Due to the complex nature of finalizing foreign nationals’ personal income tax, enterprises and employees are suggested to develop a specific sequence for tax finalization in order to avoid mistakes in practice.
It is recommended for organizations and individuals to take the following factors into account when completing the 2014 Personal Income Tax (PIT) Finalization for nonnative citizens: taxable income of foreign nationals being residents or nonresidents; subjects of tax finalization; dossier, place of submission, and deadlines for tax finalization.
- Incomes subject to PIT
- Incomes from business activities (not including incomes of sole traders with an annual revenue of 100 million VND or less);
- Incomes from salaries and wages;
- Incomes from capital investment, except for Government bond interests;
- Incomes from capital transfer;
- Incomes from real estate transfer;
- Incomes from winning prizes;
- Incomes from copyright;
- Incomes from commercial franchising;
- Incomes from inheritances that are securities, capital holdings in economic organizations or business establishments, real estate, and other assets subject to ownership or usage registration;
- Incomes from gifts that are securities, capital holdings in economic organizations or business establishments, real estate, and other assets subject to ownership or usage registration.
2. Determine whether foreign nationals are residents or nonresidents in Vietnam
a. Foreign nationals being individuals residing in Vietnam
Foreign nationals are deemed residents in Vietnam if satisfying one of the following conditions:
- Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam, in which the arrival and departure dates are considered as one day;
- Having a place of habitual residence in Vietnam, including a registered place of permanent residence or a house rented for dwelling in Vietnam under a term rent contract.
If the taxable incomes foreign nationals receive are in a foreign currency, they must be converted into Viet Nam Dong following the average exchange transaction rate on the inter-bank foreign exchange market at the time of taxable income generation.
b. Foreign nationals being individuals not residing in Vietnam
Nonnative citizens considered nonresidents in Vietnam are those who fail to meet the abovementioned conditions.
3. Subjects of PIT Finalization for foreign nationals
Subjects required to declare and finalize PIT for foreign nationals as prescribed by law include:
- Authorised tax finalization: Foreign nationals earning income from salaries and wages are permitted to authorize income-paying organizations and individuals to finalize their PIT income in the following cases:
- The foreign national being an individual only earns income from wage or salary, signs a labor contract for at least 03 months with an income-paying organization or individual, and in fact still works there when authorizing the finalization, even when he has not worked for the full 12 months in the year.
- The foreign national, apart from the aforementioned income from salaries and wages, earns additional income from other places, income from leasing houses or land use right.
- Income-paying bodies, being organizations or individuals, should finalize their employees’ tax imposed on the income paid by that income-paying body only.
- Direct tax finalization:
- Foreign nationals being individuals that earn incomes from business, salaries and wages, or have many incomes subject to PIT shall submit tax finalization declaration by themselves if additional tax is incurred or tax refund is claimed, or offset tax against the tax in the next period, except for some special cases.
- Foreign nationals being individuals that only earn incomes from salaries and wages from two or more income-paying bodies.
- Foreign nationals being individuals that solely earn incomes from business activities.
- Foreign nationals request for tax finalization when transferring securities.
- Special cases:
- Specific methods of calculating the submission deadlines for tax finalization dossier (*) shall apply in case where foreign nationals being residents earn incomes from wages and business activities, have been present in Vietnam for fewer than 183 days in the first calendar year and for more than 183 days in 12 consecutive months from the first date of their arrival, and are subject to tax finalization.
- Foreign nationals being residents when finishing a labor contract in Vietnam shall submit tax finalization declaration to tax authorities before their departure.
4. Tax finalization declaration dossiers
On the basis of the subjects identified in the third section herein, foreign nationals’ tax finalization declaration dossiers are categorized into cases that are different in the forms used, the appendix issued together with the Circular number 156/2013/TT-BTC, and photocopies of relevant documents (if any), e.g. photocopies of invoices and documents proving contributions to charitable funds.
In the event a foreign national receives income from an International organization, Embassy, Consulate, or from abroad, it is required to have documents proving or certifying the amount of money paid by the foreign income-paying organizations or individuals, enclosed with a Certification of Annual Income (Form 20/TXN-TNCN issued together with Circular 156/2013/TT-BTC).
In case where foreign nationals submit the PIT imposed on their taxable incomes which incur outside the territory of Vietnam, they must file additional related documents in the tax finalization dossier. In the event where according to foreign regulations, foreign tax authorities do not grant a receipt of the amount of tax paid; instead, taxpayers may submit a photocopy of the Certificate of Tax Deduction issued by the income-paying body or photocopies of bank statements of tax payment overseas, certified by the taxpayers. It is essential to stay noted that a personal commitment on the accuracy of the photocopies is required when submitting the abovementioned photocopies.
5. Places of submission of tax finalization dossier
Places to which tax finalization dossiers are submitted shall be determined according to the subjects of tax finalization declaration as follows:
- Foreign nationals earning incomes solely from salaries and wages and subject to direct annual tax declaration shall submit their tax finalization declarations to the Department of Taxation where they have submitted their tax declarations in the year.
- Foreign nationals earning incomes from two or more wage payers and subject to direct tax declaration shall submit their dossiers to:
- The tax authority directly managing the income-paying body being an organization or individual, with whom personal deductions for the taxpayer have been registered.
- The supervisory tax authority of the latest income-paying body (if the foreign taxpayer changes the workplace in the year and has claimed personal deductions at the latest income-paying body).
- The Sub-department of Taxation where the foreign national resides (if he changes the workplace in the year without claiming personal deductions at the latest income-paying body).
- Foreign nationals shall submit tax finalization dossiers to the Sub-department of Taxation where they reside in the following cases:
- The foreign national has never claimed personal deductions at any income-paying body.
- The foreign national does not sign a labor contract, signs a labor contract for less than 3 months, or signs a service contract and gains income, which has been deducted by 10%, from one or multiple entities.
- If the individual earns wages by multiple payers but does not work for any of them when finalizing tax.
- Foreign nationals shall submit tax finalization dossiers to the Sub-department of Taxation where they conduct business activities in the following cases:
- If the foreign national is an individual or in a group of individuals doing business at the same location, the tax finalization dossiers shall be submitted to the Sub-department of Taxation directly managing such business establishment. If the business location is changed in the year, the tax finalization dossiers shall be submitted to the tax authority directly managing the latest business location.
- Foreign nationals being insurance, lottery, multi-level marketing agent with a registered business. In case the foreign nationals did not register for a business, they shall file the tax finalization dossier to the Sub-department of Taxation where they reside.
- If the foreign national conducts business activities at multiple locations, the Sub-department of Taxation that issued the first taxpayer identification number shall be the place of submission of tax finalization dossiers.
6. Submission deadlines for dossier of tax finalization declaration and tax
The dossier of tax finalization declaration must be submitted within 90 days from the end of the calendar year. The deadline for tax submission is no later than the last day of the submission deadline of tax declaration dossier.
In special cases (*), submission deadlines shall be calculated as follows:
- In the first tax year: The dossier of tax finalization declaration shall be submitted within 90 days from the end of a 12-month period.
- In the second tax year: The dossier of tax finalization declaration shall be submitted within 90 days from the end of the calendar year.
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