Personal Income Tax (PIT) is one of the key financial obligations that both startups and employees need to understand thoroughly to comply with legal regulations. This obligation is stipulated under the Law on Personal Income Tax – No. 03/VBHN-VPQH dated September 16, 2024.

For small businesses and startups, understanding the legal provisions and methods for calculating PIT not only ensures transparency in operations but also fosters trust from employees. This article focuses solely on the personal income tax of employees within companies, excluding other forms of individual income.

Taxable Income According to Article 3 of the PIT Law

Article 3 of the PIT Law specifies the following taxable income, excluding incomes exempted under Article 4 of this Law:

1. Income from business activities, including:
   • Income from the production and trading of goods and services.
   • Income from independent professional activities of individuals with licenses or certificates as required by law.
   • Business income excludes income from individuals with an annual revenue of 100 million VND or less.
2. Income from salaries and wages, including:
   • Salaries, wages, and other income of similar nature.
   • Allowances and subsidies, excluding:
     • Allowances for people with meritorious services, national defense, and security.
     • Allowances for hazardous or dangerous working conditions.
     • Social welfare subsidies such as one-time maternity, work-related injury, and retirement benefits, among others.
3. Income from investment capital, including:
   • Loan interest.
   • Dividends from shares.
   • Income from other forms of capital investment, excluding government bond interest.
4. Income from capital transfer, including:
   • Income from transferring capital in economic organizations.
   • Income from transferring securities.
   • Other forms of capital transfer.
5. Income from real estate transfer, including:
   • Transfer of land use rights and attached properties.
   • Transfer of housing ownership rights.
   • Other forms of real estate transfers.
6. Income from winnings, including:
   • Lottery prizes.
   • Promotional winnings.
   • Winnings from betting and gaming.
7. Income from royalties, including:
   • Transfer or usage rights for intellectual property.
   • Transfer of technological knowledge.
8. Income from franchise activities.
9. Income from inheritance, including securities, business capital, real estate, or other assets requiring ownership registration.
10. Income from gifts, including securities, business capital, real estate, or other assets requiring ownership registration.

In summary, there are 10 types of taxable income under the PIT Law.

Progressive Personal Income Tax Explained

The progressive PIT rate applies to resident individuals and increases based on income levels. Higher income brackets are subject to higher rates, but tax is calculated only on the portion of income within each bracket.

Legal Basis: Article 22 of the PIT Law outlines the progressive tax rate structure.

Current PIT Brackets (2024)

Legal Basis: Circular No. 111/2013/TT-BTC provides detailed guidance on PIT calculation.

Steps to Calculate PIT

1. Determine Taxable Income: Taxable income = Income from wages and salaries – Deductions.
   • Deductions for personal and family circumstances:
     • Self: 11,000,000 VND/month (per Resolution No. 954/2020/UBTVQH14).
     • Each dependent: 4,400,000 VND/month.
   • Compulsory insurance contributions: PIT, Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI).
2. Determine Taxable Base: Taxable base = Taxable income – Personal and family deductions.
3. Calculate PIT Using the Progressive Rate: PIT = Total tax for each income bracket.

Example of PIT Calculation

An employee earning a monthly gross income of 30,000,000 VND, contributing 10.5% to compulsory insurance, and supporting 1 dependent, will calculate PIT as follows:

1. Taxable Income:
   • Gross income: 30,000,000 VND.
   • Compulsory insurance: 30,000,000×10.5%=3,150,000 VND
   • Personal deduction: 11,000,000 VND.
   • Dependent deduction: 4,400,000 VND.

Taxable Income = 30,000,000−3,150,000−11,000,000−4,400,000=11,450,000 VND

1. Calculate PIT:
   • Bracket 1: 5,000,000×5%=250,000 VND
   • Bracket 2: (10,000,000−5,000,000)×10%=500,000 VND
   • Bracket 3: (11,450,000−10,000,000)×15%=217,500 VND

Total PIT = 250,000+500,000+217,500=967,500 VND

Why Businesses Must Understand PIT

• Legal Compliance: Accurate PIT calculation avoids legal risks.
• Employee Trust: Transparency in salary and tax builds employee confidence.
• Cost Optimization: Proper use of deductions can reduce expenses for both businesses and employees.

Contact Globalink for Expert Assistance

Calculating PIT can be complex, especially for startups. Globalink offers tailored services to help you:

• Understand and comply with PIT regulations.
• Build transparent payroll and tax systems.
• Train staff on financial and tax compliance.

Contact us today for specialized support:

• Hotline: 0908173988
• Email: Tienvu.globalinklaw@gmail.com

Let Globalink help you build a strong legal and financial foundation for your business!