New tax changes effective July 1, 2013

(Baonghean) - Several individuals in Vinh City have asked: What are the new points regarding changes to personal income tax, corporate income tax, and VAT policies effective from July 1, 2013?

Reply:

1. Businesses subject to the new corporate income tax rate:

Government Decree No. 92/2013/ND-CP dated August 13, 2013, provides detailed regulations for the implementation of several articles effective from July 1, 2013, of the Law amending and supplementing certain articles of the Corporate Income Tax Law and the Law amending and supplementing certain articles of the Value Added Tax Law.

This Decree provides detailed regulations on several articles and clauses of the amended Corporate Income Tax Law No. 32/2013/QH13 and the amended Value Added Tax Law No. 31/2013/QH13, effective from July 1, 2013. Specifically, it includes the following regulations:

- Small businesses with annual revenue not exceeding 20 billion VND are entitled to a corporate income tax rate of 20%.

- Revenue from the sale, lease, or lease-purchase of social housing is subject to a corporate income tax rate of 10% and a value-added tax rate of 5%.

- Revenue from the sale, lease, or lease-purchase of commercial housing under 70m2 and with a selling price below 15 million VND/m2 is subject to a 5% tax rate during the period from July 1, 2013 to June 30, 2014.

Accordingly, the revenue (not exceeding 20 billion VND) used as the basis for considering eligibility for the 20% corporate income tax rate is the revenue of the immediately preceding year.

For businesses with a tax period of 12 months or less in 2012, and newly established businesses in the first six months of 2013, the tax rate will be based on the average monthly revenue of 2012 and the average monthly revenue of 2013 up to the end of June. If the average monthly revenue does not exceed VND 1.67 billion, they will be entitled to a tax rate of 20%.

Revenue from the sale, lease, or lease-purchase of social housing subject to a corporate income tax rate of 10% is revenue generated from July 1, 2013, regardless of the contract signing date.

2. Personal income tax when a company pays dividends:

Official Letter No. 2269/TCT-TNCN dated July 16, 2013, from the General Department of Taxation regarding personal income tax policy. According to point 3, Section II, Part A of Circular 84/2008/TT-BTC, when paying dividends to individuals, the company is responsible for deducting 5% capital investment tax. According to the General Department of Taxation, if the company pays dividends to its employees using the annual savings interest rate at a bank calculated on the number of shares held, this is also subject to capital investment tax.

If the company does not pay dividends but repurchases the individual's shares at par value plus the aforementioned savings interest, then the income from this share transfer is considered income from the transfer of securities.

In cases where individuals transferring property do not register to pay tax according to the full tax schedule with a tax rate of 20%, a tax rate of 0.1% will be applied to the transfer price for each transaction.

Transfer price = [par value + interest] x number of shares.

3. Personal income tax, incidental income:

This document provides temporary guidance on some new provisions of the amended Personal Income Tax Law No. 26/2012/QH13, effective from July 1, 2013. These provisions include:

- Increase the personal tax deduction from 4 million to 9 million VND/person/month and the dependent tax deduction from 1.6 million to 3.6 million VND/person/month.

- The rental period used as a basis for determining whether a foreigner is a resident individual has been adjusted upwards from 90 to 183 days.

- The income threshold for calculating personal income tax deductions for seasonal workers has been raised from 1 million to 2 million VND. The deduction rate is also uniformly set at 10%, regardless of whether the individual has a tax identification number or not.

- Income from the transfer of shares, regardless of whether they are from a public company or not, is considered income from securities.

- Houses and construction projects under construction are not exempt from personal income tax under the category of a single residence.

- Accumulated life insurance premiums and voluntary retirement savings are subject to a 10% personal income tax. Insurance companies and fund management companies are responsible for deducting this tax before payment, so they do not need to add it to taxable income for personal income tax purposes during the period.

NT (Compilation)