To: Provincial/municipal Tax Departments

The Finance Ministry has recently received official letters of the Tax Departments of Ho Chi Minh City and some localities on problems in the withholding of 10% personal income tax by income-paying agencies. On this issue, the Finance Ministry hereby provides the following opinions:

The withholding of 10% tax on other incomes (other than salary or wage income) has been recently stipulated in the Finance Ministry’s Circular No. 05/2002/TT-BTC of January 17, 2002, guiding the implementation of the Government’s Decree No. 78/2001/ND-CP of October 23, 2001, detailing the implementation of the Ordinance on Income Tax on High-Income Earners. However, this Circular gives no neither specific guidance on tax refund procedures and income levels subject to tax withholding.

According to the current provisions, when paying incomes to individuals, income-paying agencies shall withhold tax for remittance into the state budget. Meanwhile, Article 29 of Ordinance No. 35/2001/PL-UBTVQH10 on Personal Income Tax stipulates: “… tax authorities shall have to retrospectively collect tax money, fines or refund the paid tax amounts which have arisen as within the last 5 years…”

Since 2004, coordinated measures have been taken to withhold 10% tax; at the year-end, individuals make tax finalization and are refunded tax under the guidance of the Finance Ministry’s Circular No. 81/2004/TT-BTC of August 13, 2004, guiding the implementation of the Government’s Decree No. 147/2004/ND-CP of July 23, 2004, detailing the implementation of the Ordinance on Income Tax on High-Income Earners. In the course of implementation of these documents there have also arisen a few problems. Therefore, the Finance Ministry agrees that income-paying agencies which have not withheld 10% tax on total incomes shall retrospectively collect personal income tax only on incomes earned from the effective date of Circular No. 81/2004/TT-BTC (from September 12, 2004 on). For regular incomes such as salaries and wages of individuals on which personal income tax has not been accurately and fully paid according to law, personal income tax shall be retrospectively collected on those earned within the last five years according to regulations.

The Finance Ministry hereby notifies provincial/municipal Tax Departments thereof for compliance.

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