Simple, Detailed, and Easy-to-Follow Guide on Calculating Personal Income Tax

Knowing how to calculate personal income tax will help you understand the law and fulfill your civic duty better. This is a mandatory tax for every citizen, but the amount varies depending on your wages and salary. Let's delve into the details in the next section of the article!

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The topic of personal income tax calculation is currently of interest to many people. This is one of the important compulsory taxes for citizens. Let’s explore the regulations, calculation methods, and individuals subject to personal income tax through today’s article by FPT Shop.

What is personal income tax?

Personal income tax is the amount deducted from the income generated by individuals from salaries and other income sources, which is then paid to the Tax Department and subsequently deposited into the state budget. Personal income tax for each individual is subject to the applicable deduction policy. Currently, personal income tax is not applicable to individuals with low income below the prescribed level.

In the case that a worker is liable to pay personal income tax but has dependents, the tax will also be reduced according to legal provisions. It can be seen that the higher the income, the higher the tax amount they have to pay.

Personal income tax is the amount deducted from salaries and other income sources for the Tax Department

Individuals subject to personal income tax

To determine the individuals subject to personal income tax and the tax rates, the current regulations in Vietnam are based on the following legal grounds:

  • The Personal Income Tax Law issued in 2007.
  • The amended and supplemented Personal Income Tax Law in 2012.
  • Circular 111/2013/TT – BTC.
  • Resolution No. 954/2020/UBTVQH14.

Based on Article 2 of the amended 2012 Personal Income Tax Law, the individuals subject to personal income tax are divided into the following two groups:

Resident individuals

These are individuals who have a place of residence or regular rental in Vietnam according to the provisions of the law. In which the lease term is from 183 days or more per year for tax calculation or individuals with regular fixed residence, present in Vietnam for 183 days or more in the solar year or continuously for 12 months from the first day of arrival in Vietnam. Additionally, both the arrival and departure days are counted as one day.

There are two cases where personal income tax is applicable to resident individuals:

  • Individuals who have signed labor contracts for 3 months or more.
  • Individuals who have signed labor contracts for less than 3 months or have no labor contract.
Resident individuals are those who have a place of residence or regular rental in Vietnam

How much income requires paying taxes?

  • If a resident individual has no dependents, then when the total income from salary, wages exceeds 11 million VND/month, personal income tax must be paid.
  • In the case of having one dependent, the income of that person must be above 15.4 million VND/month to start paying taxes.

In which the total income mentioned above is the income from salary or wages, but deducted the following amounts:

  • Insurance contributions, voluntary retirement fund contributions, charity contributions, social support activities, or humanitarian activities.
  • Income that is exempt from personal income tax.
  • Income not subject to personal income tax includes allowances, subsidies, or meal allowances, etc.

Non-resident individuals

Individuals who do not meet the full conditions of resident individuals mentioned above are determined as non-resident individuals. These individuals are usually foreigners working in Vietnam.

How much income requires paying taxes?

  • According to the current regulations, non-resident individuals are not entitled to dependents’ deductions. Therefore, if taxable income exists, personal income tax must be paid in full (taxable income > 0 means tax must be paid).
  • It can also be understood simply that if a non-resident individual has income from salary or wages, personal income tax must be paid at a tax rate of 20% on the taxable income. In cases of contributions for charity, humanitarian, educational activities, insurance contributions, or voluntary retirement fund contributions according to regulations, these amounts will be deducted.
Non-resident individuals are usually foreigners working in Vietnam

Simple instructions for personal income tax calculation

There are many different methods to calculate personal income tax. In the past, we often use existing formulas and apply corresponding coefficients to obtain the results. However, nowadays, with the support of smart applications, you can use a simple and quick method to calculate personal income tax through the eTax Mobile app. You just need to enter the corresponding data on the eTax Mobile app to get the result.

This is an application that provides support services for individuals filing personal income tax. The application is installed on mobile devices phones and implemented by the tax sector according to Decision No. 1874/QD-BTC on the action plan of the Ministry of Finance to implement Decision No. 749/QD-TTg issued on June 3, 2020 by the Prime Minister approving the National Digital Transformation Program to 2025 and vision to 2030.

Please follow these steps to calculate personal income tax:

Step 1: First, you need to download the eTax Mobile app to your phone. Depending on the operating system, you can choose one of the two links below to download:

Download the eTax Mobile app to your phone to calculate personal income tax

Step 2: Open the eTax Mobile app that you just installed. Then, you don’t need to log in like other apps. Proceed to select the Utilities section at the bottom and then choose the Tax calculator section.

Step 3: Enter your Total personal income per month. Then enter the Number of dependents. Finally, click on Calculate personal income tax.

Enter the corresponding salary and wage information for the app to calculate personal income tax for you

Dependents are individuals that the taxpayer is responsible for nurturing, caring for, and providing monthly support. This includes: Minors (under 18 years old); Disabled children who are incapable of working; Individuals with no income or with income that does not exceed the prescribed limit.

Conclusion

So in this article, FPT Shop has shared with you the latest, comprehensive, and simplified method of calculating personal income tax according to the provisions of the current law. Remember to save it for future reference. And don’t forget to continue following FPT Shop to read interesting and helpful information. If you find the article useful, you can share it with others.

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Frequently asked questions

Calculating your personal income tax can be done in a few simple steps. First, determine your taxable income by subtracting any deductions and allowances from your total income. Next, apply the appropriate tax rates to your taxable income, taking into account any tax brackets and thresholds. Finally, consider any additional taxes or deductions, such as Medicare and Social Security taxes, to arrive at your total tax liability.

Tax brackets and thresholds vary depending on your filing status and income level. For example, in the US, the tax brackets for single filers in 2023 are: 10% for income up to $9,950, 12% for income between $9,951 and $40,525, and so on. It’s important to refer to the latest tax brackets and thresholds for your specific country and filing status.

There are several deductions and allowances that you may be eligible for, which can reduce your taxable income. Common deductions include student loan interest, retirement contributions, and medical expenses. Allowances can include personal exemptions, dependent exemptions, and standard or itemized deductions. It’s important to review the specific deductions and allowances available in your country of residence.

You can file your taxes by completing and submitting the appropriate tax forms to the relevant tax authority. This may be done manually or electronically, depending on your preference and the options provided by the tax authority. It’s important to meet the filing deadlines to avoid late fees and penalties.

If you have multiple sources of income, such as wages from a job, income from investments, or self-employment income, you will need to report and calculate taxes for each source separately. Each type of income may have different tax treatments and rates, so it’s important to understand the specifics for each.

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