What are cases of PIT withholding according to the progressive tax rate schedule?

Are income from wages and salaries subject to PIT withholding in Vietnam?

According to Article 28 of Decree 65/2013/ND-CP, the guidelines are as follows:

Tax withholding

1. Tax withholding involves the organization or individual paying income deducting the payable tax amount from the taxpayer’s income before releasing the income.

2. Types of income subject to tax withholding:

a) Income of non-resident individuals, including cases not physically present in Vietnam;

b) Income from wages, salaries, remunerations, including brokerage activities;

c) Income from activities as insurance agents, lottery agents, and multilevel marketing;

d) Income from capital investment;

đ) Income from capital transfer of non-resident individuals, transferring securities;

e) Income from winnings;

g) Income from royalties;

h) Income from franchising.

Income from wages and salaries is subject to PIT withholding before the organization or individual pays the income to the employee.

What are cases of PIT withholding according to the progressive tax rate schedule? (Image from the Internet)

What are cases of PIT withholding according to the progressive tax rate schedule in Vietnam?

Based on point b, clause 1, Article 25 of Circular 111/2013/TT-BTC, the tax withholding guidelines are outlined as follows:

Tax withholding and Tax withholding certificates

1. Tax withholding

...

b) Income from wages, salaries

b.1) For resident individuals signing labor contracts of three (03) months or more, the organization or individual paying income shall deduct tax according to the progressive tax rate schedule, even in cases where individuals sign contracts of three (03) months or more at multiple places.

b.2) For resident individuals signing labor contracts of three (03) months or more but terminating before the contract ends, the organization or individual paying income shall still deduct tax according to the progressive tax rate schedule.

...

Thus, the withholding of PIT according to the progressive tax rate schedule is conducted for resident individuals who sign labor contracts of three (03) months or more, even in cases where individuals sign contracts of three (03) months or more at multiple places.

Note: In the case where resident individuals sign labor contracts of three (03) months or more but resign before the contract ends, the organization or individual paying income shall still deduct tax according to the progressive tax rate schedule.

What is the income threshold for PIT withholding according to the progressive tax rate schedule in Vietnam?

Also at point b, clause 1, Article 25 of Circular 111/2013/TT-BTC it is stipulated:

Tax withholding and Tax withholding certificates

1. Tax withholding

...

b) Income from wages, salaries

...

b.5) The deductible tax amount for income from wages and salaries of resident individuals is determined according to the guidelines in Article 7 of this Circular; for non-resident individuals, it is determined according to Article 18 of this Circular.

Referring to Article 7 of Circular 111/2013/TT-BTC, the guidelines are as follows:

Basis for Tax Calculation on Taxable Income from Business, Wages, and Salaries

The basis for tax calculation on income from business and income from wages and salaries is taxable income and tax rate. To be specific:

1. Taxable income is determined by subtracting (-) from taxable income according to the guidelines in Article 8 of this Circular the following withholdings:

a) Personal withholdings according to paragraph 1, Article 9 of this Circular.

b) Insurance contributions, voluntary pension funds according to paragraph 2, Article 9 of this Circular.

c) Charitable, humanitarian, and educational promotion contributions according to paragraph 3, Article 9 of this Circular.

Additionally, according to Article 1 of Resolution 954/2020/UBTVQH14 regulating the family circumstance withholding level as follows:

Family Circumstance withholding Level

Adjust the family circumstance withholding level specified in paragraph 1, Article 19 of the Personal Income Tax Law No. 04/2007/QH12, amended and supplemented according to Law No. 26/2012/QH13 as follows:

1. withholding level for the taxpayer is 11 million VND/month (132 million VND/year);

2. withholding level for each dependent is 4.4 million VND/month.

Based on the above regulations, income from wages and salaries of resident individuals is only subject to PIT withholding if, after withholdings, the remaining income exceeds 0 VND. To be specific:

* Formula for determining taxable income

Taxable income = Taxable income - withholdings.

Where:

- Taxable income: Total income from wages and salaries received by the individual (after excluding tax-free items, if any).

- withholdings include:

+ Personal withholdings:

++ 11 million VND/month (132 million VND/year) for the taxpayer.

++ 4.4 million VND/month for each dependent.

+ Insurance contributions (social insurance, health insurance, unemployment insurance) and voluntary pension funds as guided in paragraph 2, Article 9 of Circular 111/2013/TT-BTC.

+ Charitable, humanitarian, educational promotion contributions as guided in paragraph 2, Article 9 of Circular 111/2013/TT-BTC.

In summary, individuals with income from wages and salaries are only subject to PIT withholding when their taxable income after withholdings (such as family circumstance withholding, insurance) exceeds 0 VND.

- If individuals have no dependents, total income after insurance withholdings must exceed 11 million VND/month to be taxable.

- If there are dependents, this income threshold increases by 4.4 million VND/month for each dependent.