Which Entities Are Required to Finalize Personal Income Tax? What Are the Penalties for Not Finalizing Personal Income Tax?
Entities required to finalize personal income tax?
According to the provisions in Section 1 Official Dispatch 13762/CTHN-HKDCN in 2023, the following entities are required to finalize personal income tax:
(1) For individuals directly finalizing with the Tax Authority:
- Resident individuals with income from wages and salaries from two or more places who do not meet the conditions for authorization to finalize according to regulations (the cases authorized are specified in point 3 section I of this official dispatch) must directly file personal income tax finalization with the tax authority if there is additional tax payable or a tax refund request for the excess tax paid to be credited to the next tax period.
- Individuals present in Vietnam for less than 183 days in the first calendar year but for 183 days or more within 12 consecutive months from the first day they are present in Vietnam must finalize for the first 12 consecutive months from the first day of their presence in Vietnam.
- Foreign individuals ending their working contracts in Vietnam must finalize personal income tax with the tax authority before leaving the country. If they have not completed tax finalization procedures with the tax authority, they must authorize the income-paying organization or another entity to finalize the tax according to the regulations on tax finalization for individuals.
If the income-paying organization or another entity is authorized to finalize taxes, they must take responsibility for additional personal income tax payable or the excess tax refund of the individual.
- Resident individuals with income from wages and salaries paid from abroad and resident individuals with income from wages and salaries paid from International Organizations, Embassies, and Consulates not having tax deductions during the year must directly finalize with the tax authority if there is additional tax payable or a tax refund request for the excess tax paid to be credited to the next tax period.
- Resident individuals who have income from wages and salaries and are eligible for tax reduction due to natural disasters, fires, accidents, or serious illnesses affecting their tax payment ability cannot authorize the income-paying organization to finalize taxes on their behalf but must directly file personal income tax finalization with the tax authority according to regulations.
(2) For organizations and individuals paying income from wages and salaries:
- Organizations and individuals paying income from wages and salaries must declare personal income tax finalization, regardless of whether tax deductions arise, and finalize personal income tax on behalf of individuals authorized to do so.
If an individual authorizes the organization to finalize personal income tax, and there is additional tax payable after finalization of 50,000 VND or less eligible for tax exemption, the income-paying organization still declares the individual's information in the organization's personal income tax finalization dossier and does not aggregate the additional tax payable of individuals with additional tax payable of 50,000 VND or less after finalization.
- In case an individual is transferred from the previous organization to the new organization due to mergers, consolidations, splits, separations, conversions of enterprise type, or the previous and new organizations being in the same system, the new organization is responsible for finalizing personal income taxes on behalf of the individual for both the income paid by the previous organization and the income paid by the new organization, collecting tax deduction certificates from the previous organization (if any).
- In case the income-paying organization or individual dissolves, goes bankrupt, ceases operations, or terminates contracts, or reorganizes the business, they must declare personal income tax finalization up to the time of dissolution, bankruptcy, cessation of operations, contract termination, or business reorganization.
In case of changing the type of enterprise (excluding state-owned enterprises being equitized) where the converted enterprise inherits all tax obligations of the converted enterprise, tax finalization up to the decision on conversion is not required; the enterprise finalizes taxes at the end of the year.
(3) For authorization of personal income tax finalization
Resident individuals with income from wages and salaries authorize their personal income tax finalization to the income-paying organization or individual. Specifically:
- Individuals with income from wages and salaries who sign labor contracts of 03 months or more at one place and actually work there at the time the income-paying organization or individual finalizes taxes, even if they have not worked for a full 12 months in the calendar year.
If an individual is transferred from the previous organization to the new organization due to mergers, consolidations, splits, separations, conversions of enterprise type, or the previous and new organizations being in the same system, the individual authorizes the new organization to finalize taxes.
- Individuals with income from wages and salaries who sign labor contracts of 03 months or more at one place and actually work there at the time the income-paying organization or individual finalizes taxes, even if they have not worked for a full 12 months in the calendar year; simultaneously have casual income at other places averaging no more than 10 million VND per month annually and have had 10% personal income tax deducted without requesting tax finalization for this income portion.
- After authorizing tax finalization, if the organization finalizing taxes on behalf of the individual has finalized taxes, but later finds that the individual must directly finalize taxes with the tax authority, the income-paying organization does not adjust the tax finalization of the organization, but issues a tax deduction certificate to the individual according to the finalization result, noting on the bottom left of the tax deduction certificate:
“Company ... finalized personal income tax on behalf of Mr./Ms. .... (by authorization) at line (serial number) ... of Appendix Table 05-1/BK-TNCN” for the individual to directly finalize taxes with the tax authority. In case the income-paying organization uses electronic tax deduction certificates, they print the conversion from the original electronic tax deduction certificate and note the above content on the printout to provide to the taxpayer.
Which entities are required to finalize personal income tax? What are the penalties for not finalizing personal income tax?
Entities not required to finalize personal income tax
According to the provisions in Section 2 Official Dispatch 13762/CTHN-HKDCN in 2023, the following entities are not required to finalize personal income tax:
(1) For individuals
Individuals with income from wages and salaries in the following cases are not required to finalize personal income tax:
- Individuals with additional personal income tax payable after finalization of 50,000 VND or less. Individuals are exempt from tax in this case and do not need to submit personal income tax finalization dossiers or tax exemption dossiers;
- Individuals where tax payable is less than the tax temporarily paid and have no request for a refund or credit to the next tax period;
- Individuals with income from wages and salaries who sign labor contracts of 03 months or more at one unit, concurrently have casual income averaging no more than 10 million VND per month annually and have had 10% personal income tax deducted without requesting tax finalization for this income portion;
- Individuals whose employers purchase life insurance (excluding voluntary retirement insurance), other non-compulsory insurance with premium accumulation where the insurer or employer has deducted 10% personal income tax on insurance premiums purchased or contributed by the employer for the employee, the employee is not required to finalize taxes for this income.
(2) For organizations and individuals paying income from wages and salaries
Organizations and individuals paying income from wages and salaries are not required to finalize personal income tax, including those not generating income payments in the year; organizations or individuals temporarily ceasing operations or business for the entire calendar year.
What are the penalties for not finalizing personal income tax?
Based on Article 13 Decree 125/2020/ND-CP, the penalties for late or non-filing of personal income tax finalization are as follows:
Penalties for violations related to the deadline for tax return submission
1. A warning for delays in submitting tax returns from 01 to 05 days with mitigating circumstances.
2. A fine ranging from 2,000,000 VND to 5,000,000 VND for delays in submitting tax returns from 01 to 30 days, excluding the case specified in clause 1 of this Article.
3. A fine ranging from 5,000,000 VND to 8,000,000 VND for delays in submitting tax returns from 31 to 60 days.
4. A fine ranging from 8,000,000 VND to 15,000,000 VND for one of the following violations:
a) Delays in submitting tax returns from 61 to 90 days;
b) Delays in submitting tax returns from 91 days or more without tax payable;
c) Non-submission of tax returns without tax payable;
d) Non-submission of appendices as prescribed on tax management for enterprises involved in related-party transactions along with the corporate income tax finalization returns.
5. A fine ranging from 15,000,000 VND to 25,000,000 VND for delays in submitting tax returns over 90 days from the deadline, with tax payable, and the taxpayer has fully paid the tax and late payment fees to the state budget before the tax authority announces a tax inspection decision or before the tax authority prepares a record of the late submission as prescribed in clause 11 Article 143 of the Law on Tax Administration.
In cases where the fine amount under this clause is greater than the tax amount arising on the tax return, the maximum fine is equal to the tax amount payable on the tax return, but not lower than the median of the penalty range specified in clause 4 of this Article.
6. Remedial measures:
a) Mandate the late submission of tax payments to the state budget for violations specified in clauses 1, 2, 3, 4, and 5 of this Article in cases where late tax payment leads to late tax payment;
b) Mandate the submission of tax returns, appendices to tax returns for violations specified in points c and d clause 4 of this Article.
Thus, the act of not filing tax finalization returns can be fined from 8 million VND to 15 million VND.
Note: The penalty level for not finalizing personal income taxes as stated above applies to organizations. For individuals violating personal income tax finalization, the fine will be 1/2 of the fine level for organizations as prescribed in clause 5 Article 5 Decree 125/2020/ND-CP.
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