When shall enterprises finalize PIT in Vietnam?

When shall enterprises finalize PIT in Vietnam?

Pursuant to Point d, Clause 6, Article 8 of Decree 126/2020/ND-CP, regulations are as follows:

Types of taxes filed monthly, quarterly, yearly, on each occurrence of tax obligations, and tax finalization declarations

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6. Taxes and charges that require annual finalization and finalization at the time of dissolution, bankruptcy, cessation of operations, contract termination, or enterprise reorganization. In cases of changing the type of enterprise (excluding state-owned enterprises undergoing equitization) where the transformed enterprise inherits all tax obligations from the enterprise being transformed, there is no need to declare tax finalization at the time of the decision to change the enterprise type; the enterprise finalizes taxes at the end of the year. Specifically:

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d) Personal income tax (PIT) applied to organizations and individuals paying income subject to personal income tax derived from salaries and wages; individuals with income from salaries and wages authorize tax finalization to organizations and individuals paying income; individuals directly finalize taxes with tax authorities from income derived from salaries and wages. Specifically:

d.1) Organizations and individuals paying income derived from salaries and wages are responsible for declaring tax finalization and finalizing on behalf of individuals with authorization from the income paying organization or individual, regardless of whether tax withholding has occurred or not. If no income is paid, there is no need to declare PIT finalization. In cases where an individual is transferred from an old organization to a new organization due to the old organization undergoing merger, consolidation, division, separation, changing the form of the enterprise, or when both the old and new organizations belong to the same system, the new organization is responsible for finalizing taxes on behalf of the individual for income paid by the old organization and retrieving the tax withholding certificates issued by the old organization to the employee (if any).

d.2) Resident individuals with income derived from salaries and wages authorize tax finalization to organizations and individuals paying their income. Specifically:

Individuals with income derived from salaries and wages enter into labor contracts of three months or more at one place and are actually working there at the time the organization or individual conducting tax finalization, even if they have not worked the full 12 months in the year. If the individual is transferred from an old organization to a new organization as specified in point d.1 of this clause, they may authorize tax finalization to the new organization.

Individuals with income derived from salaries and wages enter into labor contracts of three months or more at one place and are actually working there at the time the income-paying organization or individual finalizes taxes, even if they have not worked the full 12 months in the year; and concurrently have side income at other places averaging no more than 10 million VND per month annually and have had personal income tax withheld at a rate of 10% without requiring tax finalization for this part of the income.

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Therefore, the following cases require PIT finalization for enterprises:

Organizations paying income, regardless of whether or not tax withholding has occurred, are responsible for declaring:

- Tax finalization

- Tax finalization on behalf of individuals with authorization

In cases where the organization does not occur income payment from salaries and wages during the year, it is not required to declare PIT finalization.

When shall enterprises finalize PIT in Vietnam? (Image from Internet)

What is the maximum penalty for individuals failing to submit PIT finalizations in Vietnam?

Based on Article 17 of Decree 125/2020/ND-CP regarding penalties for tax evasion as follows:

Penalty for tax evasion

1. A fine equal to 1 times the evaded tax amount will be imposed on taxpayers who have at least one mitigating circumstance and commit one of the following violations:

a) Failing to submit a taxpayer registration file; failing to submit a tax declaration file or submitting a tax declaration file more than 90 days past the deadline for submission or the extended deadline for submission, except in cases specified at points b and c, Clause 4, and Clause 5, Article 13 of this Decree;

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2. A fine equal to 1.5 times the evaded tax amount will be imposed on taxpayers who commit one of the violations specified in Clause 1 of this Article without aggravating or mitigating circumstances.

3. A fine equal to 2 times the evaded tax amount will be imposed for taxpayers who commit one of the violations specified in Clause 1 of this Article and have one aggravating circumstance.

4. A fine equal to 2.5 times the evaded tax amount will be imposed for taxpayers who commit one of the violations specified in Clause 1 of this Article and have two aggravating circumstances.

5. A fine equal to 3 times the evaded tax amount will be imposed for taxpayers who commit one of the violations specified in Clause 1 of this Article and have three or more aggravating circumstances*.*

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To be specific:, the aggravating circumstances applied to consider penalties for individuals failing to submit PIT finalizations are as follows:

According to the provisions in Clause 1, Article 6 of Decree 125/2020/ND-CP as follows

Mitigating and aggravating circumstances in taxation and invoicing violations

1. Aggravating and mitigating circumstances according to the provisions of the law on administrative violations handling.

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Referring to the provisions of Article 10 of Law on Handling of Administrative Violations 2012, the aggravating circumstances applied for considering penalties for individuals failing to submit PIT finalizations include the following circumstances:

(1) Administrative violations organized;

(2) Repeated administrative violations; recidivism;

(3) Inciting, luring, using minors to violate; forcing individuals dependent on one materially or spiritually to commit administrative violations;

(4) Using individuals knowingly in a state of mental disorder or other illness that deprives cognitive ability or behavior control to commit administrative violations;

(5) Insulting or defaming persons executing public duties; administrative violations characterized by hooliganism;

(6) Exploiting positions or powers to commit administrative violations;

(7) Exploiting circumstances of war, natural disasters, pandemics, or other special social difficulties to commit administrative violations;

(8) Violating while serving a criminal sentence or undergoing an administrative measures decision;

(9) Continuing to perform administrative violations despite requests from competent authorities to cease;

(10) Engaging in evasion or concealment of administrative violations after the fact;

(11) Administrative violations on a large scale, involving large quantities or values of goods;

(12) Violations against multiple persons, including children, the elderly, the disabled, or pregnant women.

*Note: The circumstances listed above, if already stipulated as administrative violations, will not be considered as aggravating circumstances.

Therefore, an individual failing to submit PIT finalizations may be fined up to three times the tax amount due if there are three or more aggravating circumstances.

What are procedures for handling the receipt and processing of PIT finalizations in Vietnam?

According to Section 6 of Official Dispatch 636/TCT-DNNCN 2021, the responsibility for receiving and processing PIT finalizations by tax authorities is guided as follows:

- The tax authority is responsible for propagating, instructing, and urging taxpayers to carry out tax finalization in compliance to avoid being subject to penalties as per legal regulations.

- The tax authority organizes the receipt of PIT finalizations based on the principle of creating favorable conditions in terms of location, personnel, and reception time to ensure completion within the prescribed deadlines.

- After accepting PIT finalizations, the tax authority reviews and processes tax finalization declarations that have not been accounted for within the tax sector's IT application system; processes the dossiers as per regulations without returning them unless individuals require adjustments or seek tax authority clearance.

Instructions are provided for the implementation of electronic tax transaction account registration and Official Dispatch 535/TCT-DNNCN 2021 from the General Department of Taxation guiding the submission of form 02/QTT-TNCN electronically via its portal.