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Personal income tax calculation regime for probationary employees in Vietnam

Even though they are probationary employees with a salary of 85% of the official job, the employee may also have to pay 10% PIT in some cases. So, what is the regulation on the personal income tax calculation regime for probationary employees in Vietnam?

Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC stipulates: “Organizations and individuals that pay wages, remuneration and other payments to resident individuals who do not sign labor contracts (in the direction of prescribed at Points c, d, Clause 2, Article 2 of this Circular) or signing a labor contract of less than three (03) months with a total income of two million (2,000,000) VND/time or more, must withhold tax at the rate of 10% on income before paying to individuals.”

Accordingly, if signing a probationary contract or a labor contract with a term and content of a probationary period of fewer than 3 months with a total income of 2 million VND or more, the employer will have the obligation to withhold 10% personal income tax before paying wages to employees.

However, this policy is not officially applied by many businesses.

That’s why when a business does apply this policy, many employees who have 10% of their income deducted at the end of the month can’t help but be surprised, shocked, and think that they are “being cheated” by the business as other businesses have no mechanism to collect 10% of the employee’s probationary salary.

However, this amount is a tax paid to the state and at the end of the year, at the tax finalization period, employees can claim a tax refund if their income during this probationary period is not yet taxable (11 million VND and considered additional conditions of family deduction).

If the employee is officially recruited to the job and still works at the enterprise until that time, the employee can authorize the company to go through the procedures of declaration, and tax refund and receive back the 10% paid.

If the employee is not accepted to work or is accepted to work but does not stay at the enterprise until the tax finalization period, the employee will have to go to the tax office to declare and request a tax refund themselves.

Cases where the employee is not deducted from personal income tax

If the employee does not want to pay the 10% PIT rate while on probation, based on Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC, if the employee can estimate that the total income after reduction from family conditions is not enough to pay personal income tax, employees can make a commitment to send the business as a temporary basis for not deducting 10% of tax.

Accordingly, employees can make a temporary commitment to withhold PIT payment if they fully meet the following conditions:

– Having a total income of 2 million VND/time or more.

– A resident individual signs a probationary contract or a labor contract of fewer than 3 months with probation contents.

– Have only income subjected to a tax deduction (if employees work in 2 or more places, they will not be able to make a commitment).

– Estimated total taxable income after family conditions deduction is not high enough to pay tax (11 million VND/month – 132 million VND/year or less if there are no dependents).

– Must register for tax and have a tax identification number at the time of commitment.

After satisfying the above conditions, the employee downloads and completes Form 08/CK-TNCN attached to Circular 80/2021/TT-BTC and then sends it to the enterprise in order to not to be deducted 10% of the salary for paying PIT.

ASL LAW is the top-tier Vietnam law firm for Employment and Labor Law. If you need any advice, please contact us for further information or collaboration.


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