Recently, the issue of personal income tax (PIT) finalization has received significant public attention due to increasingly stringent regulations. Many people are still wondering whether they will be penalized for not finalizing their PIT, especially as the deadline for 2021 PIT finalization (April 30, 2022) is approaching.
In addition, there are some key issues regarding the method and timing of personal income tax settlement, and the cases where tax settlement is mandatory (or not mandatory). The administrative penalties for late payment, etc., have also received a lot of attention.
1. Will I be penalized for not filing my personal income tax return for 2022?
Personal income tax is a mandatory contribution to the state budget; every year, all taxpayers are obligated to settle and pay their taxes on time. Therefore, individuals and organizations that fail to settle their personal income tax on time will be subject to penalties.
1.1. Cases where tax settlement is exempt or mandatory.
Regarding cases where personal income tax finalization for 2022 is not required, this applies if the organization or individual falls under one of the cases specified in point d, clause 6, article 8, chapter II of Government Decree No. 126/2020/ND-CP dated October 19, 2020, detailing some provisions of the Law on Tax Administration:
- Organizations and individuals paying income from salaries and wages do not generate income payments.
- In cases where individuals directly settle their tax obligations with the tax authorities and the additional personal income tax payable after settlement is less than or equal to 50.000 VND.
- Individuals whose personal income tax payable is less than the amount of tax already paid provisionally, without requesting a refund or offsetting it against the next tax filing period.
- Individuals with income from salaries and wages under a labor contract of 3 months or more with one employer, and who also have other income during the year averaging no more than 10 million VND per month and have had personal income tax deducted at a rate of 10%, 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 10% personal income tax on the corresponding premium amount purchased or contributed by the employer for the employee, are not required to file a tax return for this income.
In summary, the above content fully outlines the regulations related to cases where personal income tax final settlement is not required. Organizations and individuals who meet the conditions for tax final settlement must strictly adhere to the regulations in declaring and settling personal income tax, avoiding regrettable errors that could affect their production and business processes, as well as ensuring their legitimate rights and interests in tax declaration and payment.
1.2. Deadline for submitting personal income tax return.
From a legal perspective, the deadline for personal income tax settlement is regulated in detail and specifically according to Clause 4, Article 44 of the 2019 Tax Administration Law for income earned in 2021 as follows:
- The last day of the third month from the end of the fiscal year for personal income tax final settlement filings by businesses and organizations.
- The last day of the fourth month from the end of the year is the deadline for filing personal income tax returns for individuals who directly file their tax returns.
Therefore, income for 2021 needs to be settled at the beginning of 2022 according to the following deadline:
- March 31, 2022 is the latest deadline for tax settlement if individuals with income from salaries and wages authorize their organizations or businesses to settle their tax obligations on their behalf.
- April 30, 2022 is the latest deadline for tax settlement if individuals with income from salaries and wages directly settle their tax obligations with the tax authorities.
1.3. Methods for submitting tax return documents
Authorization for personal income tax final settlement.
To authorize the income-paying organization to settle the tax liability, employees need to prepare the authorization documents as stipulated in Clause 3, Article 21, Circular 92/2015/TT-BTC, which include the following documents:
– Authorization form: Use Form No. 02/UQ-QTT-TNCN.
– Receipts or documents (photocopies) of charitable, humanitarian, or educational contributions (if any).
Employees who submit authorization documents have fully prepared the necessary information for the income-paying organization to carry out personal income tax settlement.
Self-assessment of personal income tax
Besides authorizing the income-paying organization to settle personal income tax, employees can also settle their own personal income tax. According to Clause 3, Article 21, Circular 92/2015/TT-BTC, the documents required for self-settlement of personal income tax include:
- Form 02/QTT-TNCN: Tax return form issued in accordance with Circular 92/2015/TT-BTC.
- Appendix form No. 02-1/BK-QTT-TNCN issued together with Circular 92/2015/TT-BTC.
- Copies of documents proving the amount of tax withheld, provisionally paid, or paid abroad (if any).
- Receipts or documents (photocopies) proving charitable, humanitarian, or educational contributions (if any).
After preparing all the necessary documents, individuals who are required to file their own tax returns will submit their tax return to the Tax Department where they filed their tax return during the year.
2. Summary of penalties for late submission of tax returns.
Individuals and organizations that violate the regulations by submitting tax returns late will be subject to penalties depending on the severity of the violation. In addition, remedial measures will be applied, requiring them to pay the full amount of overdue taxes into the state budget.
2.1. Penalties for violating the 2022 tax settlement deadline.
The penalties for late filing, paying, and settling personal income tax for 2022 are applied according to Article 13 of Decree 125/2020/ND-CP, depending on the number of days overdue, the specific penalties are as follows:
- If tax returns are filed 1 to 5 days late compared to the deadline and there are mitigating circumstances, a warning penalty will be imposed.
- In cases where tax returns are filed late by 1 to 30 days compared to the prescribed deadline (excluding cases where a warning penalty has already been issued for late filing by 1 to 5 days), an administrative fine of VND 2.000.000 to VND 5.000.000 will be imposed.
- If tax returns are filed 31 to 60 days late compared to the prescribed deadline, an administrative fine of VND 5.000.000 to VND 8.000.000 will be imposed.
- In the event of committing any of the following acts, the administrative fine ranges from 8,000,000 VND to 15.000.000 VND:
- Filing tax returns 61 to 90 days late compared to the deadline.
- Filing tax returns 91 days or more late than the prescribed deadline, but without incurring any tax liability.
- No tax returns were filed and no tax liability arose.
- When filing corporate income tax returns, the accompanying appendices regarding tax management for businesses with related-party transactions are not included.
Penalties for failure to file tax returns in 2022
In cases where tax returns are filed more than 90 days after the prescribed deadline, and tax liabilities arise, and the taxpayer has paid the full amount of tax and late payment penalties to the state budget before the tax authority issues a decision to conduct a tax audit or inspection, or before the tax authority draws up a record of late filing of tax returns as stipulated in Clause 11, Article 143 of the 2019 Law on Tax Administration, the administrative fine ranges from VND 15.000.000 to VND 25.000.000.
(Note: In this case, if the penalty amount is greater than the tax liability reported on the tax return, the maximum penalty in this case will be equal to the tax liability, but a minimum of VND 11.500.000.).
2.2. Penalties for late payment of fines for violations
When submitting personal income tax returns late, taxpayers are obligated to pay the penalty within the deadline. Further late payment will result in additional late payment penalties as stipulated in Article 42 of Decree 125/2020/ND-CP, specifically:
- Late payment penalties are calculated at a rate of 0,05% per day on the amount of the overdue fine.
- The total number of days of late payment of fines includes holidays and weekends, and is calculated from the day following the deadline for payment until the day before the organization or individual makes the payment.
Therefore, taxpayers who pay late will also be charged an additional late payment penalty calculated as follows: Late payment penalty = 0.05% x Amount overdue x Number of days overdue
However, in some cases, individuals or organizations will not be charged late payment penalties:
- During the period when the enforcement of the fine decision is suspended.
- During the review period, a decision will be made on reducing or waiving the fine.
- The amount of the fine is not yet due in cases where the fine can be paid in installments.
Note: The above penalties apply to organizations and businesses that violate the regulations. If an individual is required to self-declare their personal income tax but fails to submit a tax return, the penalty will be half the penalty for businesses as stated above.