THE NEW REGULATIONS ON PERSONAL INCOME TAX LAW 2021

Create at: 28/12/2021 16:17

ROLE OF PERSONAL INCOME TAX LAW

“The establishment of the Personal Income Tax Law marked remarkable progress and created a turning point in the history of the development of the Vietnamese tax system, in order to ensure fairness in regulating incomes of all classes of people in society, ensuring ensure reasonable encouragement of the population's income, encourage all individuals to work hard, produce and do business, increase income and get rich legitimately. PIT is no longer the responsibility of only high-income earners, but in principle, all income-earning individuals must fulfill tax obligations. The introduction of PIT has adjusted income, narrowing the gap between high-income people and low-income people in society".

According to the Journal of Legislative Research No. 19(227), October 2012.

IMPORTANT CHANGES OF PERSONAL INCOME TAX LAW

The adjustment of the income tax law in the period 2007-2009 when Vietnam experienced the effects of the world economic crisis, left heavy consequences, which manifested itself as the bankruptcy of a series of banks and enterprises, high inflation, public debt crisis, unemployment. This has made people's lives not improve, the ability to pay taxes is also limited. Moreover, the Personal Income Tax Law at that time also had many shortcomings and was difficult to enforce.

And the most recent adjustment and supplement are not other than ensuring the rights of individual employees before the COVID-19 Pandemic,...

NEW REGULATIONS ON PERSONAL INCOME TAX LAW IN 2021

1. Employees are entitled to a PIT payment extension due to the impact of the COVID-19 pandemic.

With the goal of reducing difficulties for taxpayers due to the impact of the Covid-19 pandemic, the Government has issued Decree No. 52/2021/ND-CP.

Clause 3, Article 4 of this Decree clearly states:

⭐ Personal income tax payment extension for the amount of tax payable in 2021 of business households and individuals operating in economic sectors and fields such as Agriculture, forestry, and fisheries; Food production and processing; Warehouse transportation; accommodation and catering services; education and training; health and social assistance activities; real estate business…

⭐ According to the above regulations, business households/individuals need to fully pay the extended tax amount in this Clause by December 31, 2021.

2. New regulations on how to calculate PIT for tenants.

Circular No. 40/2021/TT-BTC of the Ministry of Finance (effective from August 1, 2021) has a number of new regulations on PIT, notably the regulation on how to calculate PIT for tenants.
According to previous regulations, individuals leasing properties with total revenue generated in a calendar year of 100 million VND/year or less are not required to pay PIT.

3. Regulations on cases exempt from paying PIT.

🍀 Facing the impact of the Covid-19 pandemic on employees, the National Assembly Standing Committee proposed a number of tax exemption and reduction solutions, especially personal income tax.

🍀 PIT exemption for income earned from production and business activities in the third and fourth quarters of 2021 at the district level of households & individuals affected by the Covid-19 epidemic in 2021.

🍀 Not applicable to income from business activities of products and services, software, digital entertainment content, games, movies, music, advertising...

Number	Incomes exempt from tax under the personal income tax law 2021
1	Any income from wages or overtime wages compared to office hours.
2	Retirement income.
3	Transfer of land and real estate.
4	Transfer of houses, properties, land use rights.
5	Individuals earning income from land-use rights.
6	Income from real estate in the form of inheritance or gifts.
7	Income of individuals and households.
8	Households or individuals that have income from converting agricultural land into production are allocated by the State.
9	Income from bank interest, insurance, other credit institutions, etc.
10	Income from remittances is exempt from tax.
11	Individuals with scholarships.
12	Compensation from life & non-life insurance, health insurance, workers' accident compensation.
13	Compensation from the State and other compensations.
14	Money received from charity funds, foreign aid sources.
15	Salaries and wages of seafarers, ship owners, and users.

🍀 On June 1, 2021, the Ministry of Finance issued Circular 40/2021/TT-BTC providing guidance on value-added tax, personal income tax, and tax management for business households and individuals. The Circular takes effect from August 1, 2021, with the main contents on:

4. Add many incomes subject to PIT

Compared with the current one, Circular 40/2021 adds the following new taxable incomes:

Content	The personal income tax rate
Income from sales bonuses, promotions, discounts,...	0.5%
Compensation for breach of contract, other compensation	0.5%

5. Add tax calculation method for business households & individuals.

🍁 According to the provisions of Decree 126/2020, business households and individuals will pay tax by the method of monthly or quarterly tax declaration and do not have to finalize tax.

🍁 The latest tax payment method applies according to Circular 40/2021 with the following specific subjects:

With large-scale business households & individuals applying tax declaration method; Business households & individuals, small scale but still choose to apply this method, but choose to pay tax according to the declaration method.
Business households & individuals pay tax on a monthly basis

🍁 Some other cases are selected to declare tax quarterly: Business households & individuals satisfy the conditions to meet the criteria for quarterly tax declaration (Article 9 of Decree 126/2020)

🍁 In addition, individuals or business households do not have to finalize tax if they pay tax according to the declaration method.

🍁 In summary, the following cases arise which are listed as the ones that employees need to pay attention to the most:

🍁 In case of arising, the solution according to Circular 40/2021/TT-BTC.

The case	The solution according to Circular 40/2021/TT-BTC
Individuals with rental properties with a revenue of 100 million VND/year or less.	Individuals do not have to pay VAT and do not have to pay PIT which is the total revenue generated in the calendar year of the property lease contracts.
An individual who leases property to an enterprise has signed a contract with the content of the agreement that the lessee will pay tax.	Enterprises are responsible for deducting, declaring, and paying VAT & PIT on behalf of individual
Before paying the property rent in the calendar year, the enterprise has deducted VAT and PIT.	Individuals leasing properties over 100 million VND.
During the year, individuals have revenue from many sources or expect revenue of over 100 million VND/year.	Individuals authorizing businesses to declare and pay on behalf of individuals with contracts of 100 million/year or less.

✨ In conclusion, tax in general and personal income tax, in particular, is an important tool to generate revenue for the state budget, to meet the spending needs of the state apparatus on security, national defense, and economic zones. public administration sector. The amendment of the Law on Personal Income Tax is very urgent in the current period with the risk of long-term economic impact, the COVID-19 epidemic, respond to each development quickly, in order to ensure the rights and interests of taxpayers and create equality and fairness in tax obligations of citizens.

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