Instructions for personal income tax settlement according to new regulations

Subjects required to settle taxes

According to regulations, individuals with income from salaries and wages must directly declare and settle personal income tax with the tax authority if there is additional tax payable or if there is an overpaid tax that needs to be refunded or offset in the next tax declaration period. Individuals who are present in Vietnam in the first calendar year for less than 183 days, but in 12 consecutive months from the first day of presence in Vietnam for 183 days or more, the first year of settlement is 12 consecutive months from the first day of presence in Vietnam.

Foreign individuals who have terminated their employment contracts in Vietnam must declare and settle their taxes with the tax authorities before leaving the country. In cases where individuals have not completed tax settlement procedures with the tax authorities, they must authorize the income-paying organization or another organization or individual to settle their taxes in accordance with regulations. In cases where the income-paying organization or another organization or individual receives authorization to settle their taxes, they must be responsible for the additional personal income tax payable or be refunded the excess tax paid by the individual.

Resident individuals with income from salaries and wages who are eligible for tax reduction due to natural disasters, fires, accidents, or serious illnesses that affect their ability to pay taxes must not authorize organizations or individuals who pay income to make tax settlements on their behalf, but must directly declare and settle taxes with the tax authority.

For organizations and individuals paying income from salaries and wages, they are responsible for declaring and settling personal income tax regardless of whether there is a tax deduction or not, and settling personal income tax on behalf of authorized individuals. In cases where individuals authorize organizations to settle personal income tax and have additional tax payable after settlement of VND 50,000 or less that is exempt from tax, the organization paying income still declares information of individuals who are paid that income in the organization's personal income tax settlement declaration file and does not summarize the additional tax payable of individuals with additional tax payable after settlement of VND 50,000 or less. In cases where organizations paying income have settled personal income tax before the effective date of Decree No. 126/2020/ND-CP, there will be no retroactive processing.

In case an individual is an employee transferred from an old organization to a new organization due to the old organization merging, consolidating, dividing, separating, or converting the type of enterprise or the old organization and the new organization are in the same system, the new organization is responsible for finalizing personal income tax under the authorization of the individual for both the income paid by the old organization and the new income-paying organization collects the personal income tax deduction certificate issued to the employee by the old income-paying organization (if any).

Resident individuals with income from salaries and wages are authorized to settle personal income tax for organizations and individuals paying income, specifically:

Individuals who have income from salaries and wages who sign a labor contract for 3 months or more at one place and are actually working there at the time the organization or individual pays the income shall make tax settlement, including cases where they have not worked for 12 months in a calendar year. In cases where an individual is an employee transferred from an old organization to a new organization due to the old organization merging, consolidating, dividing, separating, or converting the type of enterprise, or the old organization and the new organization are in the same system, the individual is authorized to make tax settlement for the new organization.

Individuals who have income from salaries and wages who sign labor contracts for 3 months or more at one place and are actually working there at the time the organization or individual pays the income and makes tax settlement, including cases where they do not work for 12 months in a calendar year; and at the same time have irregular income in other places with an average monthly income of no more than 10 million VND in a year and have had personal income tax deducted at a rate of 10% if there is no request for tax settlement for this income.

After an individual has authorized tax settlement, the income-paying organization has made tax settlement on behalf of the individual. If it is discovered that the individual is subject to direct tax settlement with the tax authority, the income-paying organization will not adjust the personal income tax settlement of the income-paying organization, but will only issue a tax deduction certificate to the individual according to the settlement number and record it in the lower left corner of the tax deduction certificate so that the individual can directly settle tax with the tax authority.

Subjects not required to pay tax

Individuals whose personal income tax payable after the finalization of each year is from VND 50,000 or less. Individuals exempted from tax in this case shall self-determine the exempted tax amount, are not required to submit personal income tax finalization dossiers and do not have to submit tax exemption dossiers. In case the finalization period from 2019 or earlier was finalized before the effective date of Decree No. 126/2020/ND-CP, there will be no retroactive processing;

Individuals whose personal income tax payable is less than the amount of tax provisionally paid without requesting a tax refund or offset against the next tax declaration period; Individuals whose income from salaries and wages is signed with a labor contract for 3 months or more at a unit, and who have irregular income in other places with an average monthly income in the year of no more than 10 million VND and are entitled to a personal income tax deduction at a rate of 10%, if there is no request, do not have to finalize tax on this income.

If an individual is purchased by an employer for life insurance (except voluntary pension insurance) or other non-compulsory insurance with accumulated insurance premiums for which the employer or insurance company has deducted personal income tax at a rate of 10% on the insurance premium amount corresponding to the portion purchased or contributed by the employer for the employee, the employee does not have to finalize personal income tax on this portion of income.

Increase family deduction level

Pursuant to Resolution No. 954/2020/UBTVQH14 of the National Assembly Standing Committee, the deduction level for taxpayers is increased from VND 9 million/month to VND 11 million/month (VND 132 million/year). The deduction level for each dependent is increased from VND 3.6 million/month to VND 4.4 million/month. The family deduction level is applied from the 2020 tax period. Cases that have temporarily paid tax according to the family deduction level prescribed in Clause 1, Article 19 of the Personal Income Tax Law No. 04/2007/QH12, which has been amended and supplemented by a number of articles under Law No. 26/2012/QH13, shall have their personal income tax payable re-determined according to the family deduction level prescribed in Resolution No. 954/2020/UBTVQH14.

To be entitled to deductions for dependents, the taxpayer must register for deductions for dependents according to regulations. In case the taxpayer has not calculated family deductions for dependents in the tax year, the deduction for dependents will be calculated from the month in which the obligation to support arises when the taxpayer makes tax finalization and registers for family deductions for dependents.

In case the taxpayer is authorized to make final settlement and has not calculated family deductions for dependents in the tax year, the deductions for dependents will also be calculated from the month in which the obligation to support arises when the taxpayer makes the final settlement and registers for family deductions for dependents through the income paying organization.

Submit tax settlement declaration

Pursuant to Clause 8, Article 11 of Decree No. 126/2020/ND-CP of the Government. In case an individual declares and submits a personal income tax finalization declaration at the website https://canhan.gdt.gov.vn, the system has the function of supporting the determination of the tax finalization authority based on information related to tax obligations arising in the year declared by the individual. The place to submit personal income tax finalization dossiers is specifically determined as follows:

For income paying organizations, submit personal income tax finalization declaration dossiers to the Tax authority directly managing that income paying organization.

In case of direct settlement with the tax authority: Individuals residing in one place with salary and wage income and subject to self-declaration of tax in the year shall submit tax settlement declaration dossiers to the tax authority where the individual directly declares tax in the year. In case an individual has salary and wage income in two or more places, including cases where both income subject to direct declaration and income deducted by the paying organization are included, the individual shall submit tax settlement declaration dossiers to the tax authority where the largest source of income is in the year. In case the largest source of income in the year cannot be determined, the individual shall choose to submit the settlement dossier at the tax authority directly managing the paying organization or the place where the individual resides.

Resident individuals with salary and wage income subject to deduction at source from two or more paying organizations must submit tax finalization declaration documents as follows:

Individuals who have calculated family deductions for themselves at an organization or individual paying income shall submit their tax finalization declaration to the tax authority directly managing the organization or individual paying that income. In case an individual changes their workplace and the organization or individual paying the last income calculates family deductions for themselves, they shall submit their tax finalization declaration to the tax authority managing the organization or individual paying the last income. In case an individual changes their workplace and the organization or individual paying the last income does not calculate family deductions for themselves, they shall submit their tax finalization declaration to the tax authority where the individual resides. In case an individual has not calculated family deductions for themselves at any organization or individual paying income, they shall submit their tax finalization declaration to the tax authority where the individual resides.

In case a resident individual does not sign a labor contract, or signs a labor contract for less than 3 months, or signs a service provision contract with income at one or more places where 10% has been deducted, the tax finalization declaration must be submitted to the tax authority where the individual resides.

Individuals residing during the year have income from salaries and wages at one or many places but at the time of settlement do not work for any organization or individual paying income, the place to submit tax settlement declaration is the tax authority where the individual resides.

Deadline for submitting tax settlement declaration

Pursuant to the provisions of Point a, Point b, Clause 2, Article 44 of the Law on Tax Administration No. 38/2019/QH14 of the National Assembly, the deadline for declaring and submitting personal income tax finalization dossiers is as follows:

For income paying organizations: the deadline for submitting tax finalization declarations is no later than the last day of the third month from the end of the calendar year or fiscal year.

For individuals directly settling taxes: The deadline for submitting tax settlement dossiers is no later than the last day of the 4th month from the end of the calendar year. In case the deadline for submitting tax settlement dossiers coincides with a holiday according to regulations, the deadline for submitting tax settlement dossiers is the next working day. In case an individual has a personal income tax refund but is late in submitting the tax settlement declaration according to regulations, no penalty will be applied for administrative violations of declaring tax settlement after the deadline.

According to VGP