Decree of Government No.147/2004/ND-CP of July 23, 2004 detailing the implementation of the ordinance on income tax on high-income earners

DECREE

DETAILING THE IMPLEMENTATION OF THE ORDINANCE ON INCOME TAX ON HIGH-INCOME EARNERS

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to May 19, 2001 Ordinance No. 35/2001/PL-UBTVQH10 on Income Tax on High-Income Earners of the National Assembly Standing Committee; and March 24, 2004 Ordinance No. 14/2004/PL-UBTVQH11 Amending and Supplementing a Number of Articles of the Ordinance on Income Tax on High-Income Earners of the National Assembly Standing Committee;
At the proposal of the Finance Minister,

DECREES:

Chapter I

SCOPE OF APPLICATION

Article 1.- According to Article 1 of the Ordinance on Income Tax on High-Income Earners (hereinafter referred to as the Income Tax Ordinance), income tax payers include:

1. Vietnamese citizens who live at home or travel overseas for working missions or labor and earn income;

2. Individuals who do not bear the Vietnamese nationality but reside in Vietnam for an indefinite time and earn income;

3. Foreigners working in Vietnam, including those who do not live in Vietnam but have their income generated in Vietnam.

Article 2.- Taxable incomes include regular and irregular incomes, except for those prescribed in Article 4 of this Decree.

1. Regular incomes include:

a/ Wages, salaries, remunerations, including income amounts being house rents, electricity and water charges, which are paid by the income earners’ employers and not calculated in wages or remunerations. Particularly, house rents shall be calculated according to the amounts actually paid by employers but must not exceed 15% of the total taxable income; other incomes earned through participation in projects, business societies or enterprises’ managing boards; assorted allowances and rewards in cash or in kind;

b/ Incomes being copyright royalties for use of patents, trademarks or works; incomes being authors’ emoluments; incomes being scientific and technical service charges; informatics services; consultancy, designing and training services; agency services; brokerage commissions;

c/ Incomes other than wages or remunerations, earned from production, business or service activities, which are not subject to enterprise income tax, such as: incomes from activities of performance, performance organization, fashion shows, advertisements and other services.

2. Irregular incomes include:

a/ Incomes from technology transfer, excluding gifts or donations;

b/ Lottery prizes in any form, including sale promotion prizes.

Article 3.- Income tax shall temporarily not be imposed on income amounts being bank deposit interests, savings interests, interests on bills, bonds, promissory notes and/or stocks; incomes from securities investment activities, securities purchase-sale margin.

Article 4.- Incomes not subject to tax include:

1. The following allowances, which are provided for by the Vietnamese State for incomes generated in Vietnam, including:

a/ Itinerancy allowance;

b/ Poisonousness and hazardousness allowances;

c/ Position or responsibility allowance applicable to officials and State employees;

d/ Region-based allowance; job-attraction allowance; special allowance for a number of remote islands and border regions with particularly difficult daily-life conditions;

e/ Seniority allowance for the armed forces, customs and cipher offices;

f/ Specific allowances for a number of branches and occupations as prescribed by law;

g/ Preferential allowance for officials engaged in revolutionary activities before 1945;

h/ Other allowances from the State budget.

2. Other incomes generated in Vietnam, including:

a/ Working trip allowance;

b/ Food ration expenses for a number of special branches and occupations according to the State-prescribed regime;

c/ Social supports for social policy benefi-ciaries and other subsidies from the State budget;

d/ Insurance indemnities for participants in life and property insurance regimes;

e/ Severance supports and job-loss supports according to the State-prescribed regimes;

f/ Supports for those who are transferred to work at production and/or business establish-ments, including lump-sum regional transfer supports;

g/ Pecuniary rewards for technical innova-tions, inventions, international prizes and national prizes organized by the Vietnamese State;

h/ Pecuniary rewards accompanying the State-conferred titles, such as: Professor, People’s Teacher, Labor Hero, People’s Armed Forces Hero and other State-conferred titles; pecuniary rewards or other preferential treatment regimes from the State budget;

i/ Social insurance and medical insurance premiums deducted from wages or remunerations of laborers.

3. Incomes of individual business household owners, which are subject to enterprise income tax.

Chapter II

TAX CALCULATION BASES AND TAX RATE TABLES

Article 5.- Bases for tax calculation are the taxable incomes and the tax rates.

Article 6.- Taxable incomes

1. Taxable regular incomes:

a/ For Vietnamese citizens:

- For Vietnamese citizens and other individuals permanently residing in Vietnam: Taxable regular income is the total income earned by each individual and calculated on a monthly average in a year, which is over VND 5 million. Particularly, singers, circus artists, dancers, footballers and professional athletes shall enjoy a deduction of 25% from their incomes when determining their taxable incomes;

- For Vietnamese citizens who work both at home and abroad, their taxable average monthly incomes shall be determined by the total incomes generated at home and abroad divided by 12 months.

b/ For foreigners and Vietnamese citizens working or laboring abroad:

- For foreigners residing in Vietnam and Vietnamese citizens working or laboring abroad, the taxable regular income is the total of incomes generated in Vietnam and abroad and calculated on a monthly average in a year, which is over VND 8 million.

In cases where the declared monthly average income generated abroad is lower than that generated in Vietnam and this cannot be proved, the monthly average income in Vietnam shall serve as basis for calculating the income generated during the overseas stay period.
The conventional tax calculation month has 30 days. 

- For foreigners not residing in Vietnam, their taxable income is the total income generated in Vietnam, paid for jobs performed in Vietnam, regardless of whether they receive such income in Vietnam or abroad.

Foreigners shall be regarded as residing in Vietnam if they stay in Vietnam for 183 days or more in the period of 12 months as from the date of their arrivals in Vietnam; and regarded as not residing in Vietnam if they stay in Vietnam for less than 183 days in the same period.

2. Taxable irregular incomes:

a/ Incomes from technology transfers with the value of over VND 15 million for each contract, regardless of the number of payment times;

b/ Lottery prizes in any form, including sale promotion prizes, with the value of over VND 15 million for each time of prize winning and reception.

Article 7.- Tax rates

1. Tax rates applicable to regular incomes:

a/ For Vietnamese citizens at home and other individuals permanently residing in Vietnam, the following partially progressive tax rate table shall apply:

Calculation unit: VND 1,000

b/ For foreigners residing in Vietnam and Vietnamese citizens working or laboring abroad, the following partially progressive tax rate table shall apply:

Calculation unit: VND 1,000

c/ For foreigners not residing in Vietnam, the tax rate of 25% of their total taxable income shall apply.

d/ For Vietnamese citizens who earn in a tax calculation year their incomes both at home and abroad, the monthly average income generated at home shall be subject to the tax rate table specified at Point a, Clause 1 of this Article, while the income amount generated abroad shall be subject to the tax rate table specified at Point b, Clause 1 of this Article.

2. Tax rates applicable to irregular incomes shall be determined on the basis of the total taxable income:

a/ The tax rate of 5% shall apply to incomes from technology transfer;

b/ The tax rate of 10% shall apply to incomes being lottery prizes or sale promotion prizes.

Article 8.- Income amounts in foreign currencies must be converted into Vietnam dong at the average transaction exchange rates on the inter-bank foreign currency market announced by the State Bank at the time the foreign-currency incomes are generated for calculating taxable incomes. Incomes in kind shall be calculated at their market prices at the time they are generated.

Chapter III

TAX DECLARATION, PAYMENT AND FINAL SETTLEMENT

Article 9.- Organizations and individuals that pay incomes or agencies authorized to pay incomes (called income-paying agencies for short) shall make the income tax registration, declaration, payment and final settlement according to the guidance of the tax agencies.

Article 10.- The income tax declaration and payment shall be carried out according to the withholding principle. Income-paying agencies are obliged to withhold tax money before paying incomes to tax payers for payment of tax amounts on the latter’s behalf to the State budget.

Article 11.- Individuals who have taxable incomes shall have to declare and pay tax in full and on time; and make annual final settlement of tax on their regular incomes according to the Finance Ministry’s regulations.

Article 12.- Income-paying agencies shall have the following responsibilities, obligations and interests:

1. To register, declare, withhold and remit income tax in full and on time into the State budget; make integrated tax declaration and calculation tables, and submit to the tax agencies the lists of income tax payers;

2. To guide tax payers in receiving income tax declaration forms, making income tax declarations, payment and final settlement with the tax agencies;

3. To keep books and records related to the income tax declaration, calculation and payment, and observe the periodical reporting regime and report on tax final settlement with the tax agencies;

4. To calculate tax, withhold tax money, calculate remuneration amounts to be enjoyed and remit tax into the State budget;

5. To give income tax receipts to tax-paying individuals; to manage, use and settle tax receipts according to the prescribed regime;

6. To withhold tax money and enjoy a remuneration of 0.5% of tax amount on regular incomes, or 1% of tax amount on irregular incomes, before remitting tax into the State budget.

Article 13.- Organizations that manage and/or pay incomes to foreigners shall have to guide and complete the procedures for income tax payment before carrying out the exit procedures for such foreigners.

Foreigners being income tax payers shall, before leaving Vietnam, have to produce income tax payment receipts.

Article 14.- Agencies, including: the exit and entry management agency, the agency granting work permits to foreigners, the labor management agency and other concerned agencies shall have to supply to the tax agencies information related to taxable incomes and tax payers at the requests of tax agencies.

Chapter IV

TAX EXEMPTION OR REDUCTION

Article 15.- Income tax exemption or reduction shall be considered for:l

1. Cases where tax payers suffer damage or losses caused to their property, incomes and lives by natural calamities, enemy sabotage or accidents. The level of tax exemption or reduction to be considered shall correspond to the damage or loss extents but must not exceed the payable tax amount;

2. In special cases where the tax payment by individuals affects the national economic, political and/or social interests, the Finance Ministry shall propose the Prime Minister to decide on tax exemption or reduction on a case-by-case basis.

The Finance Ministry shall prescribe the procedures for income tax exemption or reduction provided for in this Article.

Chapter V

HANDLING OF VIOLATIONS AND COMMENDATION

Article 16.- Tax payers, tax officers and other organizations and individuals that violate the legislation on income tax on high-income earners shall, depending on their acts and seriousness of violation, be handled according to the provisions of Articles 21, 23 and 24 of May 19, 2001 Ordinance No. 35/2001/PL-UBTVQH10 on Income Tax on High-Income Earners of the National Assembly Standing Committee.

Article 17.- Tax agencies and tax officers that well fulfill their assigned tasks, persons who have merits in detecting acts of violating the legislation on income tax on high-income earners shall be commended and/or rewarded according to the Government’s common regulations.

Chapter VI

COMPLAINTS AND STATUTE OF LIMITATIONS

Article 18.- Organizations and individuals may lodge complaints about the improper implementation of the legislation on income tax on high-income earners to them.

Complaints must be sent to the tax agencies directly managing them or issuing  handling decisions within 30 days after the receipt of tax money-withholding notices, tax notices, collection orders or handling decisions.

Pending the settlement of their complaints, complainants shall still have to pay in full and on time the notified tax and fine amounts.

Complaint-receiving agencies shall have to consider and settle complaints within 15 days after receiving them. For complicated cases, that time limit may be extended but must not exceed 30 days after the receipt of complaints. For cases falling beyond their settling competence, they must transfer dossiers thereof or report thereon to competent agencies for settlement and notify such to the complainants within 10 days after receiving complaints.

Article 19.- In cases where the complainants disagree with the complaint-settling decisions of the complaint-receiving agencies or past the time limits prescribed in Article 18 of this Decree the complaint-receiving agencies have not yet settled them, the complainants may lodge their complaints to the immediately superior agencies of the complaint-receiving agencies.

Article 20.- Tax agencies shall have to reimburse tax or fine amounts collected in contravention of regulations and pay compensations (if any) within 15 days after receiving settling decisions of superior authorities or competent agencies according to law provisions.

Article 21.- When detecting and concluding that there exist false declarations for tax evasion or tax-related mistakes, the tax agencies shall have to retrospectively collect tax or fine or reimburse tax amounts collected within five years prior to the date of inspecting and detecting the false declarations for tax evasion or the tax-related mistakes. For individuals who fail to register, declare or pay tax, the time limit for retrospectively collecting tax or fines shall be counted from the date the taxable income is generated.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 22.- In cases where international agreements which Vietnam has signed or acceded to contain provisions on income tax payment different from those of this Decree, the provisions of such international agreements shall apply.

Article 23.- This Decree takes effect 15 days after its publication in the Official Gazette and replaces the Government’s Decree No. 78/2001/ND-CP of October 23, 2001 detailing the implementation of the Ordinance on Income Tax on High-Income Earners.

The income tax declaration and calculation made before July 1, 2004 shall comply with the provisions of the Government’s Decree No. 78/2001/ND-CP of October 23, 2001. As from July 1, 2004, such activities shall comply with the provisions of this Decree.

Article 24.- The Finance Minister shall have to organize and inspect the collection of income tax nationwide; settle complaints and denunciations about income tax falling under his/her competence.

Article 25.- The Finance Ministry guides the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies and the presidents of the People’s Committees of the provinces and centrally-run cities shall have to implement this Decree.