Distinguish between taxable income and income subject to PIT
Taxable income and income subject to personal income tax (PIT) are two terms that are often confused with each other. Let’s learn about taxable income and income subject to PIT through the following article.
1. What is the difference between taxable income and income subject to PIT?
Taxable income is the basis for determining taxable income, from taxable income applied to the tax table, the amount of tax payable can be calculated.
Of the 10 types of income subject to personal income tax, income from business and income from salaries and wages of resident individuals is subject to the progressive tax table, the remaining 8 types of income are subject to the full tax table.
According to Article 2 of Circular 111/2013/TT-BTC, taxable income includes income from: salaries and wages; business; capital investment; capital transfer; real estate transfer; winnings; copyright; franchise; inheritance; gift. Specifically, to distinguish between taxable income and personal income tax, it is necessary to consider the formulas for determining taxable income.
How to Calculate the Taxable Income
The formulas for determining personal income tax vary depending on whether the taxpayer is a resident or non-resident individual and on the type of taxable income.
1.1 For income from salaries, wages, and business of resident individuals:
Taxable income = Taxable income – Deductions
In which, taxable income is always greater than taxable income, there may be taxable income without taxable income.
1.2 For income from winnings, inheritance, gifts, copyrights, and franchises of both resident and non-resident individuals
Taxable income = Taxable income – VND 10 million/time/contract
In which, taxable income is always greater than or equal to taxable income. There may be taxable income without taxable income.
1.3 For income from salaries, wages, business of non-resident individuals; from capital investment, capital transfer, real estate transfer of both resident and non-resident individuals
Taxable income = Taxable income
Accordingly, taxable income is always equal to taxable income.
2. Formula for calculating personal income tax from income sources
For readers to easily follow and visualize taxable income, taxable income, based on Circular 111/2013/TT-BTC amended and supplemented by Circular 92/2015/TT-BTC, S4B Vietnam has compiled the formulas for calculating personal income tax from taxable income sources below:
2.1 From business, from salary, wages
– For resident individuals signing labor contracts for 03 months or more
Personal income tax payable = (Taxable income – Deductions) x Tax rate
– For resident individuals not signing labor contracts/signing labor contracts for less than 03 months
Personal income tax payable = Total income before payment * Tax rate 10%
– For non-resident individuals
Personal income tax payable = Taxable income * Tax rate 20%
2.2 From capital investment
Personal income tax payable = Taxable income x Tax rate 5%
2.3 From capital transfer
– For income from capital transfer
Personal income tax payable = Transfer price x Tax rate 20%
– For income from securities transfer
Personal income tax payable = Securities transfer price each time x Tax rate 0.1%
2.4 Personal income tax from transfer
Personal income tax payable = Transfer price x Tax rate 2%
- In case of transfer of real estate under joint ownership, tax liability is determined separately for each taxpayer according to the real estate ownership ratio. The basis for determining the ownership ratio is legal documents such as: initial capital contribution agreement, will or court division decision, etc.
- In case there are no legal documents, the tax liability of each taxpayer is determined according to the average ratio.
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2.5 Personal income tax from copyright
Personal income tax payable = Taxable income x 5% tax rate
2.6 Personal income tax from franchising
Personal income tax payable = Taxable income x 5% tax rate
2.7 Personal income tax from winnings
Personal income tax payable = Taxable income x 5% tax rate
2.8 Personal income tax from inheritance and gifts
Personal income tax payable = Taxable income x 10% tax rate
3. When must personal income tax be paid?
Pursuant to Article 7 of Circular 111/2013/TT-BTC, personal income tax for resident individuals with income from salaries and wages is calculated as follows:
Personal income tax payable = Taxable income x Tax rate (1)
In which, taxable income is determined as follows:
Taxable income = Taxable income – Deductions (2)
Next, taxable income is calculated according to the following formula:
Personal income tax = Total income – Tax-exempt income (3)
Based on the above formulas, individuals only have to pay tax when they have taxable income (taxable income > 0).
Above are the basic differences between taxable income and personal income taxable income. If you have any related questions, please contact S4B Vietnam for support and detailed answers.
S4B Vietnam
- Address: Unit 701B-701C, Tower A, Handi Resco, 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam
- Tel: + 84 24 3974 4181
- Email: service@s4b.com.vn
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