Who shall be subject to personal income tax (PIT) finalization in Vietnam

Who shall be subject to personal income tax (PIT) finalization in Vietnam according to Official Letter No. 636/TCT-DNNCN dated March 12, 2021 of the General Department of Tax of Vietnam.

Post date: 19-03-2022

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Who shall be subject to personal income tax (PIT) finalization in Vietnam

Who shall be subject to personal income tax (PIT) finalization in Vietnam

Pursuant to the Law on Tax Administration No. 38/2019/QH14 effective from July 1st , 2020; Decree No. 126/2020/ND-CP detailing a number of articles of the Law on Tax Administration effective from December 5, 2020, to ensure timely guidance for organizations and individuals to carry out the tax administration. uniform PIT finalization in accordance with the current PIT law, the General Department of Tax of Vietnam issued Official Letter No. 636/TCT-DNNCN dated March 12, 2021 guiding a number of contents as follows:

I. Who shall be subject to personal income tax (PIT) finalization in Vietnam.

1. For individuals who shall directly finalize with tax authorities

- Residents earning incomes from salaries and wages shall directly declare PIT finalization with tax authorities if there is additional tax to be paid or overpaid tax amounts to be refunded or offset in the next tax period.
- Individuals present in Vietnam for less than 183 days in the first calendar year, but 183 days or more in 12 consecutive months from the first day of presence in Vietnam, the first year of PIT finalization is 12 consecutive months from the first day of presence in Vietnam.
- Individuals who are foreigners ending their working contracts in Vietnam shall make personal income tax finalization with tax authorities before leaving the country. In case an individual has not completed personal income tax finalization procedures with the tax authority, he/she shall authorize an income paying organization or another organization or individual to finalize personal income tax according to regulations on personal income tax finalization. In case the income paying organization or other organizations or individuals receive authorization for finalization, they must be responsible for the additional PIT payable or have their overpaid tax refund refunded.
- Residents who earn incomes from salaries and wages and are considered for tax reduction due to natural disasters, fires, accidents or fatal diseases affecting their ability to pay tax shall not authorize income paying organizations or individuals for PIT finalization, but they must directly declare the PIT finalization with tax authorities as prescribed.

2. For income paying organizations from salaries and wages in Vietnam.

Income paying organizations and individuals from salaries and wages in Vietnam are responsible for PIT finalization, regardless of whether tax withholding or not, and PIT finalization on behalf of authorized individuals. In case an individual authorizes an organization to finalize personal income tax and has an additional tax payable after finalization of VND 50,000 or less which is eligible for tax exemption, the income paying organization still declares personal information to be paid such income in the personal income tax finalization declaration file of the organization and not aggregate the additional payable tax amount of individuals whose additional tax payable after finalization is 50,000 VND or less. In case the income paying organization has finalized PIT before the effective date of Decree No. 126/2020/ND-CP, it will not be processed retroactively.
In case an individual is an employee who is transferred from the old organization to the new one because the old organization merges, merges, divides, separates, transforms the type of enterprise or the old organization and the new organization in Under the same system, the new organization is responsible for finalizing PIT as authorized by the individual for both the income paid by the old organization and the new income paying organization to collect the PIT withholding documents issued by the previous organization. the organization paying the old income already granted to the employee (if any).

3. For authorization of personal income tax finalization

Residents earning incomes from salaries and wages authorize income-paying organizations and individuals for personal income tax finalization, specifically as follows:
- Individuals earning incomes from salaries and wages sign labor contracts for 03 months or more at a place and are actually working there at the time the income-paying organization or individual performs the tax finalization, including the case of not working for full 12 months in a calendar year. In case an individual is an employee who is transferred from the old organization to the new one because the old organization merges, merges, divides, separates, transforms the type of enterprise or the old organization and the new organization in the same system, the individual shall authorize the new organization for personal income tax finalization.
- Individuals earning incomes from salaries and wages sign labor contracts for 03 months or more at a place and are actually working there at the time the income paying organization or individual performs tax finalization, including case of not working for full 12 months in a calendar year; and at the same time have current income elsewhere in the year on average not more than 10 million VND and have been withheld PIT at the rate of 10% if there is no requirement for tax finalization on this income.
- After an individual has authorized the tax finalization, the income paying organization has made the tax finalization on behalf of the individual, if it is discovered that the individual is subject to tax finalization with the tax authority directly, the income paying organization shall do not adjust the PIT finalization of the income paying organization, only issue tax deduction vouchers to individuals according to the settlement number and write it in the lower right corner with following contents: “Company ... has finalized PIT on behalf of Mr/Ms. .... (by authorization) in line (ordinal number) ... of the Appendix to List 05-1/BK-TNCN” so that he/she can perform direct tax finalization with tax authorities.

II. Who shall not be subject to personal income tax finalization in Vietnam

1. For individuals who directly settle with the Tax Authority

Individuals earning incomes from wages and salaries in the following cases are not required to finalize personal income tax:
- Individuals whose personal income tax amount to pay more after the final settlement of each year is from amount of 50,000 VND or less. Tax-exempt individuals in this case determine the exempted tax amounts themselves, are not required to submit personal income tax finalization dossiers and are not required to submit tax exemption dossiers. In case the settlement period from 2019 and earlier has already been settled before the effective date of Decree No. 126/2020/ND-CP, it will not be processed retroactively;
- Individuals whose payable personal income tax amount is smaller than the temporarily paid tax amount without request for tax refund or offset in the next tax return period;
- Individuals earning incomes from salaries and wages sign labor contracts for 3 months or more at a unit, and at the same time have an average monthly income of not more than VND 10 million in other places in a year and have may withhold PIT at the rate of 10%, if there is no request, no tax finalization is required for this income;
- Individuals whose employer buys life insurance (except voluntary retirement insurance), other optional insurance with accumulated premiums that the employer or insurance enterprise has deducted. except for PIT at the rate of 10% on the insurance premium amount corresponding to the part purchased or contributed by the employer to the employee, the employee is not required to finalize PIT on this income.

2. For organizations and individuals paying incomes from salaries and wages

In case the organization and individual does not pay income, it is not required to declare PIT finalization.

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