Instructions on how to calculate personal income tax

Posted date 23/03/2018

2.888 view

Posted date 23/03/2018

2.888 view

MSc. Tran Thi Thuy
Teacher: Department of Accounting

Personal income tax is the amount of money that income earners must pay a portion of their salary, or from other sources of income, to the State budget. This is the obligation of every citizen to contribute to the development of the country. So who must pay personal income tax, when is taxable income determined, and how is personal income tax calculated? The author would like to clarify the above contents as follows:
Personal income tax payer.
According to Article 2 of the Law on Personal Income Tax, personal income tax payers include resident individuals with taxable income as prescribed in Article 3 of the Law on Personal Income Tax arising within and outside the territory of Vietnam and non-resident individuals with taxable income as prescribed in Article 3 of this Law arising within the territory of Vietnam.
Time to determine income subject to personal income tax.
It is the time when an organization or individual pays the organization to the taxpayer. Personal income tax is a monthly tax. Accountants can declare it monthly or quarterly, but the final settlement is done annually.
How to calculate personal income tax for residents with labor contracts > 3 months
For employees with contracts signed for 3 months or more, personal income tax is calculated according to the formula:

Personal income tax payable

Taxable income

Tax rate

In there:

Taxable income	=	Taxable income	-	Deductions
Taxable income	=	Total income	-	Tax-exempt items

- Total income: is the total income from salaries, wages and other taxable income of the nature of salaries and wages according to Article 2 of Circular 111/2013/TT-BTC
- Tax exemptions:
+ House rent, electricity, water and other services related to housing paid by the employer on behalf of the employee must not exceed 15% of the total taxable income generated.
+ Allowances and subsidies that are not included in taxable income must be regulated by competent state agencies such as toxic allowances, national defense and security allowances, etc.
+ For business trip allowances for employees on business trips, if the company clearly stipulates the level of benefits, personal income tax will be exempted;
+ Telephone allowance, currently the corporate income tax law has not clearly regulated, so if the company stipulates how much telephone allowance, that amount will be deducted.
+ If the clothing allowance is received in kind, it is fully tax-exempt. If the individual receives it in cash, it is exempted up to a maximum of VND 5,000,000.
+ Meal and lunch allowance: if the company pays cash to employees, the maximum reduction is 730,000 VND/month
+ Income from salary, wages for night work, overtime is paid higher than salary, wages for day work, during working hours
Deductions:
+ Family deduction: For taxpayers: 9 million VND/month, for dependents: 3.6 million VND/month
+ Compulsory insurance: Social insurance 8%, Health insurance 1.5%, Unemployment insurance 1%
Tax rate: Personal income tax rate on income from salaries and wages is applied according to the progressive tax schedule specified in Appendix No. 01/PL-TNCN according to Circular 111/2013/TT-BTC

Level	Taxable income /month	Tax rate	Calculate tax payable
Method 1	Method 2
1	Up to 5 million VND	5%	0 million + 5% TNTT	5% TNTT
2	Over 5 million to 10 million	10%	0.25 million VND + 10% TNTT over 5 million VND	10% TNTT - 0.25 million
3	Over 10 million to 18 million	15%	0.75 million VND + 15% TNTT over 10 million VND	15% TNTT - 0.75 million VND
4	Over 18 million to 32 million	20%	1.95 million VND + 20% TNTT over 18 million VND	20% TNTT - 1.65 million
5	Over 32 million to 52 million	25%	4.75 million VND + 25% TNTT over 32 million VND	25% TNTT - 3.25 million
6	Over 52 million to 80 million	30%	9.75 million + 30% of income tax over 52 million	30% TNTT - 5.85 million
7	Over 80 million	35%	18.15 million VND + 35% of income tax over 80 million VND	35% TNTT - 9.85 million

How to calculate income tax for resident individuals with 3-month labor contracts
For resident individuals with labor contracts of less than 3 months, personal income tax is deducted for each payment of income from VND 2,000,000 or more, with a deduction rate of 10% of total income/time.
If an individual has only one income subject to proportional tax deduction but the estimated total taxable income of the individual after family deduction is below 9 million VND/month and has a personal income tax code at the time of commitment, the individual with income shall make a commitment No. 02/CK-TNCN and send it to the income paying organization so that the income paying organization can use it as a basis for temporarily not deducting personal income tax.
Good luck!

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