Recently, the General Department of Taxation issued Official Dispatch 636/TCT-DNNCN on guidelines for personal income tax finalization, in which details the entities subject to PIT finalization in Vietnam?
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Which entities are subject to PIT finalization in Vietnam? (Illustration)
Specifically, according to Official Dispatch 636/TCT-DNNCN, there are 3 entities subject to personal income tax finalization: individual taxpayers, income payer and authorized entities. Guidelines of the General Department of Taxation regarding this matter are as follows:
(1) Individuals directly finalizing PIT with tax authorities in Vietnam
A resident salary earner shall directly submit the PIT finalization dossier to the tax authority if his/her PIT is underpaid or overpaid and he/she claims a refund or has it carried forwards to the next period.
If an individual has been present in Vietnam for fewer than 183 days in the first calendar year but more than 183 days in 12 consecutive months from the date of his/her arrival, the first PIT finalization year is the period of 12 consecutive months from the date of his/her arrival.
An individual that is a foreigner whose employment contract in Vietnam has ended shall submit a tax finalization dossier to the tax authority before exit. If he/she has not complete PIT finalization procedures with the tax authority, he/she may authorize the income payer or another entity to complete PIT finalization procedures with the tax authority as per regulations. The income payer or the authorized entity must pay tax arrears if tax is underpaid or will receive a refund in case tax is overpaid.
A resident salary earner who is eligible for tax reduction due to a natural disaster, conflagration, accident, or fatal disease shall finalize PIT himself/herself instead of authorizing the income payer to perform this task.
(2) Income payers in Vietnam
Income payers shall declare and finalize PIT on behalf of authorizing individuals, whether PIT is deducted or not. If an individual authorizes the income payer to finalize PIT, has the tax arrears not exceeding 50.000 VND and is eligible for tax exemption, the income payer shall still specify information about that individual in its PIT finalization dossier but shall not aggregate his/her tax arrears which is not exceeding 50.000 VND. If the income payer has completed PIT finalization procedures before the effective date of Decree 126/2020/ND-CP, no retrospective treatment will apply.
In case an employee is re-assigned to a new organization after the old organization is acquired, consolidated, fully or partially divided, or converted, or to a new organization that is in the same system as the old organization, the new organization shall finalize PIT as authorized by such employee, including the income paid by the old organization, and collect documents about deduction of PIT issued by the old organization to such employee (if any).
(3) Authorization to finalize PIT in Vietnam
A resident salary earner may authorize the salary payer to finalize tax if:
- The salary earner has an employment contract with duration of at least 03 months and is working for the salary payer in reality when the salary payer carries out PIT finalization procedures, even if the salary earner has not worked for a full period of 12 months in the calendar year. In case an employee is re-assigned to a new organization after the old organization is acquired, consolidated, fully or partially divided, or converted, or to a new organization that is in the same system as the old organization, the employee may authorize the new organization to finalize PIT.
- The salary earner has an employment contract with a duration of at least 03 months and is working for the salary payer in reality when the salary payer carries out PIT finalization procedures, even if the salary earner has not worked for a full period of 12 months in the year, and earns an average monthly irregular income not exceeding 10 million VND on which 10% PIT has been deducted and does not wish to have this income included in the PIT finalization dossier.
- After the income payer completes PIT finalization procedures as authorized by an employee, if that employee is found to have to submit PIT finalization dossier to the tax authority himself/herself, the income payer must not adjust its PIT finalization dossier but shall issue the PIT withholding certificate whose bottom left corner bears the phrases: “Company…..has finalized PIT on behalf of Mr./Mrs. ..... (according to the power of attorney) at the line (ordinal number)…. of the List No. 05-1/BK-TNCN” to that employee for finalizing PIT with tax authority.
More details can be found in Vietnam's Official Dispatch 636/TCT-DNNCN issued on 12/3/2021.
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