The method of calculating personal income tax for salaried individuals and business individuals has been clearly stipulated in the Law on Personal Income Tax 2007, amended and supplemented in 2012; the Law amending a number of articles of tax laws in 2014 and documents guiding the current Law on Personal Income Tax.

How to calculate personal income tax for salaried individuals

Personal income tax for salaried individuals is calculated based on taxable income and progressive tax rates.

According to current regulations, there are 2 types of income from salaries and wages that are subject to tax, including: irregular income (labor contracts of less than 2 months and seasonal contracts, commissions, discounts, etc.); regular income (salary, bonuses, allowances, etc. for labor contracts of 2 months or more).

For casual income, if the income is over 2 million VND or the total payments in a month are over 2 million VND, the tax is deducted at a rate of 10%. For income under 2 million VND, there is no deduction.

With regular income, according to current regulations, individuals without dependents must pay income tax when their total income from salary and wages is over 11 million VND/month (this income has deducted mandatory insurance contributions according to regulations, subsidies and other contributions such as charity, humanitarian...).

The family deduction for personal income tax payers is 11 million VND. In addition, if there are dependents, the deduction for each dependent is 4.4 million VND/month.

Under current regulations, the progressive tax schedule for salaried employees consists of 7 levels, with tax rates ranging from 5% to 35%.

The progressive tax rates are determined as follows:

Thus, the personal income tax payable for salaried employees is the total tax calculated by each level.

Tax amount calculated for each income level = Taxable income of income level x Corresponding tax rate of that income level

For example: Ms. Nguyen Thi A has an income from salary and wages in August 2024 of 30 million VND with a monthly insurance contribution of 3.15 million VND (in the compulsory social insurance contribution structure, employees will pay 10.5% of their salary as the basis for social insurance contribution). Ms. A is single, does not register for family deductions for dependents and does not have any allowances or subsidies that are exempt.

Ms. A's personal income taxable income is determined as follows:

- Income subject to personal income tax is 30 million VND

- Personal family deduction according to current regulations is 11 million VND

- Monthly insurance payment is 3.15 million VND

Taxable income = Personal income taxable income - Family deductions - Monthly insurance payments = 30 million VND - 11 million VND - 3.15 million VND = 15.85 million VND.

Amount of personal income tax payable = 5 million VND x 5% + 5 million VND x 10% + 5.85 million VND x 15% = 1.6275 (million VND).

How to calculate personal income tax for business individuals

Business individuals pay personal income tax according to the revenue rate for each field and industry of production and business.

In which, revenue is the total amount of sales, processing fees, commissions, and service provision fees arising during the tax period from the production and trading of goods and services. In case the business individual cannot determine the revenue, the competent tax authority shall determine the revenue according to the provisions of the law on tax administration.

Tax rates are determined as follows:

Thus, personal income tax payable for business individuals = taxable revenue x personal income tax rate.

Business people with revenue from production and business activities in the calendar year of less than 100 million VND do not have to pay personal income tax.

For example: Ms. Nguyen Thi B sells shoes, with a personal income tax revenue of 30 million VND in August 2024. Her business sector belongs to the distribution and supply of goods group, so the personal income tax rate is calculated at 0.5%.

The amount of personal income tax that Ms. Bich must pay is calculated as follows:

Amount of personal income tax payable = Revenue subject to personal income tax x Personal income tax rate = 30 million VND x 0.5% = 150,000 (VND).