In the draft of the Personal Income Tax Law (replacement), the Ministry of Finance plans to revise regulations on calculating personal income tax for capital and stock transfers.

The ministry proposes a 20% tax rate on the taxable income from stock transfers for resident individuals. This taxable income is determined by subtracting the purchase price and related reasonable expenses from the selling price within the annual tax period.

If the purchase price and related transfer expenses cannot be determined, the tax will be 0.1% of the stock's selling price for each transaction.

For capital transfers, the ministry also proposes a 20% tax on taxable income, calculated on a per-transaction basis. If the purchase price and expenses cannot be determined, the seller will be subject to a 2% tax rate.

Stock trading at Rong Viet Securities Joint Stock Company (District 1, TP HCM), in 10/2024. Photo: An Khuong

Stock trading at Rong Viet Securities Joint Stock Company (District 1, TP HCM), in 10/2024. Photo: An Khuong

The current Personal Income Tax Law 04/2007, effective since 2009, stipulates two methods of collecting taxes on stock transfers. If the tax is applied to annual income, individuals temporarily pay 0.1% of the selling price for each transfer. At the end of the year, they will file a final tax return and deduct the temporarily paid tax. If the cost basis and related expenses cannot be determined, they will pay 0.1% of the selling price for each transaction and will not need to file a year-end tax return.

Since 2013, Law 71/2014 has stipulated a unified method for calculating personal income tax on stock transfers at a rate of 0.1% of the transfer price for each transaction. However, many opinions suggest that taxing even in cases of losses is inappropriate. Experts have repeatedly recommended that authorities should determine the method of taxing individual income, where tax is only levied if there is a profit.

The Ministry of Finance states that the revision to the tax calculation method for stock transfers stems from practical implementation, recent trends, and international experience.

According to the ministry, most countries tax income from capital and stock transfers, but the methods vary significantly. Some countries tax a percentage of the transfer price, while others tax the income, or apply different tax policies for listed and unlisted securities.

For example, Indonesia applies a 0.1% withholding tax on revenue from the transfer of listed shares on the stock market. The Philippines levies a 0.6% tax on the transaction value. Japan applies a flat rate of 20.3% to income from the sale of certain securities, such as stocks, bonds, and warrants. China applies a 20% tax on income from the transfer of unlisted securities, while Thailand taxes income from capital like other ordinary income.

Phuong Dung