Notes on Tax Declaration and Personal Income Tax (PIT) Deduction from 2023 Salary

1. Determining Taxable Income from Salary and Wages

"The moment of determining taxable income from salary and wages is when the organization or individual pays income to the taxpayer."

2. PIT Deduction

"PIT deduction is the process where the organization or individual paying income calculates and deducts the tax payable from the taxpayer’s income before disbursing it.

• For residents signing labor contracts of three (03) months or more, the organization or individual paying income must deduct tax according to the progressive tax table, including in cases where individuals have signed contracts of three (03) months or more at multiple places.

• For residents who sign labor contracts of three (03) months or more but leave before the contract ends, the organization or individual paying income must still deduct tax according to the progressive tax table.

• For foreign individuals working in Vietnam, the organization or individual paying income should temporarily deduct tax based on the individual’s working duration in Vietnam, as stated in the contract or official dispatch. If the individual works in Vietnam for more than 183 days in the tax year, the progressive tax table applies; if under 183 days, the full tax table applies.

• For residents who do not sign a labor contract (as per clauses c, d, Article 2 of this Circular) or sign contracts shorter than three (03) months with a total income payment of 2,000,000 VND or more per time, tax must be deducted at 10% on the income before payment.

If an individual has only income subject to the above tax rate but estimates that their total taxable income after deductions does not reach the taxable threshold, the individual may make a commitment (using the form provided with tax management instructions) to the paying organization, which will temporarily not deduct PIT.

Based on the individual’s commitment, the paying organization will not deduct PIT. At the end of the tax year, the paying organization must still compile the list and income of individuals who are not subject to tax deductions (using the form provided with tax management instructions) and submit it to the tax authority. The individual making the commitment is responsible for their commitment, and any fraud detected will be handled in accordance with the Tax Management Law.

Individuals making commitments as per this guideline must register for tax and have a tax code at the time of the commitment."

3. Tax Declaration

Organizations or entities that pay income and have PIT deductions must file tax declarations monthly or quarterly. If no PIT deduction occurs in a month or quarter, the organization does not need to file a tax return.

The choice to file monthly or quarterly is determined once from the first month the deduction occurs and applies for the entire year. Specifically:

• Organizations or individuals paying income with PIT deductions of at least 50 million VND in the month must file monthly tax returns, unless they are subject to VAT declaration on a quarterly basis.

• Organizations or individuals who are not required to file monthly tax returns as per the above guidance must file quarterly tax returns.

(Declaration using Form 05/KK-TNCN PIT Deduction Declaration Form (TT92/2015))

4. Example:

• In October 2022, the company paid 4,000,000 VND to an employee. The personal deduction for the employee in October is 11,000,000 VND. Therefore, the employee does not have taxable income in October.

• In November 2022, the company paid 12,000,000 VND to an employee. The personal deduction for the employee is 11,000,000 VND; dependent reduction (registered) is 4,400,000 VND. Therefore, the employee does not have taxable income in November.

• In December 2022, the company paid 20,000,000 VND to an employee. The personal deduction is 11,000,000 VND. The taxable income is 9,000,000 VND (20,000,000 - 11,000,000). The PIT due is calculated according to the progressive tax table:

  • Level 1: taxable income up to 5 million VND, tax rate 5%: 5 million VND × 5% = 250,000 VND.

  • Level 2: taxable income from 5 million VND to 10 million VND, tax rate 10%: (9 million VND - 5 million VND) × 10% = 400,000 VND.

Therefore, the company deducts 650,000 VND PIT before paying the employee and files the PIT deduction for Q4/2022, submitting the PIT to the state budget.

5. Notes

Before paying salary, wages, allowances, and other payments to residents (employees, etc.), organizations must deduct PIT and file the PIT deduction declaration monthly/quarterly (using Form 05/KK-TNCN PIT Deduction Declaration Form (TT92/2015)) as per regulations.

Avoid the situation where the organization does not file PIT deductions monthly/quarterly, but later, during the year-end PIT settlement, taxes are found to be payable, or the PIT settlement declaration shows no tax payable, yet when the tax authority checks, it discovers that the organization should have filed monthly/quarterly PIT deductions but did not.

Organizations that do not file PIT deductions monthly/quarterly as required will be fined according to Decree 125/2020 dated October 19, 2020, detailing administrative penalties for tax violations.

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