Income exempted from personal income tax

An individual who generates taxable income in Vietnam, regardless of the source of the income, is considered a taxpayer under Vietnamese law; however, individuals should note that certain income generated in Vietnam is exempt from the personal income tax.

This article focuses on clarifying income that is exempt from personal income tax (“PIT”) according to Vietnamese law and is classified by PLF into the following groups.

1. Group of income related to real estate:

1.1 Income from the transfer of real estate (including future housing and construction works as per the law on real estate trading) between the following parties:

• Wife and husband;
• Biological parents and children;
• Adoptive parents and adopted children;
• Parents-in-law and daughters-in-law;
• Parents-in-law and sons-in-law;
• Paternal grandparents and grandchildren;
• Maternal grandparents and grandchildren; and
• Siblings.

It is important to note that current regulations do not limit the number of transfers or the value of transfers between the individuals listed above. This regulation is based on respecting and maintaining close family relationships in Vietnamese culture.

1.2 Income from transferring residential housing, land use rights, and related assets (excluding future housing and construction works) in Vietnam for individuals who own only one residential house or land use right.

The condition that the individual “owns only one residential house or one residential land use right in Vietnam” is determined as follows:

• At the time of transfer, the individual has the ownership or use rights to only one residential house or land plot including any attached building components. The certificate of ownership or use rights to the house and land determines the ownership or use rights to residential housing and land. The person transferring the house or land is responsible for declaring and bearing full legal responsibility for the declaration’s accuracy. If the competent authority discovers any false declarations, it will deny the tax exemption, and the individual will face legal penalties.
• Individuals must have owned or used the house or land for at least 183 days before transferring ownership.
• The residential house or land use rights must be transferred in full.

1.3 Income from the value of land use rights granted by the State without charge or with reduced land use fees as prescribed by law.

1.4 Income from inheritance or gifts in the form of real estate (including future housing and construction works as per the law on real estate trading) between the following parties:

• Wife and husband;
• Biological parents and children;
• Adoptive parents and adopted children;
• Parents-in-law and daughters-in-law;
• Parents-in-law and sons-in-law;
• Paternal grandparents and grandchildren;
• Maternal grandparents and grandchildren; and
• Siblings.

2. Group of income related to agriculture, forestry, and fisheries:

2.1 Households and individuals directly engaged in:

• Agricultural production;
• Forestry production;
• Salt production;
• Aquaculture, and
• Fishing activities

earn income.

It provided that the products have remained unprocessed into other products or have only undergone simple processing.

Accordingly, households and individuals directly engaged in the production activities mentioned in this clause must satisfy the following conditions:

• Have legal rights to use land or water surfaces for production and directly participate in agricultural, forestry, salt production, or aquaculture activities. For fishing activities, they must have ownership or use rights to boats, vessels, or fishing equipment and directly engage in fishing activities (excluding fixed nets and prohibited activities); and
• Reside in the locality where the agricultural, forestry, salt production, or aquaculture activities take place, as per the legal regulations on residency. Resident status does not affect fishing activities.

2.2 Income from the conversion of agricultural land by households or individuals, which was allocated by the State for production purposes.

2.3 Income of individuals who own boats, individuals with rights to use boats, and individuals working on boats. Those earn money by providing goods and services that directly support offshore fishing activities.

3. Group of income from wages and salaries:

• The portion of wages and salaries earned from night work or overtime is higher than the wages and salaries earned from daytime work or regular working hours, as prescribed by law.
• Retirement pensions are paid by the Social Insurance Fund under the Law on Social Insurance and monthly retirement pensions. These are received from the voluntary retirement fund. Foreign entities do not tax retirement pensions paid to individuals living and working in Vietnam.
• Income from wages and salaries of Vietnamese crew members received for working on foreign ships or Vietnamese ships engaged in international transportation.

4. Other income groups:

4.1 Income from scholarships, including:

• Scholarships received from the state budget; or
• Scholarships received from domestic and foreign organizations (including living allowances) under the organization’s scholarship support program.

Compensation received from life insurance, non-life insurance, and health insurance. Compensation for work accidents, state compensation, and other compensation as prescribed by law.

4.2 Income received from charitable funds that are permitted or recognized by competent state authorities.

Also, operating for charitable and humanitarian purposes, and not for profit.

4.3 Income received from foreign aid for charitable and humanitarian purposes in the form of government and non-governmental aid.

This is approved by competent state authorities.

4.4 Income from interest on deposits at banks and credit institutions, income from interest on life insurance contracts.

4.5 Income from remittances