Vietnam’s Ministry of Finance has proposed a new personal income tax policy, suggesting that individuals who transfer securities or capital will be taxed 20% on their actual profits, calculated annually. This is part of a draft law to replace the current Personal Income Tax Law, now open for public consultation.

According to the proposal, resident individuals transferring capital would pay a 20% tax on taxable income, calculated for each transaction. Taxable income would be determined as the selling price minus the purchase price and related costs incurred in generating that income.

If the purchase price and associated costs cannot be verified, the tax would be calculated as 2% of the selling price per transaction.

For securities transfers, resident individuals would also be taxed at 20% of their actual profits during the tax year. The taxable amount would be the sale price minus the cost basis and eligible expenses. However, if the purchase price and costs cannot be identified, a flat tax of 0.1% on the sale value would apply per transaction.

Under the existing Personal Income Tax Law (Law No. 04/2007, effective since January 1, 2009), taxpayers can choose between two methods: a 20% tax on annual net income or a 0.1% flat tax on the sale price per transaction if cost basis documents are unavailable. In practice, most taxpayers opt for the 0.1% method due to its simplicity and exemption from end-of-year tax reconciliation.

Those choosing the 20% annual method currently make 0.1% provisional tax payments with each sale. At the end of the year, if they opt to finalize taxes based on actual profits and have sufficient documentation for cost and expenses, they can declare and settle directly with the tax authority.

However, Law No. 71/2014 later standardized taxation to a single method: 0.1% on each transaction’s selling price.

Over time, some experts and taxpayers have argued that taxing even loss-making trades is unreasonable and that taxes should be based solely on actual profits.

The Ministry of Finance explained that the new proposal is based on both past implementation challenges and international trends.

Most countries, the ministry noted, impose taxes on income from capital gains and securities transactions, but their methods differ significantly. Some levy taxes based on the transaction value, others on net income, and some distinguish between listed and unlisted securities.

For example, Indonesia applies a 0.1% withholding tax on revenues from listed shares. The Philippines imposes a 0.6% tax on total transaction value. Japan applies a fixed 20.3% rate on gains from certain securities such as stocks, bonds, and warrants.

China taxes 20% on income from unlisted securities. Thailand generally treats capital income as regular income, except for specific exemptions such as gains from listed shares and income from bonds or treasury bills.

Nguyen Le