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Federal Income Tax Rates for the Year 2013

Personal tax rates and tax brackets for 2014

New Tax Rates for 2013

For the year 2013, there is a new top tax bracket of 39.6%.
There are also two new surtaxes starting in 2013:

• An additional Medicare tax of 0.9% on wages and self-employment income, and
• A net investment income tax of 3.8% on the lower of modified adjusted gross income or net investment income.

Both of these new taxes apply to individuals earning more than $200,000 (for single filers) or $250,000 (for married filing jointly).


Taxpayers in the highest tax bracket of 39.6% potentially face a combined 43.4% (39.6% + 3.8%) marginal tax rate on their income.

Other Tax Rates are Also Changing

• The Social Security tax has reverted back to its normal rate of 12.4% (it had been at 10.4% for 2011 and 2012).
• The Medicare tax remains at 2.9%, plus there's an additional Medicare tax of 0.9% on wages and self-employment over a threshold amount.
• The capital gains tax rates have a new 20% top rate. There are now three tiers of tax rates on capital gains and qualified dividends: 0%, 15%, and 20%. (Capital gains could also be subject to the new net investment income tax of 3.8%, making the top rate on long-term gains effectively 23.8% combined.)
• The alternative minimum tax rates remain at 26% and 28%.

 The Federal Income Tax Rates

The following tax rates apply to ordinary income. That is, these tax rates apply to most types of income. Special rates apply to specific types of income such as long-term capital gains and qualified dividends.
Each tax rate applies to a specific range of taxable income, which is called a tax bracket. Taxable income is total worldwide income after various deductions have been subtracted.
Note: These tax rate schedules are provided for tax planning purposes. To compute your actual income tax, please see the 2013 Instructions for Form 1040 and the 2013 Tax Tables.

Single Filing Status

[Tax Rate Schedule X, Internal Revenue Code section 1(c)]

• 10% on taxable income from $0 to $8,925, plus
• 15% on taxable income over $8,925 to $36,250, plus
• 25% on taxable income over $36,250 to $87,850, plus
• 28% on taxable income over $87,850 to $183,250, plus
• 33% on taxable income over $183,250 to $398,350, plus
• 35% on taxable income over $398,350 to $400,000, plus
• 39.6% on taxable income over $400,000.

Married Filing Jointly or Qualifying Widow(er) Filing Status

[Tax Rate Schedule Y-1, Internal Revenue Code section 1(a)]

• 10% on taxable income from $0 to $17,850, plus
• 15% on taxable income over $17,850 to $72,500, plus
• 25% on taxable income over $72,500 to $146,400, plus
• 28% on taxable income over $146,400 to $223,050, plus
• 33% on taxable income over $223,050 to $398,350, plus
• 35% on taxable income over $398,350 to $450,000, plus
• 39.6% on taxable income over $450,000.

Married Filing Separately Filing Status

[Tax Rate Schedule Y-2, Internal Revenue Code section 1(d)]

• 10% on taxable income from $0 to $8,925, plus
• 15% on taxable income over $8,925 to $36,250, plus
• 25% on taxable income over $36,250 to $73,200, plus
• 28% on taxable income over $73,200 to $111,525, plus
• 33% on taxable income over $111,525 to $199,175, plus
• 35% on taxable income over $199,175 to $225,000, plus
• 39.6% on taxable income over $225,000.

Head of Household Filing Status

[Tax Rate Schedule Z, Internal Revenue Code section 1(b)]

• 10% on taxable income from $0 to $12,750, plus
• 15% on taxable income over $12,750 to $48,600, plus
• 25% on taxable income over $48,600 to $125,450, plus
• 28% on taxable income over $125,450 to $203,150, plus
• 33% on taxable income over $203,150 to $398,350, plus
• 35% on taxable income over $398,350 to $425,000, plus
• 39.6% on taxable income over $425,000.

 How to Utilize your Marginal Tax Rates
Individuals can use the tax rate schedules in a number of ways to help plan their finances. You can use these tax rates to figure out how much tax you will pay on extra income you earn. For a taxpayer in the 25% tax bracket, extra income will be taxed at that rate until the taxpayer reaches the next tax bracket of 28%.
Remember that different intervals of income are taxed at different rates, and the income intervals at which the rates apply are slightly different based on a person's filing status. For example, a person who files as Head of Household earning $48,600 per year would have the first $12,750 of their taxable income taxed at the 10% rate, and their taxable income between $12,750 and $48,600 taxed at the 15% rate. A Head of Household filer earning $200,000 a year would fall within the 28% tax bracket, although some of their income is taxed at the 10%, 15%, and 25% rates.
Alternatively, you can use these tax rates to figure out how much tax you will save by increasing your deductions. A taxpayer in the 28% tax bracket, for example, will save 28 cents in federal tax for every dollar spent on a tax-deductible expense, such as mortgage interest or charity.
Be aware that marginal tax rates interact with other tax rates, especially the alternative minimum tax, which can push income into a higher tax rate or eliminate the tax savings of certain types of deductions.
Source: the official tax brackets for 2013 were published by the Internal Revenue Service in Revenue Procedure 2013-15 (pdf).

Income tax in the United States

Federal government receipts by source, 2010.^[1]

A tax is imposed on net taxable income in the United States by the federal, most state, and some local governments.^[2] Income tax is imposed on individuals, corporations, estates, and trusts.^[3] The definition of net taxable income for most sub-federal jurisdictions mostly follows the federal definition.
The rate of tax at the federal level is graduated; that is, the tax rates of higher amounts of income are higher than on lower amounts. Some states and localities impose an income tax at a graduated rate, and some at a flat rate on all taxable income. Federal tax rates in 2009 varied from 10% to 35%.^[4]
From 2003 through 2011, individuals were eligible for a reduced rate of federal income tax on capital gains and qualifying dividends. The tax rate and some deductions are different for individuals depending on filing status. Married individuals may compute tax as a couple or separately. Single individuals may be eligible for reduced tax rates if they are head of a household in which they live with a dependent. 

Taxable income: is defined in a comprehensive manner in the Internal Revenue Code and regulations^[5] issued by the Department of Treasury and the Internal Revenue Service. Taxable income is gross income as adjusted minus tax deductions. Most states and localities follow this definition at least in part, though some make adjustments to determine income taxed in that jurisdiction. Taxable income for a company or business may not be the same as its book income.
Gross income: includes all income earned or received from whatever source. This includes salaries and wages, tips, pensions, fees earned for services, price of goods sold, other business income, gains on sale of other property, rents received, interest and dividends received, alimony received, proceeds from selling crops, and many other types of income. Some income, however, is exempt from income tax. This includes interest on municipal bonds.

Federal receipts by source as share of total receipts (1950-2010). Individual income taxes (blue), payroll taxes/FICA (green), corporate income taxes (red), excise taxes (purple), estate and gift taxes (light blue), other receipts (orange).^[6]

Adjustments: (usually reductions) to gross income of individuals are made for alimony paid, contributions to many types of retirement or health savings plans, certain student loan interest, half of self-employment tax, and a few other items. The cost of goods sold in a business is a direct reduction of gross income.
Business deductions: Taxable income of all taxpayers is reduced by tax deductions for expenses related to their business. These include salaries, rent, and other business expenses paid or accrued, as well as allowances for depreciation. The deduction of expenses may result in a loss. Generally, such loss can reduce other taxable income, subject to some limits.
Personal deductions: Individuals are allowed several nonbusiness deductions. A flat amount per person is allowed as a deduction for personal exemptions. For 2012 this amount is $3,800. Taxpayers are allowed one such deduction for themselves and one for each person they support.
Standard deduction: In addition, individuals get a deduction from taxable income for certain personal expenses. Alternatively, the individual may claim a standard deduction. For 2012, the standard deduction is $5,950 for single individuals, $11,900 for a married couple, and $8,700 for a head of household.
Itemized deductions: Those who choose to claim actual itemized deductions may deduct the following, subject to many conditions and limitations:

• Medical expenses in excess of 7.5% of adjusted gross income,
• State, local, and foreign taxes,
• Home mortgage interest,
• Contributions to charities,
• Losses on nonbusiness property due to casualty, and
• Deductions for expenses incurred in the production of income in excess of 2% of adjusted gross income.

Capital gains: and qualified dividends may be taxed as part of taxable income. However, the tax is limited to a lower tax rate. Capital gains include gains on selling stocks and bonds, real estate, and other capital assets. The gain is the excess of the proceeds over the adjusted basis (cost less depreciation deductions allowed) of the property. This limit on tax also applies to dividends from U.S. corporations and many foreign corporations. There are limits on how much net capital loss may reduce other taxable income.

Total U.S. Tax Revenue as a % of GDP and Income Tax Revenue as a % of GDP, 1945-2011, from Office of Management and Budget Historical

Tax credits: All taxpayers are allowed a tax credit for foreign taxes and for a percentage of certain types of business expenses. Individuals are also allowed credits related to education expenses, retirement savings, child care expenses, and a credit for each child. Each of the credits is subject to specific rules and limitations. Some credits are treated as refundable payments.
Alternative Minimum Tax: All taxpayers are also subject to the Alternative Minimum Tax if their income exceeds certain exclusion amounts. This tax applies only if it exceeds regular income tax, and is reduced by some credits.
Tax returns: Individuals must file income tax returns in each year their income exceeds the standard deduction plus one personal exemption, or if any tax is due. Other taxpayers must file income tax returns each year. These returns may be filed electronically. Generally, an individual's tax return covers the calendar year. Corporations may elect a different tax year. Most states and localities follow the federal tax year, and require separate returns.
Tax payment: Taxpayers must pay income tax due without waiting for an assessment. Many taxpayers are subject to withholding taxes when they receive income. To the extent withholding taxes do not cover all taxes due, all taxpayers must make estimated tax payments.
Tax penalties: Failing to make payments on time, or failing to file returns, can result in substantial penalties. Certain intentional failures may result in jail time.
Tax returns may be examined and adjusted by tax authorities. Taxpayers have rights to appeal any change to tax, and these rights vary by jurisdiction. Taxpayers may also go to court to contest tax changes. Tax authorities may not make changes after a certain period of time (generally 3 years).

Today, we relax with a family video:

Please focus on the baby. He delicious eating!! :)

Download overview Vietnam here - Vietnam Guide (source HSBC)

Personal Income Tax (’PIT’) - Vietnam

Scope

For individual tax purposes, Vietnam residents are those individuals residing in Vietnam for 183 days or more in a calendar year, or in 12 consecutive months from the first date of arrival.
Vietnam residents also include those having a permanent residence in Vietnam (including, in the case of foreigners, a registered residence which is recorded on the permanent or temporary residence card).
Where an individual stays in Vietnam for more than 90 days but less than 183 days in a tax year, the individual will be treated as a tax non-resident if he or she can prove that they are tax resident of another country.
Tax residents are subject to Vietnamese PIT on their worldwide taxable income, wherever it is paid or received. Employment income is taxed on a graduated tax rates basis. Non- employment income is taxed at a variety of different rates.
Individuals not meeting the conditions for being tax residents are considered tax non-residents.
Non-residents are subject to PIT at a flat tax rate of 20% on the income received as a result of working in Vietnam in the tax year, and at various other rates on their non-employment income. This may be affected by an applicable DTA.

Tax declarations and payment

For employment income, tax has to be declared and paid provisionally on a monthly basis by the 20th day of the following month.
The amounts paid are reconciled to the total tax liability at year-end.
Expatriate employees are also required to carry out a PIT finalisation on termination of their Vietnamese assignments before exiting Vietnam. Tax refunds due to excess tax payments are only available to those who have a tax code.
For non-employment income, the individual is required to declare and pay PIT in relation to each type of taxable non- employment income. The PIT regulations require income to be declared and tax to be paid on a regular basis, often each time income is received.

Taxable Income

Employment income
The definition of the taxable employment income is broad and includes all cash remuneration and benefits- in-kind. However, there are a limited number of items that are not subject to tax.
Non-employment income
Taxable non-employmentincome includes:

• Business income (e.g. rental income);
• Investment income (e.g. interest, dividends);
• Gains on sale of shares;
• Gains on sale of real estate; and
• Inheritances in excess of VND10 million.

Tax deductions
Tax deductions include:
1. Contributions to mandatory social, health and unemployment insurance schemes;
2. Contributions to certain approved charities;
3. Tax deduction:

• Personal allowance: VND48 million/year,
• Dependant deduction: VND1.6 million/month. The dependant allowance is not automatically granted, and the taxpayer needs to register qualifying dependants and provide supporting documents to the tax authority

Social, Health and Unemployment Insurance

Social Insurance (’SI’) and Unemployment Insurance (’UI’) contributions are applicable to Vietnamese individuals only. Health insurance (’HI’) contributions are required for Vietnamese and foreign individuals that are employed under Vietnam labour contracts.
The regulated salary to be used to calculate for Social Insurance, Health Insurance and Unemployment Insurance contribution is the basic salary stated in labour contract, capped at 20 times the minimum salary (current minimum salary for the purpose of calculating SI, HI and UI is VND1,050,000 per month).
Statutory SI, HI and UI employer contributions do not constitute a taxable benefit to the employee. The employee contributions are deductible for PIT purposes.
SI/HI/UI contributions are as follows:

Import and Export Duties

Import and export duty rates are subject to frequent changes and it is always prudent to check the latest position.
Import duty rates are classified into three categories:
1. Ordinary rates;
2. Preferential rates – applicable to imported goods from countries that have Most Favoured Nation (MFN, also known as Normal Trade Relations) status with Vietnam. The MFN rates are in accordance with Vietnam’s WTO commitments and are applicable to goods imported from other member countries of the WTO; and
3. Special preferential rates applicable to imported goods from countries that have
a special preferential trade agreement with Vietnam (e.g. ASEAN countries, China, Korea, Japan, Australia and New Zealand).
To be eligible for preferential rates or special preferential rates, the imported goods must be accompanied by an appropriate Certificate of Origin (’C/O’). Without such a C/O, or when goods are sourced from non- preferential treatment countries, the ordinary rate (being the MFN rate with a 50% surcharge) is imposed.

Special Sales Tax (’SST’)

SST is a form of excise tax that applies to the production or import of certain goods and the provision of certain services. Goods and services that are subject to SST are also subject to VAT.
The Law on SST classifies objects subject to SST into two groups:
1. Commodities – cigarettes, liquor, beer, automobiles having less than 24 seats, motorcycles, airplanes, boats, petrol, air- conditioners up to 90,000 BTU, playing cards, votive papers.
2. Service activities – discotheque, massage, karaoke, casino, gambling, golf clubs, entertainment with betting and lotteries.

Natural Resources Tax

Natural Resources Tax is payable by industries exploiting Vietnam’s natural resources such as petroleum, minerals, forest products, seafood and natural water.
The tax rates vary depending on the natural resource being exploited and are applied to the production output at a specified taxable value per unit.
Various methods are available for the calculation of the taxable value of the resources, including cases where the commercial value of the resources cannot be determined.

Property Tax

Land in Vietnam is owned by the state, meaning that users of land are required to acquire or rent land use rights from the government.
Foreign investors requiring land for their operations in Vietnam will pay a rental fee to the government, which is in effect a form of property tax.
The rental fees for land use rights vary depending upon the location, infrastructure and the industrial sector in which the business is operating.
In addition, land users (including owners of houses and apartments) have to pay land tax from 2012 onwards under the law on non-agricultural land tax. The tax is charged with progressive tax rates ranging from 0.03% to 0.15% on the taxable price determined by the local authority from time-to-time based on the location and use of the land.

Environmental Protection Tax

The Law on Environment Protection Tax took effect from 1 January 2012.
The environment protection tax is an indirect tax which is applicable to the production and importation of certain goods including petroleum products.

Other Taxes

Numerous other fees and taxes can apply in Vietnam, including business license tax and stamp duty or registration fees.

Tax Audits and Penalties

Tax audits are carried out regularly and often cover a number of tax years. Prior to an audit, the tax authorities send the taxpayer a written notice indicating the time and scope of the audit inspection.
There are detailed regulations setting out penalties for various tax offences. These range from relatively minor administrative penalties through to tax penalties amounting to various multiples of the additional tax assessed.
The general statute of limitations for posing penalties is five years. The tax authorities can collect under-declared and unpaid tax at any time.

Audit and Accounting

Foreign-invested business entities are generally required to adopt the Vietnamese Accounting System (’VAS’). If a company strictly follows the VAS, registration with the Ministry of Finance (’MoF’) is not required. However, if the VAS is modified, a written approval from the MoF is required before implementation.
Accounting records are required to be maintained in VND. A foreign-invested business entity can select a foreign currency to be used for its accounting records and financial statements in limited circumstances (per Circular 244 issued by the Ministry of Finance). Accounting records are required in Vietnamese, although a commonly used foreign language can be used along with Vietnamese. At the end of the financial year, the entity must perform a physical count of its fixed assets, cash and inventory.
The annual financial statements of all foreign-invested business entities must be audited by an independent auditing company operating in Vietnam. Audited annual financial statements must be completed within 90 days from the end of the year. These financial statements should be filed with the applicable licensing body, Ministry of Finance, local tax authority, Department of Statistics, and other local authorities as required by law. Vietnam has issued 26 accounting standards and 37 auditing standards which are primarily based on international standards, but with some local modifications.

Source: https://globalconnections.hsbc.com 

Foreign textile firms inverst in Vietnam to take advantage of TPP

 Foreign textile firms inverst in Vietnam to take advantage of TPP

 GBS - Many large foreign firms have entered Vietnam's garment and textile sector with an eye on export opportunities the Trans-Pacific Partnership is expected to bring.

Jiangsu Yulun Textile Group of China recently got a license for a US$68-million textile, dyeing, and yarn plant in an industrial zone in Nam Dinh Province near Hanoi, Thoi bao Kinh te Saigon Online reported.

Industrial zone managers said the factory would go on stream in the middle of 2016 and produce 9,816 tons of yarn and 21.6 million meters of cloth and dye 24 million meters of both a year.

Nam Dinh authorities said a Hong Kong investor also wants to build a garment and textile industrial zone on 1,000 hectares in the province.

In Ho Chi Minh City, Forever Glorious Company belonging to Taiwanese corporation Sheico has committed a $50-million investment to produce clothing and accessories for water sports. The factory is said to need 3,550 workers.

Gain Lucky Limited belonging to China-based Shenzhou International, who makes garments for Nike, Adidas, and Puma, also announced plans to invest $140 million in the city to build a 45-hectare center for designing and producing high-end products.

The TPP, which has entered the final stretch of negotiations, will lower import taxes in many large member economies like the US, Canada, Australia, and Japan. China is not a member.

Import tariffs in the US, the biggest buyers of Vietnam’s leading export, textiles, will be cut from 17-32 percent now to zero.

But it will also imposes many conditions -- for instance, apparel has to be made using yarn and other materials produced in member countries to benefit from the tax breaks.

Vietnamese garment manufacturers are not financially strong enough to invest in their own yarn and textile facilities, and rely on China and other Southeast Asian countries for most of the feedstock.

Economists have said that therefore the trade deal would benefit foreign firms coming here more than local ones.

Source: Thanhnien News

Personal income tax regulations for non-resident chief representatives

 What does Việt Nam require for chief representatives who enjoy earnings from the country but not permanently reside there to pay personal income tax?

Regulations for taxpayers:
Under Point b, Item 1, Article 6, Chapter II of the Government’s Decree 147/2004/NĐ-CP, dated on July 23, 2004, regular taxable income shall be the total income sourced in Việt Nam and overseas.

Point b, Item 1, Article 2 of the Government’s Decree 100/2008/NĐ-CP, dated on September 8, 2008 stipulates that, for non-resident individuals, their taxable incomes are earnings in Việt Nam, regardless of where the incomes are paid.

Hence, prior to December 31, 2008, chief representatives not residing but earning incomes in Việt Nam have to pay income tax on high-income earners. Since January 1, 2009 on, they have to pay income tax for their wages and salaries earned in Việt Nam.

Source: Gov.vn

Personal income tax exemption

According to Circular 133/2004/TT-BTC, dated on December 31, 2004, there are three conditions for non-residents who settle in other countries which already inked Double Tax Avoidance Agreements with Việt Nam to enjoy income tax exemption as follows:
(1) Presenting in Việt Nam for less than 183 days within 12 consecutive months of the fiscal year;
(2) Their employers do not reside in Việt Nam regardless the salaries are paid by employers or representatives of employers; and
(3) The salaries are not paid by Việt Nam-based agencies.
Under these regulations, since January 1, 2009 on, foreigners, who are citizens of countries which sealed Double Tax Avoidance Agreements with Việt Nam, hold the post of chief representatives in Việt Nam but not permanently reside here, can enjoy personal income tax exemption for their salaries and wages earned in Việt Nam./.
Source: Gov.vn

Vietnam personal income tax

Vietnam personal income tax rates are progressive to 35%. Nonresidents are taxed at a flat tax rate of 20%. Nonemployment income is taxed at rates from 0.1% to 25%.
PIT rates
Taxable Income per year (VND) Tax rate

• VND 0 - 60,000,000 5%
• VND 60,000,000 - 120,000,000 10%
• VND 120,000,000 - 216,000,000 15%
• VND 216,000,000 - 384,000,000 20%
• VND 384,000,000 - 624,000,000 25%
• VND 624,000,000 - 960,000,000 30%
• Above VND 960,000,000 35%

Residents - Other tax rates on resident individuals

• Income from capital investment, copyright and franchise activities 5%
• Income from transfer of capital 20%
• Income from transfer of real estate 25%

Non-residents - Other tax rates on non-resident individuals

• Income from business and production of goods 1%
• Income from business and production of services 5%
• Manufacturing, construction, transport and other activities 2%
• Salary and wages 20%
• Income from capital investment 5%
• Transfer of capital 0.1%
• Transfer of real estate 2%
• Copyright and franchise activities 5%
• Lottery wins, inheritance and gifts which are securities, capital or assets 10%

All residents and non-residents are subject to Personal Income Tax in Vietnam.
A resident is liable to pay tax on income sourced in Vietnam as well as on the portion of income from foreign sources (except for non-taxable income, including income from real estate transferred between a husband, wife and blood-relations, scholarships, and overseas remittances).

• Deductions are available for family considerations for residents, comprising children
• under 18, unemployed spouses and elderly and unemployed parents.
• Individuals are responsible for self-declaration and payment of tax.
• Tax Basis – Vietnamese residents are taxed on their worldwide income; nonresidents are taxed only on Vietnamese-source income.

Residence – An individual is resident if he/she: (1) spends 183 days or more in the aggregate in a 12-month period in Vietnam starting from the date the individual arrives in Vietnam; (2) maintains a residence in Vietnam; or (3) has leased a residence for 90 days or more in a tax year.
Tax Filing status – Individuals must file separate tax returns; joint tax filing is not permitted.
Taxable income – Employment income, including most employment benefits, is taxable. As from 1 January 2009, dividends (except for government bonds), interest (except for bank deposits and life insurance), capital gains from securities trading, private business income and other income from franchising, inheritance, the transfer of land use rights, and gifts/winnings or prizes are taxable in Vietnam. Profits derived from the carrying on of a trade or profession generally are taxed in the same way as profits derived by companies.
Taxation of Capital gains – Gains from a capital assignment and/or securities trading are subject to 0.1% tax on the gross sale or 20% of net profit.
Tax Deductions and allowances – Subject to certain restrictions, deductions are granted for compulsory social security and health insurance. Severance allowances and redundancy compensation are not taxable. As from 1 January 2009, all benefits in cash or in kind paid by the employer are fully taxable. A new personal income tax law provides more deductions, including a personal deduction (VND 4 million per month) and a dependent deduction (VND 1.6 million/dependent per month). Charitable donations may be deducted in full from taxable income.
Other taxes on individuals:

• Capital duty – No
• Stamp duty – Rates of 0.5%-15% apply on the transfer of property.
• Capital acquisitions tax – No
• Real property tax – The municipal authorities levy a tax on real estate.
• Inheritance/estate tax – Inheritances and gifts are subject to income tax at special rates.
• Net wealth/net worth tax – No

Social security contributions in Vietnam – Vietnamese employees are required to make SI, HI and UI contributions at rates of 5%, 1.5% and 1% of the employee's salary, respectively. Expatriates are only subject to the HI.
Tax Filing and payment of tax – Tax on employment income is withheld by the employer and remitted to the tax authorities. An individual must file a tax return and make a final tax payment by 30 March in the year following the assessment year.
Vietnam Tax year – Vietnam tax year is the calendar year
Penalties – Taxpayers are subject to an extra 0.05% for late payment, 10% on underreported amounts and more stringent penalties for tax evasion.
Source: Gov.vn