Stipulating in Detail a Number of Articles Of

GOVERNMENT SOCIALISTREPUBLIC OF VIETNAM

Independence – Freedom - Happiness

No: 100/2008/ND-CPHanoi, 8 September 2008

DECREE OF THE GOVERNMENT

stipulating in detail a number of Articles of

the Law on Personal Income Tax (PIT)

______

THE GOVERNMENT

Pursuant to the Government Organization Law dated 30 September 1992;

Pursuant to the Personal Income Tax (PIT) Law dated 21 November 2007;

Pursuant to the Tax Administration Law dated 29 November 2006;

Considering the proposal of the Minister of Finance,

DECREES:

CHAPTER I

GENERAL PROVISIONS

Article 1: Scope of regulation:

This Decree stipulates in detail a number of Articles of the PIT Law and makes regulations on registration, declaration and finalization of PIT in accordance with the provisions of the Tax Administration Law.

Article 2: Taxpayers

1. PIT payers shall comprise residents and non-residents having taxable income as stipulated in Article 3 of the PIT Law and Article 3 of this Decree. The scope in which the taxable income of taxpayers is determined shall be as follows:

a)In respect of residents, the taxable income shall be the income that they earn inside and outside Vietnam, irrespective of the place where income payment is made.

b)In respect of non-residents, the taxable income shall be the income that they earn in Vietnam, irrespective of the place where income payment is made.

1. Residents mean people who meet one of the following conditions:

a)Residing in Vietnam for 183 days or more, calculated in a calendar year or in 12 successive months from the first day when they are present in Vietnam.

Individuals residing in Vietnam in accordance with the provisions of this Article mean those who are present in the territory of Vietnam.

b)Having a permanent dwelling in Vietnam in one of the two following cases:

-Having permanent residence in accordance with the regulations on residence;

-Having a leased house to live in Vietnam in accordance with the law on residential houses, and the house lease has a leasing term of 90 or more days in the tax year.

1. Non-residents mean those who do not meet the conditions stipulated in point 2 of this Article.

Article 3: Taxable income

Taxable income of individuals shall comprise the following items of income:

1. Income from business or production activities, including:

a)Income from production or trading of goods or services in accordance with law. In particular, in respect of income from agricultural and forestry production, salt making, aquaculture and catching of aquatic products, PIT shall only be applied in cases where taxpayers are not qualified for tax exemption as stipulated in point 5, Article 4 of this Decree.

b)Income from the independent practice by individuals who have a practising licence or certificate as regulated by law.

1. Income from salaries or wages that employees receive from employers, including:

a)Salaries, wages and incomes with a nature of salaries or wages, received in the forms of cash or non-cash.

b)Allowances or benefits, except for allowances or benefits provided in accordance with law for people credited with having made contributions to the revolution, national defence and security allowances, toxicity or danger allowances for trades or jobs done in places with toxic or dangerous conditions, attraction allowances, regional allowances in accordance with law; benefits for unexpected difficulties, benefits for work-related accidents or occupational diseases; one-off benefits upon giving birth to a child or receiving an adopted child; benefits for a decline in labour capacity; one-off retirement allowances; monthly death allowances; severance allowances or loss-of-employment allowances in accordance with the provisions of the Labour Code, and other benefits paid by the social insurance fund; benefits for dealing with social evils;

The allowances or benefits which are not included in the taxable income as stated in this point must be stipulated by the competent State body.

c)Remuneration received in forms such as brokerage commission, remuneration received from taking part in a research project or programme; royalties and other items of remuneration.

d)Money received from participation in business associations, boards of administration, boards of supervisors, boards of management, societies, professional associations and other organizations;

e)Benefits in cash or in non-cash apart from salaries or wages that the employer pays, or pays on behalf of taxpayers in all forms, specifically :

-Housed rents, electricity and water costs, and costs of accompanied services (if any).

-Insurance contributions that the law does not require the employer to make for the employees.

-Membership fees and other payments for the service of individual demands such as health care, entertainment, sports activities, recreation, cosmetic surgery.

-Other benefits in accordance with the provisions of law.

f)Bonuses in cash or in non-cash in all forms, including bonuses given in the form of securities, except for the following bonuses:

-Bonuses accompanied with titles bestowed by the State, including bonuses accompanied with titles such as emulation fighters or other titles stipulated in the law on emulation and rewards. ;

-Bonuses accompanied with national or international prizes, recognized by the State of Vietnam;

-Bonuses for technological innovations, patents, inventions recognized by the competent State body;

-Bonuses given to individuals who discover and declare actions in breach of the law with the competent State body.

1. Income from investment of capital, including:

a)The interest on loans.

b)Dividends.

c) Income from investment of capital in other forms, including the case where capital contribution is made in kind, or in the form of reputation, land use right, patents, inventions, except for income received from the interest on government bond.

1. Income from capital assignment, including:

a)Income from assignment of capital contributed to economic organizations;

b)Income from transfer of securities;

c)Income from assignment of capital in other forms.

1. Income from transfer of properties, including:

a)Income from transfer of land use right and assets coupled with land.

b)Income from transfer of the right to ownership or use of residential houses;

c)Income from transfer of the right to lease land or water surface.

d)Other income received from transfer of properties.

1. Income from winning prizes in cash or in kind, including:

a)Winning lottery prizes;

b)Winning promotional prizes in all forms;

c)Winning prizes in forms of bet, or from games at casino,

d)Winning prizes from games or contests with prizes; and other forms of winning prizes.

1. Income from copyright, including:

a)Income from transfer of the right to use objects of the intellectual property right: the copyright and the right related to the copyright; the industrial property right, the right to strains of crops.

b)Income from transfer of technology, including: technical know-how, technical knowledge, solutions for rationalization of production or renewal of technology.

1. Income from franchising in accordance with the provisions of the Commercial Law.

1. Income from receiving inheritances which are securities, capital in economic organizations, business establishments, properties and other assets of which the ownership or use must be registered.

1. Income from receiving gifts which are securities, capital in economic organizations, business establishments, properties and other assets of which the ownership or use must be registered.

Article 4: Income exempt from tax:

1. Income from transfer of properties between wife and husband; between natural father or mother and children; between adoptive father or mother and adopted children; between father-in law or mother-in-law and daughter-in-law; father-in-law or mother-in-law and son-in law; between paternal grandfather, paternal grandmother, maternal grandfather or maternal grandmother and paternal grandchildren or maternal grandchildren; between siblings;

1. Income from transfer of residential house, land use right and assets coupled with land by an individual where the individual has only a sole house, or the right to use a sole piece of land in Vietnam.

1. Income from value of the land use right of individuals to whom the State has allotted land, and who are not required to pay land use fee or who are given a reduction inland use fee in accordance with law.

1. Income from receipt of inheritances or gifts which are properties between wife and husband; between natural father or mother and children; between adoptive father or mother and adopted children; between father-in law or mother-in-law and daughter-in-law; between father-in-law or mother-in-law and son-in law; between paternal grandfather, paternal grandmother, maternal grandfather or maternal grandmother and paternal grandchildren or maternal grandchildren; between siblings;

1. Income earned by households or individuals directly engaged inagricultural or forestry production; salt making; or catching aquatic products which have not been processed to become other products, or which have been rudimentarily processed.

Households or individuals directly engaged in production activities stipulated in this point must satisfy the following conditions:

a)Having the legal right to use land or water surface for production, and directly taking part in agricultural or forestry production, salt making, and aquaculture. In respect of activities of catching marine products, such households or individuals must have the right to ownership or use of ships, boats or means of catching marine products, and directly carry out such activities.

b)Actually residing in the localities where their activities of agricultural or forestry production, salt making or aquaculture take place in accordance with the law on residence.

1. Income from change of agricultural land by households or individualsto which or whom the State allotted land for production.

1. Income from the interest on depositsmade with banks or credit institutions, income from the interest on life insurance policies.

1. Income from overseas remittance.

1. The salary for working at night or working overtime, which is paid higher than the salary for working during the day or working in normal hours in accordance with law.

1. Retirement pensions paid by social insurance funds in accordance with the provisions of the Law on Social Insurance. Individuals living in Vietnam are exempt from tax on retirement pensions paid by foreign social insurance agencies.

1. Income from scholarships, including:

a)Scholarships received from the State budget;

b)Scholarships received from domestic or foreign organizations under their educational encouragement programs.

1. Income from compensations paid under life or non-life insurance policies; compensations for work-related accidents; State compensations and other compensations in accordance with law.

1. Income received from charitable funds whose establishment is permitted or recognized by the competent State body, and whose activities are for the charitable or humanitarian purpose, not for profit-making purpose.

1. Income received from sources of foreign aid given by governmental or non-governmental organizations for the charitable or humanitarian purpose, which is approved by competent State bodies.

The Ministry of Finance shall stipulate procedures and files required for determination of items of income exempt from tax as regulated in this Article.

Article 5: Tax reduction

1. Taxpayers whose capability of paying tax is affected badly by calamity, fire,accident or fatal disease shall be considered for a tax reduction which corresponds with their damages, but such a tax reduction shall not exceed the tax amount payable.

1. The Ministry of Finance shall provide regulations on procedures and documents for consideration of PIT reduction as stipulated in this Article.

CHAPTER II

BASES FOR TAX CALCULATION IN RESPECT OF

SOME KINDS OF INCOME OF RESIDENTS

SECTION 1

INCOME EARNED FROM BUSINESS

AND INCOME FROM SALARIES OR WAGES

Article 6: Income used for tax calculation in respect of income earned from business, or from salaries or wages

1. The income used for tax calculation in respect of income earned from business, or from salaries or wages shall equal the taxable income from business, or from salaries or wages as stipulated in Articles 7 and 11 of this Decree minus (-) the following items:

a)Compulsory insurance contributions in accordance with law, including social and medical insurance contributions, and professional liability insurance contributions which must be made by individuals in a number of lines of business;

b)Family-circumstance reductions as stipulated in Article 12 of this Decree;

c)Contributions made to charitable funds, humanitarian funds, or study encouragement funds as stipulated in Article 13 of this Decree.

1. The income used for tax calculation in respect of an individual who has taxable income from both business and salaries or wages shall be the total taxable income from business plus (+) the taxable income from salaries or wages minus (-) contributions and reductions stipulated in items a), b) and c), point 1 of this Article.

Article 7: Taxable income from business

The taxable income from business shall equal turnover used for calculation of taxable income as stipulated in Article 8 of this Decree minus (-) reasonable expenses stipulated in Article 9 of this Decree.

Article 8: Turnover used for calculation of the taxable income from business

1. Turnover used for calculation of the taxable income from business shall equal the total sum collected from sale or processing of goods, the commission, or the proceeds from provision of goods or services in a tax period.

The time at which the turnover is determined is the time when the title to goods is transferred or the provision of services is completed, or the time when invoices for sale of goods or provision of services are made out, regardless of whether or not payment is made.

1. In a number of cases, turnover used for calculation of the taxable income shall be stipulated specifically as follows:

a)Turnover for goods sold by the way of installment payments shall be the lump sum payment for such goods, excluding any interest payable on deferred payment;

b)Turnover for goods or services used for purposes such as exchange, gifts or presents shall be the selling price of products, goods or services of the same or similar type at the time when the exchange or donation takes place.

c)Turnover from activities of processing goods shall be the receipts from processing, including costs of employees, fuel, power and sub-materials, and other expenses required for processing of goods.

d)Turnover from activities of leasing out assets shall be the amount of rent paid by the lessee for each period under the lease contract. Where the lessee makes an advance payment of rent for many years, the turnover used to calculate the taxable income shall be the advance payment allocated to the years for which the rent is prepaid, or calculated on the basis of a lump sum payment.

e)Turnover used for calculation of the taxable income in other cases shall be stipulated by the Ministry of Finance.

Article 9: Reasonable expenses related to the generation of taxable income from business

1. Reasonable expenses stipulated in this Article must be actual payments with full invoices and source documents as regulated.

1. Reasonable expenses which are deducted shall include:

a)Salaries, wages, allowances, remuneration and other expenses paid to employees.

Salaries or wages of individuals being owners of business households shall not be included in deductible expenses.

b)Expenses of raw materials, materials, fuel, power and goods actually used for production or trading of goods or services related to turnover or taxable income in the period, calculated based on the reasonable level of consumption and the price ex warehouse. The business establishment itself shall determine such expenses and be responsible before the law.

c)Cost of amortization, and expenses for renovation or maintenance of fixed assets used for production, business or service activities. The amortization cost of fixed assets shall be charged based on the value of such fixed assets and the period of amortization as regulated by the Ministry of Finance.

d)Costs of interest on loans for production or business, directly related to generation of the turnover and taxable income.

e)Overhead expenses;

f)Taxes, fees and charges, and land rent payable, which are related to production, business or service activities as regulated by law.

g)Other payments related to generation of the income.

The Ministry of Finance shall stipulate specifically other reasonable expenses which are deducted upon calculation of taxable income.

Article 10: Taxable income, income used for calculation of tax of business individuals who fail to implement properly the regulations on accounting, invoices and source documents.

1. With respect to business individuals who fail to implement properly the regulations on accounting, invoices or source documents, and who cannot determine turnover, expenses and taxable income, the competent tax body shall fix the turnover and the rate of taxable income in order to calculate the taxable income, which is in line with each trade and each line of business or production.

2.Based on the taxable income fixed by the competent tax body as stipulated in point 1 of this Article, the tax body shall determine a deemed tax amount in accordance with the principles and procedures stipulated in Article 38 of the Law on Tax Administration.

Article 11: Taxable income from salaries or wages

1. Taxable income from salaries or wages shall be determined in accordance with the provisions in point 2, Article 3 of this Decree.

1. The time at which the taxable income from salaries or wages is determined shall be the time when the employer pays wages or salaries to the taxpayers or the time when the taxpayers receive their income.

Article 12: Family-circumstance deductions

Individuals being residents who earn income from their business or from their salaries or wages shall be entitled to family-circumstance deductions from their taxable income, specifically as follows:

1. Level of family-circumstance deduction:

a)The family-circumstance deduction for the taxpayer shall equal VND 48 million per year.

b)The deduction for each dependant whom the taxpayer is obliged to support shall equal VND 1.6 million per month from the month in which the taxpayer has obligation to support the dependant.

1. The deduction for each dependant shall only be taken from the taxable income of one taxpayer in the tax year. Where taxpayers have to jointly support one or several dependants, they themselves shall agree with each other to appoint a taxpayer who registers for being entitled to family-circumstance deductions.

1. Dependants and bases for determination dependants shall be as follows:

a)Children of less than 18 years of age.