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PIT finalisation

Released at: 08:24, 20/03/2014 TAX CONSULT

PIT finalisation

What are the notable points of Official Letter No 336/TCT-TNCN (OL 336) issued on January 24, 2014 by the General Department of Taxation regarding guidance on 2013 PIT finalisation?

by kpmg

The lease period for a leased “house” in Vietnam of 183 days or more in a tax year is used for determining tax resident status in relation to being subject to tax finalisation. The lease period of 90 days is applied for this determination before July 1, 2013.

OL No 336 indicates that for the period from January 2013 to June 2013, determination of taxable income and assessable income is based on Circular No 84/2008/TT-BTC and relevant prevailing regulations, and for the remainder of 2013 the determination is subject to Circular No 111/2013/TT-BTC and relevant regulations.

The OL also provides methodologies for calculating taxable income and tax liabilities for both cases, including net and gross employment contracts, as follows: (i) for gross employment contracts, tax liabilities are determined on monthly assessable income averaged from the taxable income of a year (i.e. 12 months) after allowable deductions; (ii) while for net employment contracts, per Example Number 9 provided in OL 336, monthly net income actually received in a month is grossed up and the monthly grossed-up income is deemed as taxable income for tax finalisation; and (iii) in addition, from July 1, 2013 (instead of October 1, 2013, the effective date of Circular No 111), the fringe benefits paid on a net tax basis by employers on behalf of employees shall be added to other net income, then grossed up in total for PIT purposes. In the Example, the following would be expected to be clarified further: in theory, compulsory insurance contributions should be deducted from net income before grossing up, while the Example shows the deduction of compulsory insurance contributions from the grossed up amount for the first six months of 2013. Of note, the approach (i.e. deducting insurance contributions from net income) is applied in the Example for the last six months of 2013.

Individuals that have already finalised their tax in order to leave Vietnam but then return to work in Vietnam until the end of the same year are required to re-finalise their tax on their worldwide income for the entire year. However, any tax paid outside of Vietnam on their income earned in the period they did not work in Vietnam can be assessed for credit in Vietnam.

Example 1 of OL No 336 makes clear that if authorised by employees, income-paying bodies should finalise their employees’ tax imposed on the income paid by that income paying body only.

Apart from these points, OL No 336 also confirms these points: (i) tax forms used for 2013 tax finalisation are still based on Circular No 28/2011/TT-BTC, except the form to authorise tax finalisation, i.e. Form 04-02/TNCN enclosed in Circular No 156/2013/ TT-BTC, which is to be applied; and (ii) there are no requirements for tax finalisation of tax residents that have income from securities transfers if they have paid the deemed tax at 0.1 per cent on each transfer and do not want to apply the tax rate of 20 per cent on the net again.

In general, there are several updates on 2013 PIT finalisation guidance compared with that issued for 2012. Individuals and enterprises should take the above guidance into account and carefully check their 2013 PIT finalisation for appropriate implementation. KPMG is pleased to discuss your particular areas of interest or concerns regarding the preparation of the 2013 PIT finalisation returns.

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