Is PIT finalization required if an individual does not earn any income in Vietnam?

Is PIT finalization required if an individual does not earn any income in Vietnam?

Pursuant to subsection d.1 point d clause 6 Article 8 of Decree 126/2020/ND-CP regarding personal income tax for organizations and individuals paying taxable income from wages and salaries; individuals earning income from wages and salaries authorizing tax finalization to the organization or individual paying the income; or individuals earning income from wages and salaries directly settling taxes with the tax authority as follows:

Types of taxes declared monthly, quarterly, annually, according to each occurrence of tax obligation and tax finalization declaration

...

6. Types of taxes, fees declared on an annual basis and settled at the time of dissolution, bankruptcy, cessation of operation, termination of contract, or reorganization of the enterprise. In the case of a conversion of the type of enterprise (excluding state-owned enterprises equitizing) where the converting enterprise inherits all tax obligations of the enterprise being converted, it is not required to declare tax finalization until the decision on converting the enterprise is made, and the enterprise declares finalization at year-end. Specifically, as follows:

...

d) Personal income tax for organizations and individuals paying taxable income from wages and salaries; individuals earning income from wages and salaries authorizing tax finalization to the organization or individual paying the income; individuals earning income from wages and salaries directly settling taxes with the tax authority. Specifically, as follows:

d.1) Organizations and individuals paying income from wages and salaries have the responsibility to declare tax finalization and settle on behalf of individuals who have authorized the income payer, regardless of whether tax deduction occurs or not. In cases where the organization or individual does not pay income, they are not required to declare PIT finalization. In cases where an individual is transferred from an old organization to a new organization due to organizational mergers, consolidations, splits, or conversions within the same system, the new organization is responsible for tax finalization authorized by individuals for the income part paid by the old organization and retrieves any personal income tax deduction certificates issued by the old organization (if applicable).

...

Thus, during the tax period, if the business does not pay income to employees, it is not required to declare PIT finalization.

Is PIT finalization required if an individual does not earn any income in Vietnam? (Image from Internet)

What are the PIT finalization for authorized income payers in Vietnam?

Pursuant to subitem 1 Section 4 Official Dispatch 883/TCT-DNNCN in 2022 from the General Department of Taxation guiding the PIT finalization for organizations and individuals authorized to pay income including:

- Declaration form for PIT finalization form number 05/QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC.

- Appendix of a detailed list of individuals subject to progressive tax accounting according to form number 05-1/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC.

- Appendix of a detailed list of individuals subject to full-rate tax accounting according to form number 05-2/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC.

- Appendix of a detailed list of dependents eligible for family circumstance deductions according to form number 05-3/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC.

In cases where individuals authorize income-paying organizations to settle tax on their behalf, individuals must prepare an Authorization Letter for PIT finalization starting from the tax period of 2021 according to form number 08/UQ-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC.

What are the penalties for failing to submit PIT finalization on time in Vietnam?

Pursuant to Article 13 of Decree 125/2020/ND-CP regulating penalties for violations regarding the deadline for submitting tax declaration dossier as follows:

Penalties for violations regarding the deadline for submitting tax declaration dossiers

1. Warning for violations of submitting tax declaration dossiers late by 1 to 5 days with mitigating circumstances.

2. Fine of 2,000,000 VND to 5,000,000 VND for violations of submitting tax declaration dossiers late from 1 day to 30 days, excluding cases specified in clause 1 of this Article.

3. Fine of 5,000,000 VND to 8,000,000 VND for violations of submitting tax declaration dossiers late from 31 days to 60 days.

4. Fine of 8,000,000 VND to 15,000,000 VND for the following acts:

a) Submitting tax declaration dossiers late from 61 days to 90 days;

b) Submitting tax declaration dossiers late from 91 days or more without incurring payable tax;

c) failing to submit tax declaration dossiers but no tax payable;

d) failing to submit annexes in accordance with tax management regulations for enterprises with related party transactions attached with corporate income tax finalization dossiers.

5. Fine of 15,000,000 VND to 25,000,000 VND for violations of submitting tax declaration dossiers late by over 90 days from the deadline, with incurred tax payable, and the taxpayer has paid the full amount into the state budget before the tax authority's inspection decision or before the tax authority establishes a record of the late submission of tax declaration dossiers in accordance with clause 11 Article 143 of the Tax Administration Law.

If the fine applicable under this clause exceeds the tax amount incurred on the tax declaration dossier, the maximum fine for this case is equal to the tax amount incurred payable according to the tax declaration dossier but not less than the median level of the fine frame prescribed in clause 4 of this Article.

6. Remedial measures:

a) Forcing full payment of late tax payment into the state budget for violations specified in clauses 1, 2, 3, 4, and 5 of this Article if the late submission of tax declaration dossiers leads to late tax payment;

b) Forcing tax declaration, and submission of annexes accompanying tax declaration dossiers for violations specified at point c, d clause 4 of this Article.

Additionally, pursuant to clause 5 of Article 5 Decree 125/2020/ND-CP regulating principles for imposing fines on administrative violations regarding tax and invoices as follows:

Principles for imposing fines for administrative violations regarding tax and invoices

...

5. For the same act of administrative violation regarding tax, invoices, the fine level for organizations is twice the fine level for individuals, excluding the fines for violations specified in Articles 16, 17, and 18 of this Decree.

Furthermore, pursuant to point a clause 4 Article 7 Decree 125/2020/ND-CP regulating the principles for applying fine levels for administrative violations regarding tax and invoices as follows:

Forms of penalties, remedial measures, and principles for applying fine levels when imposing penalties for administrative violations regarding tax and invoices

...

4. Principles for applying fine levels

a) Fine levels prescribed in Articles 10, 11, 12, 13, 14, 15, clauses 1, 2 Article 19, and Chapter III of this Decree are fine levels applied to organizations.

For taxpayers who are households, business households apply the fine level as for individuals.

...

Thus, failure to submit PIT finalization dossiers on time will be subject to administrative penalties according to legal regulations, with the lightest penalty being a warning. The fine ranges from 1,000,000 VND to 12,500,000 VND for individuals and from 2,000,000 VND to 25,000,000 VND for organizations, based on the lateness of dossier submission.

Furthermore, compulsory measures to rectify the consequences include full payment of late tax amounts into the state budget and submission of tax finalization declaration dossiers and annexes accompanying tax finalization declarations.