Requirements and motivation from personal income tax amendment

The amendment of the Personal Income Tax Law is necessary to keep up with actual fluctuations and is expected by the whole society, with the expectation that it will not only contribute to improving the capacity, effectiveness and efficiency of state management of taxes...

According to the Ministry of Finance , the draft Law on Personal Income Tax (amended) is expected to amend and supplement 30/35 articles of the current Law on Personal Income Tax.

Accordingly, focus on amending, adjusting and perfecting the contents related to personal income taxable income and tax calculation for each type of taxable income; amounts exempted from personal income tax; and personal income tax calculation for business individuals.

The draft also mentions the taxable revenue for the income of business households and individuals; tax rates for some income from the provision of software products and services; digital information content products and services on entertainment, video games, digital movies, digital photos, digital music, digital advertising, etc.

The most notable points are the deduction level when calculating personal income tax; reduction in the number of progressive tax rates applied to resident individuals with income from salaries and wages; tax calculation period, tax deduction, time to determine taxable income; responsibilities of organizations and individuals paying income and responsibilities of taxpayers.

The proposed personal income tax rate is reduced to 5 levels instead of 7 levels. Photo: Ngoc Ngan

At the same time, the draft adds regulations on other income groups subject to personal income tax; on tax exemption and reduction of personal income tax and on other specific deductions.

In addition, the Government and the Ministry of Finance are given additional authority to adjust the family deduction level, the threshold of business revenue not subject to personal income tax; the scope of determining deductible charitable and humanitarian contributions, other specific deductions; the low income level to determine dependents eligible for family deduction; and the level of temporary personal income tax deduction for individuals' irregular income.

Deputy Minister of Finance Cao Anh Tuan said that the adjustment of personal income tax will follow a 5-year roadmap. In the immediate future, the key task is to complete the database on income and taxpayers as a basis to help build tax policies more accurately and fairly.

The Ministry of Finance will continue to review and propose amendments to the policy on income from real estate transfers in a more realistic, transparent and fair manner, ensuring the nature of revenue from the difference as originally targeted, stabilizing the market and in line with international practices.

The calculation of personal income tax from securities transfer at a tax rate of 0.1% on the transfer price, collected on each transaction, aims to simplify procedures and facilitate individual investors, but is not suitable for long-term investors or those with fluctuating income, especially when losses arise, but tax refunds are not granted if not settled. Therefore, the Ministry of Finance is studying a plan to allow individuals to choose to settle at the end of the year to accurately reflect actual income, ensuring fairness.

In case of dividend payment in shares, personal income tax does not arise at the time of payment, but will be calculated at a rate of 0.1% on the transfer price when the individual transfers those shares.

In particular, the Ministry of Finance is calculating options to increase the family deduction level, and at the same time, adjusting the family deduction level calculated according to the national average to benefit people in poor provinces and remote areas, ensuring fairness for taxpayers and avoiding sudden impacts on budget revenue. Individuals who create digital content and social networks are allowed to deduct reasonable expenses of up to 4 million VND/month before calculating taxes to accurately reflect actual expenses incurred.

The most public-interested content is the proposal of the Ministry of Finance to reduce the number of levels in the personal income tax table to 5 levels instead of 7 levels as currently regulated, and the highest tax rate is still 35%....

Specifically, according to the draft, the Ministry of Finance proposes two options to amend this tax schedule in the direction of reducing the number of levels and widening the income gap.

For both options proposed by the Ministry of Finance, the minimum tax rate of 5% corresponds to a monthly taxable income of VND 10 million (after deducting family circumstances and other taxable expenses). The maximum tax rate is 35%, for taxable income of over VND 80 million (option 1) and VND 100 million or more (option 2). Narrowing the number of tax brackets will help simplify tax management and collection, facilitate declaration and integration with tax reform trends in the world .

For option 1, individuals currently paying taxes from level 2 or higher will receive a tax reduction compared to the current level; and if combined with the adjustment of the family deduction level, individuals with income at level 1 will also receive a tax reduction.

For option 2, basically every individual with taxable income of 50 million VND/month or less will receive a tax reduction equivalent to option 1. For individuals with taxable income of over 50 million VND/month, the reduction will be greater than option 1, so the state budget revenue will decrease more than option 1.

According to the direction of Deputy Prime Minister Ho Duc Phoc at the meeting on the afternoon of July 31 with ministries, branches, associations, securities and real estate enterprises, the amendment of the Personal Income Tax Law project this time must ensure compliance with current legal regulations, fairness, efficiency, suitability, and transparency in practical application...

In particular, the draft Law needs to carefully consider and evaluate the impact when designing the contents related to tax rates and roadmap for calculating personal income tax from real estate and securities transfers (stocks, dividends, bonus shares) and family deduction levels to suit the living standards of the people and each locality, as well as to develop a healthy real estate market and stock market.

It can be said that amending the Personal Income Tax Law (issued in 2007, effective in 2009) after more than 15 years of application is necessary.

This is to keep up with the actual fluctuations and is expected by the whole society, with the expectation of not only contributing to improving the capacity, effectiveness and efficiency of state tax management, but also realizing the policy of easing people's burden, creating new momentum for the emulation movement to get rich, stimulating both production and consumption, both supply and demand, contributing to reaching the goal of double-digit GDP growth in the new era in our country...

Source: https://hanoimoi.vn/yeu-cau-va-dong-luc-tu-sua-thue-thu-nhap-ca-nhan-711532.html