Korean businesses proposed personal income tax cut

11:21:51 PM | 7/3/2011

At the conference dialogue between the Korean Ministry of Finance and Businesses on policies and administrative procedures of customs tax recently, the majority opinion of Korean businesses is related to the personal income tax.

Laws on Personal Income Tax of Vietnam provides that taxpayers can be exempted based on family condition, VND 4 million for the taxpayer and VND 1.6 million for each dependent. Korean businesses supposed that exemption is not practical and does not reflect the actual costs of living. Most foreigners working in Vietnam must pay taxes. This is not to mention rent paid by companies, which is not considered taxable income in Korea but it is in the partially progressive tax table in Vietnam (approximately 15 per cent of total income). This makes the tax rate that Korean workers in Vietnam must pay even higher. According to the recommendations of the Korean businesses, it is necessary to apply some measures to reduce personal income tax for foreigners, such as increasing family exemption, excluding the rent from taxable income or allowing foreigners to choose one of two methods of calculating tax, as applied in Korea.

Therefore, Korean businesses proposed the Ministry of Finance to consider reducing personal income tax for foreign workers who are subject to high personal income tax rates now and to consider the households with high costs of living for a more reasonable family exemption.

Korean businesses also introduced two methods of calculating income tax that are applied in Korea to the Ministry of Finance of Vietnam for reference. A representative of a Korean businesses said that in Korea there are two methods of declaration available to foreign workers to choose for their benefit, including identical calculation of tax basing on the total income (around 15 per cent) and income tax declaration like native labourers.

The Finance Ministry has noted the recommendations of the Korean enterprises to study and adjust personal income tax in accordance with reality. Laws on personal income are expected to be modified in the national assembly session in May 2012.

Statistics of the Ministry of Finance has also shown that Vietnam now has 650,000 people who pay personal income tax[S1] , of which only20 per cent are foreignersworkingin Vietnam,butthey pay up to80 per cent of all taxes.

Duy Hung