Personal Income Tax Finalization in Vietnam: A Simplified Guide

1. What is Personal Income Tax? Who needs to do it? and Why?

Personal income tax (PIT) is a levy imposed by the government on the income earned by individuals. It's essentially a contribution from your earnings to finance public services and infrastructure. Understanding who needs to pay PIT and why is crucial for responsible financial planning.

What is considered taxable income?

PIT applies to various income sources, including:

• Salaries and wages: This is the most common source, whether you receive a regular paycheck or contract payments.
• Business income: Profits from self-employment ventures, freelance work, or rental income fall under this category.
• Investment income: Interest earned on savings accounts, dividends from stocks, and capital gains from selling assets like property or investments are also taxable.
• Other sources: Royalties, prizes, and certain pension income might also be subject to PIT.

Who needs to pay PIT?

The responsibility to pay PIT depends on your specific circumstances:

1. Residents:

• Earning above the tax threshold: In Vietnam, individuals residing in the country who earn above a specific annual threshold set by the government (currently VND 2,000,000 per month) are obligated to pay PIT.
• Income from various sources: Even if your individual income sources stay below the threshold, if the combined total exceeds the limit, you need to file a return and pay PIT.

2. Non-residents:

• Working in Vietnam: Anyone earning income from employment or business activities within Vietnam, regardless of their residency status, must pay PIT.
• Receiving Vietnamese-sourced income: Even if they don't physically work in Vietnam, foreigners receiving income from Vietnamese sources like rentals or investments are liable for PIT.

Exemptions and deductions:

To ensure fairness and support certain individuals, some exemptions and deductions apply to PIT:

• Minimum income exemption: Individuals earning below the set threshold are exempt from PIT.
• Dependant deductions: You can deduct a specific amount for each dependent family member from your taxable income.
• Charity contributions: Donations to approved charities can be deducted from your taxable income.
• Special exemption cases: Individuals facing extreme hardship due to natural disasters or serious illnesses might be eligible for temporary or complete PIT exemption.

Why is PIT important?

Paying PIT is a civic duty that contributes to the collective well-being of society. It helps fund essential public services like education, healthcare, infrastructure, and national security. By contributing through PIT, you become an active participant in shaping your community and nation.

Understanding your obligation:

Navigating the intricacies of PIT can be complex. Here are some resources to help you:

• Government tax websites: Vietnam's General Department of Taxation website provides comprehensive information and guidance on PIT in Vietnamese and English.
• Tax professionals: Consulting a qualified tax advisor can simplify the process and ensure you comply with all regulations.
• Personal research: Staying informed about current tax laws and updates keeps you prepared and helps you optimize your tax obligations.

Remember, paying your fair share of PIT is not just a legal requirement, but also a way to contribute to the collective good and invest in a better future for your community and country.

2. How to Settle Directly?

Direct settlement allows you to handle your Personal Income Tax (PIT) finalization yourself, instead of relying on your employer. This guide walks you through the process step-by-step, simplifying the journey for responsible tax citizens.

1. Gather your documents:

• Personal Income Tax Finalization Declaration Form: No. 02/QTT-TNCN (with Appendix II of Circular 80/2021/TT-BTC). You can download this form from the General Department of Taxation website (https://www.gdt.gov.vn/wps/portal/english).
• Family Deduction List: Form No. 02-1/BK-QTT-TNCN (only if claiming deductions for dependents).
• Tax Deduction Documents: Copies of proofs showing taxes already paid throughout the year, such as your individual income tax payment vouchers or employer-issued tax deduction certificates.
• Additional Documents: For specific situations, you might need additional documents like:
  • Income paid abroad: Documents proving the amount paid by the foreign income-paying organization.
  • Charity contributions: Receipts or vouchers for donations made to approved charities.
  • Foreign income: Documents related to income earned outside Vietnam.
  • Dependent registration documents: If claiming deductions for dependents and haven't registered them previously.

2. Determine where to submit your documents:

The location depends on your income source(s):

• One employer: Submit to the same tax agency where you directly declare your taxes during the year.
• Multiple employers:
  • If one employer accounts for most of your income, submit it to their tax agency.
• If no single source dominates, choose:
• The tax agency managing the organization pays the final income (with family deductions), if applicable.
• Your residence's tax agency.
• No current employer: Submit to your residence's tax agency.
• Income from salaries or wages requiring direct finalization with tax reduction claims: Submit to the tax agency handling your tax reduction application.

3. Complete the forms and attach the required documents:

• Fill out the Personal Income Tax Finalization Declaration Form accurately and comprehensively.
• Attach your Family Deduction List (if applicable) and all necessary supporting documents mentioned earlier.
• Make photocopies of the original documents for your records.

4. Submit your documents by the deadline:

The final day for directly settling your PIT is the last day of the 4th month after the tax year. For example, if the tax year is 2024, the deadline to submit your documents would be April 30th, 2025.

5. Consider online options:

You can also finalize your taxes online at https://canhan.gdt.gov.vn/. This convenient platform allows you to submit your documents electronically and simplifies the process further.

6. Exemptions and deductions:

Remember, you might be exempt from PIT or eligible for deductions. Check the following situations:

• Individuals with annual tax payments of VND 50,000 or less.
• Individuals with pre-paid taxes that cover their final bill.
• Certain income categories with specific tax rates already deducted (e.g., 10% on freelance income).

7. Seek help if needed:

Navigating tax regulations can be confusing. If you have any doubts or require assistance, don't hesitate to reach out to:

• Your local tax office for free guidance and clarification.
• A qualified tax professional for personalized advice and expertise.
• By following these steps and staying informed, you can confidently handle your personal income tax finalization directly and fulfill your civic duty as a responsible citizen.

Remember, this is a basic guide. Specific regulations and forms may vary, so always refer to official sources or seek professional help when needed.

3. Exemptions

• Individuals earning below the tax threshold: As of October 26, 2023, in Vietnam, anyone earning less than VND 2,000,000 per month (approximately $84 USD) falls below the taxable income threshold and is automatically exempt from paying PIT.
• Pre-paid taxes exceeding final dues: If the cumulative tax you've paid throughout the year already covers your final tax bill, you're exempt from further payments. Ensure accurate calculations and timely deductions to avoid surprises.

• Freelance income with 10% tax deducted: Certain freelance income categories have a dedicated 10% tax rate withheld at source. This pre-deducted amount covers your final PIT obligation, making further filing unnecessary.
• Social insurance and unemployment insurance contributions: The contributions you make towards social insurance and unemployment insurance are deductible from your taxable income. In some cases, depending on your income level and contributions, these deductions can completely nullify your tax liability.

Things to remember:

• Exemptions apply to your annual income. Ensure you calculate your total income over the entire year, not just individual months.
• Claiming exemptions might require supporting documentation. Gather relevant proofs and records to substantiate your situation when filing for exemption.
• Consult official sources or seek professional advice for intricate scenarios and personalized guidance. The General Department of Taxation 

Navigating PIT exemptions can be complex, but understanding the criteria and available resources empowers you to make informed decisions and ensure you receive the rightful benefits. Remember, claiming exemptions is not about evading responsibility, but about accessing fair treatment and support during challenging times.

4. Conclusion

Navigating personal income tax finalization in Vietnam may seem intricate, but with the right knowledge and tools, it becomes a manageable process. This guide has endeavored to simplify the key aspects, from understanding who needs to file to where to submit your documents.

Remember, fulfilling your tax obligations is not just a legal requirement, but a contribution to the collective good. This finalization process ensures fairness and supports vital public services that benefit everyone.

For a smooth and accurate finalization experience, remember these key takeaways:

• Know your situation: Identify your income sources and residency status to determine your filing responsibilities.
• Gather required documents: Prepare the necessary forms and supporting documents well in advance of the deadline.
• Choose the right location: Understand the factors influencing where to submit your documents.
• Claim exemptions if applicable: Explore potential exemptions based on your income level or individual circumstances.
• Seek help if needed: Don't hesitate to reach out to your local tax office or a qualified professional for guidance.

By embracing these helpful pointers and utilizing the resources available, you can confidently navigate your personal income tax finalization and fulfill your civic duty in Vietnam. Remember, knowledge is power, and informed citizens build a stronger nation for all.

I hope this comprehensive guide and concluding remarks have equipped you with the necessary knowledge and confidence to tackle your personal income tax finalization in Vietnam. Good luck!

If you need further explanation on this subject, please don't hesitate to contact us through email at lienhe@luatminhkhue.vn or phone at: +84986 386 648. Lawyer To Thi Phuong Dzung