THE GOVERNMENT

DECREES:

Chapter I

SCOPE OF APPLICATION

Article 1.- According to Article 1 of the Ordinance on Income Tax on High-Income Earners (hereinafter referred to as the Income Tax Ordinance), the income tax payers include:

1. Vietnamese citizens who live at home or travel overseas for working missions or labor and earn income;

2. Individuals who do not bear the Vietnamese nationality but reside in Vietnam for an indefinite time and earn income;

3. Foreigners working in Vietnam, including those who do not live in Vietnam but have their income generated in Vietnam.

Article 2.- Taxable incomes include regular and irregular ones, except for those prescribed in Article 4 of this Decree.

1. Regular incomes include:

a/ Incomes in forms of wage, salary and remuneration;

b/ Assorted allowances;

c/ Income amounts being house rental, power and water charges which are paid by the income earners� employers. Particularly, house rental shall be calculated according to the actually paid amounts but must not exceed 15% of total amount of wage, salary and/or remuneration;

d/ Rewards in cash and in kind from different sources;

e/ Other incomes earned by individuals through their partnership in business societies or membership in enterprises� managing boards;

f/ Incomes earned by individuals from their production, business or service activities, which are not subject to enterprise income tax, such as consultancy service under long-term contracts, job training, teaching, pre-examination drilling, cultural and art performance.

2. Irregular incomes include:

a/ Gifts, donations in kind in all forms sent by overseas organizations and individuals to individuals in Vietnam;

b/ Incomes from technology transfer, including: Transfer of the right to own or right to use industrial property objects; transfer of technologies through the purchase, sale or supply of technical know-hows, technological options, trademarks; provision of support services and technological consultations, transfer of the use or the right to use industrial, trade or scientific equipment, except for cases where they are presented as gifts or donations;

c/ Incomes from technical construction designs, industrial designs, copyright royalty and other services;

d/ Lottery prizes and sale promotion prizes in other forms.

Article 3.- Income tax shall temporarily not be imposed on income amounts being bank deposit interests, savings interests, interests on bills, bonds, promissory notes and/or shares, incomes from securities investment activities, securities purchase-sale spread.

Article 4.- Tax-free incomes are specified as follows:

1. The following allowances are provided for by the Vietnamese State for incomes generated in Vietnam, including:

a/ Night shift allowance;

b/ Noxiousness and hazard allowances applicable to occupations or jobs with noxious and hazardous working conditions;

c/ Responsibility allowance;

d/ Region-based allowance, job attraction allowance, special allowance for a number of remote islands and border regions;

e/ Seniority allowance for the armed forces; security and defense allowance;

f/ Specific allowances for a number of branches and occupations as prescribed by law;

g/ Itinerancy allowance;

h/ Preferential allowance for cadres who had joined the revolution before 1945 and other allowances from the State budget.

2. Other incomes generated in Vietnam:

a/ Working trip allowance;

b/ Food ration expenses for a number of special branches and occupations according to the State-prescribed regime;

c/ Social allowances for social policy beneficiaries and other allowances from the State budget;

d/ Insurance indemnities for participants in person and property insurance regimes;

e/ Severance allowance as provided for by the State;

f/ Allowances for those who are transferred to work at production and/or business establishments, including one-time regional transfer allowance;

g/ Monetary rewards for technical modifications, innovations and inventions, international prizes and national prizes organized or recognized by the Vietnamese State;

h/ Monetary rewards accompanying the State-conferred titles, such as Professor, People�s Teacher, Labor Hero, People�s Armed Force Hero;

i/ Social insurance and medical insurance premiums deducted from wages and remuneration of laborers.

3. Incomes of business household owners, which are already subject to enterprise income tax.

4. Regular incomes of foreigners who reside in Vietnam for less than 30 days within 12 consecutive months from the date of their first arrival in Vietnam.

Chapter II

TAX CALCULATION BASES AND TAXATION TABLE

Article 5.- Bases for tax calculation are the taxable incomes and the tax rates.

Article 6.- Taxable regular income is the total amount of incomes earned by each individual defined in Clause 1, Article 2 of this Decree, calculated on a monthly average in a year, more concretely:

1. For Vietnamese citizens working at home, or working or laboring abroad and other individuals permanently reside in Vietnam, the total income earned in a year shall be divided by 12 months (calendar year). In case of Vietnamese citizens who work both at home and abroad, their taxable income shall be the total amount of incomes generated at home and abroad.

2. For foreigners:

a/ If they reside in Vietnam for 183 days or more, the total income generated inside and outside Vietnam shall be divided by 12 months. In cases where the declared monthly average income generated abroad is lower than that in Vietnam and this cannot be proved, the monthly average income in Vietnam shall be used to calculate the income generated during the period they stay abroad. The conventional tax calculation month shall include 30 days;

b/ If they stay in Vietnam for between 30 and 182 days, the taxable income shall be the total income generated in Vietnam, regardless of the places where they receive their income;

c/ The residence duration of foreigners in Vietnam shall be calculated to be 12 consecutive months for the first tax calculation year, and for the subsequent years, it shall be calculated according to calendar years with each arrival day and each departure day shall be counted as one full day.

Article 7.- Tax rates for regular incomes:

1. Vietnamese citizens at home and other individuals permanently residing in Vietnam, who are subject to the partially progressive taxation table specified in Clause 1, Article 10 of the Income Tax Ordinance and still have a remaining income of over VND 15,000,000/month after paying income tax according to such taxation table, shall have to pay a surtax of 30% of the amount exceeding VND 15,000,000.

2. For Vietnamese citizens, who earn in a tax calculation year incomes both at home and abroad, the income amount generated at home shall be subject to the taxation table specified in Clause 1, Article 10 of the Income Tax Ordinance, while the income amount generated abroad shall be subject to the taxation table specified in Clause 2, Article 10 of the Income Tax Ordinance. The taxable incomes shall be determined on a basis of the whole year�s income divided by 12 months, for application according to the corresponding taxation table.

3. For foreigners who reside in Vietnam for 183 days or more and Vietnamese citizens working or laboring abroad, the partially progressive taxation table specified in Clause 2, Article 10 of the Income Tax Ordinance shall apply.

4. For foreigners who stay in Vietnam for between 30 and 182 days, a tax rate of 25% of the total income earned in Vietnam shall apply.

Article 8.- Taxable irregular income of each individual shall be calculated for each time of income generation, specifically:

1. Gifts, donations in kind sent from abroad shall be considered incomes of persons who are named as gift or donation recipients, including cases where recipients are enterprises� owners.

2. For incomes from technology transfer, technical construction designs and industrial designs, the taxable income shall be calculated according to the value of each contract, regardless of number of payment times.

3. For incomes being lottery prizes, sale promotion prizes, the taxable income shall be calculated for each time of prize drawing and reception.

Article 9.- Tax rates for irregular incomes shall be those prescribed in the partially progressive taxation table in Clause 1, Article 12 of the Income Tax Ordinance, except for the following cases:

1. The tax rate of 5% shall apply to incomes from technology transfers valued at more than VND 2,000,000 each time of income generation.

2. The tax rate of 10% shall apply to incomes being lottery prizes or sale promotion prizes valued at more than VND 12,500,000 each time of income generation.

3. The tax rate of 5% shall apply to incomes being gifts, donations in kind sent from abroad and valued at more than VND 2,000,000 each time of income generation.

Article 10.- Income amounts in foreign currencies must be converted into Vietnam dong at the average exchange rates on the inter-bank foreign currency market at the time of income generation for the calculation of taxable incomes. Incomes in kind shall be valued at local market prices at the time of income generation. For gifts and donations in kind sent from abroad, the prices thereof for calculating taxable incomes shall comply with regulations on import goods� tax calculation prices at the time of receipt of such gifts and donations.

Chapter III

TAX DECLARATION, PAYMENT AND FINAL SETTLEMENT

Article 11.- The income tax declaration and payment shall be carried out according to the withholding principle. Organizations and individuals that pay incomes shall be obliged to withhold tax therefrom before paying incomes to tax payers.

Article 12.- The tax payment registration and declaration for regular incomes shall be made for monthly average income in a tax calculation year, which is declared monthly for temporary tax payment according to net incomes.

1. Tax payers shall have to make tax payment registration and declaration with the tax authorities through organizations and/or individuals that pay incomes to them (for case of tax declaration and payment according to the withholding principle) or agencies authorized to collect income tax. In cases where individuals who have taxable incomes, from which the tax has not yet been withheld, they shall have to make tax declaration and payment directly with the tax authorities.

2. Organizations and individuals that pay incomes or agencies authorized to collect income tax (hereinafter referred to as income-paying agencies) shall make the tax declaration and payment according to the provisions of Clause 1, Article 16 of this Decree.

Article 13.- The tax declaration and payment for irregular incomes shall be made for each time of income generation.

Income-paying agencies shall have to withhold tax before paying incomes (including incomes of individuals in foreign countries who transfer technology into Vietnam). Individuals who carry gifts or donations for others shall have to declare and pay income tax on behalf of the gift or donation recipients.

Article 14.- Tax payers shall have to fully declare taxable incomes; pay income tax in full and on time; and make annual settlement of tax on their regular incomes according to the Finance Ministry�s regulations.

Article 15.- The Finance Ministry shall organize the income tax collection, and direct, guide and inspect organizations in performing the income tax collection by method of withholding income tax before making the income payment.

The income-paying agencies that make tax withholding shall be entitled to a remuneration of 0.5% of collected tax amount for regular incomes, and 1% of collected tax amount for irregular incomes before remitting tax into the State budget.

Article 16.- The income-paying agencies shall have to:

1. Register, declare, withhold and remit income tax in full and on time into the State budget; make integrated written tax declaration and calculation and submit to the tax authorities the list of income tax payers.

2. Guide tax payers in receiving declaration forms, making income tax declaration, payment and final settlement with the tax authorities.

3. Keep books and records related to the income tax declaration, calculation and payment, observe the periodical reporting regime and report on tax final settlement with the tax authorities.

4. Calculate tax, withhold tax and calculate remuneration amounts they are entitled to and remit tax into the State budget.

5. Give receipts to tax payers, manage, use and settle tax receipts according to the prescribed regime.

Article 17.- Organizations that manage and/or pay incomes to foreigners shall have to guide and complete the procedures for income tax payment before carrying out exit procedures for foreigners.

Foreigners being income tax payers shall have to declare the taxable income and the number of days they stay in Vietnam to the income-paying agencies or the tax authorities, so that the latter can make income tax final settlement, and fully pay income tax before leaving Vietnam.

Chapter IV

TAX EXEMPTION OR REDUCTION

Article 18.- Income tax exemption or reduction shall be considered for:

1. Cases where tax payers suffer damage or loss caused to their property, incomes and lives by natural calamities, enemy sabotage or accidents. The level of tax exemption or reduction to be considered shall correspond the damage or loss degree but must not exceed the payable tax amount.

2. In special cases where the tax payment by individuals affects the national economic, political and/or social interests, the Finance Ministry shall propose the Prime Minister to decide on tax exemption or reduction for each specific case.

The Finance Ministry shall prescribe the procedures for income tax exemption or reduction provided for in this Article.

Chapter V

IMPLEMENTATION PROVISIONS

Article 19.- Acts of violating the provisions of the income tax legislation shall be handled according to the provisions of Articles 21, 22, 23 and 24 of the Income Tax Ordinance.

Persons who have merits in detecting acts of violating the provisions of the income tax legislation or help the tax authorities collect tax arrears shall be entitled to a reward of up to 5% of the collected tax arrears actually remitted into the State budget according to the Finance Ministry�s regulations.

Article 20.- In cases where an international treaty which Vietnam has signed or acceded to contains provisions on income tax payment different from this Decree, the provisions of such treaty shall apply.

Article 21.- This Decree takes effect as from July 1, 2001 and replaces the Government�s Decree No.05/CP of January 20, 1995, Decree No.30/CP of April 5, 1997 and Decree No.170/1999/ND-CP of December 6, 1999.

Article 22.- The Finance Minister shall guide the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People�s Committees of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government
For the Prime Minister
Deputy Prime Minister
NGUYEN TAN DUNG