Can foreigners authorize tax finalization for others? What taxes in Vietnam should Foreign investors pay attention to? Domestic workers, mainly during the personal income tax finalization period, will authorize the place to pay the income. However, many people still wonder if foreigners must finalize taxes? Let us learn about this topic with LSX law firm as follow:
Can foreigners authorize tax finalization for others?
Point d, Clause 6, Article 126/2020/ND-CP and Official Letter 636/TCT-DNNCN dated March 12, 2021; stipulating that foreigners are authorized to finalize personal income tax if they fall into the following cases:
(1) Foreign individuals earning incomes from wages and salaries but signing labor contracts for 03 months; or more at 01 places; and working at that place at the time the income-paying organization; or individual makes the finalization of personal income tax, even if he does not work for full 12 months in the year.
(2) Foreign individual means an employee transferred from the old organization to the new organization by the old organization consolidating; merging, dividing, splitting or transforming the type of enterprise; or the old organization and the new organization in the same system; that individual is authorized to finalize tax for the new organization.
(3) Individuals earning income from wages and salaries sign labor contracts; from 03 months or more at 01 place and working at that place at the time the organization; or individual pays income and finalizes personal income tax (including the case of not working for full 12 months in the year); and at the same time have a current income elsewhere; where the average monthly income in the year is not more than VND 10 million; and have been withheld income tax at the rate of 10% if there is no requirement for tax finalization on this income.
When could foreigners directly declare tax finalization?
According to Point d, Clause 6, Article 126/2020/ND-CP is as follow:
(1) Residents earning incomes from wages or salaries with additional payable tax amounts; or overpaid tax amounts and requesting refunds or offsets in the next tax period, except for the following cases:
– Individuals whose additional tax payable after-tax finalization of each year is 50,000 VND or less;
– Individuals whose payable tax amount is smaller than the temporarily paid tax amount without request for tax refund or offset in the next tax return period;
(2) Individuals present in Vietnam in the first calendar year < 183 days, but counting in 12 consecutive months from the first day of presence in Vietnam is 183 days or more.
(3) Foreign individuals who terminate their working contracts in Vietnam make tax finalization declarations with tax authorities before leaving the country. Suppose an individual has not yet completed the final settlement procedure with the tax authority. In that case, they shall authorize an income-paying organization; or another organization or individual to finalize tax according to regulations on tax finalization applicable to individuals. Suppose income payers or other organizations and individuals receive tax finalization authorization. In that case, they must be responsible for the personal income tax amount and are obliged to pay more; or have their overpaid tax refunds refunded.
Note: After the individual has authorized the tax finalization; the income paying organization has made the personal income tax finalization on behalf of the individual. Suppose discovered that the individual is directly subject to tax finalization. In that case, the income payer does not adjust the tax finalization of the income paying organization; only issues tax withholding vouchers to individuals according to the settlement number; and writes in the lower-left corner of the tax withholding voucher the following content:
“Company… has settled PIT on behalf of Mr/Ms….(as authorized) at the line (ordinal number)…of Appendix List 05-1/BK-TNCN” to file direct tax settlement with tax authorities.
Is the foreigner a resident individual or a non-resident individual?
When applying the law on personal income tax, there are no separate regulations for tax calculation for foreigners; it will instead determine whether to sign an employment contract; how long the contract is to be signed to determine whether the foreigner is a resident individual or a non-resident individual.
How to identify a foreigner as a resident individual
Clause 1, Article 1 of Circular 111/2013/TT-BTC stipulates that a resident individual is a person who meets one of the following conditions:
Condition 1: Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months from the first day of presence in Vietnam, the arrival and departure dates are counted as 01 days.
Condition 2: Having a regular place of residence in Vietnam in one of the following two cases:
Case 1: Having a regular place of residence according to the provisions of the law on possession; (permanent place of residence stated or temporary home according to permanent residence card; quick residence card issued by a competent agency of the Ministry of Public Security).
Case 2: Having a rented house to live in Vietnam according to the law on housing, the lease contract term is 183 days or more in the tax year.
How to identify a foreigner as a non-resident individual
Foreigners are non-resident individuals if they do not meet the conditions of resident individuals.
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