Pursuant to Article 25 of Circular 111/2013/TT-BTC of the Ministry of Finance dated August 15, 2013 on personal income tax (PIT) withholding:
“Article 25. Tax withholding and certificate of tax withheld at source
1. Tax withholding
Tax withholding is the income payer’s calculating and withholding the tax payable from the taxpayer’s income before paying the income to the taxpayer.
b) Incomes from wages
b.1) The income payer shall deduct tax from incomes of residents that sign labor contracts for 03 months or longer according to the progressive tax table, including the persons that sign such contracts at various places.
b.2) The income payer shall still withhold tax from the incomes earned residents that sign labor contracts for 03 months but resign before such labor contracts expire according to the progressive tax table.
b.3) The income payer shall withhold tax from the incomes earned by the foreigners working in Vietnam based on the duration of work in Vietnam written in the contract or letter of introduction according to the progressive tax table (if the person has worked in Vietnam for at least 183 days in the tax year) or the whole income tax table (if the person has worked in Vietnam for fewer than 183 days in the tax year).
i) Withholding tax in other cases
The organization or person that pays a total income from 2 million VND to a resident that does not sign a labor contract (as guided in Point c and Point d Clause 2 Article 2 of this Circular) or that signs a labor contract for less than 03 months shall withhold 10% tax on the income before it is paid to the person.
For the person that earns only a taxable income as stated above but the total taxable income estimated after personal deductions are made does not reach the taxable level, the person shall make and send a commitment (the form is provided in the guiding documents on tax administration) to the income payer as the basis for temporarily exempting the income from personal income tax.
Based on the commitment made the income earner, the income payer shall not withhold tax. At the end of the tax year, the income payer shall make a list of persons that earn incomes below that taxable level (the form is provided in the guiding documents on tax administration) and send it to the tax authority. The persons are responsible for the commitments they made. Any deceit discovered shall be penalized in accordance with the Law on Tax administration.
The persons that make commitments as guided in this Point shall obtain tax registration and have tax codes when the commitments are made.”
Pursuant to Circular 92/2015/TT-BTC of the Ministry of Finance dated June 15, 2015 guiding the implementation of value added tax and personal income tax for residents with business activities; guiding the implementation of a number of amendments and supplements to personal income tax specified in the law amending and supplementing a number of articles of tax laws No. 71/2014/QH13 and Decree No. 12/2015/ND-CP dated February 12, 2015 of the government detailing the implementation of the law amending and supplementing a number of articles of tax laws and amending and supplementing a number of articles of tax decrees;
Based on the above regulations, for example, in the case of a Company signing a probationary contract for less than 3 months with an employee, during the probationary period the Company has withheld personal income tax at the rate of 10%, after the probationary period, the Company signs an official labor contract with the above employee and withholds personal income tax according to the progressive tax table when paying income from wages. The Company does not have to recalculate personal income tax according to the progressive tax table for the probationary period .
When finalizing annual tax: