Official Dispatch No. 560/TCT-TNCN of February 14, 2006, on the 2005 finalization of personal income tax
GENERAL DEPARTMENT OF TAXATION
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom – Happiness
Hanoi, February 14, 2006
ON THE 2005 FINALIZATION OF PERSONAL INCOME TAX
To: Provincial/municipal Tax Departments
The year 2005 is the first year of implementation of the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Income Tax on High-Income Earners (personal income tax). Despite reductions in the tax level, the tax revenue of 2005 was still higher than that of 2004 (VND 4,300 billion compared to VND 3,500 billion). Non-business and administrative units, representative offices and project management units made timely income tax declaration and withholding; many income-paying agencies withheld the 10% income tax and remitted it into temporary collection accounts under regulations. To ensure timely finalization of personal income tax of 2005, apart from current guiding documents, the General Department of Taxation hereby draws the attention of provincial/municipal Tax Departments to the following issues:
I. On procedures for finalization and refund of personal income tax
On December 27, 2005, the General Director of General Departiments of Taxation signed Decision No. 1640/QD-TCT, promulgating procedures for finalization and refund of personal income tax. Provincial/municipal Tax Departments are requested to guide income-paying agencies and individuals to carry out tax finalization and refund according to these procedures and pay attention to the following specific points:
1. Declaration forms for tax finalization:
>> See also: Monthly tax declaration and reporting service for enterprises and declaration and settlement of personal income tax
The 2005 tax finalization contents shall be declared according to the amended forms enclosed with the Finance Ministry’s Circular No. 12/2005/TT-BTC of February 4, 2005. Provincial/municipal Tax Departments shall have to urge and request income-paying agencies to complete and submit on time declaration forms No. 03b/TNTX together with the list of infrequent payees 10% of whose incomes were not yet withheld for payment of personal income tax. Such a list shall include payees’ full names, addresses, tax identification numbers, ID numbers and paid incomes, serving as bases for provincial/municipal Tax Departments to track incomes of individuals who have incomes from different sources.
2. Grant of tax identification numbers (TINs):
Provincial/municipal Tax Departments shall continue introducing and guiding income-paying agencies to fill in the procedures for registration of TINs for individuals under their management (especially those earning incomes from different sources making to tax finalization directly with tax authorities). When individuals send tax finalization or refund dossiers to provincial/municipal Tax Departments, they shall be checked whether they have been granted TINs. If not, provincial/municipal Tax Departments shall guide them to fill in the procedures for being granted TINs, which shall be used for tax finalization and refund according to regulations.
3. Inspection of the issuance of receipts and vouchers on personal income tax withholding
Inspection of tax payment and collection at provincial/municipal Tax Departments showed that many income-paying agencies withheld personal income tax but did not issue receipts or vouchers thereon to concerned individuals or retained tax money in excess of the set level. Therefore, provincial/municipal Tax Departments, especially district Tax Departments, are requested to instruct income-paying agencies to fill in the prescribed procedures in order to be distributed receipts and vouchers for personal income tax withholding, and to issue such receipts or vouchers to individuals as follows:
+ For infrequent individuals with taxable incomes paid by the units, the units shall, after withholding the 10% income tax, issue vouchers on income tax withholding.
+ For individuals who enjoy salaries at the units but worked for only a few months in the year and individuals who in the year earned incomes from different sources and have to make tax finalization directly at tax authorities, the units shall issue income tax receipts which certify the paid income amounts and the withheld tax amounts (if any) as a basis for tax declaration and finalization.
For income-paying agencies that fail to issue receipts or vouchers on income tax withholding to individuals or to remit the withheld tax amounts into the state budget, tax money shall be retrospectively collected and administrative sanctions shall be imposed according to current regulations.
4. Entry of data on declaration and finalization of personal income tax:
On August 24, 2005, the General Department of Taxation issued Official Letter No. 2915/TCT-TNCN, guiding the time limit for entry of data on tax declaration and finalization, by which provincial/municipal Tax Departments were requested to enter all information from personal income tax declaration forms. With regard to tax finalization declarations, provincial/municipal Tax Departments are requested to complete the entry of data before March 30 annually.
>> See also: Legal service for tax declaration, finalization
5. Some specific venues for personal income tax finalization and refund
- An individual who, in the tax finalization year, works for only a few months and earns taxable incomes in one locality then returns to his/her place of residence registration or the place where his/her personal TIN was granted, shall finalize personal income tax at such place.
- An individual who has tax amounts withheld at different places and finds at the end of the tax finalization year that he/she has some overpaid tax amount, shall make a tax refund dossier and submit it to the tax authority where he/she conducts tax finalization. If the tax authority does not have enough money in its temporary collection account for the refund, it shall guide the individual to compile a tax refund dossier according to the provisions of the Finance Ministry’s Circular No. 68/2001/TT-BTC of August 24, 2001, guiding the refund of amounts that have been remitted into the state budget.
- Self-employed laborers, who are not managed by any agency or organization and earn incomes in a year from which the 10% income tax was already withheld by income-paying agencies, shall send dossiers of request for tax refund to provincial/municipal Tax Departments. Provincial/municipal Tax Departments shall guide such individuals to fill in the procedures for being granted TINs, make memorandums of understanding according to Form No. 01a/TNTX (or Form No. 01b/TNTX), and complete declaration form No. 02a/TNTX (or 02b/TNTX) for tax payment registration, promulgated together with the Finance Ministry’s Circular No. 12/2005/TT-BTC of February 4, 2005.
Tax refund must be effected publicly and quickly according to the set procedures. Tax officers who cause difficulties or delay in the refund of personal income tax shall be disciplined under regulations.
Provincial/municipal Tax Departments shall have to publicize procedures for refund of personal income tax at their offices so that taxpayers are aware of such procedures.
II. Notable issues in the inspection of 2005 personal income tax finalization
In 2005, the Finance Ministry and the General Department of Taxation issued many legal documents guiding in detail tax policy and tax administration issues concerning several types of incomes and collection activities. Provincial/municipal Tax Departments are requested to thoroughly grasp these documents and guide their implementation, specifically as follows:
1. On taxable incomes and nontaxable incomes:
- Incomes earned by individuals from their insurance agency activities shall comply with the guidance in the Finance Ministry’s Official Letter No. 2481-TC/TCT of July 26, 2005.
- Incomes earned by individuals from playing casino games, jackpot games or winning bets (in horse or dog races) shall comply with the guidance in the Finance Ministry’s Official Letter No. 13508/BTC-TCT of October 27, 2005.
- Incomes earned by employees from overtime work at their non-public educational, medical, cultural or sports establishments set up under the Government’s Decree No. 73/ND-CP of August 19, 1999, shall not be taxed. Particularly, incomes earned from extra activities organized by public establishments themselves outside their training programs or from such activities as exam preparation or medical examination and treatment beyond working hours, shall all be taxed.
- Severance allowance and job-loss allowance are nontaxable incomes under the Labor Code. Annual allowance advances shall not be considered nontaxable incomes.
- Irregular incomes earned from lottery prizes in any form, including trade promotion prizes, shall comply with the guidance in the Finance Ministry’s Official Letters No. 27-TC/TCT of January 4, 2005, and No. 1632-BTC/TCT of February 9, 2006.
2. For revenue-generating non-business units:
Provincial/municipal Tax Departments shall inspect and urge revenue-generating non-business units to register TINs, withhold the 10% personal income tax and issue receipts and vouchers on income tax withholding under the guidance in the General Department of Taxation’s Official Letter No. 2494/TCT-TNCN of July 27, 2005, and shall assign a particular division to manage these subjects.
Note: In the revenue-generating non-business sector, individuals may have incomes from different places. At places where they sign labor contracts, their total monthly salaries and other incomes may not reach the taxable threshold (under VND 5 million/month) but they may earn other incomes from other places (where they do not sign labor contracts) of which 10% was not yet withheld by income-paying agencies. Provincial/municipal Tax Departments should issue official letters reminding the units which do not withhold personal income tax to make lists of individuals under the guidance in Official Letter No. 508-TCT/TNCN of February 17, 2005 of the General Department of Taxation. After being reminded, any units that fail to make the 2005, personal income tax declaration, withholding and finalization shall be handled according to regulations.
3. For projects and representative offices:
Provincial/municipal Tax Departments are requested to urge the fulfillment of personal income tax obligations under the guidance of the General Department of Taxation’s Official Letter No. 2202/TCT-TNCN of July 12, 2005, on enhancing the administration of personal income tax with regard to ODA projects and representative offices. On that basis, they shall review and assess the personal income tax administration by their divisions, which have been assigned specific responsibilities for management of ODA projects and representative offices, in order to work out and apply appropriate tax administration measures.
Note: Where representative offices pay incomes to Vietnamese and foreigners working for projects in other localities, provincial/municipal Tax Departments of the localities which manage representative offices’ tax payment shall have to notify such to the provincial/municipal Tax Departments of other localities (if necessary).
4. For individuals working in the domain of culture, education, arts, sports, consultancy or designing (such as artists, singers, athletes, teachers, architects...) who earn incomes from two or more different places: Provincial/municipal Tax Departments shall base themselves on declarations made according to Form No. 3b/TNTX sent monthly by income-paying agencies, enclosed with the lists of individuals who have had 10% of their incomes withheld by the income-paying agencies for payment of income tax, and the lists of those who haven’t (under the guidance on 2004 tax finalization) to find out individuals who earn high incomes from different places, then send tax finalization declaration form No. 08/TNTX to such individuals and request them to make tax finalization at tax authorities.
5. Administration of personal income tax on foreigners
Provincial/municipal Tax Departments are requested to instruct income-paying agencies and individuals to comply with Official Letter No. 3669/TCT-TNCN of October 18, 2005, of the General Department of Taxation.
Over the past time, tax authorities have detected many foreigners who work in Vietnam and fail to declare their taxable incomes, such as declaring only incomes earned in Vietnam but not incomes earned in foreign countries or declaring only incomes actually received in Vietnam but not amounts received in foreign countries for incomes derived in Vietnam... Provincial/municipal Tax Departments, therefore, should inspect and request foreigners to additionally produce the following documents: the permit for the establishment of the representative office, income payment vouchers issued by income-paying agencies, contracts on renting houses in Vietnam, written certifications of salaries and other related documents. Where a foreigner declares a salary lower than the house rent or another expense paid by his/her organization/employer, the provincial/municipal Tax Department shall request in writing such foreigner to explain his/her declaration. If the foreigner fails to give explanations or makes untruthful declarations, he/she shall be handled according to the provisions of tax law.
With regard to the certification of annual incomes of foreigners, the Finance Ministry already issued a model letter of certification of annual incomes, enclosed with Form No. 12/TNCN. To facilitate provincial/municipal Tax Departments to communicate with foreign organizations and individuals for personal income tax finalization purposes, the General Department of Taxation encloses herewith the English translation of this model letter for use by provincial/municipal Tax Departments.
Above are some contents which should be taken into consideration in the process of 2005 personal income tax finalization. Provincial/municipal Tax Departments are requested to promptly report any problems arising in the course of implementation to the General Department of Taxation for consideration and settlement.
DEPUTY GENERAL DIRECTOR
Nguyen Thi Cuc