For foreigners working in Vietnam under an employment contract, what is the method of personal income tax deduction applying to the first month's income?

For foreigners working in Vietnam under an employment contract, what is the method of personal income tax deduction applying to the first month's income?

Based on Article 25 of Circular 111/2013/TT-BTC, as amended by Clauses 1 and 2 of Article 20 Circular 92/2015/TT-BTC as follows:

Tax deduction and tax deduction certificates

1. Tax deduction

Tax deduction is when an organization or individual paying income calculates the taxable amount to be deducted from the tax payer's income before paying the income. Specifically:

a) Income of a non-resident individual

Organizations and individuals paying taxable income to non-resident individuals are responsible for deducting personal income tax before paying the income. The amount of tax to be deducted is determined according to the guidance in Chapter III (from Article 17 to Article 23) of this Circular.

b) Income from salaries and wages

b.1) For resident individuals signing employment contracts of three (03) months or more, the organization or individual paying the income shall deduct tax according to the partially progressive tax schedule, including the case where the individual signs a contract of three (03) months or more at multiple places.

b.2) For resident individuals signing employment contracts of three (03) months or more but cease work before the contract ends, the organization or individual paying the income still deducts tax according to the partially progressive tax schedule.

b.3) For foreign individuals working in Vietnam, the organization or individual paying the income bases the tax deduction on the working duration in Vietnam recorded in the contract or document appointing them to work in Vietnam. Tax is temporarily deducted according to the partially progressive tax schedule (for individuals working in Vietnam for 183 days or more in the tax year) or the full tax schedule (for individuals working in Vietnam for less than 183 days in the tax year).

b.4) Insurance businesses are responsible for deducting tax on the accumulated premiums paid by the employer for life insurance (excluding voluntary pension insurance) or other non-compulsory insurance with premium accumulation, provided by an insurer established and operating under Vietnamese law. The amount of tax to be deducted is determined according to Clause 2, Article 14 of Circular No. 92/2015/TT-BTC.

Organizations and individuals paying income are responsible for deducting tax from the insurance premiums purchased or contributed before paying salaries to employees for life insurance, other non-compulsory insurance with premium accumulation from an insurer that is not established and operating under Vietnamese law, permitted to sell insurance in Vietnam, which the organization or individual pays for the employee. The amount of tax to be deducted is determined according to Clause 2, Article 14 of Circular No. 92/2015/TT-BTC.

b.5) The tax amount to be deducted for income from salaries and wages of resident individuals is determined according to the guidance in Article 7 of this Circular; for non-resident individuals, it is determined according to Article 18 of this Circular.

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Accordingly, based on the regulations, it is evident that for foreigners working in Vietnam under an employment contract, the first month's income tax deduction method is the partially progressive tax schedule (for individuals working in Vietnam for 183 days or more in the tax year) or the full tax schedule (for individuals working in Vietnam for less than 183 days in the tax year).

For foreigners working in Vietnam under an employment contract, what is the method of personal income tax deduction applying to the first month's income? (Image from Internet)

When is a taxpayer exempted from submitting a tax return in Vietnam?

Based on Clause 3, Article 7 of Decree 126/2020/ND-CP, supplemented by Clause 2, Article 1 of Decree 91/2022/ND-CP, stipulates cases in which taxpayers are exempted from submitting tax returns as follows:

- Taxpayers engaged in activities or business that are not subject to taxation according to the law on tax for each type of tax.

- Individuals with tax-exempt income according to the law on personal income tax and as specified in Point b, Clause 2, Article 79 of the Tax Administration Law 2019 except for individuals receiving inheritance or gifts that are real estate; real estate transfers.

- Export processing enterprises solely engaged in export activities are exempted from submitting a VAT return.

- Taxpayers temporarily suspending operations or business according to the regulations in Article 4 of this Decree.

- Taxpayers who have filed a request to terminate the tax identification number, except for cases of termination of operations, contract or reorganization of the enterprise according to Clause 4, Article 44 of the Tax Administration Law 2019.

- Personal income tax declarants who are organizations or individuals paying income that must declare personal income tax monthly, quarterly but have no income tax withholding in the relevant month or quarter.

What are the penalties for failing to submit a PIT declaration in Vietnam?

Based on Article 13 of Decree 125/2020/ND-CP, the regulations are as follows:

Penalties for late filing of tax returns

1. Warning for delays in filing a tax return from 01 to 05 days if there are mitigating circumstances.

2. Fines ranging from 2,000,000 VND to 5,000,000 VND for delays in filing a tax return from 01 to 30 days, except as stipulated in Clause 1 of this Article.

3. Fines ranging from 5,000,000 VND to 8,000,000 VND for delays in filing a tax return from 31 to 60 days.

4. Fines ranging from 8,000,000 VND to 15,000,000 VND for any of the following actions:

a) Filing a tax return 61 to 90 days late;

b) Filing a tax return more than 90 days late without incurred payable tax;

c) failing to submit a tax return but no incurred payable tax;

d) Not submitting annexes required by tax management regulations for enterprises with related-party transactions along with corporate income tax finalization dossiers.

5. Fines ranging from 15,000,000 VND to 25,000,000 VND for filing a tax return more than 90 days late from the due date, with incurred payable tax, and the taxpayer has already paid the full tax, late payment interest into the state budget before the tax authority issues a tax inspection or audit decision or before the tax authority makes a record of the delay in filing a tax return as per Clause 11, Article 143 Tax Administration Law.

If the penalty amount under this clause exceeds the payable tax on the tax return, the maximum penalty is limited to the amount of the payable tax on the tax return but not less than the average level of the penalty range specified in Clause 4 of this Article.

6. Remedial measures:

a) Required to pay the full amount of late payment tax to the state budget for violations specified in Clauses 1, 2, 3, 4, and 5 of this Article if the taxpayer's late filing leads to late tax payment;

b) Required to submit the tax return and annexes along with the tax return for violations under Point c, d Clause 4 of this Article.

According to these regulations, the administrative penalty for intentionally failing to file a PIT return is determined based on the overdue duration.

Additionally, violators must implement remedial measures alongside administrative penalties.

Note: The administrative penalties above apply to organizations. For individual violators, the administrative penalty is half of that imposed on organizations.