Shall an employee working for less than a year authorize the employer to settle their PIT in Vietnam?

Shall an employee working for less than a year authorize the employer to settle their PIT in Vietnam?

According to point d2, clause 6, Article 8 of Decree 126/2020/ND-CP, a resident individual having income from salaries or wages can authorize tax settlement to the income-paying organization or individual in the following cases:

(1) An individual who has income from salaries or wages, signs a labor contract for 3 months or more at one place, and is actually working there at the time the organization or individual paying the income carries out tax finalization, even if they have not worked for a full 12 months in the year.

- In the case where an employee is transferred from an old organization to a new one due to merger, consolidation, division, separation, conversion of the business type, or if both the old and new organizations are within the same system, the individual can authorize tax settlement to the new organization.

(2) An individual who has income from salaries or wages, signs a labor contract for 3 months or more at one place, and is actually employed there at the time the organization or individual paying the income carries out tax finalization, even if they have not worked for a full 12 months in the year; in addition, having sporadic income from other places with an average monthly income in the year not exceeding 10 million VND and has been subjected to a 10% personal income tax (PIT) withholding, provided there is no request for tax finalization for this income.

(3) A foreign individual who ends their working contract in Vietnam must declare tax finalization with the tax authority before departing. If the individual has not completed tax finalization with the tax authority, they must authorize the income-paying organization or another organization/person to settle the tax according to regulations on tax finalization for individuals.

Note: In this case, the income-paying organization or the organization/person receiving authorization for tax settlement is responsible for any additional PIT payments due or for the refund of overpaid taxes to the individual.

Therefore, if an individual works for less than 1 year (12 months), they can still authorize PIT tax settlement if they fall into one of the following two cases:

- Signing a labor contract for 3 months or more at one place and actually working there at the time the organization or individual paying the income carries out tax finalization.

- Signing a labor contract for 3 months or more at one place and actually working there at the time the organization or individual paying the income carries out tax finalization. Additionally, having sporadic income from other places but with an average monthly income in the year not exceeding 10 million VND and has been subjected to a personal income tax withholding at a rate of 10% without requiring tax settlement for this income.

Shall an employee working for less than a year authorize the employer to settle their PIT in Vietnam? (Image from the Internet)

What is the deadline for submitting PIT dossiers in Vietnam?

Based on points a and b, clause 2, Article 44 of the Tax Administration Law 2019 and Section 5 of Official Dispatch 883/TCT-DNNCN in 2022, the deadlines for declaring and submitting PIT tax finalization documents are as follows:

- For income-paying organizations: The deadline for submitting tax finalization declaration documents is the last day of the 3rd month following the end of the calendar year.

- For individuals directly finalizing taxes: The deadline for submitting tax finalization documents is the last day of the 4th month following the end of the calendar year. If an individual is entitled to a PIT refund but submits the tax finalization declaration late, no penalty for late filing of tax finalization declarations shall be applied.

- If the deadline for submitting tax finalization documents coincides with a holiday as per regulations, the deadline shall be extended to the next working day following that holiday according to the 2015 Civil Code.

What are cases where an employee is not required to settle PIT in Vietnam?

According to sub-section 1, Section II of Official Dispatch 883/TCT-DNNCN in 2022 guiding the settlement of PIT, individuals earning income from salaries and wages under the following circumstances will not be required to settle personal income tax:

- Individuals whose additional PIT to be paid after finalization is 50,000 VND or less. Such individuals are exempted from tax in this case and can self-determine the exempt amount; they are not obligated to submit tax finalization documents or tax exemption documents.

In case of tax settlement periods from 2019 and earlier that have been finalized prior to the effective date of Decree 126/2020/ND-CP, retrospective treatment shall not apply.

- Individuals whose payable PIT is less than the tax already temporarily paid without a request for a tax refund or offset against the next tax declaration period.

- Individuals earning income from salaries or wages who sign a labor contract for 3 months or more with one unit, while having additional sporadic income from other places with an average monthly income in the year not exceeding 10 million VND and having PIT withheld at a 10% rate; if not requested, they are not required to settle tax for this income.

- Individuals whose employer has purchased life insurance (excluding voluntary retirement insurance) or other non-mandatory insurance that accumulates insurance premiums, where the employer or insurer has withheld PIT at a rate of 10% on the insurance premium amount corresponding to the portion the employer has purchased or contributed for the employee, such employees are not required to settle PIT for this income.