Is income from purchasing government bonds subject to personal income tax?

According to legal regulations, is income from buying government bonds subject to personal income tax?

1. Basic conditions and terms of bonds according to the law

Pursuant to Article 6 of Decree 153/2020/ND-CP and Clause 4, Article 1 of Decree 65/2022/ND-CP stipulates the basic conditions and terms of bonds as follows:

– Bond term: decided by the issuing enterprise for each offering based on the capital needs of the enterprise.

– Issuance volume: decided by the issuing enterprise for each offering based on the enterprise’s need to use capital.

– Bond issuance and payment currency

a) For bonds offered in the market domestically, the currency of issuance, interest payment, and principal of bonds is Vietnamese dong.

b) For bonds offered for sale to the international market, the currency of issuance, payment of interest, and principal of bonds is foreign currency according to regulations in the issuing market and compliance with the law on foreign exchange management.

– Bond face value

a) Bonds offered for sale in the domestic market, face value is one hundred million (100,000,000) Vietnam Dong or a multiple of one hundred million (100,000,000) Vietnam Dong.

b) Bonds offered for sale in the international market, face value comply with regulations in the issuing market.

– Form of bond

a) Bonds are offered in the form of certificates, book entries or electronic data.

b) The issuing enterprise decides specifically on the form of bond for each offering. sold according to regulations in the issuing market.

– Bond nominal interest rate

a) Bond nominal interest rate can be determined by one of the following methods: fixed interest rate for the entire bond term; floating interest rate; or a combination of fixed and floating interest rates.

b) In case the nominal interest rate is a floating interest rate or a combination of fixed and floating interest rates, the issuing enterprise must specifically state the reference basis to determine the nominal interest rate in the issuance plan and disclose information to investors buying bonds about the reference basis used.

c) The issuing enterprise decides the nominal interest rate for each offering in accordance with its financial situation and debt repayment ability. Interest rates on bonds issued by credit institutions, in addition to complying with the provisions of this Decree, must be consistent with the regulations on interest rates of the State Bank of Vietnam.

– The type of bond is decided by the issuing enterprise according to the provisions of law.

– The method of payment of interest and principal of bonds is decided by the issuing enterprise based on the need to use capital and issuance market practices to announce to the public. investors before offering bonds.

2. Principles for issuing and using bond capital according to legal regulations

Pursuant to Article 5 of Decree 153/2020/ND-CP, amended and supplemented by Article 1 of Decree 65/2022/ND-CP stipulating the principles of issuing and using bond capital

– Enterprises issue bonds on the principle of self-borrowing, self-payment, Take responsibility for the efficiency of capital use and ensure debt repayment ability.

– The purpose of issuing bonds is to implement investment programs, projects, debt restructuring of the enterprise itself or the purpose of issuing bonds according to the provisions of specialized laws. Enterprises must specifically state the purpose of issuance in the issuance plan according to the provisions of Article 13 of this Decree and disclose information to investors registering to buy bonds. The use of capital raised from bond issuance by enterprises must ensure the correct purpose according to the issuance plan and the content of information disclosed to investors.

– For green bond issuance, in addition to the provisions in Clauses 1 and 2 of this Article, capital from bond issuance must be separately accounted, managed, monitored and disbursed to projects in the field of environmental protection and projects that bring environmental benefits according to the plan. issuance has been approved.

– For bonds issued in the domestic market, enterprises are only allowed to change the conditions and terms of bonds specified in Article 6 of this Decree when meeting the following regulations:

+ Approved by a competent authority of the issuing enterprise;

+ Represented by the number of bond owners representing at least 65% of the total number of bonds of the same type in circulation or more approved;

– Information about changing the conditions and terms of bonds must be disclosed by the issuing enterprise as extraordinary information according to the provisions of Article 22 of this Decree.

3. Is income from buying government bonds subject to personal income tax (PIT)?

Pursuant to Point g, Clause 1, Article 3 of Circular 111/2013/TT-BTC, it is stipulated:

“Article 3. Tax-exempt income

[…]

g) Income from interest on deposits at credit institutions, foreign bank branches, interest from life insurance contracts; income from interest on Government bonds.

g.1) Deposit interest that is exempt from tax according to the provisions of this Point is personal income received from interest on deposits in Vietnam Dong, gold, and foreign currencies at credit institutions and foreign bank branches established and operating in accordance with the provisions of this Article. Law on credit institutions in the form of demand deposits, term deposits, savings deposits, certificates of deposit, promissory notes, treasury bills and other forms of receiving deposits on the principle of fully refunding principal and interest to depositors as agreed.

The basis for determining tax-free income for income from deposit interest is savings books (or savings cards), certificates of deposit, promissory notes, bills and other documents according to the principle Full refund of principal and interest to depositors as agreed.

g.2) Interest from life insurance contracts is the interest that individuals receive under life insurance contracts from insurance companies.

The basis for determining tax-free income for income from life insurance contract interest is the document of interest payment from the life insurance contract.

g.3) Government bond interest is the interest that individuals receive from purchasing Government bonds issued by the Ministry of Finance.

The basis for determining tax-free income for income from Government bond interest is the par value, interest rate and term on the Government bond.

Thus, the interest received from purchasing government bonds will be exemption from personal income tax (PIT)