Instructions for declaring personal income tax from personal loan interest: how to calculate tax, how to prepare personal income tax declaration according to form 06/TNCN Circular 80/2021 – example.
Currently, there are many forms of capital mobilization for businesses when they encounter difficulties, such as borrowing from commercial banks, credit institutions, other businesses or borrowing from individuals. In particular, the form of personal loans has simple and quick documents, so it is applied by many businesses. So how should the interest received by individuals be declared and calculated for personal income tax?
I. Legal basis
- Circular 111/2013/TT-BTC;
- Circular 92/2015/TT-BTC;
- Circular 80/2021/TT-BTC.
II. How to calculate personal income tax from personal loan interest
According to Point a, Clause 3, Article 2 of Circular 111/2013/TT-BTC, the interest that individuals receive from lending capital to organizations and enterprises is determined to be income subject to personal income tax.
Personal income tax on income from loan interest is determined by the formula:
| Personal income tax payable | = | Taxable income (*) | x | Tax rate (5%) |
(*) Taxable income is the interest that individuals receive.
The time for calculating personal income tax from loan interest is the time when the organization or enterprise pays income to the individual.
Example 1:
On January 1, 2022, Mr. Tran Van C lent fdiinvietnam.com Consulting Services LLC VND 500,000,000 for a term of 1 year, interest rate of 7%/year and interest paid on the 30th of each month.
- Monthly interest received = 500,000,000 VND x (7% / 12) = 2,916,667 VND;
- Taxable income for personal income tax = 2,916,667 VND;
- Personal income tax payable = 2,916,667 VND x 5% = 145,833 VND.
Because Mr. C is paid loan interest monthly, the time for calculating personal income tax is the time Mr. C receives the loan interest for the month, the 30th of each month.
Example 2:
On January 1, 2022, Mr. Tran Van C lent fdiinvietnam.com Consulting Services LLC VND 500,000,000 for a term of 1 year, interest rate of 7%/year and interest paid at the end of the term on December 31, 2022.
- Interest received at the end of the period = 500,000,000 VND x 7% = 35,000,000 VND;
- Taxable income for personal income tax = 35,000,000 VND;
- Personal income tax payable = 35,000,000 VND x 5% = 1,750,000 VND.
Mr. C receives interest at the end of the period, so the time for calculating personal income tax is December 31, 2022.
III. How to declare personal income tax from personal loan interest
Before paying interest to individual lenders, organizations and enterprises must deduct personal income tax and prepare personal income tax declaration form 06/TNCN according to Circular 80/2021/TT-BTC.
Organizations and enterprises submit form 06/TNCN monthly (if the enterprise is required to declare tax monthly) or quarterly (if the enterprise is required to declare tax quarterly).
➤ Instructions for filling out personal income tax return 06/TNCN
When declaring personal income tax from loan interest, we only declare part “I – Income from capital investment”.
- Indicator [23] – Total number of individuals with income – Number of occurrences: total number of individuals paid taxable income during the declaration period;
- Indicator [23] – Total number of individuals with income – Cumulative number: total number of individuals paid cumulative taxable income up to the declaration period;
- Indicator [24] – Total taxable income – Amount incurred: total taxable income of individuals paid income during the declaration period;
- Indicator [24] – Total taxable income – Cumulative number: total taxable income of individuals paid cumulative income up to the declaration period;
- Indicator [25] – Total personal income tax (PIT) deducted – Number of occurrences: total PIT deducted from individuals who received income during the declaration period;
- Indicator [25] – Total personal income tax (PIT) deducted – Cumulative amount: total PIT deducted of individuals paid cumulative income up to the declaration period.
Example 1:
On January 1, 2022, Mr. Tran Van C lent fdiinvietnam.com Consulting Services LLC VND 500,000,000 for a term of 1 year, interest rate of 7%/year and interest paid on the 30th of each month.
- Taxable income for personal income tax = Monthly interest = 500,000,000 x (7% / 12) = 2,916,667 VND;
- Personal income tax payable = 2,916,667 VND x 5% = 145,833 VND/month.
➨ Declaration 06/TNCN quarter 3/2022:
Example 2:
On January 1, 2022, Mr. Tran Van C lent fdiinvietnam.com Consulting Services LLC VND 500,000,000 for a term of 1 year, interest rate of 7%/year and interest paid on the 30th of each month.
- Taxable income for personal income tax = Monthly interest = 500,000,000 x (7% / 12) = 2,916,667 VND;
- Personal income tax payable = 2,916,667 VND x 5% = 145,833 VND/month.
On August 1, 2022, Ms. Nguyen Thi B lent fdiinvietnam.com Consulting Services LLC VND 700,000,000 for a term of 1 year, interest rate of 8%/year and interest paid on the 30th of each month.
- Taxable income for personal income tax = Monthly interest = 700,000,000 x (8% / 12) = 4,666,667 VND;
- Personal income tax payable = 4,666,667 VND x 5% = 466,667 VND/month.
➤ Before making the declaration form 06/TNCN, you should create a file with a detailed list of individuals who must pay personal income tax from loan interest to get data.
➨ Declaration 06/TNCN quarter 3/2022:
Note:
Personal income tax deduction declaration form 06/TNCN of the last month or quarter of the tax year must be attached with an appendix detailing the income of individuals in the tax year (PL 06-1/BK-TNCN).
For example:
On January 1, 2022, Mr. Tran Van C lent fdiinvietnam.com Consulting Services LLC VND 500,000,000 for a term of 1 year, interest rate of 7%/year and interest paid on the 30th of each month.
- Taxable income for personal income tax = Monthly interest = 500,000,000 x (7% / 12) = 2,916,667 VND;
- Personal income tax payable = 2,916.66 VND x 5% = 145,833 VND/month.
On August 1, 2022, Ms. Nguyen Thi B lent fdiinvietnam.com Consulting Services LLC VND 700,000,000 for a term of 1 year, interest rate of 8%/year and interest paid on the 30th of each month.
- Taxable income for personal income tax = Monthly interest = 700,000,000 x (8% / 12) = 4,666,667 VND;
- Personal income tax payable = 4,666,667 VND x 5% = 466,667 VND/month.
➨ Declaration 06/TNCN quarter 4/2022:
IV. Some frequently asked questions
1. Is personal loan interest included in the reasonable expenses of the business?
Circular 96/2015/TT-BTC stipulates the conditions for businesses to calculate personal loan interest into reasonable expenses as follows:
- Must contribute enough registered charter capital stated in the enterprise charter;
- The loan interest rate shall not exceed 150% of the basic interest rate announced by the State Bank of Vietnam at the time the enterprise borrows;
- Loan documents include: personal loan contract, payment documents, personal income tax deduction documents (5%).
2. When calculating personal income tax payable, can an individual deduct 11,000,000 VND?
According to Article 25 of Circular 111/2013/TT-BTC, organizations and individuals paying income from capital investment are responsible for deducting personal income tax before paying income to lending individuals and the amount of tax deducted is determined by (=) taxable income multiplied by (x) tax rate of 5%. Therefore, when calculating personal income tax from loan interest, individuals are not allowed to deduct 11,000,000 VND for themselves.
3. Are individuals required to transfer money to businesses when lending money?
When borrowing capital from individuals, businesses do not need to transfer the loan and repay the debt. Individuals can lend capital in cash and receive the principal and interest from the business in cash.
4. Is there any risk for a business to borrow money from individuals at 0% interest or no interest?
When a business borrows money from an individual at 0% interest or no interest, there is a risk of being assessed personal income tax. The tax authority will re-determine the market interest rate and collect 5% personal income tax on the interest. In addition, the business will also be fined for false declaration (due to failure to declare personal income tax) and administrative tax violations.