Starting from the 2020 tax period, employees received good news about an “increase in the personal exemption amount.” To understand the latest exemption amount, how it applies, and the procedures for claiming personal exemptions for dependents, read on!
1. Latest Personal Exemption Amount
As per Clause 1 of Resolution No. 954/2020/UBTVQH14, the personal exemption amount was adjusted from July 1, 2021, as detailed below:
For taxpayers: VND 11 million/month, or VND 132 million/year (up from VND 9 million/month or VND 108 million/year).
Latest Personal Exemption Amount
For dependents: VND 4.4 million/month/person (increased from VND 3.6 million/month/person).
This resolution came into effect on July 1, 2020, with the new exemption amount applicable from the 2020 tax settlement.
2. Who are Dependents?
According to Point d, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC, dependents include the following:
Children
This covers biological children, legally adopted children, children born out of wedlock, and stepchildren who meet one of the following criteria:
– Under 18 years old (calculated by full months).
– 18 years old and above with disabilities and no ability to work.
– Currently enrolled in a university, college, vocational school, or apprenticeship program in Vietnam or abroad, including those aged 18 and above studying at the high school level (including the period awaiting university entrance exam results from June to September of grade 12) with no income or an average monthly income of no more than VND 1 million from all sources during the year.
Spouse of the taxpayer
If the spouse is of working age, they must have a disability, no ability to work, and either no income or an average monthly income not exceeding VND 1 million during the year.
If the spouse is beyond working age, they must have no income or an average monthly income of no more than VND 1 million during the year.
Note: Average monthly income during the year refers to the total income from all sources.
Biological parents, parents-in-law, stepparents, and adoptive parents
If they are of working age, they must have a disability and no ability to work, with no income or an average monthly income of no more than VND 1 million.
If they are beyond working age, they must have no income or an average monthly income not exceeding VND 1 million during the year.
Dependents for Personal Exemption
Other individuals
Other individuals can be:
– Siblings (brothers and sisters).
– Grandparents, grandparents-in-law, aunts, uncles, and cousins.
– Grandchildren, including children of brothers and sisters.
– Other individuals with a legal obligation to support, as stipulated by law.
– For individuals of working age: They must have a disability and no ability to work, with no income or an average monthly income of no more than VND 1 million from all sources during the year.
– For individuals beyond working age: They must have no income or an average monthly income not exceeding VND 1 million during the year from all sources.
4. Registration Procedures for Dependents
Registration Procedures for Dependents
According to Clause 10, Article 7 of Circular No. 105/2020/TT-BTC (effective from January 17, 2021), there are two methods for the initial tax registration of dependents:
Method 1: Individual Directly Registers Tax for Dependents
Tax registration dossier includes:
– Tax registration form as per Form No. 20-DK-TH-TCT.
– Dependent’s documents: A copy of the identity card or valid citizen identification card for dependents aged 14 and above with Vietnamese nationality; a copy of the birth certificate or valid passport for those under 14 with Vietnamese nationality; a copy of the passport for dependents with foreign nationality or overseas Vietnamese.
Place of dossier submission:
– For individuals with income from salaries and wages paid by international organizations, embassies, or consulates: Submit the dossier to the Tax Department of their workplace.
– For individuals with income from salaries and wages paid by organizations or individuals from abroad: Submit to the Tax Department where the work is performed in Vietnam.
– Other cases: Submit to the Tax Branch or Tax Branch Office of the individual’s residence (permanent or temporary).
Method 2: Individual Authorizes the Income-Paying Organization
Tax registration dossier:
– Authorization document.
– Dependent’s documents: A copy of the identity card or valid citizen identification card for dependents aged 14 and above with Vietnamese nationality; a copy of the birth certificate or valid passport for those under 14 with Vietnamese nationality; a copy of the passport for dependents with foreign nationality or overseas Vietnamese.
After receiving the tax registration dossier, the income-paying organization will compile and send the tax registration form according to Form No. 20-DK-TH-TCT, issued along with Circular No. 105, to the direct tax authority.
Note: If an individual subject to personal income tax submitted a dossier to register dependents for personal exemption before August 12, 2016, but has not registered tax for the dependent, they must submit the above-mentioned tax registration dossier to obtain a tax code for the dependent.
Place of dossier submission:
Submit to the income-paying organization (enterprise, cooperative, etc.) if authorized.
5. Dossier for Proving Dependents
The requirements for the dossier to prove dependents vary depending on the subject. Based on Point g, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC:
Children: biological children, legally adopted children, children born out of wedlock, and stepchildren
The proof dossier includes a copy of the Birth Certificate and a copy of the ID/Citizenship Identification Card (if available).
– For children aged 18 and above with disabilities and no ability to work, add a copy of the Disability Certificate.
– For children currently studying, provide additional documents such as a copy of the Student ID Card or a declaration form with confirmation from the school, or other relevant documents.
– For adopted children, children born out of wedlock, or stepchildren, include documents proving the relationship, such as a copy of the decision to recognize adoption or the decision to recognize paternity or maternity.
Spouse of the taxpayer
Dossier for Personal Exemption
– A copy of the ID/Citizenship Identification Card.
– A copy of the Household Registration Book (proving spousal relationship) or Marriage Certificate.
If the spouse is of working age, provide additional documents proving their inability to work, such as a copy of the Disability Certificate or medical records for incurable diseases (e.g., AIDS, cancer, or chronic kidney disease).
Biological parents, parents-in-law, stepparents, and adoptive parents
– A copy of the ID/Citizenship Identification Card.
– Legal documents to establish the relationship with the taxpayer, such as a copy of the Household Registration Book (if they share the same book), birth certificate, or decision recognizing paternity or maternity by a competent state agency.
If they are of working age, in addition to the above, provide documents proving their disability and inability to work, such as:
– A copy of the Disability Certificate.
– A copy of the medical record for incurable diseases (e.g., AIDS, cancer, or chronic kidney disease).
Other individuals
– A copy of the ID/Citizenship Identification Card or Birth Certificate.
– Legal documents to establish the obligation to support according to the law, such as:
+ A copy of the documents confirming the legal obligation to support.
+ A copy of the Household Registration Book (if they share the same book).
+ A copy of the Temporary Residence Registration of the dependent (if they don’t share the same book).
+ A self-declaration form from the taxpayer, as per the model issued with the tax management guidelines, with confirmation from the People’s Committee of their commune, ward, or town, certifying that the dependent lives with the taxpayer.
+ A self-declaration form from the taxpayer, as per the model issued with the tax management guidelines, with confirmation from the commune, ward, or town where the dependent resides, certifying that the dependent currently resides in the locality and has no one else to support them (if they don’t live together).
If the dependent is of working age, provide additional documents proving their inability to work, such as:
+ A copy of the Disability Certificate.
+ A copy of the medical record for incurable diseases (e.g., AIDS, cancer, or chronic kidney disease).
Note that the personal exemption is an amount deducted from the taxable income before calculating the tax on income from salaries and wages of individual taxpayers who are residents.
6. Principles of Personal Exemption
Principles of Personal Exemption
Point c, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC stipulates the principles of personal exemption as follows:
Personal Exemption for the Taxpayer
If a taxpayer has multiple sources of income from salaries, wages, and business activities, they can choose to apply the personal exemption for themselves at one place at a time (calculated by full months).
– For foreign individuals who are residents in Vietnam, the personal exemption is calculated from January or the month of arrival in Vietnam if they first come during the tax year. It ends in the month of the termination of the labor contract and departure from Vietnam within the same tax year (calculated by full months).
– If the taxpayer has not applied the personal exemption for themselves or has not applied it for the full 12 months during the tax year, they are entitled to the full 12-month exemption when finalizing their taxes as per regulations.
Personal Exemption for Dependents
– Taxpayers are eligible for the personal exemption for dependents if they have registered for tax and have been assigned a tax code.
– When the taxpayer registers for a personal exemption for dependents, the tax authority assigns a tax code to the dependent, and the exemption is temporarily calculated for the year from the registration date.
– If the taxpayer has not applied the personal exemption for dependents during the tax year, they are entitled to the exemption from the month in which the obligation to support arises when finalizing taxes and registering for the personal exemption for dependents.
For other dependents, the deadline for registering for the personal exemption is December 31 of the tax year. After this date, the personal exemption will not be calculated for that tax year.
– Each dependent is entitled to the personal exemption for only one taxpayer per tax year. If multiple taxpayers have the same dependent, they must agree to register the personal exemption for just one taxpayer.
Hopefully, this information has been helpful. Best wishes for completing the procedures successfully.
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