Implementing the application of personal income tax law in Vietnam

Employers can also deduct Canada Pension Plan/Quebec Pension Plan (CPP/QPP), Employment Insurance (EI), and Provincial/Provincial Parental Insurance (PPIP) costs from employees' gross pay. Employers then send these deductions to the tax authorities.

People who pay too much tax or have too much deducted from their income will receive a refund from the CRA based on their annual tax return.

In general, the personal income tax return for a particular year must be filed with the CRA on or before April 30 of the following year.

1.2. Basic tax calculation.

Individual income taxpayers must report their total income for the year. Deductions are allowed in determining net income, such as deductions for Registered Retirement Savings Plans, union contributions, child care expenses, and business investment losses. Net income is used to calculate social assistance payments when assessing income from federal and provincial/territorial governments. Additional deductions are allowed in determining taxable income, such as capital losses, split capital gains included in income, and special deductions for residents of northern Canada. These deductions allow income to be kept separate from taxes.

The tax due before the deferral period is determined based on four tax brackets and rates. Non-refundable tax credits are then applied against the tax due before the deferral period for various items such as base salary, Canada/Quebec Pension Plan, employment insurance, disability, tuition, education and medical expenses. Tax credits are calculated by multiplying the income (e.g. base salary in 2008 was $9,600 CDN) by the lowest tax rate. This mechanism is designed to provide a fair compensation to taxpayers regardless of the tax rate they pay.

The non-refundable tax deduction for charitable donations is taxed at a minimum of $200 CDN for the first donation of the year, and at a maximum tax rate for any amount over $200 CDN. This tax deduction is designed to encourage more charitable giving.

Other forms of tax deductions are given to confirm that taxes have been paid to avoid double taxation of income:

 The dividend tax deduction is used to recognize tax paid at the corporate tax rate on income paid by a Canadian corporation to its shareholders; and

 Foreign tax credit is used to recognize taxes paid to foreign governments on income paid by foreign companies.

1.3. Personal income tax of provinces/regions.

Provinces/territories that have entered into personal income tax collection agreements with the federal government (called “interprovincial agreements”, which include all provinces/territories except Quebec) must apply the federal definition of “taxable income” based on the provincial/territories’ tax definitions. This means that provinces/territories are not allowed to take or ignore federal deductions when calculating taxable income based on the provincial/territories’ tax definitions.

Provincial/territorial governments offer both non-refundable and refundable tax credits to taxpayers for fixed expenses. Provinces/territorialities also impose surtaxes and provide tax breaks for high income earners.

The Canada Revenue Agency collects personal income tax based on agreements between provinces/territories and then remits the tax to the agencies. Provincial/territories tax forms are separate from federal tax forms, and taxpayers only need to pay tax once – to the CRA – for

both taxes. Similarly, if a taxpayer is entitled to a tax refund, they will receive a cheque or bank transfer for both the federal and provincial/territorial tax refund. Information on provincial tax rates is available on the Revenue website.

1.4. Quebec

Quebec administers its own provincial personal income tax system and is therefore exempt from defining the definition of taxable income. However, in order to maintain taxpayer convenience, Quebec will be comparable in many respects in applying the definitions of the federal tax system.

1.5. Individual federal marginal tax rate.

The following federal marginal tax rates are published by the Government of Canada on the Canada Revenue Agency website. Provincial income tax is not included (lowest 10% in Alberta; higher in other provinces).

Canada's federal taxable income marginal tax rate

2009

(estimated)

$0 - $38,832

$38,832-

$77,664

$77,664 -

$126,264

Higher

$126,264

15%

22%

26%

29%

2008

$0 -

$9,600

$9,601 -

$37,885

$37,886 -

$75,769

$75,770 -

$123,184

Higher

$123,184

15%

22%

26%

29%

2007

$0 -

$9,600

$9,600 -

$37,178

$37,178 -

$74,357

$74,357 -

$120,887

higher

$120,887

15%

22%

26%

29%

Maybe you are interested!

2006

$0 - $8,839	$8,839 - $36,378	$36,378 - $72,756	$72,756 - $118,285	higher $118,285
0%	15.25%	22%	26%	29%
2005	$0 - $8,648	$8,648 - $35,595	$35,595 - $71,190	$71,190 - $115,739	higher $115,739
2005	0%	15%	22%	26%	29%
2004	$0 - $8,012	$8,012 - $35,000	$35,000 - $70,000	$70,000 - $113,804	higher $113,804
2004	0%	16%	22%	26%	29%
2003	$0 - $7,756	$7,756 - $32,183	$32,183 - $64,368	$64,368 - $104,648	higher $104,648
2003	0%	16%	22%	26%	29%
2002	$0 - $7,634	$7,634 - $31,677	$31,677 - $63,354	$63,354 - $103,000	higher $103,000
2002	0%	16%	22%	26%	29%
2001	$0 - $7,412	$7,412 - $30,754	$30,754 - $61,509	$61,509 - $100,000	higher $100,000
2001	0%	16%	22%	26%	29%
2000	$0 - $7,231	$7,231 - $30,004	$30,004 - $60,009	Higher than $60,009
2000	0%	17%	25%	29%
1999	$0 - $6,794	$6,794 - $29,590	$29,590 - $59,180	Higher than $59,180
1999	0%	17%	26%	29%

Looking at the table, you can see that Canada's federal personal income tax rates have four basic tax rates and the calculation method is also progressive. For example: Your taxable income in 2009 is $150,000. Then the personal income tax according to the Canadian Federal Personal Income Tax Act will be: 15% of the first taxable income of $38,882 plus 22% of the next taxable $38,882 plus 26% of the next taxable $48,600 plus 29% of the income exceeding $126,264:

38,832 x 15% + 38,832 x 22% + 48,600 x 26% + (150,000 – 126,264)

x 29% = 33.8873$

1.6. Income not subject to tax

Some forms of income that are not subject to personal income tax in Canada include:

 Inheritance and inheritance;

 Win the lottery;

 Win prizes in simple entertainment games;

 Strike allowance;

 Compensation paid by the province/region to victims of crimes or motor vehicle accidents * ;

 Retirement benefits;

 Income from international organizations of which Canada is a member, such as the United Nations and its affiliated agencies;

 War disability benefits;

 RCMP benefits or compensation for injury, disability, or death * ;

 Aboriginal income – the first peoples to inhabit Canada, if these communities still exist.

 Capital gains based on revenue at the taxpayer's principal place of residence;

 Provincial child benefit or tax deductions and Quebec family benefits;

 Deduction of goods and services tax or equal sales tax (abbreviated as GST/HST) or Quebec provincial sales tax;

 Canada child tax benefit.

Above are the most basic information about Canadian personal income tax. It can be considered a fairly progressive and modern tax system, commonly applied in developed countries today. And Canadian personal income tax has many differences compared to current Vietnamese personal income tax.

2. China Personal Income Tax.

The Chinese Personal Income Tax Law was promulgated and applied from September 10, 1980, then amended in 1994, 1999, 2005 and 2007. The Chinese Personal Income Tax Law introduced below is the Personal Income Tax Law amended and supplemented in 1999.

2.1. Taxpayers.

Individuals who are residents or non-residents of the People's Republic of China and have taxable income are subject to personal income tax. Residents are required to pay personal income tax on all income earned domestically and abroad. Non-residents are only required to pay personal income tax on income earned in China.

Residents in China include:

 Individuals who have a permanent residence or domicile in China.

 Individuals who do not have a permanent residence or domicile in China but have a stay in China of 1 year or more.

An individual is considered to have resided in China for a period of one year or more if he or she is present in China for 365 days in a calendar year. The determination of the days during which a person resides in China does not include temporary absences. Temporary absences are defined as a single absence from China for a period not exceeding 30 days, or multiple absences with the total absence not exceeding 90 days.

Individuals who are considered to have resided in China for 1 to less than 5 years are only required to pay personal income tax on income earned in China and abroad during the period they are considered residents.

Individuals with permanent residence in China and individuals who have settled in China for 5 years or more must pay personal income tax on all income earned domestically and abroad, regardless of whether such income has been exempted from tax in China.

2.2. Taxable income and tax rates for each type of taxable income.

(1) Income from wages and salaries:

Taxable income under the Personal Income Tax Law of China includes: wages, salaries, hazardous or overseas work allowances, living and transportation allowances, tax refunds and bonuses. Non-taxable income includes employer-paid housing allowances, severance pay, relocation and career change expenses, and local transportation expenses. Meal, laundry and maid expenses are taxable if paid as allowances, otherwise they are not taxable if supported by supporting documents.

Deductible expenses : Each month, each individual is allowed to deduct 800 RMB (Chinese Yuan) from net taxable income.

For taxpayers without a place of residence in China who receive income from wages and salaries in China and taxpayers with a place of residence in China who receive income from wages and salaries abroad, when calculating the amount of taxable income from wages and salaries, in addition to the monthly deduction of 800 RMB, an additional deduction of 3,200 RMB is allowed. Thus, China applies a common tax schedule, and foreigners are allowed to deduct an additional 3,200 RMB at the starting level.

For non-resident workers and those who practice both domestically and in China, taxable income is determined in proportion to the income generated in China if approved by the local tax authorities. For example, if a person works 50% of the time in China, 50% of his/her salary is subject to tax.

PIT in China. However, to apply the above calculation, the person must have supporting documents.

Table 1 – 9-level progressive tax rate schedule

Number of levels

Monthly taxable income (RMB)	Tax rate (%)
1	Part not exceeding 500 RMB	5
2	Excess portion 500 to 2,000 RMB	10
3	Excess portion 2,000 to 5,000 RMB	15
4	Excess portion 5,000 to 20,000 RMB	20
5	Excess portion 20,000 to 40,000 RMB	25
6	Excess portion 40,000 to 60,000 RMB	30
7	Excess portion 60,000 to 80,000 RMB	35
8	Excess portion 80,000 to 100,000 RMB	40
9	Part exceeding 100,000 RMB	45

(Source: China Personal Income Tax Law 1999)

(2) Income from production and business of individual industrial and commercial households:

Taxable income of individual industrial and commercial households in the year is the total income from production and business in the year minus the payment price of expenses and losses related to taxable income. Based on the 5-level progressive tax table to calculate the amount of tax payable, the tax table is as follows:

Implementing the application of personal income tax law in Vietnam - 15

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