The Ministry of Finance has proposed changes to Decree 126, which governs certain aspects of the Law on Tax Administration. The ministry argues that clarifying the timing of tax withholding and declaration for stock dividends and bonuses is crucial to prevent policy exploitation and ensure timely tax payment.
Specifically, the ministry proposes personal income tax be withheld, declared, and paid immediately upon receipt of stock dividends and bonuses, rather than upon their sale. The issuing organization would be responsible for withholding and remitting these taxes on behalf of individuals.
Currently, dividends and profits are distributed in various forms, including cash, stock, or increased capital contributions. Cash dividends are already subject to immediate withholding, declaration, and remittance by the distributing organization, a system the Ministry of Finance considers effective. However, for stock dividends and bonuses, individuals are only liable for taxes upon selling or transferring the shares, not at the time of receipt.
The Ministry of Finance finds this current regulation problematic, as many individuals who receive stock dividends and bonuses do not sell or transfer their shares for extended periods, thus delaying their tax obligations.
"This results in untaxed increases in assets and income for individuals, particularly large or strategic shareholders like board members and supervisory board members," the ministry stated.
The ministry also argues that delaying tax declaration and payment until the point of sale could create a "delayed taxation" situation on income that has already accrued. Furthermore, this practice makes it difficult for tax authorities to monitor, control, and collect personal income tax effectively over time.
Between 2016 and 2024, declared personal income tax from capital investment reached nearly 52,000 billion VND. Of this, tax revenue from stock dividends and bonuses was approximately 1,318 billion VND, representing 2.54%.
Meanwhile, according to the Vietnam Securities Depository, individuals received 34.84 billion shares in dividends and bonuses. If these shares were all sold at par value (10,000 VND) with a 5% tax rate, the estimated personal income tax due would be 17,240 billion VND.
Therefore, the actual declared personal income tax from stock dividends and bonuses represents only 8% of the estimated potential revenue.
The ministry also cited international practices, noting that countries like Thailand and India levy taxes at the time of dividend distribution, with the issuing organization withholding taxes at the prescribed rate. Thailand currently applies a 10% rate, while India levies 10% on income exceeding 5,000 Rupees.
Phuong Dung
