When may a resident salary earner authorize personal income tax finalization in Vietnam?

When may a resident salary earner authorize personal income tax finalization in Vietnam?

According to point d.2, clause 6, Article 8 of Decree 126/2020/ND-CP stipulates that a resident salary earner can authorize the tax finalization for the salary payer. Specifically:

- Salary earners who have signed labor contracts for 3 months or more at one place and are actually working there at the time the organization or individual pays the income and carries out the tax finalization, even if they have not worked for the full 12 months in the year.

In the case where the individual is an employee transferred from the old organization to the new organization according to the provisions of point d.1, clause 6, Article 8 of Decree 126/2020/ND-CP, the individual can authorize the tax finalization for the new organization.

Referring to point d.1, clause 6, Article 8 of Decree 126/2020/ND-CP, the salary payer has the responsibility to declare the tax finalization and finalize on behalf of the authorized individuals whether or not the tax deduction has arisen. In case the organization or individual has not generated income payment, they are not required to declare personal income tax finalization.

If the individual is an employee transferred from the old organization to the new organization due to the old organization being merged, consolidated, divided, separated, converted into a different type of enterprise, or if the old and new organizations are within the same system, the new organization is responsible for the tax finalization based on the individual's authorization for both the income paid by the old organization and to retrieve the personal income tax deduction vouchers already issued to the employee by the old organization (if any).

- Salary earners who have signed labor contracts for 3 months or more at one place and are actually working there at the time the organization or individual pays the income and carries out the tax finalization, even if they have not worked for the full 12 months in the year; and simultaneously have occasional income at other places averaging no more than 10 million VND per month in the year and have had personal income tax deducted at a rate of 10%, if they do not request tax finalization for this part of the income.

When may a resident salary earner authorize personal income tax finalization in Vietnam? (Image from the Internet)

What are cases where resident salary earners directly finalize personal income tax with the tax authority in Vietnam?

According to point d.3, clause 6, Article 8 of Decree 126/2020/ND-CP, resident salary earners directly declare personal income tax finalization with the tax authority in the following cases:

- Individuals with additional tax payable or excess tax that they request to be refunded or carried forward into the next tax declaration period, except in the following cases:

+ Individuals with additional tax payable after finalization of each year of 50,000 VND or less;

+ Individuals whose payable tax amount is less than the tax already paid and do not request a refund or carry forward into the next tax declaration period;

+ Salary earners who have signed labor contracts for 3 months or more with one unit, and also have occasional income at other places averaging no more than 10 million VND per month in the year and have had personal income tax deducted at a rate of 10%, if they do not request a tax finalization for this part of the income;

+ Individuals whose employers purchase life insurance (excluding voluntary retirement insurance) or other non-compulsory insurance with an accumulation of insurance premiums that the employer or insurer has deducted personal income tax at a rate of 10% on the corresponding insurance fees, then the individual is not required to finalize personal income tax for this part of the income.

- Individuals present in Vietnam for less than 183 days in the first calendar year, but for 183 days or more in 12 consecutive months from the first day they are present in Vietnam.

- Foreign individuals terminating their employment contracts in Vietnam must finalize their taxes with the tax authority before leaving the country. If the individual has not yet completed tax finalization with the tax authority, they must authorize the income-paying organization or another organization/individual to finalize the tax in accordance with the regulations on tax finalization for individuals. If the income-paying organization or another organization/individual is authorized for the tax finalization, they must be responsible for any additional personal income tax payable or refunded on behalf of the individual.

- Resident individuals who have income from salary and wages and are subject to tax reduction due to natural disasters, fires, accidents, or serious illnesses affecting their ability to pay taxes may not authorize the income-paying organization or individual for tax finalization but must directly declare the tax finalization with the tax authority as per regulations.

Which entities are personal income taxpayers in Vietnam?

Based on Article 2 of the Personal Income Tax Law 2007, the subjects required to pay personal income tax for 2024 are as follows:

- Subjects required to pay personal income tax include resident individuals with taxable income stipulated in Article 3 of the Personal Income Tax Law 2007 arising inside and outside Vietnam, and non-resident individuals with taxable income stipulated in Article 3 of the Personal Income Tax Law 2007 arising within the territory of Vietnam.

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

+ Present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day they are present in Vietnam;

+ Having a regular place of residence in Vietnam, including a registered permanent residence or a rented house in Vietnam under a lease contract with a term.

- A non-resident individual is someone who does not meet the conditions stated in clause 2, Article 2 of the Personal Income Tax Law 2007.

- The taxpayer must declare personal income tax.