Pursuant to Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance guiding the implementation of the Law on PIT, the Law amending and supplementing a number of articles of the Law on PIT and Decree No. 65/2013/ND-CP of the Government detailing a number of articles of the Law on PIT and the Law amending and supplementing a number of articles of the Law on PIT.
+ In Clause 4, Article 2, income from capital transfer is as follows:
“4. Income from capital transfer
Income from capital transfer means personal income received, including:
a) Income from transfer of contributed capital in limited liability companies (including single-member limited liability companies), partnerships, business cooperation contracts, cooperatives, people’s credit funds, economic organizations and other organizations.
+ In Clause 1, Article 11 stipulates that the tax bases for income from the transfer of contributed capital are as follows:
“1. For income from transfer of contributed capital
The tax base for income from the transfer of contributed capital is the taxable income and tax rate .
a) Taxable income: taxable income from the transfer of contributed capital is determined by the transfer price minus the purchase price of the transferred capital and reasonable expenses related to the generation of income from capital transfer.
…
b) Tax rate
The personal income tax rate for income from the transfer of contributed capital is applied according to the Full Tax Table with a tax rate of 20%.
c) Time to determine taxable income
The time of determining taxable income is the time when the capital contribution transfer contract takes effect. Particularly for the case of capital contribution by contributed capital, the time of determining taxable income from capital transfer is the time when the individual transfers the capital or withdraws the capital.
d) Tax calculation
| Personal income tax payable | = | Taxable income | x | 20 % tax | “ |
* Pursuant to Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance guiding the implementation of a number of articles of the Law on Tax Administration; Law amending and supplementing a number of articles of the Law on Tax Administration and Decree No. 83/2013/ND-CP dated July 22, 2013 of the Government.
+ In Clause 4, Article 16, the tax declaration for income from capital transfer (except for securities transfer) is as follows:
“4. Declare tax on income from capital transfer (except securities transfer).
a) Principles of tax declaration
a.1) Residents transferring contributed capital shall declare tax according to each transfer regardless of whether or not income is generated….
a.3) If an enterprise carries out procedures to change the list of capital contributors in case of capital transfer without documents proving that the transferor has fulfilled its tax obligations, the enterprise where the individual transfers capital is responsible for declaring and paying tax on behalf of the individual..
In case the enterprise where the individual transfers the capital pays tax on behalf of the individual, the enterprise shall make the declaration instead of the individual’s tax return. The enterprise declaring instead shall write the phrase “Declaration on behalf of” in the part before the phrase “the taxpayer or the legal representative of the taxpayer” and at the same time, the declarant shall sign, specify the full name and stamp of the enterprise. On the tax calculation file, the tax receipt must still show that the taxpayer is an individual transferring contributed capital (in the case of a capital transfer of a resident) or an individual receiving the capital transfer (in the case of a capital transfer of a non-resident).
b) Tax return file
Residents earning income from the transfer of contributed capital shall declare tax according to the following form:
– Personal income tax return applicable to individuals earning income from capital transfer according to form No. 12/ KK-TNCN attached to this Circular.
– A photocopy of the capital transfer contract.
– Documents determining the value of contributed capital according to the accounting books, the contract on re-purchase of contributed capital in case of capital contribution due to re-purchase.
– Photocopies of documents proving the expenses related to the determination of income from the transfer of contributed capital and the individual signing the commitment to be responsible on those photocopies…
c) Where to file tax returns
Individuals and enterprises declare and submit tax declarations for transfer of contributed capital at the tax authority directly managing the transferred capital enterprise.
d) Time limit for filing tax returns
Individuals who declare tax on income from the transfer of contributed capital shall declare personal income tax no later than the 10th (tenth) day from the effective date of the contribution transfer contract .
In case the enterprise pays tax on behalf of an individual, the time to submit the tax return is at the latest before the time of carrying out the procedures for changing the list of capital contributors as prescribed by law.
d) Time limit for tax payment
The tax payment deadline is the time limit stated in the Tax authority’s notice of tax payment.”
* Pursuant to Circular No. 92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance guiding the implementation of VAT and PIT for residents conducting business activities; guiding the implementation of a number of amendments and supplements to PIT specified in the law amending and supplementing a number of articles of tax laws No. 71/2014/QH13 and Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the law amending and supplementing a number of articles of the tax laws and amending and supplementing a number of articles of the tax decrees.
+ In Article 13 amending and supplementing Article 5 of Circular No. 111/2013/TT-BTC stipulating the conversion of taxable income into Vietnam Dong as follows:
“Article 13. Amending and supplementing Article 5 of Circular No. 111/2013/TT–BTC as follows:
“Article 5. Converting taxable income into Vietnam Dong
Revenues and incomes subject to personal income tax are calculated in Vietnam Dong.
In case of revenue and taxable income received in foreign currency, it must be converted into Vietnam Dong at the actual buying exchange rate of the bank the individual opens a transaction account at the time of income generation.
In case the taxpayer does not open a transaction account in Vietnam, he/she must convert the foreign currency into Vietnam Dong at the buying exchange rate of the Joint Stock Commercial Bank for Foreign Trade of Vietnam at the time of income generation.
For foreign currencies that do not have an exchange rate with Vietnam Dong, they must be converted through a foreign currency with an exchange rate with Vietnam Dong.
…””
+ In Clause 7, Article 24 Amending and supplementing tax forms and declarations for business individuals and personal income tax forms and declarations:
“…The list of tax forms and declarations applicable to business individuals and the forms and declarations of personal income tax are made according to Appendix 02 issued with this Circular.”
+ Group 04, Appendix 02: List of forms for business individuals and forms for PIT issued together with Circular No. 92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance.
| No | Form no _ | Form name _ |
| Group 04 – Individuals self-filing tax on other types of income | ||
| 21 | 04/CNV-TNCN | Personal income tax return
(Applicable to residents earning income from capital transfer, individuals transferring securities declaring directly to tax authorities) |
* Pursuant to Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance guiding the implementation of Decree No. 218/2013/ND-CP dated December 26, 2013 of the Government regulating and guiding the implementation of the Law on Corporate Income Tax.
+ Clause 2, Article 2 provides for taxpayers as follows:
“2. Foreign organizations doing business in Vietnam that are not under the Investment Law, the Enterprise Law or earning income in Vietnam shall pay corporate income tax under the separate guidelines of the Ministry of Finance. If these organizations have capital transfer activities, they shall pay corporate income tax under the guidelines in Article 14, Chapter IV of this Circular.”
+ Clause 1, Article 11 stipulates the corporate income tax rates as follows:
“1. From January 1, 2014 , the corporate income tax rate is 22%, except for the cases specified in Clauses 2 and 3 of this Article and the cases where preferential tax rates are applicable.
…
From January 1, 2016, cases subject to the tax rate of 22% will change to apply the tax rate of 20%.“
+ Article 14 stipulates capital transfer income as follows:
“Article 14. Income from capital transfer
Scope of application:
Income from capital transfer of an enterprise is income obtained from the transfer of part or all of the enterprise’s invested capital to one or more other organizations and individuals (including the sale of the enterprise). The time of determining income from capital transfer is the time of transferring capital ownership.
…
Tax bases
a) Taxable income from capital transfer is determined:
| Taxable income | = | Transfer price | – | Purchase price of the transferred capital | – | Transfer cost |
In which:
– The transfer price is determined as the total actual value received by the transferor under the transfer contract.
…
c) For a foreign organization doing business in Vietnam or earning income in Vietnam but this organization does not operate under the Law on Investment, the Law on Enterprises (collectively referred to as foreign contractors) and has capital transfer, the tax declaration and payment shall be made as follows:
Organizations and individuals receiving capital transfer are responsible for determining, declaring, withholding and remitting on behalf of foreign organizations the payable corporate income tax amount. In case the transferee is also a foreign organization that does not operate under the Law on Investment or the Law on Enterprises, the enterprise established under the law of Vietnam where the foreign organization invests its capital shall declare and pay on behalf of the corporate income tax payable from capital transfer activities of the foreign organization.
Tax declaration and payment shall comply with the provisions of legal documents on tax administration.”
* Pursuant to Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance guiding corporate income tax in Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the Law amending and supplementing a number of articles of the Law on Taxation and amending and supplementing a number of articles of the Tax Decrees and amending and supplementing a number of articles of Circular No. 78/2014 /TT-BTC dated June 18, 2014, Circular No. 119/2014/TT-BTC dated August 25, 2014, Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance.
+ In Article 8 amending and supplementing the second bullet point, point a, Clause 2, Article 14 of Circular No. 78/2014/TT-BTC as follows:
“- The purchase price of the transferred capital is determined for each case as follows:
+ If it is a transfer of contributed capital to establish an enterprise, it is the value of the accumulated contributed capital up to the time of capital transfer on the basis of comparison, accounting records and documents and approved by the parties to the capital investment or to the business cooperation contract, or audit results of an independent auditing company for 100% foreign-owned enterprises.
+ If it is the capital acquired through repurchase, the purchase price is the capital value at the time of purchase. The purchase price is determined on the basis of the capital contribution repurchase contract and payment documents.
If the enterprise satisfies the conditions for accounting in foreign currencies and strictly complies with the provisions of law on accounting regimes with the transfer of contributed capital in foreign currency, the transfer price and purchase price of the transferred capital are determined in foreign currency; In case the enterprise that does accounting in Vietnam dong transfers contributed capital in a foreign currency, the transfer price must be determined in Vietnam dong according to the buying exchange rate of the Commercial Bank where the enterprise opens an account at the time of transfer”.
* Pursuant to Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance guiding the implementation of Decree No. 91/2014/ND-CP dated October 1, 2014 of the Government amending, supplementing a number of articles in the Decrees on tax regulations.
+ In Article 16, amending Article 12, Circular No. 156/2013/TT-BTC stipulates CIT declaration as follows:
“Article 16. Amendment to Article 12, Circular No. 156/2013/TT-BTC as follows :
“Article 12. Corporate income tax declaration
…2. Enterprise income tax declaration means declaration according to each time of arising, annual finalization or tax finalization up to the time of decision on enterprise division; consolidation; merger; business transformation; dissolution; termination of operation.
…
Cases of corporate income tax declaration according to each time it is incurred:
…
– Corporate income tax declaration according to each time it is incurred, applicable to foreign organizations doing business in Vietnam or earning income in Vietnam (collectively referred to as foreign contractors) that do not operate under the Law on Investment, Law on Enterprises with income from capital transfer.
…
Declaring corporate income tax for capital transfer
…
b) Foreign organizations doing business in Vietnam or earning income in Vietnam (collectively referred to as foreign contractors) that do not operate under the Law on Investment, the Law on Enterprises, and conduct capital transfer, shall declare corporate income tax each time it is incurred
Organizations and individuals receiving capital transfer are responsible for determining, declaring, withholding and paying on behalf of foreign organizations the payable corporate income tax amount. In case the transferee is also a foreign organization that does not operate under the Law on Investment or the Law on Enterprises, the enterprise established under the law of Vietnam where the foreign organization invests its capital shall declare and pay on behalf of the corporate income tax payable from capital transfer activities of the foreign organization.
The deadline for filing tax returns is the 10th (tenth) day from the date the competent authority approves the capital transfer, or the 10th (tenth) day from the date the parties agree to transfer the capital in the capital transfer contract, in case the capital transfer is not approved.
Tax declaration dossiers for income from capital transfer:
– Corporate income tax declaration on capital transfer (according to Form No. 05/TNDN issued together with Circular No. 156/2013/TT-BTC);
– Photocopy of the transfer contract. In case the transfer contract is in a foreign language, the following main contents must be translated into Vietnamese: The transferor; the transferee ; transfer time; transfer content; rights and obligations of each party; value of contract; payment term, method, currency.
– Photocopy of the competent authority’s decision approving the capital transfer (if any);
– Photocopy of the certificate of capital contribution;;
– Original vouchers of expenses.
In case it is necessary to supplement the dossier, the tax authority must notify the organization or individual receiving the capital transfer on the day of receiving the dossier for the case of direct receipt of the dossier; within 03 (three) working days from the date of receipt of the dossier in case of receipt by post or through electronic transactions.
Tax return filing location: at the tax office where the enterprise of the foreign organization or individual transferring capital registers to pay tax.
…””
* Pursuant to Circular No. 26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance guiding on value-added tax and tax management in Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the Law amending and supplementing a number of articles of the Law on Taxation and amending and supplementing a number of articles of the Decrees on taxation and amending and supplementing a number of articles of Circular No. 39/2014/TT-BTC dated March 31, 2014 of the Ministry of Finance on invoices for selling goods and providing services.
+ In Clause 4, Article 2 amending and supplementing Article 27 of Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance as follows:
“3. In case revenue , expenses and taxable prices are generated in foreign currencies, they must be converted into Vietnam dong at the actual exchange rate according to the guidelines of the Ministry of Finance in Circular No.200/2014/TT–BTC dated December 22, 2014 guiding the corporate accounting regime as follows:
– The actual exchange rate for revenue accounting is the buying rate of the commercial bank where the taxpayer opens an account.
– The actual exchange rate for cost accounting is the selling rate of the commercial bank where the taxpayer opens an account at the time of the foreign currency payment transaction.
– Other specific cases shall comply with the guidelines of the Ministry of Finance in Circular No. 200/2014/TT-BTC dated December 22, 2014.”
Based on the foregoing, the principles are as follows:
1. For individuals:
In case individuals generate income from the transfer of contributed capital in the Company, they shall declare PIT from the capital transfer according to the provisions of Clause 1, Article 11 of Circular No. 111/2013/TT-BTC dated August 15, 2013 and Clause 4, Article 16 of Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance (with form No. 12/KK-TNCN issued together with Circular No. 156/2013/TT-BTC has been replaced by form No. 04/CNV-TNCN issued together with Circular No. 92/2015/TT-BTC).
– Regarding the exchange rate from foreign currency to Vietnam dong: Follow the guidelines in Article 13 of Circular No. 92/2015/TT-BCT dated June 15, 2015 of the Ministry of Finance.
2. For organizations:
In case foreign Companies transfer its capital contribution in the Company in Vietnam to foreign organizations not present in Vietnam, this activity is subject to declaration and payment of corporate income tax from the capital transfer in Vietnam.
The Company in Vietnam is responsible for declaring and paying on behalf of the payable corporate income tax on the income arising from the capital transfer transaction of the foreign Company according to the guidelines in Article 14 of Circular No. 78/2014/TT-BTC dated June 18, 2014; Article 8 of Circular No. 96/2015/TT-BTC dated June 22, 2015 and Article 16 of Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance.
– Regarding exchange rate from foreign currency to Vietnam dong: Follow the guidelines in Clause 4, Article 2 of Circular No. 26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance.