The following content provides an overview of the regulations regarding personal income tax (PIT) refunds in Vietnam, including cases where a refund is not applicable, the implications of not claiming a refund, and the timeframe for processing refund requests. This information is based on the relevant laws and regulations and is intended to clarify taxpayers’ rights and obligations under Vietnamese tax law.
1. Cases Where Personal Income Tax Refunds Are Not Applicable
According to Clause 2, Article 8 of the 2007 Law on Personal Income Tax, the management of PIT refunds is conducted in compliance with the general legal framework for tax administration. This includes activities such as tax registration, tax declaration, tax withholding, tax payment, tax finalization, tax refunds, and the handling of tax violations. All these measures must adhere to specific legal provisions to ensure fairness and transparency in tax collection and related processes.
Circumstances Allowing PIT Refunds. The Law on Personal Income Tax clearly defines the circumstances under which taxpayers are entitled to request a refund of excess tax paid. These include:
- Overpayment of Tax: When the amount of tax paid exceeds the tax liability, the taxpayer is entitled to claim a refund for the overpaid amount.
- Taxable Income Below the Threshold: If a taxpayer has paid tax but their taxable income is below the threshold subject to taxation, they are entitled to request a refund for the tax paid.
- Other Cases as Determined by Competent Authorities: This could involve special circumstances or changes in tax policies as determined by relevant government agencies
These provisions aim to protect taxpayers’ rights while ensuring fairness in the application of tax policies.
Standard Deduction Threshold: Based on Resolution 954/2020/UBTVQH14, which amends the family deduction under Clause 1, Article 19 of the 2007 Law on Personal Income Tax (as amended by Law No. 26/2012/QH13), the applicable thresholds are as follows:
- Taxpayer Deduction: VND 11 million/month (equivalent to VND 132 million/year).
- Dependent Deduction: VND 4.4 million per dependent/month.
This means that individuals are only subject to PIT if their taxable income (total income after deducting exempt income and standard deductions) exceeds VND 11 million/month or VND 132 million/year. If a taxpayer’s taxable income is below this threshold, they are not liable for PIT and may claim a refund for any excess tax paid. For example, if an individual has already paid PIT but their taxable income is below VND 132 million/year, they are entitled to request a refund. However, if their taxable income equals or exceeds VND 132 million/year, they are not eligible for a refund unless the tax paid exceeds the calculated liability.
2. Consequences of Not Claiming a Personal Income Tax Refund
Tax authorities do not automatically issue PIT refunds. Refunds are only processed upon the taxpayer’s request. If a taxpayer has overpaid tax but does not submit a refund request, the excess amount will be carried forward and offset against future tax liabilities in subsequent tax periods.
Key Provisions
- Refund Requests Through Tax Finalization: According to Article 28 of Circular 111/2013/TT-BTC, PIT refund requests must be submitted as part of the annual tax finalization process. For individuals who have authorized their employers or income-paying organizations to handle tax finalization, refunds will be processed through these organizations.
- Direct Tax Finalization: Individuals who directly file their tax declarations with the tax authority can choose either to request a refund or to apply the overpaid tax to future tax periods. This provides flexibility for taxpayers in managing their tax liabilities.
- Late Submission of Finalization Forms: Taxpayers who fail to submit their tax finalization forms on time are not subject to administrative penalties, provided they can substantiate their refund claims and submit the necessary documentation.
- Time Limit for Refund Claims: Taxpayers should note that PIT overpayments from more than 10 years ago are not eligible for refunds, as specified in Point c, Clause 3, Article 60 of the 2019 Law on Tax Administration.
Therefore, failure to claim a PIT refund does not result in immediate loss of the overpaid amount, as it can be carried forward. However, taxpayers must comply with legal requirements and timelines to safeguard their rights.
3. Timeframe for Processing Personal Income Tax Refunds
The timeframe for processing PIT refunds is governed by Article 75 of the 2019 Law on Tax Administration, which categorizes refund requests into two types: pre-refund verification and post-refund verification.
Pre-Refund Verification
- Processing Time: The tax authority must process the refund within six (6) working days from the date of notification of acceptance of the refund request.
- Conditions: If the refund request does not meet the requirements, the tax authority will notify the taxpayer of the rejection.
Post-Refund Verification
- Processing Time: For cases requiring verification before issuing a refund, the tax authority must complete the process within forty (40) working days from the date of notification of acceptance of the refund request.
- Verification Process: This extended timeline ensures that the tax authority can thoroughly examine the taxpayer’s documents and information.
Adjustments for Incomplete Applications
If there is a discrepancy between the information provided by the taxpayer and the tax authority’s database, the taxpayer will be asked to provide additional documentation. The time taken for this clarification will not be included in the official processing timeframe.
Penalties for Delayed Refunds
If the tax authority fails to issue a refund decision within the stipulated timeframe due to its own fault, it must not only refund the tax but also compensate the taxpayer with interest. The interest rate is set at 0.03% per day, calculated on the refund amount and the number of days delayed. This compensation is funded from the central government budget.
In conclusion, the regulations governing personal income tax refunds in Vietnam aim to ensure fairness and transparency while safeguarding taxpayers’ rights. Taxpayers must adhere to the relevant rules and timelines to claim refunds effectively. Additionally, the provisions for compensating taxpayers in cases of delayed refunds underscore the government’s commitment to accountability and efficiency in tax administration. Understanding these regulations enables taxpayers to manage their tax obligations more effectively and benefit from the protections provided by the law.
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Dinh Phuong Thao