Personal Income Tax Law 2007 (Law No. 04/2007/QH12)

THE LAW

PERSONAL INCOME TAX

Based on the Constitution of the Socialist Republic of Vietnam of 1992, as amended and supplemented by Resolution No. 51/2001/QH10;
The National Assembly enacted the Personal Income Tax Law.

Chapter 1

GENERAL PROVISIONS

Article 1. Scope

This law stipulates the subjects liable to tax, taxable income, tax-exempt income, tax reductions, and the basis for calculating personal income tax.

Article 2. Taxpayers

1. Individuals subject to personal income tax are resident individuals with taxable income as stipulated in Article 3 of this Law arising within and outside the territory of Vietnam, and non-resident individuals with taxable income as stipulated in Article 3 of this Law arising within the territory of Vietnam.

2. A resident individual is someone who meets one of the following conditions:

a) Being present in Vietnam for 183 days or more within a calendar year or within 12 consecutive months from the first day of arrival in Vietnam;

b) Having a permanent residence in Vietnam, including having a registered permanent residence or renting a house in Vietnam under a fixed-term lease contract.

3. A non-resident individual is a person who does not meet the conditions specified in Clause 2 of this Article.

Article 3. Taxable income

Taxable income subject to personal income tax includes the following types of income, except for income exempt from tax as stipulated in Article 4 of this Law:

1. Income from business activities, including:

a) Income from the production and sale of goods and services;

b) Income from independent professional activities of individuals holding licenses or professional certificates as prescribed by law.

2. Income from salaries and wages, including:

a) Salaries, wages, and other payments of a similar nature;

b) Allowances and subsidies, excluding those prescribed by law on preferential treatment for meritorious individuals, national defense and security allowances, hazardous and dangerous work allowances for industries, occupations or jobs in workplaces with hazardous or dangerous elements, attraction allowances, regional allowances as prescribed by law, emergency hardship allowances, occupational accident and disease allowances, one-time allowances for childbirth or adoption, allowances due to reduced working capacity, one-time retirement allowances, monthly survivor benefits, severance pay, unemployment benefits as prescribed by the Labor Code, other allowances paid by Social Insurance, and allowances for resolving social evils;

c) Remuneration in various forms;

d) Money received from membership in business associations, boards of directors, supervisory boards, management boards, and other organizations;

d) Other benefits received by the taxpayer, whether in monetary or non-monetary form;

e) Bonuses, excluding bonuses accompanying titles awarded by the State, bonuses accompanying national and international awards, bonuses for technical improvements, inventions, and discoveries recognized by competent state agencies, and bonuses for detecting and reporting violations of the law to competent state agencies.

3. Income from capital investments, including:

a) Interest on loans;

b) Dividends;

c) Income from capital investments in other forms, excluding income from interest on government bonds.

4. Income from capital gains, including:

a) Income from the transfer of capital shares in economic organizations;

b) Income from the transfer of securities;

c) Income from the transfer of capital in other forms.

5. Income from the transfer of real estate, including:

a) Income from the transfer of land use rights and assets attached to the land;

b) Income from the transfer of ownership or use rights of housing;

c) Income from the transfer of land lease rights and water surface lease rights;

d) Other income received from the transfer of real estate.

6. Income from winnings, including:

a) Winning the lottery;

b) Winning prizes in promotional activities;

c) Winnings from gambling or casino games;

d) Winning prizes in games, contests with prizes, and other forms of prize winning.

7. Income from royalties, including:

a) Income from the transfer or licensing of intellectual property objects;

b) Income from technology transfer.

8. Income from franchising.

9. Income from inheritance in the form of securities, capital shares in economic organizations and businesses, real estate, and other assets requiring registration of ownership or use.

10. Income from receiving gifts in the form of securities, capital shares in economic organizations and businesses, real estate, and other assets requiring registration of ownership or use.

The Government shall provide detailed regulations and guidelines for the implementation of this Article.

Article 4. Tax-Exempt Income

1. Income from the transfer of real estate between spouses; biological parents and their children; adoptive parents and their adopted children; father-in-law and mother-in-law and daughter-in-law; father-in-law and mother-in-law and son-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; and siblings.

2. Income from the transfer of housing, land use rights, and assets attached to residential land by individuals in cases where the individual owns only one house and one plot of land.

3. Income derived from the value of land use rights granted to individuals by the State.

4. Income from inheritance or gifts of real estate between spouses; biological parents and their children; adoptive parents and their adopted children; father-in-law and mother-in-law and daughter-in-law; father-in-law and mother-in-law and son-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; and siblings.

5. Income of households and individuals directly engaged in agricultural production, forestry, salt production, aquaculture, and fishing that has not been processed into other products or has only undergone basic processing.

6. Income from the conversion of agricultural land allocated by the State to households and individuals for production. 

7. Income from interest on deposits at credit institutions, interest from life insurance contracts.

8. Income from remittances.

9. The portion of wages for night work and overtime work shall be paid at a higher rate than the wages for daytime work and work during regular hours as stipulated by law.

10. Pension payments are made by the Social Insurance Fund.

11. Income from scholarships, including:

a) Scholarships received from the state budget;

b) Scholarships received from domestic and foreign organizations under their scholarship support programs.

12. Income from compensation under life and non-life insurance contracts, compensation for work-related accidents, state compensation, and other compensation as prescribed by law.

13. Income received from charitable funds established or recognized by competent state authorities, operating for charitable and humanitarian purposes, and not for profit.

14. Income received from foreign aid for charitable and humanitarian purposes, in the form of government and non-governmental organizations, subject to approval by competent state agencies.

Article 5. Tax reduction

Taxpayers facing difficulties due to natural disasters, fires, accidents, or serious illnesses affecting their ability to pay taxes may be considered for tax reductions commensurate with the extent of the damage, but not exceeding the amount of tax payable.

Article 6. Conversion of taxable income into Vietnamese Dong

1. Taxable income received in foreign currency must be converted into Vietnamese Dong at the average exchange rate in the interbank foreign exchange market published by the State Bank of Vietnam at the time the income is generated.

2. Taxable income received in non-monetary form must be converted into Vietnamese Dong according to the market price of the product or service, or a similar or equivalent product or service, at the time the income is generated.

Article 7. Tax Period

1. The tax period for resident individuals is stipulated as follows:

a) The annual tax period applies to income from business activities; income from salaries and wages;

b) The tax period is based on each instance of income generation for income from capital investment; income from capital transfer, excluding income from securities transfer; income from real estate transfer; income from lottery winnings; income from royalties; income from franchise fees; income from inheritance; and income from gifts.

c) The tax period for income from securities transfers can be based on each transfer or annually. If an individual chooses an annual tax period, they must register with the tax authorities at the beginning of the year.

2. The tax period for non-resident individuals is calculated based on each instance of income generation, applicable to all taxable income..

Article 8. Tax management and tax refunds

1. Tax registration, declaration, deduction, payment, settlement, refund, handling of tax law violations, and tax management measures shall be carried out in accordance with the provisions of the law on tax management.

2. Individuals are eligible for tax refunds in the following cases:

a) The amount of tax paid is greater than the amount of tax due;

b) Individuals who have paid taxes but whose taxable income is below the tax threshold;

c) Other cases as decided by the competent state authority.

Article 9. Application of international treaties

In cases where an international treaty to which the Socialist Republic of Vietnam is a party contains provisions on personal income tax that differ from the provisions of this Law, the provisions of that international treaty shall apply.

Chapter 2

BASIS FOR TAXATION OF RESIDENT INDIVIDUALS

Section 1:

DETERMINING TAXABLE INCOME AND INCOME SUBJECT TO TAX

Article 10. Taxable income from business activities

1. Taxable income from business is determined by revenue minus reasonable expenses related to generating taxable income from business during the tax period.

2. Revenue is the total amount of money from sales, processing fees, commissions, and the supply of goods and services arising during the tax period from the production and business activities of goods and services.

Revenue is recognized at the time of transfer of ownership of goods, completion of services, or issuance of a sales invoice or service provision invoice.

3. Reasonable expenses related to generating taxable income from business operations during the tax period include:

a) Salaries, wages, fees and other expenses paid to employees;

b) Costs of raw materials, fuel, supplies, energy, goods used in production and business, and costs of outsourced services;

c) Depreciation, maintenance, and repair costs of fixed assets used in production and business;

d) Payment of interest on loans;

d) Management costs;

e) Taxes, fees, and charges payable in accordance with the law are included in the expenses;

g) Other expenses related to generating income.

4. The determination of revenue and expenses is based on norms, standards, regulations, and accounting documents and records as prescribed by law.

5. In cases where multiple individuals participate in a business under a single business registration, the taxable income of each individual shall be determined according to one of the following principles:

a) Calculated according to the capital contribution ratio of each individual as stated in the business registration;

b) Calculated according to the agreement between the individuals as stated in the business registration;

c) Calculated as the average income per capita in cases where the business registration does not specify the capital contribution ratio or there is no agreement on income distribution among individuals.

6. For individual businesses that have not complied with accounting regulations, invoices, and supporting documents, and whose revenue, expenses, and taxable income cannot be determined, the competent tax authority shall determine the revenue and taxable income ratio to ascertain the taxable income appropriate to each industry and business activity in accordance with the law on tax administration.

Article 11. Taxable income from salaries and wages

1. Taxable income from salaries and wages is determined by the total income specified in Clause 2, Article 3 of this Law that the taxpayer receives during the tax period.

2. The time of determining taxable income from salaries and wages is the time when the organization or individual pays the income to the taxpayer or the time when the taxpayer receives the income.

Article 12. Taxable income from capital investment

1. Taxable income from capital investment is the total amount of income from capital investment as stipulated in Clause 3, Article 3 of this Law that the taxpayer receives during the tax period.

2. The time of determining taxable income from capital investment is the time when the organization or individual pays income to the taxpayer or the time when the taxpayer receives the income.

Article 13. Taxable income from capital transfers

1. Taxable income from capital gains is determined by the selling price minus the purchase price and reasonable expenses related to generating the income from the capital gains.

2. If the purchase price and related costs of the securities transfer cannot be determined, the taxable income shall be determined as the selling price of the securities.

3. The time for determining taxable income from capital transfer is the time when the capital transfer transaction is completed in accordance with the law.

The Government shall provide detailed regulations and guidelines for the implementation of this Article.

Article 14. Taxable income from the transfer of real estate.

1. Taxable income from the transfer of real estate is determined by the transfer price of the real estate for each transaction minus the purchase price of the real estate and related expenses, specifically as follows:

a) The transfer price of real estate is the price stated in the contract at the time of transfer;

b) The purchase price of the real estate is the price stated in the contract at the time of purchase;

c) Related expenses are deductible based on supporting documents and invoices as prescribed by law, including fees and charges as prescribed by law related to land use rights; land improvement costs, house renovation costs, site leveling costs; investment costs for the construction of housing, infrastructure and architectural works on the land; and other costs related to the transfer of real estate.

2. If the purchase price and related costs of the real estate transfer cannot be determined, the taxable income shall be determined as the real estate transfer price.

3. The Government shall prescribe the principles and methods for determining the transfer price of real estate in cases where the transfer price cannot be determined or the transfer price of land use rights stated in the contract is lower than the land price stipulated by the Provincial People's Committee in effect at the time of transfer.

4. The time for determining taxable income from the transfer of real estate is the time when the transfer contract becomes effective according to the provisions of the law.

Article 15. Taxable income from winnings

1. Taxable income from lottery winnings is the portion of the prize value exceeding 10 million VND that the taxpayer receives for each winning instance.

2. The time of determining taxable income from winnings is the time when the organization or individual pays the income to the taxpayer.

Article 16. Taxable income from royalties

1. Taxable income from royalties is the portion of income exceeding 10 million VND that the taxpayer receives when transferring or granting the right to use intellectual property objects or transferring technology under each contract.

2. The time of determining taxable income from royalties is the time when the organization or individual pays the income to the taxpayer.

Article 17. Taxable income from franchise agreements

1. Taxable income from franchise agreements is the portion of income exceeding VND 10 million that the taxpayer receives under each franchise agreement. 

2. The time of determining taxable income from franchise agreements is the time when the organization or individual pays income to the taxpayer.

Article 18. Taxable income from inheritance and gifts

1. Taxable income from inheritance and gifts is the portion of the inherited or gifted property value exceeding 10 million VND that the taxpayer receives each time it occurs.

2. The time of determining taxable income is stipulated as follows:

a) For income from inheritance, the taxable time is the time when the taxpayer receives the inheritance;

b) For income from gifts, the taxable time is the time when the organization or individual gives the gift to the taxpayer, or the time when the taxpayer receives the income.

Article 19. Personal deductions

1. Personal deductions are amounts deducted from taxable income before calculating tax on income from business, salaries, and wages of resident individual taxpayers. Personal deductions consist of the following two parts:

a) The tax deduction for taxpayers is 4 million VND/month (48 million VND/year);

b) The deduction for each dependent is VND 1,6 million per month.

2. The determination of the personal allowance for dependents is based on the principle that each dependent can only be claimed as a deduction once by one taxpayer.

3. Dependents are individuals whom the taxpayer is responsible for supporting, including:

a) Minor children; children with disabilities who are unable to work;

b) Individuals with no income or income not exceeding the prescribed level, including adult children attending university, college, vocational school or apprenticeship; spouses unable to work; parents who are past working age or unable to work; and other dependents whom the taxpayer directly supports.

The government sets income levels and declarations to determine dependents eligible for personal allowance deductions.

Article 20. Deductions for charitable and humanitarian contributions

 1. Charitable and humanitarian contributions are deductible from income before calculating tax on business income, salaries, and wages of resident individual taxpayers, including:

a) Contributions to organizations and facilities that care for and nurture children in extremely difficult circumstances, people with disabilities, and elderly people without support;

b) Contributions to charitable funds, humanitarian funds, and scholarship funds.

2. The organizations, establishments, and funds specified in points a and b of Clause 1 of this Article must be authorized or recognized by competent state agencies, and operate for charitable, humanitarian, and educational purposes, not for profit.

Article 21. Taxable income

1. Taxable income from business income, salaries, and wages is the total taxable income as stipulated in Articles 10 and 11 of this Law, minus contributions to social insurance, health insurance, professional liability insurance for certain industries and professions that are required to participate in mandatory insurance, and deductions as stipulated in Articles 19 and 20 of this Law.

2. Taxable income from capital investment, capital transfer, real estate transfer, lottery winnings, royalties, franchise fees, inheritance, and gifts is the taxable income stipulated in Articles 12, 13, 14, 15, 16, 17, and 18 of this Law.

Section 2:

TAX SCHEDULE

Article 22. Progressive tariff schedule

1. A progressive tax rate schedule shall apply to taxable income as stipulated in Clause 1, Article 21 of this Law.

2. The progressive tariff schedule is as follows:

Tax bracket	Taxable income/year (million VND)	Taxable income/month (million VND)	Tax rate (%)
1	Go to 60	Go to 5	5
2	On 60 to 120	On 5 to 10	10
3	On 120 to 216	On 10 to 18	15
4	On 216 to 384	On 18 to 32	20
5	On 384 to 624	On 32 to 52	25
6	On 624 to 960	On 52 to 80	30
7	On 960	On 80	35

Article 23. Full tariff schedule

1. The full tax rate applies to taxable income as stipulated in Clause 2, Article 21 of this Law.

2. The full tariff schedule is stipulated as follows:

Taxable income	Tax rate (%)
a) Income from capital investment	5
b) Income from royalties and franchise fees	5
c) Income from winnings	10
d) Income from inheritance and gifts	10
d) Income from capital transfers as stipulated in Clause 1, Article 13 of this Law Income from the transfer of securities as stipulated in Clause 2, Article 13 of this Law.	20 0,1
e) Income from the transfer of real estate as stipulated in Clause 1, Article 14 of this Law Income from the transfer of real estate as stipulated in Clause 2, Article 14 of this Law.	25   2

Article 24. Responsibilities of organizations and individuals paying income and responsibilities of resident individuals paying taxes.

1. The responsibilities for declaring, deducting, paying taxes, and settling tax accounts are stipulated as follows:

a) Organizations and individuals paying income are responsible for declaring, deducting, and paying taxes into the state budget and settling tax accounts for all types of taxable income paid to taxpayers;

b) Individuals with taxable income are responsible for declaring and paying taxes to the state budget and settling tax accounts for all income in accordance with the law on tax administration.

2. Organizations and individuals paying income are responsible for providing information on the income and dependents of taxpayers under their management in accordance with the law.

3. The government shall prescribe the appropriate tax deduction rates for each type of income specified in point a, clause 1 of this Article.

Chapter 3

TAX BASE FOR NON-RESIDENT INDIVIDUALS

Article 25. Tax on income from business

1. The tax on income from business activities of non-resident individuals is determined by multiplying the revenue from production and business activities specified in Clause 2 of this Article by the tax rate specified in Clause 3 of this Article.

2. Revenue is the total amount of money generated from the provision of goods and services, including costs paid by the buyer of goods and services on behalf of non-resident individuals that are not reimbursed.

In cases where the contract agreement does not include personal income tax, the taxable revenue must be converted to the total amount of money that a non-resident individual receives in any form from the provision of goods and services in Vietnam, regardless of the location where the business activities are conducted.

3. The tax rates on income from business activities are stipulated for each field and industry of production and business as follows:

a) 1% for goods trading activities;

b) 5% for service business activities;

c) 2% for manufacturing, construction, transportation, and other business activities.

Article 26. Tax on income from salaries and wages

1. The tax on income from salaries and wages of non-resident individuals is determined by multiplying the taxable income from salaries and wages as stipulated in Clause 2 of this Article by the tax rate of 20%.

2. Taxable income from salaries and wages is the total amount of salaries and wages received by a non-resident individual for performing work in Vietnam, regardless of where the income is paid.

Article 27. Tax on income from capital investment

The tax on income from capital investments by non-resident individuals is determined by multiplying the total amount received by the non-resident individual from investing capital in organizations or individuals in Vietnam by a tax rate of 5%.

Article 28. Tax on income from capital gains

The tax on income from capital gains of non-resident individuals is determined by multiplying the total amount received by the non-resident individual from the transfer of capital in a Vietnamese organization or individual by a tax rate of 0,1%, regardless of whether the transfer takes place in Vietnam or abroad.

Article 29. Tax on income from the transfer of real estate

The tax on income from the transfer of real estate in Vietnam by non-resident individuals is determined by multiplying the real estate transfer price by a tax rate of 2%.

Article 30. Tax on income from royalties and franchise fees.

1. The tax on royalties earned by non-resident individuals is determined by multiplying the portion of income exceeding VND 10 million per contract for the transfer or licensing of intellectual property rights or technology transfer in Vietnam by a tax rate of 5%.

2. The tax on franchise income of non-resident individuals is determined by multiplying the portion of income exceeding VND 10 million per franchise contract in Vietnam by the tax rate of 5%. 

Article 31. Tax on income from lottery winnings, inheritance, and gifts.

1. The tax on income from lottery winnings, inheritance, and gifts of non-resident individuals is determined by multiplying the taxable income specified in Clause 2 of this Article by a tax rate of 10%. 

2. Taxable income from lottery winnings for non-resident individuals is the portion of the prize value exceeding VND 10 million for each winning instance in Vietnam; income from inheritance and gifts is the portion of the inherited or gifted property value exceeding VND 10 million for each instance of income received by a non-resident individual in Vietnam.

Article 32. Time of determining taxable income

1. The time of determining taxable income for income stipulated in Article 25 of this Law is the time when the non-resident individual receives the income or the time when the invoice for the sale of goods or provision of services is issued.

2. The time of determining taxable income for income stipulated in Articles 26, 27, 30, and 31 of this Law is the time when an organization or individual in Vietnam pays income to a non-resident individual, or the time when a non-resident individual receives income from an organization or individual abroad.

3. The time of determining taxable income for income stipulated in Articles 28 and 29 of this Law is the time when the transfer contract takes effect.

Article 33. Responsibilities of organizations and individuals paying income and responsibilities of non-resident individuals paying taxes.

1. Organizations and individuals paying income are responsible for deducting and remitting tax to the state budget each time taxable income is paid to taxpayers.

2. Non-resident individuals are responsible for declaring and paying taxes on each income earned, in accordance with the tax administration laws, as stipulated by tax authorities.  

Chapter 4

TERMS ENFORCEMENT

Article 34. Enforcement

1. This Law takes effect on January 01, 01.

2. The following documents and regulations are hereby repealed:

 a) The Ordinance on Income Tax for High-Income Earners No. 35/2001/PL-UBTVQH10 has been amended and supplemented in several articles by Ordinance No. 14/2004/PL-UBTVQH11;

b) The Law on Land Use Rights Transfer Tax promulgated on June 22, 1994, has been amended and supplemented in several articles according to Law No. 17/1999/QH10;

c) Regulations on corporate income tax for individuals engaged in production and business activities, excluding private enterprises as stipulated in the Corporate Income Tax Law No. 09/2003/QH11;

d) Other regulations concerning taxation of individual income that are contrary to the provisions of this Law.

3. Income of individuals that is eligible for tax incentives as stipulated in legal documents prior to the effective date of this Law shall continue to enjoy those incentives.

Article 35. Implementation Guidelines 

The Government shall provide detailed regulations and guidelines for the implementation of this Law.

This law was passed by the 11th National Assembly of the Socialist Republic of Vietnam at its 2nd session on November 21, 2007.

 

CHAIRMAN OF THE NATIONAL ASSEMBLY Nguyen Phu Trong