Does business conversion require terminal tax return in Vietnam? Are employees not working for full 12 months in the year authorized to finalize tax in Vietnam? In which cases do individuals earning income from salaries directly submit the personal income tax finalization dossier to the tax authority in Vietnam?
Hello. My business that was previously registered as a joint stock company now wants to convert to a multiple-members limited liability company and will receive all tax obligations, do I need tax finalization when carrying out the conversion procedure?
Please advise. Thankyou.
Clause 6, Article 43 of the Law on Tax Administration 2019 provides as follows:
6. The tax declaration dossier upon shutdown, contract termination, business conversion or business re-arrangement consists of:
a) The terminal tax return;
b) The financial statement up to the time of shutdown, contract termination, business conversion or business re-arrangement;
c) Other documents relevant to tax statement.
According to Clause 6, Article 8 Decree 126/2020/ND-CP has the following provisions:
6. The following taxes and amounts shall be declared annually and finalized when an enterprise is dissolved, shuts down, terminates a contract or undergoes rearrangement. In case of conversion (except equitized state-owned enterprises) where the enterprise after conversion inherits all tax obligations of the enterprise before conversion, tax shall be finalized at the end of the year instead of the issuance date of the decision on conversion. Tax shall be finalized at the end of the year):
According to this Article, your case is business conversion from a joint stock company to a multiple-members limited liability company and after the conversion will receive the entire tax liability of the converted business, it is not need to make tax finalization with tax authorities in Vietnam.
According to Item d.2 Point d Clause 6 Article 8 Decree 126/2020/ND-CP has the following provisions:
d.2) A resident salary earner may authorize the salary payer to finalize tax if:
The salary earner has an employment contract with duration of at least 03 months and is working for the salary payer in reality when the tax is finalized by the salary payer, even if the salary earner has not worked for full 12 months in the year. In case the salary earner is reassigned to a new organization as prescribed in Point d.1 of this Clause, he/she may authorize the new organization to finalize tax.
The salary earner has an employment contract with a duration of at least 03 months and is working for the salary payer in reality when tax is finalized by the salary payer, even if the salary earner has not worked for full 12 months in the year, and earns an average monthly irregular income not exceeding 10 million VND which on which 10% personal income tax has been deducted and does not wish to have this income included in the tax finalization dossier.
Thus, when you have not worked for full 12 months but at the time of settlement, you are still working at the enterprise, you are still authorized to finalize tax in Vietnam.
Except for the case in the year, you have an employment contract of at least 03 months at 2 places or work at one place but have a current income of more than VND 10,000,000/month in another place in Vietnam.
Pursuant to Item d.3 Point d Clause 6 Article 8 Decree 126/2020/ND-CP has the following provisions:
d.3) A resident salary earner shall directly submit the personal income tax finalization dossier to the tax authority in the following cases:
Tax is underpaid or overpaid and the individual claims a refund or has it carried forward to the next period, unless: the tax arrears is not exceeding 50.000 VND; the amount of tax payable is smaller than the amount provisionally paid but the individual does not claim a refund or does not have it carried forward to the next period; the individual has an employment contract with a duration of at least 03 months and earns an average monthly irregular income not exceeding 10 million VND which on which personal income tax has been deducted at 10% and does not wish to have this income included in the tax finalization dossier; the individual’s life insurance (except voluntary retirement insurance) or any other voluntary insurance with insurance premium accumulation is purchased by the individual’s employee and 10% personal income tax on the part purchased or contributed by the taxpayer.
The individual has been present in Vietnam for fewer than 183 days in the first calendar year but more than 183 days in 12 consecutive months from the arrival date.
An individual that is a foreigner whose employment contract in Vietnam has ended shall submit a tax finalization dossier to the tax authority before exit or authorize the income payer or another organization or individual to prepare and submit the tax finalization dossier as per regulations. The income payer or the authorized organization/individual must pay tax arrears if tax is underpaid or will receive a refund in case tax is overpaid.
Resident salary earners who are eligible for tax reduction due to a natural disaster, fire, accident or serious illness shall finalize tax themselves instead of authorizing income payers to perform this task.
According to this Article, individuals earning incomes from direct salaries must make personal income tax finalization dossier with tax authorities in the above cases in Vietnam.
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