HOW TO CALCULATE PERSONAL INCOME TAX FOR INDIVIDUALS WITH INCOME FROM 2 PLACES? INSTRUCTIONS FOR PERSONAL INCOME TAX FINALIZATION WORKING IN 2 PLACES.

I/ Who must pay personal income tax?

According to the provisions of Article 1 of Circular 111/2013/TT-BTC, personal income tax taxpayers include residents and non-residents who meet the statutory conditions. Specifically:

1. For residents:

A resident is a person who meets one of the following conditions:

First, being present in Vietnam for 183 days or more in a calendar year or for 12 consecutive months from the first day of presence in Vietnam.

Second, have a regular place of residence in Vietnam in one of the following two cases:

Have a regular place of residence in accordance with the law on residence

Have a rented house to live in in Vietnam in accordance with the law on housing

2. For non-residents:

A non-resident is a person who does not meet the above conditions.

II/ How much income must pay personal income tax?

When calculating personal income tax, it is necessary to pay attention to the following two types of income: Taxable income and taxable income

In there:

Taxable income = Total income – (Exempt items + Non-taxable items)

Taxable income = Taxable income - (Insurances + Deductions)

According to Clause 1, Article 19 of the 2007 Law on Personal Income Tax, revised in 2012: “Family deduction is the amount deducted from taxable income before tax calculation for income from business, salaries and wages of the taxpayers who are residents. Family deduction includes the following two parts:

a) The deduction for taxpayers is 9 million VND/month (108 million VND/year).

b) The deduction for each dependent is 3.6 million VND/month."

Thus, at least one person will automatically have a deduction of 9 million VND/month. Therefore, personal income tax only applies to people with a minimum income of over 9 million VND/month.

III/ How to calculate personal income tax in 2 places:

According to Clause 1, Article 25 of Circular 111/2013/TT-BTC providing for personal income tax deduction.

1. Tax deduction

Tax deduction is the income-paying organizations and individuals deduct the payable tax amount from the taxpayer's income before paying the income, specifically as follows:

b) Income from salaries, wages:

b.1) For a resident who signs a labor contract of three (03) months or more, the income paying organizations or individuals shall deduct tax according to the progressive tax table, even in the case of an individuals sign contracts of three (03) months or more at many places.

i) Tax deduction for some other cases:

Organizations and individuals that pay wages, remunerations and other expenses to residents do not sign labor contracts (under the guidance at Points c, d, Clause 2, Article 2 of this Circular) or sign a labor contract of less than three (03) months with a total income of two million (2,000,000) VND/time or more, tax must be deducted at the rate of 10% of income before paying to individuals.

In case an individual has only income that is subject to tax deduction according to the above rate, but the estimate of the individual's total taxable income after family deduction is not enough to pay tax, income-earning individuals make a commitment (made according to the form promulgated together with the guiding document on tax administration) and send it to the income-paying organization to serve as a temporary basis for not deducting personal income tax.

Individuals making commitments under the guidance at this point must register for tax and have a tax identification number at the time of commitment.

Conclusion:

👉 Individuals earning incomes from 2 places and sign a labor contract of 3 months or more shall calculate personal income tax according to the progressive tax table.

👉 Individuals earning incomes from many places, including those signing labor contracts of less than 3 months (seasonal, contracted, etc.) but with a salary of 2,000,000/time or 2,000,000/month or more, they must deduct 10% (Cannot make commitments because of income from 2 places).

IV/ Personal and dependents deductions calculation:

According to Clause 1, Article 9 of Circular 111/2013/TT-BTC providing for the family deduction:

c.1) Personal deduction:

c.1.1) Taxpayers who have multiple sources of income from salaries, wages, and business, at a given time (in full monthly basis) taxpayers choose to calculate personal deduction in one place.

i, Taxpayers only have to register and submit documents to proof for each dependent once during the period for which family deduction is calculated. In case the taxpayer changes the workplace, business place, they have to register and submit documents to proof for each dependent as the same as the first-time registration of dependents according to the guidance at point h.2.1.1.1, point h, paragraph 1, this article.

According to Official Dispatch 34863/CT-TTHT dated 26/05/2017 of Hanoi Tax Department

“In case a taxpayer signs a labor contract for more than three months in two places, the taxpayer is allowed to personal deduction at an income-paying agency and dependents deduction at the other income-paying agency. This family deduction does not affect the individual's personal income tax liability if the principles as guided at Point c, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC are maintained.

Conclusion:

👉 Individuals with multiple sources of income are only allowed to personal deduction in 1 place.

👉 If you want dependents deductions, you must register at the company you want to deduce.

Example:

Ms. An signs a contract at Company A with a contract term of more than 3 months and registers for personal deduction at Company A. Thus, company A will calculate personal income tax for Ms. An according to the progressive tax table and calculate personal deduction for Ms. An.

In addition, Ms. An also signs a contract with company B, assuming there are 2 cases:

a) If she signs a contract with a working term of more than 3 months, the company also calculates according to the progressive tax table, but does not calculate any deductions for Ms. An anymore, because Ms. An has already deducted from company A. How much the total amount paid will be included in taxable income.

b) If she signs a contract with a working term of less than 3 months, then:

⚡ Salary < 2 million/time or month, personal income tax is not deducted.

⚡ Salary > 2 million/time or month, 10% must be deducted (No commitment 02)

V/ Personal income tax finalization for individuals working in 2 places:

According to Official Letter 801/TCT – TNCN dated March 2, 2016 of the General Department of Taxation:

Organizations that pay incomes from salaries and wages, regardless of whether tax deduction or not, are responsible for making tax finalization and tax finalization on behalf of authorized individuals.

In case the organization does not generate income from salaries and wages in 2015, it is not required to declare personal income tax finalization.

Conclusion:

👉 If your company pays someone's salary, they must finalize personal income tax for that person (whether or not a tax deduction is incurred). That mean they must finalize the salaries and wages that your company pays for that employee.

👉 Nobody pays anyone's salaries, so there's no finalization.

+ “Individuals earning salaries and wages sign a labor contract of 3 months or more at an income-paying organization, and at the same time have a monthly average income of not more than 10 million VND in other places in the year. If the individual does not request tax finalization on this current income, he/she is authorized to finalize at an income-paying organization that signs a labor contract from 3 months or more. If an individual has a request for tax finalization on this current income, he/she shall directly make a tax finalization with the tax authority.”

+ “Individuals earning incomes from salaries and wages sign labor contracts of 3 months or more at a unit, and at the same time have current incomes that have not been deducted (including cases that have not yet reached the deduction level and has reached the level of deduction but not deduction), the individual does not authorize the tax finalization but must go to make the personal income tax finalization.”

VII/ Where to submit personal income tax finalization for individuals:

1. For income-paying organizations – enterprises:

The place to submit the 2016 personal income tax finalization documents with the organization paying-income from salaries and wages shall comply with the instructions at point c, clause 1, Article 16 of Circular 156/2013/BB-BTC.

⚡ Income-paying organizations submit personal income tax finalization documents at Department of taxation or District-level Tax Department directly managed.

2. For residents earning incomes from salaries and wages, tax finalization directly with tax authority:

2.1. Individuals earning incomes from salaries and wages directly declare tax, the place to submit tax finalization documents is the Department of Taxation where individuals submit tax declaration documents for the year.

2.2. Individuals earning incomes from salaries or wages from two or more places and subject to tax finalization directly with tax authority shall submit tax finalization documents as follows:

- Individuals who have calculated personal deductions at any income-paying organization shall submit a tax finalization documents at the tax agency directly managing that income-paying organization. In case the individual changes the workplace and at the last income-paying organization tries to calculate personal deduction, he/she shall submit a tax finalization documents at the tax authority managing the last income-paying organization. In case the individual changes the workplace and at the organization that pays the final income without personal deduction, the tax finalization documents shall be submitted at the Tax Department where the individual resides (where he/she registers his/her permanent residence or temporary residence).

- In case the individual has not yet calculated personal deduction at any income-paying organization, he/she shall submit a tax finalization documents at the Tax Department where the individual resides (where he/she registers his/her permanent residence or temporary residence).

2.3. In case an individual does not sign a labor contract, or signs a labor contract of less than 3 months, or signs a contract to provide services with income at one place or many places, 10% has been deducted, tax finalization shall be made at The Tax Department where the individual resides (registration of permanent or temporary residence).

2.4. Individuals who have income from salaries or wages in one place or many places during the year but at the time of tax finalization do not work at any income paying organization, the place to submit the tax finalization documents is the Tax Department where the individual resides (registration of permanent or temporary residence).

IV/ How to pay social insurance of income from 2 places?

According to Clause 1, Article 39 of Decision 959/QD-BHXH dated September 9, 2015 of Vietnam Social Insurance:

1. Subjects participating in compulsory social insurance, health insurance and social insurance

1.2. Employees who have 2 or more labor contracts with different units shall pay social insurance and unemployment insurance according to the first signed labor contract, and pay health insurance according to the labor contract with the highest salary.

Conclusion:

👉 Pay social insurance, unemployment insurance at the place where the first contract is signed

👉 Pay health insurance at the place with the highest salary.

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