What types of income are subject to personal income tax withholding in Vietnam?

What types of income are subject to personal income tax withholding in Vietnam?

According to Clause 2, Article 28 of Decree 65/2013/ND-CP, the types of income subject to personal income tax withholding include:

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

(2) Income from wages, salaries, and remuneration, including brokerage remuneration;

(3) Income of individuals from activities as insurance agents, lottery agents, or multi-level marketing;

(4) Income from capital investment;

(5) Income from the transfer of capital by non-resident individuals, or securities trading;

(6) Prize winnings;

(7) Income from royalties;

(8) Income from franchising.

What types of income are subject to personal income tax withholding in Vietnam? (Image from the Internet)

What methods are available for personal income tax withholding for employees in Vietnam?

According to Point b, Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC (amended by Clause 1, Article 20 of Circular 92/2015/TT-BTC), which provides guidance on withholding tax for income from salaries, wages of employees, businesses shall withhold personal income tax for employees through the following three methods:

(1) Withholding tax according to the Progressive Tax Rate Schedule, applies to:

- Resident individuals signing labor contracts from three (03) months or more (including cases where individuals sign contracts of three (03) months or more at multiple places);

For resident individuals who sign labor contracts from three (03) months or more but cease working before the termination of the labor contract, the organization or individual paying income shall still withhold tax according to the Progressive Tax Rate Schedule.

- Foreign individuals working in Vietnam, the organization or individual paying income shall base on the working period in Vietnam of the taxpayer recorded in the contract or document assigning the work to temporarily withhold tax according to the progressive rate schedule (for individuals working in Vietnam for 183 days or more in the tax year).

(2) Withholding tax according to the Flat Tax Rate Schedule, applies to foreign individuals working in Vietnam for less than 183 days in the tax year.

The organization or individual paying income shall base on the working period in Vietnam of the taxpayer recorded in the contract or document assigning the work to implement withholding.

(3) Withholding tax at the rate of 10% on income before payment to the individual, applies to:

- Resident individuals not signing labor contracts (as guided at Point c, d, Clause 2, Article 2 of Circular 111/2013/TT-BTC) or signing labor contracts under three (03) months with a total income of two million (2,000,000) VND or more per payment, must withhold tax at 10% on income before payment to the individual.

Note for this case, if an individual has only one source of income subject to withholding at the aforementioned rate but estimates the total taxable income after family allowance deduction is not taxable, the individual should make a commitment (based on the form attached to tax management guidance documents) to send to the income-paying organization for them to temporarily refrain from withholding personal income tax.

Based on the commitment of the income recipient, 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 details of individuals not subject to withholding (using the form attached to tax management guidance documents) and submit it to the tax authority. Individuals making commitments are responsible for their commitments, and any detected fraud will be handled according to the current Law on Tax Administration.

Is it necessary to submit a tax declaration if there is no personal income tax withholding in Vietnam?

Based on Clause 3, Article 7 of Decree 126/2020/ND-CP supplemented by Clause 2, Article 1 of Decree 91/2022/ND-CP, the cases where it is unnecessary to submit a personal income tax declaration are prescribed as follows:

Tax Declaration Dossier

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3. Taxpayers are not required to submit tax declaration dossiers in the following cases:

a) Taxpayers only engage in activities or business not subject to tax according to tax law for each type of tax.

b) Individuals have income exempted from tax according to the Personal Income Tax Law and the provisions at Point b, Clause 2, Article 79 of the Law on Tax Administration, except for individuals receiving inheritances or gifts of real estate; transferring real estate.

c) Export processing enterprises only have export activities and are not required to submit VAT declaration dossiers.

d) Taxpayers temporarily cease operations or business as prescribed in Article 4 of this Decree.

e) Taxpayers filing to terminate tax identification number efficacy, excluding cases of terminating activities, terminating contracts, reorganizing enterprises according to Clause 4, Article 44 of the Law on Tax Administration.

f) Individuals or organizations declaring personal income tax on behalf of others on a monthly or quarterly basis, and in such months or quarters, there is no occurrence of personal income tax withholding for the income recipient.

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Simultaneously, Clause 1, Article 25 of Circular 111/2013/TT-BTC defines withholding tax as the activity of the organization or individual paying income in deducting the tax amount payable from the income of the taxpayer before payment.

Thus, according to the aforementioned regulations:

- In any month/quarter where personal income tax withholding occurs, a personal income tax declaration must be submitted.

- In any month/quarter where personal income tax withholding does not occur, a declaration is not required.