Don't let small tax debt get big collection

Many people with small casual incomes receive notices requiring them to file additional tax returns and are being charged huge amounts of back taxes, fines, and late fees.

People and businesses settle taxes at the Ho Chi Minh City Tax Department - Photo: TTD

How to avoid this?

Crying because of an income of several hundred thousand/month

There has been a new development related to the case of Mr. LTH - an employee of a branch of a large joint stock bank in Quang Ngai - just because the paying unit where he worked did not deduct tax due to the payment being quite small (one amount of 3.3 million VND/year, one amount of only 300,000 VND/year), he was charged by the tax authority with arrears, fines, and late payment of up to 20.7 million VND.

Reflecting to Tuoi Tre, Mr. LTH said that recently the tax authority sent a notice requesting explanation and additional information and documents because it discovered that he had multiple sources of income, resulting in additional taxes to be paid.

Quang Ngai Tax Department said that according to the provisions of Decree 126 of the Government , Mr. H. is in the case of having to directly settle taxes. However, because Mr. LTH has not made the settlement, the tax authority requested an explanation.

At the end of October, Mr. LTH had a written explanation that because he did not know the above regulation and thought that his monthly income generated at AIS Securities Company, which was under 2 million VND (specifically, only from a few thousand VND/month to a few hundred thousand VND/month), was too little, so he did not have to deduct 10% personal income tax.

Mr. LTH also sent a document to AIS Securities Company asking why they did not deduct 10% before paying him. The securities company cited Clause 1, Article 25, Circular 111 of the Ministry of Finance to confirm that the company is not allowed to deduct tax on income under 2 million VND/month.

"I affirm that I did not intentionally evade taxes on a small, insignificant income because every year I pay personal income tax at the bank where I work about 40 - 60 million VND.

As a citizen who always respects the law and always fully complies with tax obligations, I respectfully request the Ministry of Finance, the General Department of Taxation, and the Quang Ngai Provincial Tax Department to support me in paying additional tax on the outstanding amount for the irregular income that has not been deducted 10% tax (10% on income at AIS in 2022 and 2023), instead of summing up all income calculated according to the progressive tax schedule because it is too disadvantageous for taxpayers," said Mr. LTH.

However, in the reply, the Quang Ngai Tax Department said that there was no basis to support him in only paying the remaining tax amount, for the irregular income that had not been deducted 10% tax as he requested and required him to comply with the regulations, that is, to synthesize the income and calculate according to the progressive tax table and to pay the fine and late payment as stated above.

Which individual is authorized to settle taxes?

According to the provisions of Decree No. 126/2020, an individual has a source of income from a labor contract of 3 months or more at a unit and is actually working there at the time of personal income tax settlement.

In addition, the individual also has a source of income from a labor contract of 3 months or more and has irregular income from other places with an average monthly income of no more than 10 million VND in the year and has had personal income tax deducted at a rate of 10%. If the individual does not have the need to settle this irregular income, he/she is also authorized to authorize the unit to settle it on his/her behalf.

Individuals who do not fall into the above cases must directly settle personal income tax with the tax authority to determine tax obligations according to the settlement. In case an individual authorizes settlement in violation of regulations, the tax authority shall inspect, verify, request the individual to fulfill the obligation and collect tax according to regulations.

Based on the above regulations, if the securities company that Mr. LTH collaborates with deducts 10% of the income paid to him in 2022 and 2023 (one amount of 3.3 million VND/year and one amount of only 300,000 VND/year), he will not be subject to arrears, fines, or late payment of up to 20.7 million VND.

Mr. H.'s story above is not unique to anyone. Because in reality, many taxpayers have three sources of income, in which the first source of income has been deducted at source, the second source of income has been deducted 10%, and the third source of income is too small so the paying agency does not deduct.

Ms. TM (Go Vap District, Ho Chi Minh City) said that her job sometimes requires her to attend conferences and she receives a compensation of 300,000 - 500,000 VND/time.

This is an irregular and not very valuable income, but recently when looking up the eTax Mobile application, she discovered that a unit had included this income in deductible expenses, causing her to have a tax debt and risk being charged with arrears, fines, and late payment like Mr. LTH's case, which made her very worried.

Regulations do not cover all actual occurrences.

Speaking with Tuoi Tre, Dr. Nguyen Ngoc Tu - a tax expert - commented that the policy has created convenience for taxpayers as well as reduced the workload for tax authorities, when allowing individuals with occasional income of no more than 10 million VND and a 10% deduction.

If an individual does not need to settle this current income, he/she can authorize his/her unit to settle it on his/her behalf.

However, the current policy still does not cover all the actual occurrences when many individuals have occasional income of only 300,000 - 500,000 VND/time but forget to declare in time, leading to arrears, late payment fines, and administrative penalties.

Most individuals with irregular income elsewhere are qualified people such as university lecturers, doctors, lawyers, journalists... when invited to contribute professional work in an outside unit. The main income is from their paying agency. So the tax is paid very fully.

"In essence, they have no intention of evading taxes, but because their income is too small, they only have 1-2 incomes of a few hundred thousand dong a year.

Moreover, in reality, this income plus the occasional income that has been deducted 10% tax is mostly under 10 million VND/month. In case it is higher than 10 million VND, the amount of tax to be paid is not much," said Mr. Tu.

To fully support and create more convenience for individual taxpayers, tax experts recommend that the Ministry of Finance should have clear instructions on this matter.

If the decree or tax management law needs to be amended, the Ministry of Finance should soon propose to the competent authority to amend it in the direction that individuals are authorized to settle taxes for their paying agencies when they have irregular income from other places of over 2 million VND with 10% tax deducted and the total irregular income in the year is on average not more than 10 million VND/month.

Source: https://tuoitre.vn/dung-de-no-thue-nho-bi-truy-thu-to-20241103081101448.htm