Conditions for creating personal income tax pledge
2023/02/19
- Pham Kieu Phuong Khanh
Introduction
Withholding tax is a system in which an organization or individual paying salary or compensation deducts income tax at the time of payment and pays the tax. An organization or individual that pays a salary or remuneration of 2,000,000 VND or more per time to a resident who has not concluded a labor contract or whose labor contract period is less than 3 months shall be subject to a 10% levy on the amount. Taxes must be withheld and paid to the individual concerned. However, there are exceptional cases in which tax does not need to be withheld.
This article describes the pledge for temporary non-withholding of income tax (hereinafter referred to as the “Personal Income Tax Pledge”) as stipulated in Form 08/CK-TNCN of Circular No. 80/2021/TT-BTC. Describe individuals who meet the creation criteria.
1. Individuals who meet the conditions for creating a personal income tax pledge
Residents who receive salary, remuneration or other income may use Form 08/CK-TNCN to issue a pledge if all five of the following conditions are met:
| Conditions | Content |
| 1. Labor contract | Residents who have not concluded a labor contract or whose labor contract period is less than 3 months |
| 2.Tax registration | Already have a tax code at the time of pledge |
| 3. Income amount | Have a total income of VND2.000.000 or more per transaction |
| 4.Taxable income amount | The amount of taxable income after deducting employment income deductions, basic deductions, and dependent deductions from gross income does not reach the minimum amount required to pay tax |
| 5.Type of income | Earn only income that is subject to withholding tax at a rate of 10% during the period from January 1, the start of the tax year, to the time of the pledge |
Source: Created by the author based on various materials
2. Obligations of organizations and individuals who pay salaries and remuneration (withholding agent)
From January 1, 2022, meet the conditions for making a personal income tax pledge (because there is no 10% personal income tax deduction) based on Circular No. 80/2021/TT-BTC and Form 08/CK-TNCN. If so, the relevant person may sign a written oath.
In addition, at the end of the tax year, the withholding agent shall use Form 05-2/BK-QTT-TNCN attached to the Guidelines on Tax Administration to collect information on individuals who do not need to withhold tax and their income information. A comprehensive list must be prepared and submitted to the tax authorities within 90 days from the end of the tax year.
Individuals making pledges must be held responsible for their pledges, and any misconduct found will be punished in accordance with the provisions of the Tax Administration Law.
※Points to remember
If an individual receives income of VND 2,000,000 or more from two or more places at a time, such income is subject to a 10% personal income tax deduction. However, if the amount of taxable income after deducting the employment income deduction amount (including the basic deduction amount and dependent deduction amount) does not reach the minimum amount required to pay tax, the issue will be issued on November 8, 2018. Based on the guidance of the Official Letter No. 4389/TCT-TNCN by the Directorate General of Taxation, the individual can make a pledge for each income unit.
The following deductions are available for salary income or personal business income of Vietnam residents:
(1) Basic deduction
11,000,000 VND per month can be deducted (132,000,000 VND per year)
(2) Dependency deduction
4,400,000 VND per month can be deducted per dependent (52,800,000 VND per year)
Conclusion
The above describes the conditions for creating a personal income tax pledge and the latest points to keep in mind that will be applied from 2022. We hope this will be helpful when providing guidance to employees and considering application.
References
-Circular No. 111/2013/TT-BTC: Enforcement Guidelines for the Amendment Act on the Personal Income Tax Law
-Decision No. 954/2020/UBTVQH14: Decision on adjustment of personal deductions in the Personal Income Tax Law
-Circular No. 80/2021/TT-BTC: Enforcement Guidelines of the Tax Administration Law
-Decree No. 126/2020/NDCP
