4. You should ignore any implications of value added tax (VAT). (19 marks)
(30 marks)
2 Assume that today’s date is 1 June 2012.
PMG, a large Vietnamese incorporated and listed company, is reviewing an employment agreement with Mr Leonardo
di Panucci under which he will act as the Finance Director of PMG from 1 July 2012. Mr Panucci is 53 years old
and an Italian. The commencement of his employment on 1 July 2012 will also be his first date of arrival in Vietnam.
The employment contract is expected to last for two years. After negotiation, both parties have agreed the following
gross remuneration for Mr Panucci (i.e. tax will be borne by himself):
– Monthly salary: USD20,000;
– Annual bonus to be received by the end of each 12th month that he works for PMG: USD20,000;
– One-off relocation allowance: USD5,000;
– Tuition fee for his children: USD3,000 per month for his son, Caprio di Panucci, 21 years old, who will study in
an international university in Vietnam, and USD2,000 per month for his daughter, Monica di Panucci, 17 years
old, who will study in an international school in Vietnam;
– Housing allowance: USD4,000 per month, to be paid directly by PMG to the landlord.
Mr Panucci’s wife, Vendetta di Panucci, is aged 56 and she will join him during his assignment to Vietnam to take
care of their two children. Mrs Vendetta di Panucci has no income from any sources.
Before his employment in Vietnam, Mr Panucci has been working for a Singaporean company with a net income of
USD22,000 per month. The effective Singaporean tax rate on Mr Panucci’s income in Singapore was 20% and he
will settle all taxes in Singapore at this rate before arriving in Vietnam. His wife and children had no income in
Singapore.
PMG is aware of a well-known ruling from the General Department of Taxation in 2011 requesting that for an
individual first arriving in Vietnam, if the individual spends more than 183 days in the first calendar year in Vietnam,
their world-wide income from 1 January to 31 December would be included in their taxable income in Vietnam (i.e.
the income received before their arrival in Vietnam in the year would also be taxed in Vietnam), and in return, the
individual would be allowed to deduct personal relief for 12 months and credit the tax paid overseas in Vietnam. On
the other hand, if the individual spends less than 183 days in that calendar year, the normal rule for determining tax
residency and taxable income under the current Personal Income Tax Circulars in Vietnam (Circulars 84/2008 and
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