Guide to personal income tax finalization for 2020

I. ENTITIES REQUIRED TO FILING TAX RETURNS

1. For individuals who directly settle their tax obligations with the Tax authorities.

Individuals residing in Vietnam who earn income from salaries and wages must file their personal income tax return with the tax authorities if they have additional tax payable or if they have overpaid tax and request a refund or offset against the next tax period.

Individuals who are present in Vietnam for less than 183 days in the first calendar year, but whose presence in Vietnam for 183 consecutive months from the first day of arrival is 12 days or more, will have their first tax year considered as the 12 consecutive months from the first day of arrival in Vietnam.

Foreign individuals whose employment contracts in Vietnam have ended must file their tax returns with the tax authorities before leaving the country. If the individual has not yet filed their tax return with the tax authorities, they may authorize the income-paying organization or another organization/individual to file the tax return on their behalf, in accordance with regulations on tax settlement for individuals. If the income-paying organization or other organization/individual receives the authorization to file the tax return, they will be responsible for any additional personal income tax payable or will be reimbursed for any overpaid tax.

Individuals residing in Vietnam who have income from salaries and wages and are eligible for tax reduction due to natural disasters, fires, accidents, or serious illnesses affecting their ability to pay taxes cannot authorize the income-paying organization or individual to file their tax return on their behalf. Instead, they must directly file their tax return with the tax authorities as prescribed.

2. For organizations that pay income in the form of salaries and wages.

Organizations and individuals paying income from salaries and wages are responsible for filing personal income tax returns regardless of whether tax withholding occurred or not, and for filing personal income tax returns on behalf of authorized individuals. If an individual authorizes an organization to file their personal income tax return and the additional tax payable after settlement is 50.000 VND or less, which is exempt from tax, the organization paying the income will still declare the information of that individual in its personal income tax return and will not aggregate the additional tax payable of individuals with an additional tax payable of 50.000 VND or less. If the organization paying the income has already filed its personal income tax return before the effective date of Decree No. 126/2020/ND-CP, no retroactive application will be made.

In cases where an individual is an employee transferred from an old organization to a new organization due to a merger, consolidation, division, separation, or conversion of business type, or if the old and new organizations are within the same system, the new organization is responsible for settling personal income tax under the individual's authorization for both the income paid by the old organization and for retrieving any personal income tax withholding certificates issued by the old organization to the employee (if any).

3. Regarding authorization for personal income tax settlement.

Individuals residing in Vietnam who receive income from salaries and wages may authorize the organization or individual paying the income to settle their personal income tax, specifically as follows:

– Individuals with income from salaries and wages who have signed labor contracts of 03 months or more with one employer and are actually working there at the time the organization or individual paying the income performs tax finalization, even if they have not worked for a full 12 months in the calendar year. In cases where an individual is an employee transferred from an old organization to a new organization due to a merger, consolidation, division, separation, or conversion of business type, or if the old and new organizations are within the same system, the individual may authorize the new organization to finalize their tax finalization.

– Individuals with income from salaries and wages under a labor contract of 03 months or more at one place and actually working there at the time the organization or individual paying the income settles the tax, even if they do not work for a full 12 months in the calendar year; and who also have incidental income from other sources averaging no more than 10 million VND per month during the year and have already had personal income tax deducted at a rate of 10%, if they do not request a tax settlement for this portion of income.

– After an individual has authorized tax settlement, and the income-paying organization has settled the tax on their behalf, if it is discovered that the individual is subject to direct tax settlement with the tax authorities, the income-paying organization will not adjust its own personal income tax settlement. Instead, it will only issue a tax deduction certificate to the individual based on the settlement amount and write the following in the lower left corner of the certificate: “Company … has settled personal income tax on behalf of Mr./Ms. … (as authorized) at line (serial number) … of Appendix 05-1/BK-TNCN” so that the individual can directly settle the tax with the tax authorities.

II. ENTITIES NOT REQUIRED TO FILE TAX RETURNS

1. For individuals who directly settle their tax obligations with the Tax Authority.

Individuals with income from salaries and wages in the following cases are not required to file personal income tax returns:

– Individuals whose additional personal income tax payable after the annual tax settlement is 50.000 VND or less are exempt from tax. In this case, individuals determine the exempted tax amount themselves; they are not required to submit a personal income tax settlement report or an exemption application. If the settlement period from 2019 and earlier was settled before the effective date of Decree No. 126/2020/ND-CP, no retroactive application will be made.

– Individuals whose personal income tax payable is less than the amount of tax already paid provisionally, and who do not request a refund or offset against the next tax filing period;

– Individuals with income from salaries and wages under a labor contract of 03 months or more at one unit, and also with incidental income from other sources averaging no more than 10 million VND per month during the year, and who have already had 10% personal income tax deducted, are not required to file a tax return for this income unless requested otherwise;

– Individuals whose employers purchase life insurance (excluding voluntary retirement insurance) or other non-mandatory insurance with accumulated premiums, and where the employer or insurance company has deducted personal income tax at a rate of 10% on the corresponding premium amount purchased or contributed by the employer for the employee, are not required to file a personal income tax return for this income.

2. For organizations and individuals paying income from salaries and wages.

If an organization does not generate any income payments, it is not required to file a personal income tax return.

III. FAMILY DEDUCTIONS

1. Personal allowance deduction

Based on Resolution No. 954/2020/UBTVQH14 dated June 2, 2020, of the Standing Committee of the National Assembly, the personal allowance stipulated in Clause 1, Article 19 of the 2007 Personal Income Tax Law, as amended and supplemented by the 2012 amended Personal Income Tax Law, is adjusted as follows:

- The deduction level for the taxpayer is 11 million VND / month (132 million VND / year);

- The deduction level for each dependent is 4,4 million / month.

The personal allowance deduction is applied from the 2020 tax year. Cases where tax has been provisionally paid based on the personal allowance deduction stipulated in Clause 1, Article 19 of the Personal Income Tax Law No. 04/2007/QH12, as amended by Law No. 26/2012/QH13, will have their personal income tax payable recalculated based on the personal allowance deduction stipulated in Resolution No. 954/2020/UBTVQH14 when settling personal income tax for the year 2020.

2. Deductions for dependents

To be eligible for dependent deductions, taxpayers must register for dependent deductions as prescribed. If a taxpayer has not claimed dependent deductions during the tax year, they are entitled to claim them from the month the obligation to support arises, upon filing their tax return and registering for dependent deductions. For other dependents as guided in section d.4, point d, clause 1, Article 9 of Circular No. 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance, the deadline for registering dependent deductions is no later than December 31st of the tax year. After this deadline, the dependent deduction will not be claimed for that tax year.

In cases where taxpayers who are eligible for authorized tax settlement have not yet claimed the dependent deduction for dependents during the tax year, they are still entitled to claim the dependent deduction from the month the obligation to support arises when the taxpayer performs authorized tax settlement and registers the dependent deduction through the income-paying organization.

IV. PROCEDURES FOR FILING AND FINALIZING TAXES

1. Filing tax returns

1.1. Personal Income Tax Final Settlement Documents

Personal income tax finalization declarations are to be prepared according to the guidelines in Circular No. 92/2015/TT-BTC dated June 15, 2015, of the Ministry of Finance until another legal document replaces it.

1.2. Filing supplementary personal income tax return

– In cases where an organization or individual submits a supplementary declaration that does not change their tax obligations, they only need to submit an Explanation of the Supplementary Declaration and related documents; they do not need to submit a Supplementary Declaration form.

– In cases where organizations or individuals have not yet submitted their annual tax return, taxpayers must submit supplementary tax returns for the months or quarters containing errors or omissions, and simultaneously consolidate the supplementary data into their annual tax return.

– In cases where organizations or individuals have already submitted their annual tax return:

+ For individuals who directly file and settle their taxes, they only need to submit supplementary annual tax return documents.

+ For organizations and individuals paying income from salaries and wages, they must simultaneously submit supplementary annual tax return documents and monthly/quarterly tax returns containing corresponding errors or omissions.

2. Where to submit tax return documents

The place for submitting personal income tax finalization documents follows the specific instructions in Clause 8, Article 11 of Government Decree No. 126/2020/ND-CP dated October 19, 2020. If an individual declares and submits their personal income tax finalization declaration via the website https://canhan.gdt.gov.vn, the system will assist in determining the tax authority responsible for finalization based on information related to the tax obligations incurred during the year as declared by the individual.

The specific location for submitting personal income tax returns is as follows:

2.1. Organizations paying income must submit their personal income tax return to the tax authority directly managing that organization.

2.2. For individuals who directly settle their tax obligations with the Tax authorities.

– Individuals residing in Vietnam who receive salary and wage income from one source and are subject to self-declaration of tax during the year shall submit their tax return to the tax authority where they directly declare their taxes during the year, as stipulated in Point a, Clause 8, Article 11 of Decree No. 126/2020/ND-CP. If an individual has salary and wage income from two or more sources, including both income subject to direct declaration and income from organizations that have already deducted taxes, the individual shall submit their tax return to the tax authority where the largest source of income for the year is located. If the largest source of income for the year cannot be determined, the individual shall choose to submit their tax return to either the tax authority directly managing the paying organization or their place of residence.

– Individuals residing in Vietnam who receive salary or wage income subject to withholding tax from two or more sources must submit their tax return as follows:

Individuals who have claimed personal deductions at a particular income-paying organization or individual should file their tax return at the tax authority directly managing that organization or individual. If an individual changes workplaces and the last income-paying organization or individual claimed personal deductions, they should file their tax return at the tax authority managing that last income-paying organization or individual. If an individual changes workplaces and the last income-paying organization or individual did not claim personal deductions, they should file their tax return at the tax authority where they reside. If an individual has never claimed personal deductions at any income-paying organization or individual, they should file their tax return at the tax authority where they reside.

+ In cases where a resident individual does not have an employment contract, or has an employment contract for less than 03 months, or has a service contract with income earned from one or more sources where 10% has already been deducted, they must submit their tax return to the tax authority where they reside.

+ Individuals residing in Vietnam who have earned income from salaries and wages at one or more places during the year, but are not employed by any organization or individual paying the income at the time of tax settlement, should file their tax return with the tax authority in their place of residence.

V. DEADLINE FOR SUBMITTING TAX RETURN DOCUMENTS

Based on the provisions of points a and 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 final settlement documents is as follows:

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

– For individuals directly filing their tax returns: The deadline for submitting tax returns is no later than the last day of the fourth month from the end of the calendar year. If the deadline coincides with a public holiday, the deadline will be the next working day. If an individual is entitled to a personal income tax refund but submits their tax return late, no penalty will be applied for the administrative violation of filing the tax return after the deadline.

VI. RESPONSIBILITIES OF TAX AUTHORITIES FOR RECEIVING AND PROCESSING PERSONAL INCOME TAX RETURNS

– The tax authorities are responsible for disseminating information, providing guidance, and urging taxpayers to properly settle and pay taxes in accordance with regulations to avoid being penalized for violations as prescribed by law.

– The Tax Authority shall organize the process of receiving personal income tax finalization documents according to the principle of creating favorable conditions in terms of location, personnel, and time for receiving documents, ensuring that all personal income tax finalization documents are received within the prescribed time limit.

– After accepting the personal income tax return, the Tax Authority will review and process tax return files that have not been recorded on the Tax Department's IT application system; process the files according to regulations and will not return the tax return files unless the individual requests adjustments from the tax authority.

Instructions for implementing the registration of electronic tax transaction accounts and Official Letter No. 535/TCT-DNNCN dated March 3, 2021, from the General Department of Taxation guiding the acceptance of Form 02/QTT-TNCN electronically through the General Department of Taxation's electronic portal.

The above is guidance from the General Department of Taxation on some aspects of personal income tax settlement according to current personal income tax laws. During implementation, if any difficulties arise, please report them to the General Department of Taxation for timely guidance.