Is tax finalization required when income is below the taxable threshold for personal income tax in Vietnam?

Is tax finalization required when income is below the taxable threshold for personal income tax in Vietnam?

Based on the provisions at Point d, Clause 6, Article 8 of Decree 126/2020/ND-CP as follows:

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

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6. Types of taxes, accounts subject to annual settlement and settlement up to the time of dissolution, bankruptcy, cessation of activities, termination of contracts, or organization restructuring. In the case of converting the type of enterprise (excluding state-owned enterprises that are privatized) where the converted enterprise inherits all tax obligations of the transformed enterprise, there is no need to declare tax finalization up to the time of the decision on enterprise transformation, the enterprise declares finalization at the end of the year. Specifically: as follows:

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d) Personal income tax for organizations, individuals paying taxable income from wages, salaries; individuals with income from wages and salaries authorized to finalize tax for organizations, individuals paying income; individuals with income from wages, salaries directly finalizing tax with the tax authority. Specifically: as follows:

d.1) Organizations and individuals paying income from wages and salaries are responsible for declaring finalization and finalization on behalf of individuals who have authorized the organization, individuals paying income, regardless of whether there is tax withholding or not. In cases where organizations and individuals do not arise in paying income, there is no need to declare personal income tax finalization. In cases where an individual is an employee transferred from an old organization to a new organization due to the old organization performing a merger, consolidation, division, separation, transformation of the enterprise type or the old and new organizations are within the same system, the new organization is responsible for finalizing tax on behalf of the individual concerning the income portion paid by the old organization and retrieving personal income tax deduction documents issued by the old organization to the employee (if any).

d.2) Resident individuals with income from wages, salaries authorized to finalize tax for organizations, individuals paying income. Specifically:

Individuals with income from wages, salaries signing labor contracts of 03 months or more at one place and currently working there at the time the organization, individuals paying income carry out tax finalization, even if not working for the entire 12 months in the year. In cases where the individual is an employee transferred from an old organization to a new organization as stipulated in point d.1 of this clause, the individual can authorize the new organization to finalize tax.

Individuals with income from wages, salaries signing labor contracts of 03 months or more at one place and currently working there at the time the organization, individuals paying income perform tax finalization, even if not working for the entire 12 months in the year; simultaneously having casual income in other places averaging monthly in the year not exceeding 10 million VND and have been deducted personal income tax at a rate of 10% if there is no request for tax finalization for this income portion.

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Thus, even though the income has not reached the level to pay PIT, individuals are still required to finalize the 2025 tax (depending on the case where the individual authorizes the organization, individual paying income to finalize, or directly declares personal income tax finalization with the tax authority).

Additionally, according to the guidance in Official Dispatch 2783/CTTPHCM-TTHT 2024, the subjects not required to finalize tax are as follows:

- Individuals with a personal income tax amount to be paid after annual settlement of 50,000 VND or less. Individuals exempt from tax in this case are self-responsible for determining the exempted tax amount, not required to file a personal income tax finalization dossier, nor required to file a tax exemption dossier. In case the settlement period before 2019 has been settled before the effective date of Decree 126/2020/ND-CP, retrospective handling is not applied;

- Individuals with a personal income tax payable smaller than the temporarily paid tax without a request for tax refund or offset against the subsequent tax declaration period;

- Individuals with income from wages, salaries with labor contracts of 03 months or more at one unit and, simultaneously, having casual income in other places with an average monthly income not exceeding 10 million VND and have been deducted personal income tax at a rate of 10% if there is no request, do not need to finalize tax for this income portion;

- Individuals purchased life insurance (excluding voluntary pension insurance), other non-compulsory insurance with accumulated insurance premiums by the employer or insurer, who have deducted personal income tax at a rate of 10% on the premium amount corresponding to the employer's purchase or contribution for the individual, do not need to finalize personal income tax for this income portion.

Is tax finalization required when income is below the taxable threshold for personal income tax in Vietnam? (Image from the Internet)

Vietnam: What does the personal income tax finalization dossier include?

Based on Article 43 of the Tax Administration Law 2019 and Circular 80/2021/TT-BTC regulating the personal income tax finalization dossier. Additionally, based on Sub-section 1 Section 4 of Official Dispatch 13762/CTHN-HKDCN 2023 issued by the Hanoi Tax Department also provides guidance on personal income tax finalization.

From these regulations, the personal income tax finalization dossier includes:

(1) For individuals directly finalizing personal income tax with tax authorities, the dossier includes:

+ Personal income tax final declaration form No. 02/QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

+ Appendix of deductions for dependents form No. 02-1/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

+ Copies (photocopies from the original) of documents proving deducted or temporarily paid taxes in the year, taxes paid abroad (if any). In cases where the income-paying organization does not issue withholding tax documents due to its cessation of operations, the tax authority will consider the taxpayer's dossier based on the tax sector database without requiring withholding tax documents.

In cases where organizations, individuals paying income use electronic PIT withholding documents, the taxpayer uses the printed version converted from the original electronic PIT withholding document sent by the income-paying organization to the taxpayer.

+ Copies of the Tax Deduction Certificate (clearly stating the payment of taxes according to the tax return) issued by the income-paying agency or certified bank documents for taxes paid abroad, in case foreign regulations do not require the issuance of a tax payment confirmation certificate.

+ Copies of invoices documenting contributions to charity, humanitarian, and educational promotion funds (if any).

+ Documents proving payment from foreign income-paying units, organizations, in cases where individuals receive income from international organizations, Embassies, Consulates, and receive income from abroad.

+ The registration dossier for dependents as prescribed at Point g, Clause 1, Article 9 of Circular 111/2013/TT-BTC, amended by Article 1 of Circular 79/2022/TT-BTC (if applying deductions for dependents at the time of tax finalization for dependents not yet registered).

(2) For organizations, individuals paying income, the personal income tax finalization dossier includes:

+ Personal income tax final declaration form No. 05/QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

+ Appendix for detailed listing of individuals taxed by progressive tariff schedule form No. 05-1/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

+ Appendix for detailed listing of individuals taxed at a full tax rate form No. 05-2/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

+ Appendix for detailed listing of dependents reducing family circumstances form No. 05-3/BK-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

(3) In cases where individuals authorize income-paying organizations to finalize on their behalf, the individual completes a Personal Income Tax Finalization Authorization Form for the tax year 2024 per form No. 08/UQ-QTT-TNCN issued with Appendix 2 Circular 80/2021/TT-BTC, dated September 29, 2021, by the Ministry of Finance.

When is the deadline for submitting the personal income tax finalization declaration in Vietnam?

Pursuant to Point a, Point b, Clause 2, Article 44 of the Tax Administration Law 2019, the deadline for declaring and submitting the Personal Income Tax Finalization dossier is as follows:

(1) For organizations paying income: The deadline for submitting the tax finalization declaration dossier is no later than the last day of the 3rd month from the end of the calendar year.

(2) For individuals directly finalizing tax: The deadline for submitting the tax finalization dossier is no later than the last day of the 4th month from the end of the calendar year.

In cases where individuals have personal income tax refunds but are late in submitting the finalization declaration as required, no penalty for late tax finalization declaration will apply.

- In cases where the tax finalization dossier submission deadline coincides with a prescribed holiday, the deadline for submitting the tax finalization dossier is calculated on the next working day following that holiday, in accordance with the Civil Code 2015.