax payable for the 1st winning = 4.2m VND
Note: Since the 3 payments are subject to the same winning, therefore only first 10m is
tax exempt. The remaining will be taxed at 10% regardless how many times of payment
2nd winning
He get another 10 millions reduction as it is a separate one
Tax = (18 millions – 10 millions) x 10% = 800.000 VND
Total tax already withhold at sources = 5m VND
3. Income being salary
VND000

Salary (32m x 12 months) 384,000

Performance Bonus (25m x 1.5 months + 32m x 0.5months) 53,500

Club membership 6,000

Life insurance (taxable but defer until due date because Bao Viet is legal 0
entity in Vietnam

Tuition fee for the son (taxable because he is Vietnamese) (2m x 12 24,000
months)

Teaching for Vietsourcing (100m/0.9) 111,111

ACCA fee (exempt as directly paid to service provider and relate to his 0
job

Total taxable income 578,611

Deduction
Personal deduction (108,000)
Family deduction for two children (43.2mx 2) (86,400)
Family deduction for parents (assuming parents pass away by end (86,400)

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 Association of Chartered Certified Accountants
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June 2018 Intake

of year)
Family deduction for wife (the wife in working age) 0
Family deduction for brother ( he is in university, over 18 years old) 0
Insurance (24,200,000 x 10,5% x 12 months) (30,492)
Charity contribution (note 1) (30,000)
Assessable income 237,391
Tax payable
= 237,391,000 x 20% - 12 months x1,650,000 = 27,663,800 VND
Note 1: Only 30m VND charity contribution to Red Cross is deductible for tax purpose
since Red cross is an official charity organization as defined by the Government. Other
contributions is not to the certified organization as regulated
4. Business income
VND000
a. His own business
VAT liability = 1.5 billions x 5% 75,000
PIT liability = 1.5b x 2% 30.000
b. Assets leasing
Revenue in 2017 is 6 months x 10m = 60m below the cap of tax
calculation of 100m, therefore no tax
c. Nuskin agency
PIT = 1b x 5% = 50m (withhold at source)
4. Inheritance
There is no tax on inheritance between immediate family member (for house) and gold

2 Question 2
Calculation of Mr Le Van Lung taxable income (gross)
USD VND’000
Income in Singapore
Salary ($5,000 x 3 months) 15,000
Living allowance ($1,000 x 3 months) 3,000
Company car (For business purposes, the pick up is not 0
taxable)
Sign on bonus 5,000
Share option (10,000 shares x $1) (W1) 0
Tuition fee (Paid directly to tuition provider) 0
Total net income 23,000
Tax in Singapore 6,500
Total income in Singapore (b4 HA) 29,500
Translate into VND (@22,500) 663,750
Housing allowance (W2) 99,563

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 Association of Chartered Certified Accountants
Paper F6: Taxation
June 2018 Intake

Total income in Singapore 763,313

Income in Vietnam
Monthly salary ($2,000 x 9 months) 18,000
Responsibility allowance ($400 x 9 months) 3,600
Overtime (The base rate is taxable) 800
Mobile phone allowance (For business purposes) 0
Housing allowance in cash (2,500-1,700) x 9 months 7,200
Taxi fee (For business purposes) 0
Tuition fee of ACCA (As get back in cash) 1,000
Bonus ($2,000 x 9/12 months) 1,500
Termination allowance ($2,000 x 4 years) 8,000
40,100
Translate into VND 902,250
Housing allowance (W3) 135,338
Total income in Vietnam 1,037,588
Total taxable income 1,701,338
Personal Allowance (108,000)
SHUI (10.5% x 24,200 x 9 months) (21,168)
Total Assessable income 1,572,170
Tax liability = 1,572,170x 35% - 9,850,000 x 12 months = 432,059,500
Minus DTR (W4) (146,250,000)
Tax payable on income being salary 285,809,500

Calculation of tax on transfer of security

= 30,000 x 22,500 x 0.1% = 675,000

Calculation of Mr Le Van Lung taxable income (net)

VND‘000
Total income in Vietnam (as above but at net) (b4 HA in 902,250
kind)
Monthly income (/9) 100,250
Personal Allowance (9,000)
SHUI 10.5% x 24,200 (W5) (2,541)
Monthly income (after deduction ) 88,709
Gross up (N-9,850,000)/0.65 121,322
Total taxable income (Gross + deduction) (monthly) 132,863
15% of Total income 19,929
Actual HA (1,700 x 22,500 = 38,250
Take the lower, which is 19,929
Calculation of assessable income
Monthly income (as above) 100,250
Housing allowance (as above) 19,929
Personal Allowance (9,000)
SHUI 10.5% x 24,200 (W5) (2,541)

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 Association of Chartered Certified Accountants
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June 2018 Intake

Monthly income (after deduction ) 108,638

Gross up (N-9,850,000)/0.65 151,982
Total taxable income in Vietnam (Gross + deduction) 163,523
(monthly)
Total taxable income in Vietnam (Gross + deduction) (9 1,471,708
months)
Total income in Singapore (as above) 763,313
Total Taxable income 2,235,021
Personal Allowance (108,000)
SHUI (10.5% x 24,200 x 9 months) (22,869)
Total Assessable income 2,104,152
Tax liability = 2,104,152,000x 35% - 9,850,000 x 12 months = 618,253,200
Minus DTR (W5) (146,250,000)
Tax payable on income being salary 472,003,200
Workings
W1: Share option scheme
Share is considered as benefit in kind under employment income. The benefit is
calculated based on the book value. However, as he has to pay for the share equal to
book value, therefore no benefit in kind equal to 0
W2: Housing allowances in Singapore
Gross income before housing all (Singapore income) 663,750,000
15% of total 99,562,500
Actual housing allowance ($2,000x 3mx 22,500) 135,000,000
Take the lower, which means 99,562,500
W3: Housing allowances in Vietnam
Gross income before housing all (Vietnam income) 902,250,000
15% of total 135,337,500
Actual housing allowance ($1,700x9mx 22,500) 344,250,000
Take the lower, which means 135,337,500
W4: Double tax relief (gross)
Total income overseas = 763,313,000
Tax in Singapore = $6,500 x 22,500 = 146,250,000
Tax in Vietnam for Singapore income = (432,059,500 x 763,313,000)/ 1,701,338,000 =
193,845,452
Amount to be relieved (the lower) = 146,250,000
W5: Assuming net income means net of tax only. Mr, Le Van Lung is still responsible for
his SHUI
W6: Double tax relief (net)
Total income overseas = 763,313,000
Tax in Singapore = $6,500 x 22,500 = 146,250,000
Tax in Vietnam for Singapore income = (618,253,200x 763,313,000)/ 2,235,021,000=
211,148,220
Amount to be relieved (the lower) = 146,250,000

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