Public Feedback to Decide Individual Income Tax

At a press briefing on individual income tax, Finance Minister Nguyen Sinh Hung said that the income tax threshold has not yet to be decided to date. However, the amount of income subject to income tax will be the remaining of income after deducting all essential expenditures for household living, studies, medical treatments, insurance, etc. 

Finance Minister Nguyen Sinh Hung.

Mr. Minister, is the current income tax threshold of VND5 million per month realistic?

Mr. Nguyen Sinh Hung: Newly regulated income tax threshold will be lower than that. The threshold of corporate income tax will be also reduced lower than the current 28%. When individual income tax law is applied, it will be lowered.

In the future, will individual income taxes be levied on all earners, not only high income earners?

Individual income taxes should be broad-based and all-inclusive. They will be a certain amount, not much. There will be cases exempted from income taxe after deducting all expenditures.

Does it mean that anyone who has income has to pay taxes?

It is income for calculating taxes. A fixed amount will be deducted based on the living expenses of a person, his or her spouse, children and parents. (At present, such tax calculation has not yet to be applied).

After deducting those expenditures and others such as school tuition, medical treatments, insurance, etc. the remaining amount of income will be taxable. And the minimum tax rate is very low. For example, if the remaining amount of income is VND1 million/month, the tax rate will be 1%-2%. 

In the case that, after subtracting all expenditures, the income gets a minus, earners still have to make the income statement. 
 
How are individual income taxes calculated if a person’s income is very high in one month and low in other months?

The amount of taxable income will be calculated yearly. The total income of one year will be subject to tax if it reaches a certain regulated amount. Regular incomes (like salary) and tax balance will be calculated annually. Only incomes from lottery or inheritance are calculated monthly.

At present, the minimum amount of taxable income is VND60 million/year. But with a new regulation, after deducting all expenditures, the income tax threshold will be lower than that.

Will people who incur individual income taxes have to carry out plenty of complex procedures such as proving that they are married?

People have to make a statement. In principle, a citizen who has incomes must pay income tax. However, income tax rates have to be reasonable. How can people pay income taxes if their income is not sufficient for living? Therefore, income taxes will be calculated on the basis of the minimum living standard.

For instance, the following matters will be taken into acount: subsistence salary, family-keeping expenditures, school tuition and medical treatments. After all the minimum expenditures for an average living standard are estimated, the leftover amount will be subject to income tax. If a person’s income is VND100 million/month, his taxable income will not be the balance from subtracting expenditures according to his living standard but the average living standard of the society.

With the current socio-economic situation, in your opinion, how much is the income tax threshold?

At present, the costs of living have only been calculated until 2009. The Ministry of Finance is considering salary policy. Income tax threshold will be decided based on the public opinions.

Source: VNN – Translated by Yen Chuong

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