The Employer's Role In Personal Income Tax (PIT) Finalization For Employees 2025

Key takeaways

• Companies only handle personal income tax finalization for employees when they receive valid authorization, which cuts administrative burden and helps both parties avoid penalties
• Proper tax withholding across all employment contract types brings compliance benefits, builds employee trust, and reduces future back-tax costs
• Complete record keeping and tax withholding certificate support protects company interests while boosting HR management efficiency
• Companies must actively advise employees on authorization conditions to prevent errors, streamline tax processes, and focus on core business goals

Personal income tax finalization means individuals or organizations declare all income earned during the year, determine taxes paid, and calculate final tax obligations or refunds due. Personal income tax finalization authorization is when employees complete Form 08/UQ-QTT-TNCN, allowing companies to handle all legal procedures with tax authorities on their behalf. This article argues that enterprises play a key role in this process, not only ensuring legal compliance but also creating competitive advantages by reducing employee burden, which boosts productivity and helps retain talent.

1. Serving as the authorized entity to finalize personal income tax for employees

Personal income tax finalization authorization under Decree 126/2020/ND-CP requires individuals to have employment contracts of 3 months or longer and be working at the company at the time of finalization. This affects how companies manage tax records, as invalid authorization may trigger tax authority adjustment requests, leading to extra costs.

When valid authorization exists, Companies handle the entire process from start to finish on behalf of employees. They compile income from salaries, wages, and other amounts according to Circular 80/2021/TT-BTC rules. Calculate personal deductions for individuals (275,000,000 VND (11,000 USD)/month) and dependents (110,000,000 VND (4,400 USD)/month).

Prepare and submit finalization documents, including: Declaration 05/QTT-TNCN, Appendix 05-1/BK-QTT-TNCN for progressive tax rates, Appendix 05-2/BK-QTT-TNCN for comprehensive tax rates, and Appendix 05-3/BK-QTT-TNCN for dependents. Work with tax authorities to process additional payments or refunds, helping companies avoid late payment penalties and boost their social responsibility image.

When authorization is absent, Company responsibilities are limited to monthly/quarterly tax withholding and payment to the state budget according to Article 24 of the Personal Income Tax Law. Provide tax withholding certificates when employees request them, per Circular 111/2013/TT-BTC. All year-end tax finalization duties belong to individual employees. Companies must note this difference to avoid confusion, keep cash flow stable, and reduce internal disputes.

2. Declaring, withholding, and paying personal income tax in compliance

Personal income tax withholding under Circular 111/2013/TT-BTC clearly separates long-term and short-term contracts, affecting progressive tax calculations versus the 10% rate. This requires companies to regularly update tax tables to avoid errors, as back taxes can result in administrative penalties under Decree 125/2020/ND-CP, ranging from 50,000,000 VND (2,000 USD) to 625,000,000 VND (25,000 USD).

For employment contracts of 3 months or longer: According to Article 25 of Circular 111/2013/TT-BTC, companies must withhold monthly taxes using progressive tax rate tables. File monthly or quarterly declarations per Decree 126/2020/ND-CP. Apply temporary personal deduction calculations based on employee declarations, with the important rule that companies bear no legal responsibility for these temporary declarations under Decree 12/2015/ND-CP. This process helps employees receive higher net salaries and increases work motivation.

For contracts under 3 months or freelancers: Withhold 10% personal income tax on each payment of 50,000,000 VND (2,000 USD) or more according to Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC. Companies don’t withhold if individuals have sole income here and provide commitments per Form 08/CK-TNCN. Individuals must register for tax codes and take responsibility for commitments; fraud cases face penalties under the Tax Administration Law. This gives companies flexibility in seasonal hiring and reduces fixed costs.

For employees who have resigned: According to Official Letter 883/TCT-DNNCN of 2022, companies must still compile and include income paid to such employees in the company’s annual tax finalization file. Issue tax withholding certificates with specific notation: “Company … has finalized personal income tax on behalf of Mr./Ms. … (by authorization) at line (serial number) … of Appendix Statement 05-1/BK-TNCN” if previously finalized. The process of handling personal income tax when terminating contracts ensures compliance and avoids back-tax risks from tax authorities.

3. Registering tax codes, updating, and keeping information

Managing personal tax codes under Circular 80/2021/TT-BTC requires companies to integrate HR systems for tracking changes, as errors can lead to back-tax assessments under Tax Administration Law 2019. This role directly connects to HR data analysis, helping forecast annual tax costs.

Companies are responsible for supporting first-time personal tax code registration for employees according to Circular 80/2021/TT-BTC rules. This helps employees avoid delays in personal tax procedures and ensures companies can fulfill tax withholding duties properly.

Managing dependent information: Update and manage dependent registration information to calculate personal deductions based on employee documentation. Under Decree 126/2020/ND-CP, each dependent qualifies for a 110,000,000 VND (4,400 USD)/month deduction. Errors here can lead to wrong tax calculations and tax authority back-assessments.

Legal document storage: Under Tax Administration Law 2019, companies must keep complete legal files, including: employment contracts, personal income tax finalization authorization (Form 08/UQ-QTT-TNCN), income commitments, and tax withholding certificates. The storage period is 10 years to serve finalization and tax authority inspection/audit cycles. Using effective employee record management methods protects companies from potential disputes and ensures legal compliance.

4. Ensuring and reflecting employee tax benefits

Personal deductions under Decree 126/2020/ND-CP include life insurance purchased by companies, helping reduce taxable income. Companies must verify documentation to avoid insufficient withholding liability under Article 24 of the Personal Income Tax Law.

Required deduction items: Record and calculate complete personal deductions for individuals (275,000,000 VND (11,000 USD)/month) and validly registered dependents (110,000,000 VND (4,400 USD)/month/person) under Decree 126/2020/ND-CP. This helps employees reduce tax obligations and increase net income.

Processing deductible contributions: Handle required insurance contributions, voluntary retirement funds, and charitable contributions to reduce taxable income. Notably, don’t finalize income from company-purchased life insurance that has already been subject to 10% withholding per current legal rules.

Handling responsibilities when employees provide wrong information: Under Article 24 of the Personal Income Tax Law, when employees provide wrong information (e.g., dependents), primary responsibility belongs to individuals. However, companies play advisory roles and require complete supporting documentation to reduce back-assessment risks from tax authorities. Companies should set up written commitments and reverse collection procedures from individuals if penalized due to wrong information.

5. Providing support, consulting, and clear information

Consulting on payroll tax and income tax as well as on the personal income tax filing deadlines before March 31 per Circular 80/2021/TT-BTC helps avoid late filing penalties, while supporting extra declarations if errors are found per Official Letter 13762/CTHN-HKDCN.

Active regulatory notifications: Actively inform all employees about annual tax finalization authorization deadlines and conditions. Under Tax Administration Law 2019, filing deadlines are the last day of the third month following the calendar year. Clearly explain authorization conditions: employment contracts of 3 months or longer, working at finalization time, and exceptions like irregular income >250,000,000 VND (10,000 USD)/month.

Required certificate provision: Per Circular 80/2021/TT-BTC, companies must provide personal income tax withholding certificates when requested for employees not eligible for authorization or who have resigned, enabling them to self-finalize. This includes converting from electronic certificates if companies apply electronic personal income tax certificate systems.

Professional inquiry resolution: Address employee questions about income figures, withheld taxes, and payroll deductions, helping employees understand their benefits and increasing trust in company payroll systems. This includes:

1. Guidance on personal deduction calculations
2. Non-taxable items
3. Procedures for additional tax payments or refunds

When must employees self-finalize taxes?

Self-finalization under Point d, Clause 6, Article 8 of Decree 126/2020/ND-CP applies when irregular income exceeds thresholds, affecting personal tax strategies. Companies need data analysis to predict these cases.

Required self-finalization cases:

• Income from multiple sources – Working at two or more companies, having irregular income, or receiving non-salary income from freelancing, business, or investments
• Resigned, no longer employed at the company – When employment contracts end before year-end finalization, no longer subject to company authorization per Official Letter 883/TCT-DNNCN
• Receiving foreign salaries, international organization payments – When foreign companies or international organizations don’t withhold or finalize taxes. Foreign nationals ending contracts must file before departure
• Self-requesting tax refunds or offsets – Additional tax obligations >1,250,000 VND (50 USD) or refunds beyond organizational finalization. Includes tax reduction cases due to natural disasters or fires

Special case: average irregular income not exceeding 250,000,000 VND (10,000 USD)/month with 10% withholding can still be authorized for primary income portions.

How can companies support employee self-finalization? Self-finalization support per Official Letter 636/TCT-DNNCN includes providing electronic certificates, helping employees avoid administrative penalties:

• Providing tax withholding certificates – Companies issue necessary documents for employees to complete self-finalization files, including income certificates, payroll statements, 10% certificates, and electronic certificate conversions if applicable
• Guiding self-declaration procedures – Accounting teams advise employees on self-finalization sequences, forms (05/QTT-TNCN and appendices), declaration preparation, and supporting deduction documentation
• Resolving data inquiries – Help employees understand income amounts, annual withheld taxes, and correct/update personal information as needed
• Consulting on refund/additional payment procedures – Support regarding tax surplus or shortage processing outside company’s scope

Important note: Individual filing deadlines are the end of the fourth month following the calendar year. Individuals face no penalties for refund-only cases with late filing.

Enterprise roles in personal income tax finalization are diverse: from authorized representatives, legal compliance, information management, to support and consulting. Evidence shows that companies active in managing these processes not only reduce legal risks but also create significant competitive advantages in attracting and keeping talent.

Leadership must actively guide employees in preparing authorization letters before March 31 annually, require complete supporting documentation, and keep careful records per Circular 80/2021/TT-BTC rules to avoid back-assessments. Investing in professional personal income tax declaration services not only ensures compliance but also helps companies optimize HR costs and boost operational efficiency.

Contact Talentnet’s payroll services today to optimize tax processes, reduce legal risks, and boost competitive advantages through complete HR management solutions.