Individual Income Tax on Probationary Employees

At the end of the year, in such cases, the Company compiles and includes them in Form 05B-2B-TNCN. The tax authority is currently conducting inspections; individuals mentioned above have income from two sources, so tax withholding is necessary, and their statements are not accepted.

Ms. Lam's enterprise is concerned about this issue, as the statement is the responsibility of the individual employee. The Company cannot know how many sources of income an employee has, and when the employee submits the statement according to the regulations, the Company cannot withhold personal income tax. Ms. Lam requests guidance from the authorities on the given situation.

Regarding this issue, the Ministry of Finance has the following opinion:

Based on Clause 6, Article 1 of the Amended Personal Income Tax Law 2012:

"6. Article 24 is amended and supplemented as follows:

"Article 24. Responsibilities of organizations and individuals paying income and responsibilities of taxpayers being resident individuals

1. Responsibilities for declaration, withholding, payment of taxes, and tax finalization are specified as follows:

a) Organizations and individuals paying income are responsible for declaring, withholding, paying taxes to the state budget, and finalizing taxes for taxable income paid to taxpayers;...”.

Based on Point 1, Clause 1, Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance, which regulates the withholding of taxes by organizations paying income to resident individuals signing labor contracts for less than 3 months as follows:

"i) Withholding tax for certain other cases

Organizations and individuals paying wages, compensation, other payments to resident individuals not signing labor contracts (as guided at Point c, d, Clause 2, Article 2 of this Circular) or signing labor contracts for less than three (03) months with a total payment level of two million (2,000,000) VND each time or more must withhold taxes at a rate of 10% on the income before paying the individual.

In the case where an individual has only one source of income subject to tax withholding at the above rate but estimates the total taxable income after family deduction not to reach the tax threshold, the individual with income can make a statement (according to the form issued with the guidance on tax management) and send it to the income payer for the payer to temporarily not withhold personal income tax.

Based on the statement of the income recipient, the income payer will not withhold the tax. At the end of the tax year, the income payer must still compile a list and income of individuals below the withholding threshold (into the form issued with the guidance on tax management) and submit it to the tax authority. The individual making the statement is responsible for it, and if fraud is found, it will be handled according to the Tax Management Law.

Individuals making statements according to this guidance must have taxpayer registration and a tax code at the time of making the statement.”.

From the above bases, in principle, individuals eligible to make a statement for the income-paying organization to temporarily not withhold personal income tax are those who have only one source of income subject to withholding tax but estimate their total taxable income for the year after family deduction not to reach the tax threshold. This statement applies only to individuals with taxpayer registration and a tax code at the time of making the statement.

In the case where Ms. Lam's enterprise pays incomes to resident individuals undergoing probation or training but fails to meet the requirements and thus do not sign labor contracts (working for less than 3 months), at the time of making the statement, it cannot be confirmed that these individuals have only one income source at the enterprise. Therefore, the enterprise must perform tax withholding according to the regulations.

Source: Chinhphu.vn

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