COMMON MISTAKES WHEN FINALIZING PERSONAL INCOME TAX 2021

Normally, at the end of the year, employees need to finalize personal income tax as well as to refund personal income tax but in the process of personal income tax finalization, there will be many mistakes because you do not understand clearly and deeply the regulations when making tax finalization, leading to confusion. With the purpose of supporting taxpayers to fulfill their tax responsibilities, especially there is a new regulation on family deduction rate in 2020, TASCO Tax Agent will point out common mistakes when taxpayers making tax finalization.

1. Wrong employee declaration in forms 05-1-BK and 05-2BK:

- Form 05-1-BK – applied to individuals with long-term labor contracts of > 3 months and subject to personal income tax according to the progressive tax table.

- Form 05-2-BK – applied to individuals who have short-term labor contracts of < 3 months and subject to personal income tax at the full tax rate.

👉 In case an individual has just signed a probationary labor contract (under 3 months) and then signs a long-term contract of > 3 months, then:

- Probationary labor contract (under 3 months) declared in item 05-2-BK

- Long-term labor contract (over 3 months) declared in item 05-1-BK

>> Currently, many cases have been invited by the social insurance agency due to incorrect declaration of forms from 05-2-BK to 05-1-BK.

2. Incorrectly confirming qualified persons to authorize personal income tax finalization on behalf of:

- Case 1: Individuals who only earn income from salaries and wages sign a labor contract of 3 months or more at an organization or individual paying income and you are actually working there at the time of authorization, even if you do not work for full 12 months in a year.

- Case 2: Individuals who only earn income from salaries and wages sign a labor contract of 3 months or more at an organization or individual paying income and you are actually working there at the time of authorization, even if you do not work for full 12 months in a year. At the same time have current income at the other places in the year on average not exceeding 10 million VND, the income payer has deducted 10% tax without requiring tax finalization for this income.

- Case 3: The individual is an employee who is transferred from the old organization to the new organization in case the old organization splits, merges or transforms an enterprise. At the end of the year, if the employee has authorize for tax finalization, the new organization must collect the personal income tax deduction documents issued to the employee by the old organization (if any) to serve as a basis for total income, deducted tax amount and finalize tax on behalf of employees.

Individuals eligible for tax finalization will calculate personal deduction according to the latest regulations in 2020 at 132 million / year (equivalent to 11 million / month), individuals not eligible for tax finalization will calculate according to the actual number of working months x 9 million VND.

3. Mistakes in dependents registration:

Legal basis: Point c, Clause 1, Article 9 of Circular 111/2013/TT-BTC

Rules:

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

For foreigners who are residents in Vietnam, the personal deduction from January or from the month of arrival in Vietnam in case the individual is present in Vietnam for the first time to the month of termination of the labor contract and to leave Vietnam in the tax year (full monthly calculation).

In case the individual has not yet deducted a personal deduction or has made a personal deduction for less than 12 months in the tax year, he will be entitled to a full 12 month deduction when making tax finalization as prescribed.

Dependents deductions:

Taxpayers are entitled to dependents deductions if the taxpayer has tax registered and taxpayers are granted a tax identification number.

When the taxpayer registers dependents deduction, the tax authority will issue a tax identification number for the dependents and be temporarily calculated family deduction in the year from the date of registration. For dependents who have been registered for dependents deduction before the effective date of this Circular will continue to receive family deduction until they are granted a tax identification number.

In case taxpayers have not yet calculated dependents deductions in a tax year, dependents deduction should be calculated from the month in which the maintenance obligation arises when the taxpayer makes tax finalization and registered dependents deduction. Particularly for other dependents (below) at Point d, Clause 1, of this Article, the time limit for family deduction is December 31 of the tax year, over the above-mentioned time limit, the family circumstance-based deduction for that tax year will not be calculated.

Each dependent is entitled to a deduction only once per taxpayer in the tax year. In case many taxpayers have the same dependents to take care of, the dependents will agree to register for family deduction for one taxpayer.

Other helpless individuals that taxpayers are directly nurturing and satisfying the conditions at Point dd, Clause 1 of this Article include:

1️⃣ Taxpayer's siblings

2️⃣ Grandfather, grandmother; aunt, uncle of the taxpayer.

3️⃣ The taxpayer's grandchildren include: brothers, sisters’ children.

4️⃣ Individuals who must directly nurtured according to the provisions of law.

5️⃣ Persons who must be directly nurtured according to the provisions of law.

⭕ When registering for dependents deduction (or nurturers), the deduction will be calculated immediately, at the end of the year if eligible for authorization of finalization, the deduction will be calculated for a full year.

⭕ Employees who change their workplace during the year must report a decrease in NPT registration at the old workplace and report an increase in NPT at the new workplace like the first time.

⭕ Employees who change their workplace during the year must report the decrease in dependents registration at the old workplace and report the increase in dependents at the new workplace as the first time.

4. Deadline for personal tax identification number registration:

Register a personal tax identification number for employees to ensure the rights and obligations of employees. In case the employee does not have a personal tax identification number, they will not be able to make the commitment 02-CK to temporarily not deduct personal tax and is the case that they have to make the personal income tax finalization by themselves and is not eligible for authorization for finalization.

Register personal tax identification number at the latest 10 days before the time of submitting the annual personal income tax finalization.

Commitment 02-CK-TNCN:

Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC:

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

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

Some opinions say that individuals still have the right to make commitments 02-CK-TNCN in the year if they work in many places and meet the following conditions:

📌 Have a personal tax identification number at the time of making the commitment.

📌 There is only "income from wages and salaries"

📌 Estimated total income for the year is less than 132 million.

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