Mr. Thanh inherited this farm from his parents and he has registered the farm economy. Mr. Thanh asked, is the value of the 6.5 billion VND pig above subject to personal income tax (PIT)? If so, how much?

Regarding this issue, the Nam Dinh Provincial Tax Department has the following opinion:

In Clause 1 and Point b Clause 5 Article 2 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Minister of Finance stipulates:

"Article 2. Taxable income

… 1. Income from business

Income from business is income earned from production and business activities in the following fields:

a) Income from production and trading of goods and services in all fields and business lines as prescribed by law such as: production and trading of goods; construction; transportation; food and beverage business; service business, including rental services of houses, land use rights, water surfaces, and other assets.

b) Income from independent professional activities of individuals in fields and professions that are granted licenses or practice certificates as prescribed by law.

c) Income from production and trading of agriculture, forestry, salt production, aquaculture, and fishing that do not meet the conditions for tax exemption as guided in Point e, Clause 1, Article 3 of this Circular.

… 5. Income from real estate transfer

… b) Income from transfer of land use rights and assets attached to land. Assets attached to land include:

b.1) Housing, including future housing.

b.2) Infrastructure and construction works attached to land, including future construction works.

b.3) Other assets attached to land include assets that are agricultural, forestry, and fishery products (such as crops and livestock)".

At Point e, Clause 1, Article 3 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Minister of Finance, it is stipulated that:

"Article 3. Tax-exempt income

… e) Income of households and individuals directly participating in agricultural, forestry, salt production, aquaculture, and fishing activities that have not been processed or have only been processed into other products.

Households and individuals directly participating in production activities according to the guidance in this point must simultaneously satisfy the following conditions:

e.1) Have the right to use land, the right to lease land, the right to use water surface, the right to lease water surface legally for production and directly participate in agricultural, forestry, salt production, and aquaculture production.

In case of subleasing land or water surface from other organizations or individuals, there must be a land or water surface lease document in accordance with the provisions of law (except for households and individuals who are contracted to plant forests, care for, manage, and protect forests with forestry companies). For fishing activities, there must be a certificate of ownership or a contract to rent a boat or vessel for fishing purposes and directly participate in fishing activities (except for fishing on rivers using the river bed (fish bed) method and not being prohibited by law).

e.2) Actually reside in the locality where agricultural, forestry, salt production, aquaculture, and fishing activities take place.

The locality where agricultural, forestry, salt production, and aquaculture activities take place according to these instructions is a district, town, or city under a province (collectively referred to as a district-level administrative unit) or a district bordering the place where the production activities take place.

For fishing activities, the place of residence is independent.

e.3) Agricultural, forestry, salt-making, aquaculture and fishing products that have not been processed into other products or have only been preliminarily processed are products that have just been cleaned, dried, peeled, de-seeded, cut, salted, refrigerated and other conventional forms of preservation".

Clause 2, Clause 3, Article 12 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Minister of Finance, amended and supplemented in Article 17 of Circular No. 92/2015/TT-BTC dated June 15, 2015 of the Minister of Finance, stipulates:

"2. Tax rate

The tax rate for real estate transfer is 2% of the transfer price or sublease price.

3. The time for calculating tax from real estate transfer is determined as follows:

- In case the transfer contract does not have an agreement that the buyer is the taxpayer on behalf of the seller, the time for calculating tax is the time when the transfer contract takes effect according to the provisions of law;

- In case the transfer contract has an agreement that the buyer is the taxpayer on behalf of the seller, the time for calculating tax is the time when the procedures for registering ownership and right to use real estate are carried out.

In the case of individuals receiving the transfer of future housing, land use rights associated with future construction works is the time when the individual submits the tax declaration to the tax authority".

In Mr. Nguyen Tuan Thanh's question, the general content does not have specific records. Therefore, he based on the above regulations and compared with the legal regulations on tax to implement. Nam Dinh Provincial Tax Department responded according to the following principles:

In the case of real estate transfer including income from the transfer of land use rights and other assets attached to land, the income subject to personal income tax from real estate transfer includes income from the transfer of land use rights and other assets attached to land including assets that are agricultural, forestry and fishery products (such as crops and livestock) according to the provisions of Clause 2 Clause 3 Article 12 Circular No. 111/2013/TT-BTC.

- In the case of business income of households and individuals directly participating in production activities agriculture, forestry, salt production, aquaculture, fishing of unprocessed or only preliminarily processed aquatic products that have not been processed into other products and satisfy all the conditions prescribed in Point e, Clause 1, Article 3 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Minister of Finance, the amount received from pig farming activities is exempt from personal income tax.

Nam Dinh Provincial Tax Department responded so that Mr. Nguyen Tuan Thanh could base on the actual situation to declare and fulfill his obligations to the state budget in accordance with the provisions of legal documents.

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