What are conditions for individuals to authorize personal income tax finalization to an income payer in Vietnam?

Who is a personal income taxpayer in Vietnam?

Based on Article 2 of the Law on Personal Income Tax 2007, the regulations regarding personal income taxpayers are as follows:

- Resident individuals who earn taxable income generated within and outside the territory of Vietnam

- Non-resident individuals who earn taxable income generated within the territory of Vietnam.

Furthermore, residents and non-residents are defined as follows:

- A resident individual is someone who meets one of the following conditions:

+ Present in Vietnam for 183 days or more within a calendar year, or within 12 consecutive months from the first day of presence in Vietnam;

+ Having a permanent residence in Vietnam, including a registered permanent residence or a rented house in Vietnam under a lease contract.

- A non-resident individual is a person who does not meet the conditions specified in Clause 2, Article 2 of the Law on Personal Income Tax 2007.

What are conditions for individuals to authorize personal income tax finalization to an income payer in Vietnam?

According to Subsection d.1 and d.2, Point d, Clause 6, Article 8 of Decree 126/2020/ND-CP, the regulations regarding individuals with income from salaries or wages authorizing tax finalization to an income payer are as follows:

Types of taxes declared monthly, quarterly, yearly, separately, and annual tax finalization declarations

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6. Types of taxes, annual collections and taxes unsettled until the time of dissolution, bankruptcy, cessation of operation, termination of contract, or organizational restructuring. In cases of business model change (excluding equitized state-owned enterprises) where the transformed enterprise inherits all tax obligations of the transformed enterprise, tax finalization declarations to the time of decision on business transformation are not required; rather, they must declare tax finalization at the year's end. To be specific: as follows:

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d) Personal income tax for organizations and individuals that pay income subject to personal income tax from salaries, wages; individuals with income from salaries, wages authorize tax finalization to organizations, individuals paying income; individuals with income from salaries, wages directly finalizing their taxes with the tax authority. To be specific: as follows:

d.1) Organizations, individuals paying income from salaries, wages are responsible for declaring tax finalization and settling taxes on behalf of individuals who have authorized that have paid such incomes, regardless of whether tax withholding arises or not. In cases where no income is paid, tax finalization declaration is not required. In situations where an employee is transferred from an old organization to a new one due to a merger, consolidation, division, separation, transformation, or within the same system, the new organization is responsible for tax finalization based on individual authorization for both the portion of income paid by the old organization and retrieve any personal income tax withholding certificates from the old organization (if any).

d.2) Resident individuals with income from salaries, wages authorize tax finalization to organizations, individuals paying income. To be specific:

Individuals with income from salaries, wages with labor contracts of 3 months or more at one place and effectively working there at the time the income payer carries out the tax finalization, even if they have not worked for a full 12 months in a year. If the individual is an employee transferred from an old organization to a new one per point d.1 of this clause, the individual is allowed to authorize tax finalization to the new organization.

Individuals with income from salaries, wages with labor contracts of 3 months or more at one place and effectively working there at the time the income payer carries out tax finalization, even if they have not worked for a full 12 months in a year; simultaneously having sporadic income from other sources not exceeding an average of 10 million VND per month within the year and having been subject to 10% personal income tax withholding if they do not request tax finalization for this income.

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Thus, individuals can authorize personal income tax finalization to an income payer if they meet one of the following conditions:

- Individuals with income from salaries, wages with labor contracts of 3 months or more at one place and effectively working at that time the income payer carries out tax finalization, even if they have not worked for a full 12 months in a year.

- Individuals being employees transferred from an old organization to a new one due to the old organization undergoing a merger, consolidation, division, separation, conversion of business type, or both the old and new organizations are within the same system.

- Individuals with income from salaries, wages under labor contracts of 3 months or more and effectively working at the place at the time of tax finalization even in cases where the employee does not work the full 12 months in a year, and simultaneously have additional income at other places with an average monthly not exceeding 10 million VND and have been subjected to 10% tax withholding.

What are conditions for individuals to authorize personal income tax finalization to an income payer in Vietnam? (Image from Internet)

Vietnam: What does the declaration for personal income tax finalization concerning an income payer authorized by individuals include?

According to Subsection 1, Section 4 of Official Dispatch 883/TCT-DNNCN of 2022 from the General Department of Taxation guiding the dossier for declaring personal income tax finalization for organizations, individuals paying income authorized by individuals includes:

- Personal income tax finalization declaration form No. 05/QTT-TNCN issued with Appendix 2 of Circular 80/2021/TT-BTC.

- Appendix of a detailed list of individuals subject to tax calculated according to the progressive tax table form No. 05-1/BK-QTT-TNCN issued with Appendix 2 of Circular 80/2021/TT-BTC.

- Appendix of a detailed list of individuals subject to tax calculated according to the full tax rate form No. 05-2/BK-QTT-TNCN issued with Appendix 2 of Circular 80/2021/TT-BTC.

- Appendix of a detailed list of dependents for family allowance deductions form No. 05-3/BK-QTT-TNCN issued with Appendix 2 of Circular 80/2021/TT-BTC.

In cases individuals authorize the income-paying organization to finalize on their behalf, they need to prepare the Authorization Letter for Personal Income Tax Finalization from the tax period year 2021 according to form No. 08/UQ-QTT-TNCN issued with Appendix 2 of Circular 80/2021/TT-BTC.