PIT Update: Vietnam Implements 50 Percent Reduction in Personal Income Tax for Individuals Working in Economic Zones

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HCMC – On October 20, 2014, Vietnam implemented a 50 percent reduction in personal income tax (PIT) for individuals who are working in the country’s economic zones. The recent tax change was outlined in the Ministry of Finance’s Circular 128/2014/TT-BTC, replacing Circular 176/2009/TT-BTC.

Economic zones are special areas in Vietnam that possess special economic regulations and provide measures that are conducive to foreign direct investment. These zones are organized into functional areas, such as non-tariff, bonded, export processing, industrial, and tourism.

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Individuals who can benefit from the new tax rules include:

  • Resident or non-resident employees who have employment contracts with businesses located in the economic zones
  • Employees who are sent to work in the zones by businesses not located in them
  • Individuals working at waste treatment facilities outside the zones

PIT snapshot

According to the PIT Law, PIT is levied on the worldwide income of Vietnam residents and on Vietnam-sourced income of non-residents, irrespective of where the income is paid. The tax calculation and finalization procedure for Vietnamese locals and expatriates is the same, but that for residents and non-residents are different.

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There are 10 types of earnings which are subject to PIT, these are as follows:

  • Incomes from business activities
  • Wages received from employers
  • Capital investment
  • Capital transfer
  • Property transfer
  • Prizes
  • Royalties
  • Commercial franchising
  • Inheritances in forms of securities, capital contribution in companies or economic organizations, real estate and other assets requiring the registration of ownership or use right
  • Gifts in forms of securities, capital contribution in companies or economic organizations, real estate and other assets requiring the registration of ownership or use rights

Resident taxpayers are subject to PIT on their worldwide employment income, irrespective of where the income is paid or earned, at progressive rates from five percent to a maximum of 35 percent. Employment income includes salaries, wages, allowances and subsidies, remuneration in all forms; benefits earned for participation in business associations, boards of directors, control boards, management boards and other organizations; premiums and bonuses in any form except those received from the State.

Vietnam Tax Guide 2014-41-inforgraphic

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