Personal income tax at at progressive rates vs plate rate in Vietnam

How to apply personal income tax at at progressive rates or plate rate in Vietnam?

Post date: 26-11-2023

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Personal income tax at at progressive rates vs plate rate in Vietnam

1. Personal income tax at at progressive rates in Vietnam

Personal income tax at at progressive rates is a method of calculating personal income tax in which the tax payable is gradually increased at each tax level.
Progression in tax levels is the tax rate gradually increasing from low to high (PIT tax rate increases from 5% to 35%).
Personal income tax at at progressive rates has 7 levels, from 5% to 35%, specified in the Tax Schedule as follows:

Level	Taxable income /month	Rates	Calculate the amount of tax payable
Level	Taxable income /month	Rates	Method 1	Method 2
1	Up to 5 million dong (md)	5%	0 md + 5% Taxable income (TI)	5% TI
2	Over 5 md to 10 md	10%	0,25 md + 10% TI over 5 md	10% TI- 0,25 md
3	Over 10 md to 18 md	15%	0,75 md + 15% TI over 10 md	15% TI - 0,75 md
4	Over 18 md to 32 md	20%	1,95 md + 20% TI over 18 md	20% TI - 1,65 md
5	Over 32 md to 52 md	25%	4,75 md + 25% TI over 32 md	25% TI - 3,25 md
6	Over 52 md to 80 md	30%	9,75 md + 30% TI over 52 md	30 % TI - 5,85 md
7	Over 80 md	35%	18,15 md + 35% TI over 80 md	35% TI - 9,85 md

For the method of calculating personal income tax, the personal income tax at at progressive rates applies to income from wages and business income specified in Article 21 and Article 22 of the Personal Income Tax Law, specifically :
Article 22. Partially progressive tariff schedule
1. The partially progressive tax schedule applies to taxable income specified in Clause 1, Article 21 of this Law.
In which, Clause 1, Article 21 stipulates as follows:
Article 21. Taxable income
1. Taxable income for income from business, salaries, and wages is the total taxable income specified in Articles 10 and 11 of this Law, excluding social insurance and medical insurance contributions. health insurance, unemployment insurance, professional liability insurance for a number of industries and professions that require compulsory insurance, voluntary pension funds, and deductions specified in Articles 19 and 20 of this Law.
The application of the partially progressive tax schedule also ensures that the resident individual has a labor contract of 3 months or more as prescribed in Point b.1, Clause 1, Article 25 of Circular 111/2013 and has income from 9,000,000 VND or more as prescribed in Point a, Clause 1, Article 12 of Decree 65/2013.

2. Personal income tax at at plate rate in Vietnam

Personal income tax at at plate rate is a method of calculating personal income tax in which the amount of personal income tax payable is determined by taxable income multiplied by (x) a certain tax rate, regardless difference in income, more or less.
Pursuant to Clause 1, Article 23 of the Personal Income Tax Law 2007 and item b.3, point b, Clause 1, Article 25 of Circular 111/2013/TT-BTC, the personal income tax at at plate rate applies to the following types of taxable income:

No	Taxable income	Rate (%)
1	Income from capital investment	5
2	Income from copyrights and franchises	5
3	Income from winning prizes	10
4	Income from inheritance and gifts	10
5	Income from capital transfer	20
6	Income from securities transfer	0.1
7	Income from real estate transfer	2

In reality, there are many types of contracts applicable to individuals and company shall deduct personal income tax, specifically: Labor contracts of less than 3 months, product contracts; Seasonal contract less than 12 months; Collaborator contract; Sales representative contract.....tax deduction will be applied at a rate of 10% when individuals have a total income of 2,000,000 VND or more as prescribed in Point i, Clause 1, Article 25 of Circular 111/2013.

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