Income from the capital transfer is one of the issues that many people are interested in, it is the basis for calculating personal income tax or corporate income tax depending on different circumstances. In this article, let’s join NPLaw to research and clarify the issues of income from capital transfer for individuals.
Pursuant to the regulations of Clause 4, Article 2 of Circular no.111/2013/TT-BTC and Article 4 of Circular no. 25/2018/TT-BTC, income from the capital transfer is personal income received, including:
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Above is the law on the definition of Income from the capital transfer, which is the basis for calculating Income Tax from capital transfer, NPLaw will clearly show this content in the next section.
From the above definition, it can realize that the income from capital transfers is long-term stable income, so this income will be subject to personal income tax.
The basis for calculating tax on income from the transfer of contributed capital is taxable income and tax rate. Inside:
Pursuant to Clause 1, Article 13 of the 2007 Law on Personal Income Tax stipulates: “Taxable income from the transfer of contributed capital is determined by the transfer price minus the purchase price of the transferred capital and reasonable expenses related to the generation of income from capital transfer”.
Taxable Income = Transfer Price - (Purchase Price + Related Expenses)
Transfer price:
Purchase price:
- For the capital contribution to establish an enterprise is the capital value at the time of capital contribution. The value of c- ontributed capital is determined based on accounting books, invoices, and vouchers.
- For additional capital contribution is the value of additional contributed capital at the time of additional capital contribution. The value of additional contributed capital is determined based on the accounting books, invoices, and vouchers.
- For the capital due to acquisition is the value of that capital at the time of purchase. The purchase price is determined based on the contract for the acquisition of contributed capital. In case the contract for the acquisition of contributed capital does not have a payment price or the price paid on the contract does not match the market price, the tax authority has the right to fix the purchase price in accordance with the law on tax administration.
- For the capital from the profit recorded as an increase in capital is the value of the profit recorded as an increase in capital.
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Related expenses shall be deducted when determining that taxable income of capital transfer activities are actual reasonable expenses incurred in connection with the generation of income from capital transfers, with valid invoices and documents as prescribed, specifically as follows:
The personal income tax on income from the capital transfer is applied under the Full Tax Schedule with a tax of 20%.
After calculating personal income tax for capital transfer, conduct to declare PIT from the capital transfer.
Pursuant to Section a.1, Point a, Clause 1, Article 11 of Circular 111/2013 / TT-BTC stipulates the transfer price as follows: “The transfer price is the amount that the individual receives under the capital transfer contract. In case the transfer contract does not stipulate the payment price or the payment price on the contract is not in accordance with the market price, the tax authority has the right to fix the transfer price in accordance with the law on tax administration”.
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It means that the transfer price is fixed by the two parties on the transfer contract, but if the transfer contract does not specify the payment price or the payment price on the contract does not match the market price, the tax authority has the right to fix the transfer price in accordance with the law on tax administration. In fact, there are many cases where the transfer price on the transfer contract is often transferred by the transferor to lower than the market price in order to evade tax obligations with state agencies, this is a violation of the law. Therefore, individuals may not transfer capital at a price lower than the market price.
Pursuant to Section a.1, Point a, Clause 4, Article 16 of Circular no. 156/2013/TT-BTC, the enterprise shall carry out procedures for changing the list of capital contributors in case of capital transfer without proof that the individual transferring capital has fulfilled its tax obligations, the enterprise where the individual transfers capital is responsible for tax declaration, pay taxes on behalf of individuals.
In case the enterprise where the individual transfers capital pays tax instead of the individual, the enterprise shall declare the tax dossier instead of the individual. The declaring enterprise instead writes the phrase “Declaration instead” in the before part of the phrase “Taxpayer or Legal representative of the taxpayer” and the declarant signs, specifying the full name and stamp of the enterprise. On the tax calculation dossier, the tax collection document must still show that the taxpayer is an individual transferring contributed capital (in case it is a capital transfer of a resident individual) or an individual receiving a capital transfer (in case it is a capital transfer of a non-resident individual).
According to the provisions of Section b.1, Point b Clause 4 Article 16 of Circular no.156/2013/TT-BTC, resident individuals having income from the transfer of the contributed capital declare tax according to the following form:
The tax authority shall prepare a Notice of tax payable form No. 12-1/TB-TNCN issued together with this Circular to send to individuals (even if the amount of tax payable does not arise).
According to the provisions of Points dd, d Clause 4 Article 16 of Circular no. 156/2013/TT-BTC:
Individuals declare tax for income from the contributed capital transfer, and declare personal income tax no later than the 10 (tenth) day from the effective date of the capital contribution transfer contract.
In case an enterprise pays taxes on behalf of an individual, the time to submit a tax declaration dossier is at least before the time of carrying out procedures for changing the list of capital contributors in accordance with the provisions of the law.
The tax payment deadline is the deadline stated on the Tax Payment Notice of the tax authority.
Individuals self-declaring, enterprises declare personal income tax instead of individual, shall submit capital transfer tax dossier in case of capital contribution by contributed capital at the tax office directly managing the enterprise with transferred contributed capital.
To better visualize this issue, NPLaw would like to give a popular situation in practice as follows: Ms. X is the Director of Y One Member Limited Liability Company, and Ms. X contributed capital to Company Y of VND 2 billion. Now because Ms. X transfers all her contributed capital in Company Y to Mr. Z with a transfer price of VND 2.5 billion, of which the legal costs for the transfer, the fee, and the budget payment fee are VND 100 million.
Taxable income = Transfer price - (Purchase price + Related expenses), so Ms. X’s taxable income is:
2.5 billion - (2 billion + 100 million) = 400 million
PIT payable by Mr. A from the transfer of contributed capital:
400 million x 20% = 80 million VND
=> Ms. X must pay PIT from the transfer of this contributed capital of VND 80 million.
These are NPLaw’s advice on the issues of income from capital transfers as well as common situations in practice. If you have any questions, please send them to email: legal@nplaw.vn or contact us directly at: 0931 449968.
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