Adjusting personal income tax: Benefit for the majority

According to the Ministry of Finance, the proposal to change the personal income tax (PIT) scale is mainly aimed at the majority of Vietnamese people who are paying PIT. Thereby, reducing the number of people who have to jump tax levels and have to make annual tax settlements. This proposal also aims to increase the tax rate for people with unusual sources of income such as income from lottery winnings...

Reduce tax rate

The Ministry of Finance has just proposed to amend the personal income tax table from 7 levels of salary and wages to 5 levels, in the direction of extending the first tax levels. Accordingly, people with taxable income from 5 to 10 million VND previously had to pay a personal income tax rate of 10%, now proposed to reduce to 5%; those from 10 to 18 million VND currently subject to 15% tax, proposed to reduce to 10%; those from 18 to 30 million VND currently subject to 20% tax, proposed to reduce to 10%...

Mr. Pham Dinh Thi, Director of Tax Policy Department (Ministry of Finance), said that the current regulations on personal income tax are still complicated, causing administrative procedures, not creating convenience for taxpayers and making it difficult for tax management... so they need to be amended. At the same time, tax rates should be adjusted to encourage and motivate individuals to get rich legally. Therefore, the Ministry of Finance proposed to reduce the number of personal income tax rates from wages and salaries to 5, and widen the gap at lower rates to even numbers.

Personal income tax will be adjusted downward.

The drafting team also proposed to supplement and amend regulations related to tax settlement and personal income tax refund, in the direction of simplifying administrative procedures. Accordingly, the current regulations on personal income tax on irregular income are subject to a 10% tax rate for income from VND 2 million or more. At the end of the year, individuals will make tax settlement to receive a tax refund, or pay additional tax.

However, in implementation, there have been many cases where tax authorities have discovered that they have been both taxed and fined, although the amount is not large, it still causes frustration for taxpayers. Therefore, it is necessary to amend to minimize cases of tax settlement.

In addition, in this revision of tax laws, the Ministry of Finance also proposed personal income tax incentives for a number of special, priority development sectors. Such as a 50% reduction in personal income tax for people working in the technology sector and priority sectors that encourage development (such as agriculture, agricultural processing, etc.). At the same time, personal income tax is exempted for income from profits from participating in agricultural cooperatives, farmers signing contracts with enterprises participating in "large fields".

According to the General Department of Taxation (Ministry of Finance), the total personal income tax in 2016 was about 65 trillion VND. Of which, personal income tax from wages and salaries was about 45.7 trillion VND, accounting for more than 70% of the total personal income tax revenue. The majority of personal income tax revenue is from foreigners. Therefore, the direction is to amend the law to extend the first levels of personal income tax (5-10% tax rate).

This will make the majority of Vietnamese who pay personal income tax fall into the group that will benefit in the future. At the same time, the extended tax scale will also help reduce the number of people who have to jump from 5% to 10% tax, thereby reducing the number of people who have to settle taxes annually.

Winning Vietlott prize over 10 billion must pay 30% tax

According to the General Department of Taxation, in 2015, individuals with income subject to personal income tax were over 17.7 million people. Of these, more than 9.3 million people had finalized their taxes, including more than 490,000 people who had to pay additional taxes (accounting for 5.2%) with an amount of more than VND 2,900 billion; and more than 1.2 million people received tax refunds (accounting for 13.7%) with an amount of more than VND 2,800 billion.

Although the number of people who self-settle taxes accounts for only 1% of the number of people who pay personal income tax, according to Mr. Thi, it still overloads the tax authority. And mainly the people who refund taxes are related to refunding current taxes (10% of current taxes from 2 million VND). Up to half of the tax settlements have small tax differences, but still have to go through complicated procedures.

To overcome this, the Ministry of Finance proposed two options. First, abolish tax settlement, and every year, the organization paying the individual is responsible for recalculating the income based on the average of 12 months to determine the additional or overpaid tax. With this method, most individuals will have their taxes reduced, because the monthly income is shared among each other and the tax scale has been raised. At the same time, the irregular income will still have a tax rate of 10%, but the taxable limit will be raised from 2 million VND to 5 million VND. However, this method is not in line with international practice.

With the remaining option, the Ministry of Finance proposed to maintain tax settlement, but if the tax amount is less than 300 thousand VND, there will be no tax refund or tax payment required. However, this regulation still generates tax refund or additional tax payment, late payment penalty, and overload at the time of tax settlement.

In particular, this time, the Ministry of Finance proposed to sharply increase personal income tax for winners of prizes such as lottery, Vietlott; winners of promotional programs of enterprises and banks. According to current regulations, winners only have to pay personal income tax at a rate of 10%. However, since Vietnam introduced computerized lottery provided by Vietnam Computerized Lottery Company (Vietlott), many people have won big prizes, with amounts ranging from tens of billions to more than 100 billion VND. With a tax rate of 10%, this is quite unreasonable because the sudden income is too huge.

Many opinions propose to increase personal income tax to suit reality and the world. Specifically, the financial agency proposes that prizes of 5 billion VND or less will be subject to personal income tax at 10%; from 5 billion VND to 10 billion VND will be subject to tax at 20%; over 10 billion VND will be subject to tax at 30%.

If the above regulation is submitted by the Government to the National Assembly and approved, most of the special prize winners (Jackpot) of Vietlott's Mega 6/45 and Power 6/55 lottery products will have to pay the highest tax rate of 30%. The lowest Jackpot prize of Mega 6/45 lottery is 12 billion VND, while the lowest Jackpot prize of Power 6/55 lottery is 30 billion VND (except in the case where there are many special prize winners in a drawing and the prize is divided).

The Ministry of Finance also proposed to add some income items subject to personal income tax, such as income from copyright (including income from transferring and transferring the right to use internet resources)...

According to Tien Phong Newspaper