Tax Finalization for Foreign Workers with Income from Two Sources
GENERAL TAX DEPARTMENT
HẢI DƯƠNG PROVINCIAL TAX DEPARTMENT
SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
No: 6001/CTHDU-TTHT
Regarding: Personal Income Tax Policy
Hải Dương, July 5, 2024
To: Ebara Pump Vietnam Co., Ltd.
Tax Code: 0800007276
(Address: Lot XN01, Lai Cách Industrial Zone, Lai Cách Town, Cam Giang District, Hai Duong Province)
In response to the Official Letter No. 2406-21/CV dated June 24, 2024, from Ebara Pump Vietnam Co., Ltd. regarding the finalization of personal income tax (PIT) for foreign workers, the Hai Duong Tax Department provides the following opinion:
Based on point b, clause 2, Article 44 of Law No. 38/2019/QH14 dated June 13, 2019, from the National Assembly, which regulates the deadline for submitting tax filing documents:
“2. The deadline for submitting tax filing documents for taxes that have an annual tax period is as follows:
b) No later than the last day of the fourth month following the end of the calendar year for PIT finalization by individuals directly filing taxes;”
Based on Circular 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance, which provides guidance on personal income tax, the regulations state:
Article 1. Taxpayers
“1. A resident individual is a person who meets one of the following conditions:
a) They have been present in Vietnam for 183 days or more in a calendar year or in any continuous 12-month period starting from the first day of arrival in Vietnam, with both the day of arrival and the day of departure being counted as one (1) day. The date of arrival and departure is based on the immigration certification on the individual’s passport (or travel document) when they enter and leave Vietnam. In cases of entering and exiting on the same day, it is counted as one day of residence.
The presence of an individual in Vietnam under this guideline refers to the individual’s physical presence on the territory of Vietnam.”
Article 9: Deductions
“1. Family deduction
...
c.1) Family deductions for the taxpayer:
c.1.2) For foreigners who are residents in Vietnam, family deductions for the individual themselves are calculated starting from the month they first arrive in Vietnam or from the month they begin work until the month their employment contract ends and they leave Vietnam during the tax year (calculated fully by month).
Example 8: Mr. E, a foreign national, worked continuously in Vietnam from March 1, 2014. On November 15, 2014, Mr. E ended his employment contract and returned to his home country. From March 1, 2014, until his return, Mr. E was in Vietnam for over 183 days. Therefore, in 2014, Mr. E was a resident individual and was entitled to family deductions from January to November 2014.”
Based on point e.1, clause 2, Article 26 of Circular No. 111/2013/TT-BTC dated August 15, 2013, from the Ministry of Finance, which provides guidance on PIT, the principle for tax filing and finalization in certain cases is:
“e.1) For resident individuals with income arising from abroad who have paid PIT according to the laws of the foreign country, the amount of tax paid abroad can be deducted. The deductible tax amount shall not exceed the tax payable calculated under the Vietnam tax table, applied to the income earned abroad. The allocation ratio is determined by the ratio between the income earned abroad and total taxable income.”
Based on Article 2 of Circular 119/2014/TT-BTC dated August 25, 2014, from the Ministry of Finance, which amends and supplements several provisions of Circular No. 156/2013/TT-BTC dated November 6, 2013, Circular No. 111/2013/TT-BTC dated August 15, 2013, Circular No. 219/2013/TT-BTC dated December 31, 2013, Circular No. 08/2013/TT-BTC dated January 10, 2013, Circular No. 85/2011/TT-BTC dated June 17, 2011, Circular No. 39/2014/TT-BTC dated March 31, 2014, and Circular No. 78/2014/TT-BTC dated June 18, 2014, which reform and simplify administrative tax procedures:
“...
For resident individuals, taxable income is income earned both within and outside the territory of Vietnam, regardless of where the income is paid or received.”
Based on Appendix 1 attached to Decree No. 126/2020/ND-CP dated October 19, 2020, from the Government, which regulates tax filing documents:
“9.2. Tax filing documents for individuals with income from salary or wages directly filed with the tax authorities:
b) Finalization documents:
Based on the above provisions and the details provided by Ebara Pump Vietnam Co., Ltd. in Official Letter No. 2406-21/CV dated June 24, 2024:
If Ebara Pump Vietnam Co., Ltd. has two foreign workers who are considered resident individuals, and they have been in Vietnam for 183 days or more in the calendar year, the tax period is based on the calendar year. The company begins calculating income from January 2022.
In 2022, the company had two foreign workers working in Vietnam from March to December, but they earned income in Japan and had paid personal income tax there. The tax paid in Japan can be deducted. The deductible tax amount shall not exceed the tax payable under Vietnam’s tax schedule, calculated for the income earned in Japan. The allocation ratio is determined by the ratio between income earned in Japan and total taxable income.
The company confirms global income for the period from January 2022 to December 2022.
For foreign individuals who are residents in Vietnam, family deductions for the individual are calculated from January or from the month they arrive in Vietnam, if they are working under an employment contract until the end of the contract and departure from Vietnam in the same tax year (calculated fully by month). At the time of finalization, the workers are still employed in Vietnam, so they are entitled to full 12-month deductions when filing taxes as per the regulations.
If the company has two foreign workers with salary income who are required to directly file PIT with the tax authorities, they must file PIT finalization using Form 02/QTT-TNCN and Form 02-1/BK-QTT-TNCN, as stipulated in Appendix 1 attached to Decree No. 126/2020/ND-CP dated October 19, 2020, and select the annual calendar year tax finalization option.
The Hai Duong Tax Department provides this response for Ebara Pump Vietnam Co., Ltd. for their information.
