New guidance of General Department of Taxation on personal income tax finalisation

Hanoi Tax Department supported taxpayers to fullfill tax finalisation. Photo: Thùy Linh

Who must fulfill tax finalisation?

According to the guidance of the General Department of Taxation, the person subject to personal income tax finalisation (PIT) directly with the tax authority is a resident with income from salaries and wages and directly declare PIT finalisation with the tax authority, has to make additional tax payment or overpaid tax amount requested for refund or offset in the next tax declaration period.

If an individual who is present in Vietnam for less than 183 days in the first calendar year, but accounting in 12 consecutive months since the first day of his/her presence in Vietnam is 183 days or more from the first settlement year is 12 consecutive months since the first day of presence in Vietnam.

The individual is foreigner who terminates the contract to work in Vietnam must declare the tax finalisation with the tax authority before leaving the country. In case individuals have not completed tax finalisation procedures with the tax authority, they should authorise income-paying organisations or other organisations or individuals to make tax finalisation in accordance with regulations on tax finalisation applicable to individuals.

In case the income-paying organisation or other organisations or individuals are authorized to conduct tax finalisation, they must be responsible for the amount of additional PIT payment or refunded for the overpaid amount of the individual.

Besides that, residents who have income from salaries or wages and are also eligible for tax reduction due to natural disasters, fire, accident or fatal disease affecting their ability to pay tax should not authorise organisations and individuals to pay PIT finalisation on their behalf. They must directly declare the finalisation with the tax authority in accordance with regulations.

Particularly for organisations paying income from salaries and wages, the General Department of Taxation instructs organisations and individuals that pay income from salaries and wages to declare the PIT finalisation should not distinguish whether there is an arising amount of tax abatement or not and PIT finalisation on behalf of authorised individuals.

In case an individual authorised to finalise PIT for the organisation and has an amount of additional taxpayment after finalisation of VND50,000 or less and is eligible for tax exemption, the income paying organisation still declares the personal information of that person in the organisation's personal income tax finalisation declaration dossier and does not aggregate the additional amount of tax payment of the individuals. In case the income paying organisation has finalized PIT before the effective date of Decree No. 126/2020/ND-CP, no retrospective processing is required.

In case the employee is transferred from an old organisation to the new one due to the mergers, consolidation, separation, or transforming the type of business of old organisation and the new organisation are in the same system, the new organisation is responsible for the PIT finalisation under the authorisation of the individual for both the income paid by the old organisation and the new income paying organisation has to recover the tax abatement of PIT documents issued by old organisation granted to the employee (if any).

Cases of exemption from tax finalisation

The General Department of Taxation also implements guidance on subjects that are not required to finalise tax. Accordingly, the individual directly fulfill tax finalisation with the tax authority will be the individual with the additional PIT payment after the final settlement of each year is VND50,000 or less. In this case, individuals eligible for tax exemption should determine the exempted tax amounts by themselves, they are not required to submit personal income tax finalisation dossiers and are not required to submit tax exemption dossiers.

If the settlement period from 2019 or earlier has been settled before the effective date of Decree No. 126/2020/ND-CP, no retrospective processing is required.

In addition, individuals not subject to tax finalisation also include individuals whose personal income tax amount is smaller than the temporarily paid tax amount without claiming tax refund or offset against the next tax return period; individuals with income from salaries or wages and signing labor contracts for 3 months or more in one unit and having current income in other places on average monthly in the year not exceeding VND10 million deduct a PIT at the rate of 10%, if there is no request, tax finalisation is not required for this income portion; the individual whose life insurance is purchased by the employer (except voluntary pension insurance), other optional insurance with accumulated premiums that the employer or insurance company has deducted PIT at the rate of 10% on the premium amount corresponding to the part that the employer buys or contributes to the employee, the employee is not required to finalise PIT on this income.

For organisations and individuals that pay income from salaries or wages, the General Department of Taxation stipulates that, in case the organisation does not pay any income, it is not required to declare the PIT finalisation.