Sign in Subscribe
Tax law

Ministry of Finance Proposes Decree to Tighten Personal Income Tax on Dividends and Bonus Shares

Strategic Insights

— 2 min read

The Ministry of Finance is proposing a draft decree to amend Decree No. 126/2020/NA on Tax Management, with a focus on tightening personal income tax (PIT) on dividends and bonus shares paid in securities rather than cash. According to the ministry, between 2016 and 2024, individual investors received 34.84-billion shares in the form of dividends or bonus issues, valued at approximately VNA10,000 each. If sold, this would result in a notional PIT liability of VNA17.42-trillion (US$683 million). However, only VNA1.318-trillion, or 8% of the liability, has been declared and paid, highlighting a significant compliance gap.

Key Takeaways:

  • The draft decree aims to clarify that an individual becomes liable for PIT when a dividend is received, regardless of whether it is paid in cash or shares.
  • Taxpayers should not wait until they sell securities to declare income, and dividendaEUR'paying organisations would have to withhold PIT when the dividend or bonus shares are distributed.
  • For listed companies and other dividendaEUR'paying entities, withholding would be based on the payment date stated in the corporate announcement.
  • The draft decree also requires dividendaEUR'paying organisations to file PIT returns monthly instead of waiting until securities are transferred.
  • If the draft decree is approved, it would align Decree 126 with the Personal Income Tax Law and reduce opportunities to exploit timing differences.
  • Stakeholders have until later this month to comment on the proposed amendments.
  • The draft decree targets a significant compliance gap, where only 8% of the notional PIT liability on dividends and bonus shares has been declared and paid.
  • The current PIT declaration on dividends and bonus shares accounts for only 2.54% of total PIT declared from all investment activities.

Statistics:

  • Between 2016 and 2024, individual investors received 34.84-billion shares in the form of dividends or bonus issues.
  • The notional PIT liability on dividends and bonus shares would be approximately VNA17.42-trillion (US$683 million) if all shares were sold at par value of VNA10,000 each.
  • Only VNA1.318-trillion, or 8% of the notional liability, has been declared and paid as PIT.
  • Total PIT declared from all investment activities reached VNA51.965-trillion, with tax on dividends and bonus shares accounting for VNA1.318-trillion (2.54% of total PIT).

Sources:

  • "The Ministry of Finance is circulating a draft decree amending several articles of Decree No. 126/2020/NA on Tax Management."
  • "According to the ministry, between 2016 and 2024, individual investors received 34.84-billion shares in the form of dividends or bonus issues."
  • "Over the same period, total PIT declared from all investment activities reached VNA51.965-trillion, of which tax on dividends and bonus shares accounted for just VNA1.318-trillion, or 2.54%."
  • "Stakeholders have until later this month to comment on the proposed amendments before the decree is finalised and submitted to the Government for approval."

Read more