Shall incomes from working under probation contract subject to tax deduction in Vietnam?

Shall incomes from working under probation contract subject to tax deduction in Vietnam?

Based on Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC, the regulation is as follows:

Tax Deduction and Tax Deduction Certificates

1. Tax Deduction

...

i) Tax Deduction for Certain Cases

Organizations and individuals paying salaries, wages, or other remuneration to resident individuals without labor contracts (as guided in Points c, d, Clause 2, Article 2 of this Circular) or with labor contracts of less than three (03) months with a total payment of income from two million (2,000,000) VND/time or more must deduct tax at a rate of 10% on the income before paying it to the individual.

In cases where an individual has only one source of income subject to tax deduction at the above rate but estimates that their total taxable income after family allowances does not reach the taxable threshold, they can make a commitment (using the form issued along with tax management guidance documents) and send it to the income-paying organization, so the organization can temporarily not deduct personal income tax.

Based on the individual’s commitment, the income-paying organization does not deduct tax. At the end of the tax year, the income-paying organization must still summarize the list and income of individuals who have not reached the tax deduction threshold (using the form issued along with tax management guidance documents) and submit it to the tax authority. The individual making the commitment is responsible for their commitment, if fraud is detected, it will be handled according to the provisions of the Law on Tax Administration.

Individuals making commitments as guided in this point must have taxpayer registration and a tax code at the time of commitment.

Given this, when signing a probation contract with an employee for less than 3 months with a total payment of income from two million (2,000,000) VND/time or more, tax must be deducted at a rate of 10% on the income before paying it to the probationary individual.

In cases where the probationary individual has only one source of income subject to tax deduction at the above rate but estimates that their total taxable income after family allowances does not reach the taxable threshold, they can make a commitment so the company can use it as a basis to temporarily not deduct personal income tax.

Shall incomes from working under probation contract subject to tax deduction in Vietnam? (Image from the Internet)

Shall certificates of tax deduction be issued to individuals who authorize the finalization of personal income tax in Vietnam?

Based on Clause 2, Article 25 of Circular 111/2013/TT-BTC, the regulation on tax deduction certificates is as follows:

Tax Deduction and Tax Deduction Certificates

...

2. Tax Deduction Certificates

a) Organizations and individuals paying incomes that have deducted tax as guided in Clause 1 of this Article must issue tax deduction certificates upon request from the individuals being deducted. In cases where the individual authorizes the finalization of taxes, the tax deduction certificate is not issued.

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

b.1) For individuals without labor contracts or with labor contracts of less than three (03) months: individuals have the right to request the income-paying organization or individual to issue tax deduction certificates for each tax deduction or issue one certificate reflecting multiple tax deductions in one tax period.

Example 15: Mr. Q signs a service contract with Company X to take care of the trees in the company's campus once a month from September 2013 to April 2014. Mr. Q's income is paid by the company each month with an amount of 03 million VND. In this case, Mr. Q can request the company to issue a tax deduction certificate each month or a certificate reflecting the taxes deducted from September to December 2013 and one certificate 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 tax deduction certificate in one tax period.

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

Given this, individuals authorizing the finalization of personal income tax to the company will not be issued tax deduction certificates by the company.

Vietnam: How many days after submitting tax finalization will personal income tax be refunded?

Based on Article 75 of the Law on Tax Administration 2019, it is regulated as follows:

Time Limit for Handling Tax Refund Documents

1. For documents under the pre-refund category, the tax authority must decide on the tax refund for the taxpayer or notify the taxpayer to submit the documents for inspection before refund if falling under the cases specified in Clause 2, Article 73 of this Law or notify the taxpayer of non-refund if the documents do not meet the refund conditions, within 06 working days from the date the tax authority issues a notice of acceptance of the documents and the time limit for handling tax refund documents.

In cases where the information declared on the tax refund documents differs from the management information of the tax authority, the tax authority will notify in writing for the taxpayer to explain or supplement the information. The explanation or supplement time is not included in the time limit for handling tax refund documents.

2. For documents under the pre-inspection category, the tax authority must decide on the tax refund for the taxpayer or non-refund if the documents do not meet the refund conditions, within 40 days from the date the tax authority issues a written notice of acceptance of the documents and the time limit for handling tax refund documents.

3. Beyond the time limits specified in Clauses 1 and 2 of this Article, if the delay in issuing the tax refund decision is due to the fault of the tax authority, in addition to the tax amount to be refunded, the tax authority must also pay interest at a rate of 0.03%/day on the amount to be refunded and the number of delayed days. The interest amount is sourced from the central budget according to the provisions of the law on state budget.

Thus, the personal income tax refund time is regulated as follows:

- For documents under the pre-refund category, the tax authority must decide on the tax refund for the taxpayer not later than 06 working days from the date the tax authority issues a notice of acceptance of the documents and the time limit for handling tax refund documents.

- For documents under the pre-inspection category, the tax authority must decide on the tax refund for the taxpayer not later than 40 days from the date the tax authority issues a written notice of acceptance of the documents and the time limit for handling tax refund documents.