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Common Mistakes When Calculating Personal Income Tax (Part 2)



Last part: Common Mistakes When Calculating Personal Income Tax (Part 1)

 

The employee earns income from two workplaces in a calendar year but still authorizes the tax settlement to the enterprise

According to Point a, Clause 3, Article 21, Circular No. 92/2015/TT-BTC amending Circular No. 111/2013/TT-BTC guiding tax declaration and tax settlement, employees can only authorized the enterprise the tax settlement when the following conditions are satisfied:

  • The employees are working at the enterprise at the time of making tax settlement;
  • Sign a labor contract from three (03) months or longer;
  • Earn income from only one place in a calendar year (even not working full 12 months) or:
    • have current income in other places where such income has been deducted at 10% rate, and have no intention of settling this income (this income when being estimated must not increase the total PIT payable; according to Clause 3, Article 21, Circular No. 92/2015/TT-BTC amending and supplementing to Clause 2, Article 16, Circular No. 156/2013/TT-BTC, individuals are not required to prepare tax settlement only in case there is no arising additional payable tax and no request for tax refund);
    • be transferred from the old organization to the new organization in case the old organization divides, splits, consolidates, merges or transforms.

Note: In case the employee earns income from business activities such as asset leasing, etc. he/she can authorize the enterprise to prepare tax settlement, because the income from such activities shall be calculated separately.

Thus, if the employee has income from two (02) or more places, for example: from January to May, the employee works at
Company A, from June to December, he works at Company B, although company A has issued tax withholding documents,
he is still not eligible to authorize the tax settlement at company B
, because the income of company A is not a current income
or income after being transferred within the old organization.

 

Excluding personal expenses and service charge (even not in cash) when calculating PIT

Other than salaries and wages, enterprises have direct expenses for specific employees but not yet included in taxable income when calculating their PIT. In practice, such allowances or benefits which employees receive directly in cash or non-cash are all subjected to PIT (except for tax-exempted items).

Some common expenses subjected to PIT beside salaries and wages are as follow:

  • Housing rental and services (up to 15% of taxable income that excludes housing rental); household furniture purchasing…
  • Round-trip air ticket to the home country in excess of the prescribed tax-exempt level (once a year);
  • Golf membership fees, cosmetic service fees, medical examination and treatment directly spent for specific employees;
  • Air tickets, visa fee for relatives of foreign employees working in Vietnam.
  • Meal allowances paid in cash that excess the level prescribed in Labor Law (currently VND 730,000/month);
  • Life insurance or other accumulated-fee insurance products (except for voluntary pension insurance).

 

An expense for employees, which is not deductible when calculating corporate income tax, is not taxable when calculating PIT

The company purchases air tickets, pays medical examination fees for employees… which does not obtain sufficient invoices or documents; or conducts transactions not related to business activities such as purchasing air tickets for employees’ relatives, buying household appliances…

The above-mentioned expenses, though not deductible when calculating CIT, are still subjected to taxable income when calculating PIT as prescribed in Circular No. 111/2013/TT-BTC (taxable incomes).

Due to the fact that these are two different taxes, the rules to be applied are completely independent. Determining deductible
expenses should be based on legal documents guiding on CIT; while calculating taxable personal income should be based on
legal documents guiding on PIT.

 

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Common Mistakes When Calculating Personal Income Tax (Part 3)

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