Guidance on Finalizing Personal Income Tax for 2016 - Part I

According to the regulations of the Law on Personal Income Tax and the Amended Tax Management Law 2012, taxpayers who are subject to personal income tax finalization must file their personal income tax finalization returns no later than 90 days from the end of the calendar year or fiscal year.

I. LEGAL BASIS

The 2016 personal income tax finalization will be carried out according to the regulations in the following documents:

- Law on Personal Income Tax 2007.- Amended Personal Income Tax Law 2012.- Law Amending Tax Laws 2014.- Decree 65/2013/ND-CP guiding the Law on Personal Income Tax and the Law amending and supplementing some articles of the Law on Personal Income Tax.- Decree 91/2014/ND-CP amending decrees on taxation.- Decree 12/2015/ND-CP guiding the Law amending and supplementing some articles of the Tax Laws and amending and supplementing some articles of tax-related decrees.- Circular 111/2013/TT-BTC guiding the Law on Personal Income Tax and Decree 65/2013/ND-CP issued by the Minister of Finance.- Circular 119/2014/TT-BTC amending Circulars 156/2013/TT-BTC, 111/2013/TT-BTC, 219/2013/TT-BTC, 08/2013/TT-BTC, 85/2011/TT-BTC, 39/2014/TT-BTC, and 78/2014/TT-BTC to reform and simplify tax administrative procedures issued by the Minister of Finance.- Circular 151/2014/TT-BTC guiding the implementation of Decree 91/2014/ND-CP amending and supplementing several articles of the tax-related decrees issued by the Minister of Finance.- Circular 92/2015/TT-BTC guiding the implementation of value-added tax and personal income tax for resident individuals engaged in business activities; guiding the implementation of several amended and supplemented articles on personal income tax as stipulated in the Law amending and supplementing some articles of Tax Laws 71/2014/QH13 and Decree 12/2015/ND-CP detailing the implementation of the Law amending and supplementing some articles of the tax laws and amendments to some articles of tax-related decrees issued by the Minister of Finance.- Circular 156/2013/TT-BTC guiding the Law on Tax Management; Law amending and supplementing several articles of the Law on Tax Management and Decree 83/2013/ND-CP issued by the Minister of Finance.- Circular 128/2014/TT-BTC guiding the reduction of personal income tax for individuals working in economic zones issued by the Minister of Finance.

II. PERSONAL INCOME TAX FINALIZATION SUBJECTS

1. Organizations and individuals paying taxable personal income

- Organizations and individuals paying taxable personal income, regardless of whether tax deduction arises or not, are responsible for filing personal income tax finalization returns and finalizing personal income tax on behalf of authorized individuals (Point c, Clause 1, Article 26 of Circular 111/2013/TT-BTC).- In cases where an organization does not engage in paying income from wages or salaries, it is not required to perform personal income tax finalization (Clause 1, Article 21 of Circular 192/2015/TT-BTC);

Thus, if an enterprise does not pay salaries, it is not required to carry out personal income tax finalization, but if salaries are paid regardless of tax liability, it still must perform personal income tax finalization.

- No personal income tax finalization is required; only a list of individuals who received income during the year (if any) must be provided to the tax authority according to Form 05/DS-TNCN issued with Circular 92/2015/TT-BTC no later than 45 days from the date of the decision regarding the dissolution or termination of operations for organizations or individuals paying income that undergo dissolution or termination but do not generate personal income tax deductions;- In cases where the paying organization undergoes division, separation, merger, consolidation, or business conversion and intentionally finalizes taxes on behalf of employees transferred from the old organization, the new organization is responsible for tax finalization for the entire income paid by the old organization.- Income-paying organizations undergoing division, separation, merger, consolidation, business conversion, dissolution, or bankruptcy must finalize personal income tax for the deducted tax amount no later than 45 days from the date of division, separation, merger, consolidation, business conversion, dissolution, or bankruptcy and issue tax deduction certificates to employees as a basis for employees to finalize their personal income tax. In case of business type conversion, if the receiving party inherits all tax obligations from the pre-conversion business (such as converting from a Limited Liability Company to a Joint Stock Company or vice versa; converting from a 100% State-owned enterprise to a Joint Stock Company and other cases as prescribed by law), the pre-conversion business does not have to file tax finalization up to the decision on business conversion, and the receiving party will perform the annual tax finalization as prescribed.

Cases where personal income tax finalization returns are not required

According to Clause 4, Article 25 of Circular 92/2015/TT-BTC, organizations and individuals having income payments related to the following incomes are not required to file personal income tax finalization returns:

- Organizations and individuals paying income from capital investment, securities transfer, royalties, franchising, lottery winnings for resident and non-resident individuals; income from the business of non-resident individuals; Organizations transferring capital from non-resident individuals;- Insurance enterprises paying income to insurance agents, income from life insurance policy accumulation fees; pension fund management companies withholding personal income tax for voluntary pension fund accumulation; multi-level marketing enterprises withholding personal income tax for income of individuals participating in multi-level marketing networks;- Lottery companies paying income to lottery agents.

Authorization for Personal Income Tax Finalization

According to Clause 3, Article 21 of Circular 92, individuals with income from salaries or wages can authorize organizations or individuals paying income to finalize taxes on their behalf in the following cases:

- Individuals only having income from salaries or wages with labor contracts of three months or more from one income-paying organization and currently working at that organization at the time of tax finalization authorization, even if they do not work for the full 12 months in the year.- Individuals with income from salaries or wages with labor contracts of three months or more from one income-paying organization and currently working at that organization at the time of tax finalization authorization, even if they do not work for the full 12 months in the year and simultaneously have other occasional income that on average per month during the year does not exceed VND 10 million, with tax withheld at 10% by the paying entity without requesting tax finalization for this income.- Individuals who are transferred from the old organization to the new one due to division, separation, merger, consolidation, or business conversion. If the employee authorizes tax finalization at the end of the year, the new organization must reclaim the personal income tax withholding certificates previously issued by the old organization (if any) to aggregate income, tax withheld, and tax finalization on behalf of the employees.

Additionally, the above contents can refer to the regulations in Official Dispatch 801/TCT-TNCN 2016 guiding personal income tax finalization in 2015 and providing taxpayer identification numbers for dependents issued by the General Department of Taxation.

1. Resident individuals with income from salaries, wages, or business

Resident individuals with income from salaries, wages, or business must file a personal income tax finalization return if they have additional tax liabilities or overpaid tax claiming for refund/offset.

Cases not authorized for personal income tax finalization (Article 12 of Circular 151/2014/TT-BTC):

- Individuals with income subject to additional tax liabilities greater than the pre-paid tax that have no refund request or tax offset for the following term.- Individuals with income from salaries or wages with labor contracts of three months or more from one entity having additional occasional income not exceeding VND 10 million per month on average, with tax withheld at source at the rate of 10% if no finalization is requested for this income.- Part of an individual's income from life insurance policies or other non-compulsory insurances accumulated fees, where the employer or insurer withholds personal income tax at the rate of 10% on the insurance premium.

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