The Ministry of Finance has proposed a significant change to the personal income tax regime applied to capital gains from securities and equity transactions, shifting from the current flat-rate method to taxing actual profits.

Under the draft revised Law on Personal Income Tax, the ministry is suggesting a 20 per cent tax rate on profits earned by resident individuals from securities and equity transfers.

Taxable income would be calculated as the difference between the selling price and the purchase price, minus any reasonable associated costs. For securities transactions, taxable income would be determined annually.

In cases where the original cost and expenses cannot be verified, the investor would be subject to a flat tax: 0.1 per cent on the selling price of each securities transaction and 2 per cent on equity transfers.

Previously, the law applied a single method, taxing 0.1 per cent on the value of every securities transaction, regardless of whether it resulted in a gain or loss. This approach was widely criticised for being unfair and failing to reflect actual taxable income.

The Ministry of Finance stated that the new proposal is informed by both domestic realities and international practices. In many countries, capital gains are taxed, but the methods vary: some apply taxes on transaction value, others on net profits, or differentiate between listed and unlisted securities.

In particular, derivative securities, due to their different nature compared to underlying stocks, are increasingly being taxed based on actual income in countries such as the United Kingdom, the United States, Japan and Thailand. Taiwan, for instance, imposes significantly lower tax rates on derivatives, which are between 150 and 600 times lower than those on traditional securities.

The ministry noted that the reform aims to ensure fairness, transparency, and alignment with global tax trends and practical conditions. — VNS

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