What is PIT finalization in Vietnam? What are the cases in which employees in Vietnam are not required to finalize PIT?

What is PIT finalization in Vietnam?

Under the provisions of Clause 10, Article 3 of the Tax Administration Law 2019:

Explanation of terms

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10. Tax finalization means the calculation of tax accrued in a tax year or over the period from the beginning of a tax year to the termination of taxable activities, or over the period during which taxable activities occur as prescribed by law..

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PIT finalization can be understood as individuals with taxable income according to the regulations of the PIT Law 2007 personally or authorize income payers to determine the payable tax amount within the period in which the PIT obligation arises in accordance with the law.

What is PIT finalization in Vietnam? What are the cases in which employees in Vietnam are not required to finalize PIT? (Image from the Internet)

What are the cases in which employees in Vietnam are not required to finalize PIT?

Under the guidance of the General Department of Taxation in Vietnam in Section 2 Official Dispatch 883/TCT-DNNCN in 2022, the provisions are as follows:

II. ENTITIES NOT REQUIRED TO FINALIZE TAX

1. For individuals

Individuals with income from salaries and remunerations in the following cases do not have to finalize PIT:

- Individuals with an additional payable PIT amount after the annual finalization of 50,000 VND or less. Individuals exempt from tax in this case self-determine the exempted tax amount and are not required to submit a PIT finalization dossier or a tax exemption dossier. In the case of finalization periods from 2019 and earlier finalized before the effective date of Decree 126/2020/ND-CP, no retrospective processing is carried out;

- Individuals with an amount of payable PIT less than the temporarily paid tax amount who do not request a tax refund or offset for the subsequent declaration period;

- Individuals with income from salaries and remunerations having a labor contract term of 03 months or more at one unit, and concurrently having sporadic income at other places with an average monthly income in the year not exceeding 10 million VND, and have been deducted 10% PIT, if there is no request, they are not required to finalize tax for this income part;

- Individuals whose employers purchase life insurance (excluding voluntary pension insurance) or other non-compulsory insurance with a cumulative insurance fee, and the employer or insurer has deducted 10% PIT on the insurance fee corresponding to the part the employer purchases or contributes for the employee, the employee is not required to finalize PIT for this income part.

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Thus, employees are not required to finalize PIT on income from salaries and remunerations in the following four cases:

- After the annual finalization, if the employee has an additional payable PIT amount of 50,000 VND or less, they are exempt from tax, self-determine the exempted tax amount, and are not required to submit a PIT finalization dossier or a tax exemption dossier.

- The payable PIT amount of the employee is less than the temporarily paid tax amount, and there is no request for a tax refund or offset for the subsequent declaration period.

- Income from salaries and remunerations having a labor contract term of 03 months or more, and sporadic income averaging not more than 10 million VND monthly, which has been deducted 10% PIT.

- Employees whose employers purchase life insurance or other non-compulsory insurance with cumulative insurance fees, which have been deducted 10% PIT on the insurance fees corresponding to the part purchased or contributed by the employer.

What does income from salaries and remunerations subject to PIT in Vietnam include?

According to Clause 2, Article 3 of the Personal Income Tax Law 2007 (amended and supplemented by Clause 1, Article 1 of the Law on Amendment to Personal Income Tax Law 2012), taxable income from salaries and remunerations of employees includes:

- salaries, remunerations and amounts of similar nature;

- Allowances, subsidies, except for amounts:

+ Those paid under legal provisions on preferential treatment of persons with meritorious services;

+ defense or security allowances; hazard or danger allowances for persons working in branches, occupations or jobs at places where exist hazardous or dangerous elements;

+ allowances for attraction of laborers to work in certain branches or in certain regions specified by law;

+ allowances for sudden difficulties, allowances for laborers having labor accident or suffering from occupational disease, lump-sum maternity or child adoption allowances; allowances for working capacity loss, lump-sum retirement allowances, monthly survivorship allowances and other allowances as prescribed by law on social insurance;  

+ severance and job-loss allowances specified in the Labor Code;

+ subsidies of social relief nature and other allowances, subsidies without nature of salaries, remunerations as prescribed by the Government.