LATEST PERSONAL INCOME TAX FINALIZATION INSTRUCTION 2020

Suppose: Personal income tax finalization at the beginning of 2020 for the income received in 2019

Legal basis:

- Article 21 of Circular No. 92/2015/TT-BTC.

- Official dispatch No. 6043/CT-TTHT dated February 18, 2020 of Hanoi Tax Department and personal income tax finalization in 2019 and grant of tax identification numbers to dependents.

I/ Subjects of personal income tax finalization:

Income-paying organizations and individuals (Enterprises): Finalize for the income that enterprises have paid during the year.

Income-earning individuals (Employees): Finalize the income they have received during the year.

The relationship between employees and enterprises: Individuals can authorize the enterprise to finalize on their behalf if they are eligible for authorization as prescribed.

As follows:

1. Income-paying organizations and individuals (Enterprises):

a) Enterprises must make personal income tax finalization declaration:

Enterprises that pay incomes from wages and salaries, whether arise tax deduction or not, are responsible for declaring and finalizing tax on behalf of authorized individuals.

(Meaning: In 2019, every enterprise that pays income must make a personal income tax finalization declaration in 2020. Even in 2019 there is no personal income tax amount to be deducted or paid -> Still have to make a declaration).

b) Enterprises that are not required to make personal income tax finalization declarations:

If in 2019, your business does not arise income paying from salaries and wages, it is not required to make a personal income tax finalization declaration.

Enterprises that dissolve or terminate operations and generate income payments but do not have personal income tax deduction, the Enterprises do not make personal income tax finalization, only provide to the tax authority with a list of individuals who have paid incomes during the year (if any) according to form No. 05/DS-TNCN issued together with Circular No. 92/2015/TT-BTC no later than the 45th day from the date of issuance of a decision on dissolution or termination of operation.

2. Income-earning individuals (Employees):

a) Employees must make personal income tax finalization:

Underpayment of personal income tax (Compulsory to make personal income tax finalization declaration). Residents earning incomes from salaries and wages are responsible for tax finalization if there is additional tax payable.

Overpaid personal income tax that you want to refund or offset in the next tax declare period. If an individual overpaid personal income tax but wants to refund or offset in the next tax period, he/she must make a personal income tax finalization declaration. If an individual has an overpaid personal income tax amount and does not want to refund or offset it in the next tax period, he/she is not required to make a personal income tax finalization declaration.

📌 In addition, there are other cases:

+ Resident individuals earning incomes from salaries or wages are considered for tax reduction due to natural disasters, fires, accidents or fatal diseases.

+ Individuals who are foreigners and terminate their working contracts in Vietnam must make tax finalization declarations with tax authority before exit of the country.

📌 Individuals can finalize taxes in 1 of 2 ways:

Method 1: Do your own tax finalization directly with the tax authority.

Method 2: Authorize the business to make finalization instead.

b) Employees are not required to make tax finalization.

Residents have overpaid personal income tax amount and do not want to refund or offset tax in the next tax declare period.

The resident has fully paid the personal income tax payable in the year. (Neither overpaid nor underpaid)

Individuals who do not reside in Vietnam but have deductions or temporary payments during the year.

3. Authorization for tax finalization:

a) In case individuals are eligible to authorize finalization on behalf of:

- Individuals earning income only from salaries or wages, sign a labor contract of 03 months or more at an income-paying organization and are actually working at that organization at the time of authorization for tax finalization, including In case an individual works less than 12 months in a year at an organization, and at the same time has an average monthly income of not more than 10 million VND in other places in the year, the income payer has fully deducted 10% of the tax amount without no tax return required on this portion of income.

- Individuals are employees who are transferred from the old organization to the new organization in case the old organization divides, separates, merges or transforms an enterprise.

In addition to the above cases, the employee must self-declare personal income tax with the tax authority.

b) In case individuals are ineligibility to authorize tax finalization on behalf of:

- The individual does not meet the conditions as mentioned in section 3.a above. Specifically:

⭐ Sign a labor contract of less than 3 months or do not sign a labor contract

⭐ Sign labor contracts of 3 months or more at many income-paying organizations

⭐ Actually retired at the enterprise at the time of authorizing tax finalization. (No longer working at the business organization you want to authorize).

⭐ Having a current income in many places but the average monthly income in the year exceeds 10 million VND, such current income has not been fully taxed at 10% by the income payers.

- Individuals who satisfy the conditions for authorization specified in Section 3.1 but have been granted personal income tax deduction documents by the income paying organization shall not authorize the tax finalization to the income paying organizations (except for the case the organization recover and cancels the tax deduction documents already granted to the individual).

- Individuals who have not yet registered for a tax identification number.

- Individuals who earn incomes from salaries and wages and are considered for tax reduction due to natural disasters, fires, accidents, or fatal diseases then do not authorize tax finalization, but individuals make tax finalization declarations be themselves together with tax reduction consideration documents according to the regulations in Clause 1, Article 46 of Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance.

II/ Deadline for personal income tax finalization declaration submission:

The deadline for submitting tax finalization documents is the 90th day from the end of the calendar year.

III/ How to calculate personal income tax finalization in 2020 for income paid in 2019:

Personal income tax payable for the whole year = (Average monthly taxable income x Tax rate according to the progressive tax table) x 12 months.

In there:

Average monthly taxable income = (Total taxable income - Total deductions) /12 months.

1. Taxable income is the total income from wages and salaries that an individual actually receives from January 1, 2019 to December 31, 2020.

Taxable income for the year = Total income received during the year - Amounts determined to be tax-free for the year.

2. Deductions

Deductions that are deducted from an individual's taxable income before determining taxable income from salaries and wages shall comply with the guidance in Article 9 of Circular No. 111/2013/TT-BTC and Article 15 of Circular No. Circular No. 92/2015/TT-BTC.

3. Note:

The above calculation method only applies to individuals authorized for finalization.

Individuals who do not authorize finalization or are not eligible to authorize finalization, the payable personal income tax amount is the personal income tax that the enterprise has deducted.

VI/ Personal income tax finalization documents:

Circular No. 92/2015/TT-BTC has changed all forms of personal income tax finalization from wages and salaries. So which forms are used for personal income tax finalization?

1. For business organizations when submitting personal income tax finalization documents:

- Form No. 05/QTT-TNCN: The personal income tax finalization declaration replaces the form 05/KK-TNCN enclosed with Circular 156/2013/TT-BTC.

- Form No. 05-1/BK-QTT-TNCN: Appendix of detailed list of individuals subject to tax according to the progressive tax table, replacing form 05-1/BK-TNCN enclosed with Circular 156/2013 /TT-BTC.

- Form No. 05-2/2013/QTT-TNCN: Appendix of detailed list of individuals subject to tax at partial tax rates, replacing form 05-2/BK-TNCN enclosed with Circular 156/2013/ TT-BTC.

- Form No. 05-3/BK-QTT-TNCN: Appendix for detailed list of dependents for family deductions, replacing form 05-3/BK-TNCN enclosed with Circular 156/2013/TT-BTC.

2. For individuals who make tax finalization by themselves, the following forms shall be used:

- 02/QTT-TNCN: Personal income tax finalization declaration instead of personal income tax finalization declaration form No. 09/QTT-TNCN enclosed with Circular 156/2013/TT-BTC.

- 02-1/BK-QTT-TNCN: List of family deductions for dependents.

- 02/DK-NPT-TNCN: Registration of dependents for family deduction.

- 02/TB-MST-NPT: Notify dependents tax identification number.

V/ Where to submit the personal income tax finalization declaration:

- Income-paying organizations and individuals that are production and business establishments shall submit tax declaration documents at the tax authority directly managing the organization or individual.

- For individuals who make their own tax finalization:

+ Individuals who have calculated personal deductions at any income-paying organization or individual shall submit a tax finalization documents at the tax authority directly managing that income-paying organization or individual.

+ Individuals who change their workplace during the year and at the organization or individual that pay their final income for personal deduction, shall submit a tax finalization documents at the tax authority managing that organization or individual.

+ Individuals who change their workplace during the year and at the organization or individual that pay their final income without personal deduction, they shall submit a tax finalization documents at the Tax Department where the individual resides.

+ In case the individual has not yet calculated personal deduction at any income-paying organization or individual, the tax finalization documents shall be submitted at the Tax Department where the individual resides.

The above is very necessary information for individuals receiving income and business organizations paying income in 1 year. TASCO tax agent also provides personal income finalization service for customers. If you have a need to use the service, please contact TASCO Tax Agent for free advices and we will provide you with the best quality services.

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