Công văn 636/TCT-DNNCN

To: Departments of Taxation of provinces and central-affiliated cities

On June 13, 2019, the National Assembly has promulgated the Law on tax administration No. 38/2019/QH14, coming into force from July 01, 2020; on June 02, 2020, the Standing Committee of the National Assembly has promulgated the Resolution No. 954/2020/UBTVQH14 on changes to personal income tax (PIT) exemptions; and on October 19, 2020, the Government has promulgated the Decree No. 126/2020/ND-CP on elaboration of the Law on tax administration, coming into force from December 05, 2020; these documents introduce some new regulations on PIT finalization. In order to facilitate the PIT finalization in accordance with regulations of the Law on personal income tax in force, the General Department of Taxation hereby provides some guidelines as follows:

I. ENTITIES MAKING PIT FINALIZATION

1. Individuals directly finalizing PIT with tax authorities

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

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 No. 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

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.

II. ENTITIES THAT ARE NOT REQUIRED TO FINALIZE PIT

1. Individuals directly finalizing PIT with tax authorities

 Salary earners must not finalize PIT in the following cases:

- After finalizing PIT, the PIT arrears is not exceeding 50.000 VND. In this case, the salary earner shall himself/herself determine the tax exempt and is not required to submit the PIT finalization dossier and application for tax exemption. If PIT for the tax year 2019 and earlier has been finalized before the effective of Decree No. 126/2020/ND-CP , no retrospective treatment will apply;

- The amount of PIT payable is smaller than the amount provisionally paid but the individual does not claim a refund or does not have it carried forward to the next period;

- In case an individual has entered into an employment contract with a duration of at least 03 months with an employer and earns an average monthly irregular income not exceeding 10 million VND on which 10% PIT has been deducted, the PIT on this income shall not be finalized if not requested by that individual.

- If an individual’s life insurance (except voluntary retirement insurance) or any other voluntary insurance with insurance premium accumulation is purchased by the individual’s employer and 10% PIT on the part purchased or contributed by the employer has been deducted, that individual must not finalize PIT on this part.

2. Income payers

PIT finalization is not required if an organization does not pay any income.

III. TAXPAYER’S PERSONAL AND FAMILY CIRCUMSTANCE DEDUCTIONS

1. Taxpayer’s personal and family circumstance deductions

Pursuant to the Resolution No. 954/2020/UBTVQH14 dated June 02, 2020 of the Standing Committee of National Assembly, the taxpayer’s personal and family circumstance deduction levels prescribed in Clause 1 Article 19 of the 2007 Law on Personal Income Tax, as amended in the 2012 revised Law on Personal Income Tax, will be subject to the following adjustments:

- Taxpayer’s personal deduction will be VND 11 million/month (VND 132 million/year);

- Family circumstance deduction per a taxpayer’s dependent will be VND 4,4 million/month.

These deduction levels will be applied from the tax period 2020. PIT amounts provisionally paid at the taxpayer’s personal and family circumstance deduction levels prescribed in Clause 1 Article 19 of the Law on Personal Income Tax No. 04/2007/QH12, as amended in the Law No. 26/2012/QH13, shall be re-computed at the new taxpayer’s personal and family circumstance deduction levels prescribed in the Resolution No. 954/2020/UBTVQH14 when carrying out the 2020 PIT finalization procedures.

2. Family circumstance deductions for taxpayer’s dependents

In order to apply family circumstance deductions for taxpayer’s dependents, a taxpayer must carry out registration of dependents as prescribed. If family circumstance deductions for taxpayer’s dependents are not yet applied in the tax year, deduction for a taxpayer’s dependent will be calculated from the month in which the support obligation is incurred when the taxpayer carries out PIT finalization procedures and has successfully completed procedures for registration of taxpayer’s dependents. With regard to other taxpayer’s dependents as prescribed in Paragraph d.4, and Point d Clause 1 Article 9 of the Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance, the deadline for registration of family circumstance deductions is December 31 of the tax year. After this deadline, no family circumstance deductions will be calculated in that tax year.

If family circumstance deductions for dependents of a taxpayer who authorizes the income payer to finalize PIT are not yet applied in the tax year, deduction for that taxpayer’s dependents will be also calculated from the month in which the support obligation is incurred when the taxpayer authorizes the income payer to finalize PIT and has completed procedures for registration of dependents through the income payer.

IV. PIT FINALIZATION PROCEDURES

1. PIT declaration

1.1. PIT finalization dossier

PIT finalization dossier will be prepared in accordance with the Circular No. 92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance until it is superseded by a new legislative document.

1.2. PIT finalization dossier supplementation

- If the supplementation does not lead to a change in tax obligations, only a written explanation and relevant documents are required while a supplementary tax return is not required.

- If the annual tax finalization dossier has not been submitted, the taxpayer shall provide supplementary tax documents of the erroneous month or quarter and include the rectification in the annual tax finalization dossier.

- If the annual tax finalization dossier has been submitted:

+ The individual who directly submits the PIT finalization dossier shall only provide the supplementation to the annual tax finalization dossier.

+ The income payer shall provide the supplementation to its terminal PIT return and the erroneous monthly or quarterly tax return.

2. Submission of PIT finalization dossiers

PIT finalization dossiers shall be submitted in accordance with Clause 8 Article 11 of the Government’s Decree No. 126/2020/ND-CP dated October 19, 2020. In case an individual declares and submits PIT finalization dossier through the website: https://canhan.gdt.gov.vn, the tax authority shall be determined by the system based on the information about tax obligations incurred in the year provided by that individual.

PIT finalization dossiers will be submitted as follows:

2.1. Income payers shall submit PIT finalization dossiers to their supervisory tax authorities.

2.2. For individuals directly finalizing PIT with tax authorities

- Resident individuals who earn salary in one location and declare tax themselves shall submit tax finalization dossiers to the tax authorities to which tax declarations are submitted during the year as prescribed in Point a Clause 8 Article 11 of Decree No. 126/2020/ND-CP. In case an individual earns salary in more than one location, including salary on which tax is declared directly and salary on which tax has been deducted by the income payer, the tax finalization dossier shall be submitted to the tax authority of the area where the biggest source of income is located. In case the area where the biggest source of income is located cannot be identified, the tax finalization dossier shall be submitted to the supervisory tax authority of the income payer or the area where the individual resides.

- In case a resident individual earning salary from more than one sources on which tax has been deducted by salary payers:

+ The tax finalization dossier shall be submitted to the supervisory tax authority of the salary payer where the taxpayer’s personal and family circumstance deduction are claimed. In case the individual’s workplace is changed and the personal deduction is claimed at the last salary payer, the tax finalization dossier shall be submitted to the supervisory tax authority of such salary payer. In case the individual’s workplace is changed and the taxpayer’s personal and family circumstance deduction are not claimed at the last salary payer, the tax finalization dossier shall be submitted to the tax authority of the area where the individual resides. In case the taxpayer’s personal and family circumstance deduction have not been claimed at any salary payer, the tax finalization dossier shall be submitted to the tax authority of the area where the individual resides.

+ In case a resident individual does not have an employment contract or has an employment contract of less than 03 months or has a service provision contract and earns income at one location or more from which 10% PIT has been deducted, the tax finalization dossier shall be submitted to the tax authority of the area where the individual resides.

+ In case a resident individual earns salary at one location or more but is not working for the salary payer when the tax finalization dossier is being prepared, the tax finalization dossier shall be submitted to the tax authority of the area where the individual resides.

V. DEADLINES FOR SUBMISSION OF PIT FINALIZATION DOSSIERS

Pursuant to Point a, Point b Clause 2 Article 44 of the Law on Tax Administration No. 38/2019/QH14 of the National Assembly, PIT finalization dossiers must be submitted by the following deadlines:

- Income payers shall submit PIT finalization dossiers by the last day of the 03^rd month from the end of the calendar year or fiscal year.

- Individuals who themselves finalize PIT shall submit PIT finalization dossiers by the last day of the 04^th month from the end of the calendar year. If the deadline for submission of PIT finalization dossier falls on days off or holidays as prescribed, the deadline shall be the following business day. If an individual has PIT refund but fails to submit the PIT finalization dossier by the prescribed deadline, no administrative penalty for such late submission will be imposed.

VI. TAX AUTHORITIES’ RESPONSIBILITY TO RECEIVE AND PROCESS PIT FINALIZATION DOSSIERS

- Tax authorities shall disseminate information, instruct and expedite taxpayers to finalize and pay PIT as per regulations in order to avoid incurring administrative penalties.

- Tax authorities shall arrange personnel and provide convenient locations and working times for ensuring the receipt of PIT finalization dossiers by the prescribed deadlines.

- After receiving PIT finalization dossiers, tax authorities shall review and process PIT finalization dossiers which are not recorded on the IT system of taxation branch; process received PIT finalization dossiers as prescribed and shall not return any PIT finalization dossiers, unless the taxpayer submits a request for change of tax authority; provide guidance on issuance of electronic tax transaction accounts and implementation of the Official Dispatch No. 535/TCT-DNNCN dated March 03, 2021 of General Department of Taxation providing guidance on receipt of declaration 02/QTT-TNCN through the web portal of the General Department of Taxation.

These are the General Department of Taxation’s guidelines on PIT finalization in accordance with regulations of the Law on Personal Income Tax in force. Any difficulties that arise during the implementation of this document should be promptly submitted to the General Department of Taxation for consideration./.