New Personal Income Tax Policy on Bank Transfers Every Foreigner in Vietnam Must Know

As non-cash transactions become increasingly common, understanding Personal Income Tax (PIT)regulations concerning money received into personal bank accounts is vital for foreigners residing in Vietnam. It is a common misconception that every transfer into a personal account is immediately taxable. The tax authorities base the tax obligation on the nature of the transaction—whether the income is a taxable source—not merely the volume of money in and out of the account.

The General Department of Taxation, specifically the E-commerce Tax Sub-department, has provided guidance outlining 8 categories of income received into personal accounts that are subject to PIT (based on the Law on Personal Income Tax 2007, as amended).

8 Types of Taxable Income Received into Personal Accounts

Foreigners should be particularly aware of the following eight scenarios, as these forms of income, when received into a personal account, are generally subject to Vietnamese PIT if they meet the tax thresholds.

1. The first category is Income from Business Activities and Professional Practices. This includes income from production, business, and licensed professional practices. It is important to note a key exemption: Individuals engaging in business activities with an annual revenue of 100 million VND or less are not subject to PIT or Value Added Tax (VAT) on this income.
2. The second category is Income from Salaries and Wages. This covers all income classified as salaries and wages, but it specifically excludes legally specified allowances and subsidies that are not considered part of the salary or wage structure.
3. The third source of taxable income is Income from Capital Investment. This includes interest from loans, dividends, and other forms of capital investment returns. An important exception here is that income from interest on Government bonds is generally exempt.
4. Following this, the fourth category is Income from Capital Transfer. This involves income from the transfer of capital contributions in economic organizations, transfer of securities, and other forms of capital transfer.
5. The fifth category is Income from Real Estate Transfer. This covers income from the transfer of land use rights, houses, attached assets, and the right to lease land or water surface. It includes all forms of income derived from real estate transfer.
6. The sixth taxable source is Income from Winnings. This includes income from lotteries, promotions, betting, games, and prize-winning competitions, covering all forms of winnings as stipulated by law.
7. The seventh category deals with Income from Royalties. This involves income from the transfer or licensing of intellectual property rights and income from technology transfer.
8. Finally, the eighth category is Income from Commercial Franchising, which refers to income generated from franchising activities.

Important Considerations

These 8 types of income are subject to PIT only if they reach the prescribed taxable level according to current Vietnamese tax regulations. A crucial point is that there is No Double Taxation: If an individual has already fully complied with their tax obligations on a specific source of income, subsequent bank transfers related to the final payment of that already-taxed income will not be taxed again. The core principle is to Focus on the Source: tax is levied on the nature and source of the income (whether it is one of the 8 taxable categories), not simply the transfer of money between accounts. For example, personal transfers between family members or the repayment of a personal loan are typically non-taxable, provided they are not disguised forms of the taxable income listed above.

Foreign residents are strongly advised to consult with a qualified tax professional in Vietnam to ensure full compliance with the law and understand how these regulations specifically apply to their unique financial situation and income sources.

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Source: Vietnam Insider