DEDUCTIONS UNDER THE LATEST RULES FOR PIT calculation

DEDUCTIONS UNDER THE LATEST RULES FOR PIT calculation

Deductions are the amounts deducted from an individual's taxable income before determining taxable income from salaries or wages.

Pursuant to Article 9 of Circular 111/2013 / TT-BTC, Article 15 of Circular 92/2015 / TT-BTC of the Ministry of Finance, Official Letter 801 / TCT-TNCN and Resolution No. 954/2020 / UBTVQH14 on Family deductions, including:

• Family allowances
• Discounts for insurance premiums, Voluntary pension fund
• Discounts for charity, humanitarian and study promotion contributions.

Regulations on each deduction when calculating PIT are as follows:

1. Reduction based on family circumstances

a) Family deduction is the amount deducted from the taxable income before tax calculation for income from salaries and wages of resident taxpayers.

b) The level of personal deductions for themselves and their dependents:

• Before July 1, 2020, the deduction is as follows:

+ For the taxpayer, it is 9 million VND / month (108 million VND / year).

+ For each dependent: 3.6 million / month

• From 1 July 2020 onwards, the deduction rate is as follows:

+ For the taxpayer himself: 11 million VND / month (132 million VND / year)

+ For each dependent: 4.4 million / month.

So according to the new tax law, the family allowances for taxpayers themselves have increased to 2 million dong / month; The family allowances for dependents also increased to 800,000 VND / month compared to the old tax law.

Note: When a taxpayer has paid PIT with the previous family's deduction, it will be recalculated when making PIT finalization at the end of 2020. In addition, the deadline for annual PIT finalization. 2020 has been extended for 1 month which is April 30, 2021.

c) Calculation of personal deductions for themselves and their dependents

c.1) Personal deduction for the taxpayer:

- If the taxpayer has many sources of income from salaries and wages, at a time (calculated according to the full month), the taxpayer chooses to calculate family deduction for himself in one place.

See also: How to calculate personal income tax for individuals working in 2 places

- In case the personal tax year has not yet deducted for himself or reduced for himself for less than 12 months, a full 12 month deduction shall be made when making tax finalization.

- For foreigners being individuals residing in Vietnam, family circumstances reduction for themselves from January or from month to Vietnam in case the individual is present in Vietnam for the first time until the month of contract termination employees and leave Vietnam in the tax year (fully calculated by month).

c.2) The level of family allowances for dependents:

- The taxpayer is entitled to family deduction for dependents if the taxpayer has registered and has been issued with a dependent tax code.

- When a taxpayer registers family deduction for a dependent, he or she will be issued a tax identification number by the tax authority for the dependent and may temporarily calculate family deduction this year from the date of registration.

- In case the taxpayer has not yet calculated family allowances for their dependents in the tax year, the dependent deduction is calculated from the month when the nurturing obligation arises when the taxpayer makes tax finalization and is posted. sign family deductions for dependents.

Particularly for other dependents as guided in Item d.2, Point d, Clause 1, this Article; The time limit for registration of family circumstance-based reduction is December 31 of the tax year. Past that time limit, family deduction may not be granted for that tax year.

• Each dependent is only entitled to a one-time deduction for the tax year
• In cases where many taxpayers have the same nurturing dependents, the taxpayer will negotiate by themselves to apply for family deduction for a taxpayer.

2. The deduction for insurance premiums, voluntary retirement funds

a) Insurance premiums include: social insurance, health insurance, unemployment insurance, and occupational liability insurance for a number of occupations that require compulsory insurance.

b) Voluntary pension contributions, voluntary retirement insurance contributions to the voluntary retirement fund and voluntary pension insurance are deducted from taxable income according to the actual arising but at night no more than one (01) million VND / month for employees participating in voluntary retirement products under the guidance of the Ministry of Finance, including the amount paid by the employer to the employee and also the money paid by the employee (if any), including the case of joining many funds. The basis for determining the deductible income is a photocopy of the payment (or fee payment) receipt issued by the voluntary pension fund or the insurance enterprise.

c) Foreigners being individuals residing in Vietnam, Vietnamese people being resident individuals but working in foreign countries with income from salaries and wages abroad have participated in paying compulsory insurance in accordance with the regulations of the country where the individual resides or works similarly to the provisions of Vietnamese law such as social insurance, health insurance, unemployment insurance, compulsory professional liability insurance and other compulsory insurances (if any), such premiums shall be deducted from taxable income from salaries and wages when calculating personal income tax. Foreigners and Vietnamese individuals paying the above insurance premiums abroad will be temporarily deducted from their income for tax deduction during the year (if any) and calculated according to the official number if individuals make tax finalization according to regulations. If there is no document to temporarily deduct during the year, a lump-sum deduction will be made upon tax finalization.

d) Insurance contributions and contributions to the Voluntary Pension Fund of a year are deducted from the taxable income of that year.

dd) Documents proving that the above deducted insurance is a photocopy of the receipt of the insurance organization or the income paying organization's confirmation of the deductible, paid insurance amount (school income payers to pay instead).
 

3. Deductions for charitable, humanitarian and study promotion contributions

a) Charity, humanitarian and study promotion contributions that are deducted from taxable incomes from the pre-tax salary and wages of taxpayers being resident individuals, including:

a.1) Contribution to organizations and facilities that care for and nurture children in extremely difficult circumstances, the disabled, the elderly without support. Establishment organizations to care and nurture children in difficult circumstances and people with disabilities must be established and operate in accordance with Decree No. 68/2008 / ND-CP dated May 30, 2008 of the Government. Government regulations on conditions and procedures for the establishment, organization, operation and dissolution of social protection institutions; Decree No. 81/2012 / ND-CP dated October 8, 2012 of the Government amending and supplementing Decree 68/2008 / ND-CP dated May 30, 2008 of the Government stipulating conditions and procedures for the establishment, organization, operation and dissolution of social protection establishments and the Government's Decree No. 109/2002 / ND-CP of December 27, 2002 amending and supplementing a number of articles of Decree No. 195 / CP dated December 31, 1994 of the Government detailing and guiding the implementation of a number of articles of the Labor Code regarding working time and rest time. Documents to prove contributions to organizations and facilities that care for and nurture children in extremely difficult circumstances, people with disabilities, and helpless elderly are legal receipts of the organization's legal collection. department.

=> Thus, it is necessary to have 2 conditions that the establishment is recognized under the regulations and legal receipts (receipts or payment orders).

a.2) Contributions to charity funds, humanitarian funds, and study promotion funds established and operated under the Government's Decree No. 30/2012 / ND-CP dated April 12, 2012 organization, operation of social funds, charity funds, activities for charity, humanitarian, study promotion, non-profit purposes and regulations in other documents related to management , using funding sources. Documents proving charitable, humanitarian or study promotion contributions are legal receipts issued by organizations, central or provincial funds.

b) Charity, humanitarian and student encouragement contributions earned in a year shall be deducted from the taxable income of that tax year, if the deduction is not fully deducted, it shall not be deducted from the taxable income of the tax year. next. The maximum deduction level must not exceed the assessable income from salaries and wages of the tax year in which the humanitarian donation or study promotion arises.

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