Vietnam: When must the certificate of personal income tax withholding be prepared?

Vietnam: When must the certificate of personal income tax withholding be prepared?

Pursuant to Article 31 of Decree 123/2020/ND-CP, the certificate of personal income tax withholding must be prepared at the time the organization or individual paying the income withholds the personal income tax from the individual.

Additionally, the certificate of personal income tax withholding must be given to the individual whose income is withheld.

The issuance time of the certificate of personal income tax withholding is when the individual requests the organization or individual paying the income for it.

Previously, the certificate of personal income tax withholding issued to the individual could be a paper document or an electronic document containing all the information required by law. However, now all businesses, organizations, and individuals must use electronic certificate of personal income tax withholdings.

Vietnam: When must the certificate of personal income tax withholding be prepared? (Image from the Internet)

What are procedures to purchase the certificate of personal income tax withholding in Vietnam?

According to Clause 2, Article 33 of Decree 123/2020/ND-CP, regarding the use of electronic certificate of personal income tax withholdings, the organization deduction the personal income tax may develop its own software system to use the electronic certificates.

The procedure to purchase electronic certificate of personal income tax withholdings from each provider may vary. However, businesses still need to follow these steps:

Step 1: The business reviews and selects an electronic certificate of personal income tax withholding package that suits its needs.

Step 2: Provide the registration documents for the service, and the sales staff of the software provider will proceed to draft the service agreement for the electronic certificates for the customer.

Typically, the registration documents will require the following:

- 01 scanned copy of the business's registration certificate- 01 scanned copy of the legal representative's ID card or Citizen Identity Card or passport.- In case of an authorized signatory: additional provision of the authorization letter and the authorized person's ID card or Citizen Identity Card or passport.

Step 3: The software provider's staff will guide the customer on how to use the electronic certificates.

Step 4: Upon completion of the trial period, the provider will officially hand over the software for the customer to use.

Note: Official Dispatch 2455/TCT-DNNCN in 2022 by the General Department of Taxation also clearly states that organizations using electronic certificate of personal income tax withholdings are not required to register, notify issuance, or transfer electronic data to the tax authority; the deduction organization may develop its own software system to use the electronic certificates, ensuring mandatory content as prescribed.

Is personal income tax deduction required for probation contracts?

According to Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC, the regulations are as follows:

tax deduction and tax deduction certificates

1. Tax deduction

...

i) Tax deduction in some other cases

Organizations and individuals paying wages, remuneration, or other payments to resident individuals without a labor contract (as guided in Points c and d, Clause 2, Article 2 of this Circular) or with a labor contract for less than three (03) months with a total amount of income payment of two million (2,000,000) VND or more per occasion must withhold tax at a rate of 10% on the income before paying it to the individuals.

In cases where individuals have only this income, which is subject to tax deduction according to the stated rate, but the estimated total taxable income after family deduction does not reach the taxable threshold, these individuals can make a commitment (according to the form issued with the tax management guideline document) and send it to the organization paying the income so that the organization can temporarily refrain from personal income tax deduction.

Based on the individual's commitment, the income-paying organization will not withhold tax. At the end of the tax year, the income-paying organization must compile a list and income of individuals who are exempt from tax deduction (according to the form issued with the tax management guideline document) and submit it to the tax authority. Individuals making the commitment must be responsible for their commitments; if any fraud is detected, they will be handled according to the Tax Management Law.

Individuals making commitments as guided under this point must have taxpayer registration numbers and tax codes at the time of commitment.

...

Thus, when entering into a probation contract with an employee for less than 3 months and the total income payment is two million (2,000,000) VND or more per occasion, it is required to withhold tax at a rate of 10% on the income before paying it to the individual on probation.

In cases where the individual on probation has only this income, which is subject to the above deduction rate, but the estimated total taxable income after family deductions does not reach the taxable threshold, they can make a commitment as a basis for the company to temporarily refrain from deduction personal income tax.