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Thứ 4, Ngày 27/09/2017, 15:00
Question 16
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27/09/2017

On personal income tax.

According to Point I, Clause 1, Article 25 of Circular no. 111/2013/TT-BTC.

 "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."

  1. 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.
  2. 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.
  3. The persons that make commitments as guided in this Point shall obtain tax registration and have tax codes when the commitments are made.

This is quite unsound because a worker who signed a labor contract over 03 months, the monthly taxable level is 9 million VND and personal deduction is 3.6 million VND per dependant (if any). This causes difficulties for the businesses because there are a big number of workers who work less than 03 months and the majority of them quit without noticing. The business needs commitments from the workers for tax exemption when working with the tax department. In reality the withholding rate of 10% is too high compared to the low salary of the workers.


Answer by the Department of Taxation

 According  to  Point  b,  Point  i,  Clause  1,  Article  25  of  Circular    no.

111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance:

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.

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.

For the aforementioned guidance:

The worker who does not sign a labor contract or that signs a labor contract for less than 03 months, the organization is responsible for withholding 10% tax on the income from 2 million VND and above.

For the person that earns the total taxable income estimated after personal deductions are made does not reach the taxable level, the person shall make and send a commitment to the income payer as the basis for temporarily exempting the income from personal income tax.

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.

 


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