Instructions for deducting 10% personal income tax before paying salaries and wages to employees in Vietnam

Instructions for deducting 10% personal income tax before paying salaries and wages to employees in Vietnam (Internet image)

Hanoi Department of Taxation has the following opinion:

- Pursuant to Clause 2, Article 18 of the Labor Code 2019 on competence to conclude employment contracts:

2. In respect of seasonal works or certain jobs which have a duration of less than 12 months, a group of employees aged 18 or older may authorized the representative of the group to conclude the employment contract, in which case such employment contract shall be effective as if it was separately concluded by each of the employees.

The employment contract concluded by the said representative must be enclosed with a list clearly stating the full names, ages, genders, residences and signatures of all employees concerned.

- Pursuant to Circular 111/2013/TT-BTC guiding the implementation of the Law on Personal Income Tax, the Law amending and supplementing a number of articles of the Law on Personal Income Tax and Decree 65/2013/ND-CP detailing a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax:

+ Clause 2, Article 2 stipulates taxable income from wages and remunerations:

2. Incomes from wages and remunerations.

Incomes from wages and remunerations (hereinafter referred to as wages) are incomes paid to employees from employers, including:

a) Wages, remunerations, and the other amounts paid as wages or remunerations in cash or not in cash.

...c) Remunerations in the forms of agent commission, brokerage commission, payments for participation in science and technology researches, payments for participation in projects and schemes, royalties according to regulations of law on royalties, payments for teaching, payments for participation in artistic performance, sports, payments for advertising, payments for other services, and other remunerations...

+ Clause 2, Article 8 stipulates taxable income from wages:

2. Taxable income from wages

a) The taxable income from wages equals the sum of wages, remunerations and other incomes considered wages received by the taxpayer in the tax period as guided in Clause 2 Article 2 of this Circular.

b) Time to calculate taxable income:

Taxable income from wages and remuneration shall be calculated when the income is paid to the taxpayer...

+ At Point i, Clause 1, Article 25, regulations on tax deduction and tax deduction documents:

1. Tax deduction

Tax deduction is an act of calculating and withholding the tax payable from the taxpayer’s income by the income payer before the income is paid to the tax payer.

...i) Withholding tax in other cases

The organization or person that pays a total income from 2 million VND to a resident that does not sign a labor contract (as guided in Point c and Point d Clause 2 Article 2 of this Circular) or that signs a labor contract for less than 03 months shall withhold 10% tax on the income before it is paid to the person.

Based on the above regulations, Hanoi Tax Department has the following opinions:

In cases where the Center pays wages or remuneration to individuals who do not have a business registration, do not sign a labor contract, or sign a labor contract for less than three (03) months to carry out scientific research projects, the income that an individual receives is subject to personal income tax from wages. The Center is responsible for deducting personal income tax at the rate of 10% of income before paying individuals according to the instructions in Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC, not distinguishing between individuals and groups of individuals.

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