Circular 176-2009-TT-BTC of the Ministry of Finance guiding reduction of personal income tax for individuals working in economic zones, dated 9 September 2009 (Circular 176)
The Ministry of Finance has recently issued Circular 176 which details specific reductions in Personal Income Tax (PIT) for individuals (both Vietnamese and foreigners, and both resident and non-resident) who work directly in economic zones.
A 50% reduction
Under Circular 176, eligible employees are entitled to a 50% reduction in the amount of PIT payable on their salary and wages income. Importantly, the reduction does not extend to all PIT payable by eligible employees, for example any PIT payable on investment or other non-salary income will still be at the full rate, subject to any other relevant exemptions or reductions.
Who is eligible?
In order to be eligible for the reduction, the key nexus is the location of the individual’s work. As such, employees working for an entity whose office is not within an economic zone, may still be eligible for the reduction in PIT if they have been appointed to work within the zone, for example to perform economic contracts signed by the entity with an entity within the zone. Conversely, even if an employer has a business establishment within an economic zone, an employee must also actually work within the area of the economic zone in order to be eligible for the PIT reduction.
Individuals who have been issued with a business registration certificate in an economic zone and who have taxable income from activities of production or business in the zone, are also entitled to a 50% reduction in the PIT on that business income.
Although Circular 176 does not come into full force until late October 2009, it will apply to reduce the amount of PIT payable by eligible individuals with income accrued in economic zones from 1 January 2009.