03 notes on responsibilities of employers for employees’ personal income tax liability

Personal income tax

Employees must pay personal income tax (“PIT”) deducted from their salary into the State budget after calculating deductions. However, the employer also has the responsibility for the PIT. Does an employer have a partial obligation for the personal income tax for the employee’s PIT as regulated by law? BLawyers Vietnam explains below:

1. Obligation of PIT registration for employees

Employers are obliged to register PIT for employees when employees pay PIT through the employer and authorize the employer. Accordingly, the employer is responsible for collecting the employee’s tax registration information, filling in the tax registration form, and sending it to the tax authority that directly manages the employer. If the employee works for more than one employer in the same tax period, one of the employers shall register tax for the employee as authorized by the employee.

If the employee pays PIT not through the employer or has not authorized the employer to register for tax, the employee has responsibility for the tax registration.

2. Responsibility for declaring, withholding and paying PIT on behalf of employees

The employer is responsible for declaring, withholding, and paying PIT on behalf of the employee, except in cases where the employee must directly declare tax with the tax authority as prescribed. Accordingly, the employer declares PIT on behalf of the employee on a monthly or quarterly basis. If the employer chooses quarterly PIT declaration, it must be subject to PIT withholding under regulations and quarterly value-added tax declaration.

If the employee works at a dependent unit or a business location in a different province from the location of the employer’s headquarters, the employer shall withhold PIT and submit a tax return dossier and table appendix (according to the form) determining the amount of PIT payable in the localities to the direct managing tax authority. At the same time, the employer pays the employee’s PIT amount into the state budget for each province where the employee works.

Specifically:

  • For the income of employees who have signed a labor contract of at least 3 months: On a monthly basis, the employer withholds tax based on the taxable income and the tax rate according to the partially progressive tax table, and temporarily calculates deductions to calculate PIT payable and withhold PIT under the law.
  • For salaries and other payments to employees who do not sign a labor contract or sign a labor contract of less than 3 months: The employer must temporarily withhold PIT at the rate of 10% of the income paid to the employee.

However, employers who do not pay taxable income in any month/quarter are not required to declare PIT for that month/quarter.

For example: In January 2023, company A makes monthly PIT declaration and employs 05 employees but does not pay salaries to these employees. Therefore, company A does not have to declare PIT for employees in January 2023. However, in February 2023, company A pays salary of VND7,000,000 – 9,000,000 to employees, although employees are not liable to pay PIT, company A still declares PIT for such employees in February 2023.

3. Responsibility for PIT finalization for employees

The employer is responsible for PIT finalization on behalf of the employee if the employee is a resident who meets conditions and the employer is authorized to do so, including the following cases:

  1. The employee signs a labor contract of at least 03 months at a workplace and is actually working there at the time the employer makes the tax finalization, even if the employee has not worked for full 12 months in the year; in addition, if the employee has current income in other workplaces with an average monthly income of not more than VND10,000,000 and has PIT withheld at the rate of 10% but does not request to finalize tax on this income;
  2. The employee is transferred from a former employer to a new employer due to merger, consolidation, division, separation, transformation of the business form of the former employer or the former employer and the new employer are in the same system; or
  3. Foreign employees have not yet completed tax finalization.

However, if the employer is authorized by the employee to make the tax finalization, but the employer does not pay taxable income, the employer is not required to finalize PIT.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 05 February 2024

Writer: Minh Truong

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