How much salary is subject to PIT deduction using the progressive tax tariff in Vietnam?

When does an employer deduct personal income tax (PIT) for employees using the progressive tax tariff in Vietnam?

According to point b, clause 1, Article 25 of Circular 111/2013/TT-BTC, employers shall deduct personal income tax (PIT) using the progressive tax tariff for employees who have signed labor contracts with a duration of 3 months or more with the employer.

This applies even when employees sign multiple contracts of 3 months or more at different places.

If an individual has signed a labor contract of 3 months or more but resigns before the contract ends, the employer must still deduct tax according to the progressive tax tariff for income paid to the employee during their working period.

How much salary is subject to PIT deduction using the progressive tax tariff in Vietnam? (Image from the Internet)

How much salary is subject to PIT deduction using the progressive tax tariff in Vietnam?

Also at point b, clause 1, Article 25 of Circular 111/2013/TT-BTC it is stipulated:

Tax Deduction and certificates of tax deduction

1. Tax Deduction

...

b) Income from salaries and wages

...

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

Reference to Article 7 of Circular 111/2013/TT-BTC provides:

Basis for Tax Calculation on Taxable Income from Business, Salary, and Wages

The basis for calculating tax on income from business and income from salaries and wages is taxable income and tax rate. Specifically:

1. Taxable income is determined by taxable income as guided in Article 8 of this Circular minus (-) the following deductions:

a) Deductions for family circumstances as guided in clause 1, Article 9 of this Circular.

b) Payments for insurance, voluntary retirement fund contributions as guided in clause 2, Article 9 of this Circular.

c) Contributions to charity, humanitarian, and study promotion funds as guided in clause 3, Article 9 of this Circular.

Additionally, according to Article 1 of Resolution 954/2020/UBTVQH14 regarding family circumstance deductions:

Family Circumstance Deductions

Adjustment of family circumstance deduction as stipulated in clause 1, Article 19 of the Law on Personal Income Tax No. 04/2007/QH12 as amended and supplemented by Law No. 26/2012/QH13 as follows:

1. Deduction for the taxpayer is 11 million VND/month (132 million VND/year);

2. Deduction for each dependent is 4.4 million VND/month.

Based on the above regulations, income from salaries and wages for resident individuals is only subject to PIT deduction using the progressive tax tariff if, after deductions, the remaining income exceeds 0 VND. Specifically:

* Formula to determine taxable income

Taxable Income = Taxable Income - Deductions.

Where:

- Taxable Income: The total salary, wage income received by the individual (after excluding non-taxable amounts, if any).

- Deductions include:

+ Family Circumstance Deduction:

++ 11 million VND/month (132 million VND/year) for the taxpayer.

++ 4.4 million VND/month for each dependent.

+ Payments for insurance (social insurance, health insurance, unemployment insurance) and voluntary retirement fund contributions as specifically guided in clause 2, Article 9 of Circular 111/2013/TT-BTC.

+ Contributions to charity, humanitarian, and study promotion as specifically guided in clause 3, Article 9 of Circular 111/2013/TT-BTC.

In conclusion, after calculation, the employee is only subject to PIT deduction using the progressive tax tariff when their taxable income exceeds the total deductions, simply understood as:

- Individuals with a salary income exceeding 11 million VND/month (after deducting insurance and family circumstance deductions) will be subject to PIT deduction.

- Specific taxable income levels will vary depending on the number of dependents and other deductions applicable to each individual.

Does the employer issue certificates of tax deduction for employees when deducting PIT in Vietnam?

According to clause 2, Article 25 of Circular 111/2013/TT-BTC, regulations regarding the issuance of certificates of tax deduction are as follows:

Tax Deduction and certificates of tax deduction

...

2. certificates of tax deduction

a) Organizations or individuals paying income, which has been subjected to tax deduction as per clause 1 of this Article, must issue a certificate of tax deduction upon request from the individual whose tax was deducted. In cases where individuals authorize tax finalization, no certificate of tax deduction is issued.

b) Issue of certificates of tax deduction in certain specific cases as follows:

b.1) For individuals not signing a labor contract or signing a labor contract of less than three (03) months: individuals have the right to request the income-paying organization or individual to issue a certificate of tax deduction for each tax deduction or issue one document for multiple tax deductions in a tax period.

Example 15: Mr. Q signed a service contract with employer X to take care of plants on the employer's premises on a monthly basis from September 2013 to April 2014. Mr. Q’s income is paid monthly by the employer at 03 million VND. In this case, Mr. Q can request the employer to issue a certificate of tax deduction each month or issue one document reflecting the tax deducted from September to December 2013, and another document for the period from January to April 2014.

b.2) For individuals signing labor contracts of three (03) months or more: the income-paying organization or individual only issues one certificate of tax deduction per tax period.

Example 16: Mr. R signed a long-term labor contract (from September 2013 to August 2014) with employer Y. In this case, if Mr. R is required to finalize taxes directly with the tax authority and requests the employer to issue a certificate of tax deduction, the employer will issue 01 document reflecting the tax deducted from September to December 2013, and 01 document for the period from January to August 2014.

Thus, when deducting PIT, the employer is responsible for issuing a certificate of tax deduction upon the employee's request, unless the individual has authorized tax finalization.