(Comprehensive Guide — Procedures, Timeline, Legal Basis, Common Mistakes, and Compliance Tips)
Foreign employees working in Vietnam are subject to Vietnam’s Personal Income Tax (PIT). When they terminate employment or exit Vietnam, they must complete PIT finalization to close their tax obligations under Vietnamese law. This article provides an in-depth, SEO-optimized guide on the required procedures, documentation, timeline, and important compliance notes according to the newest regulations.
1. What Is PIT Finalization When Terminating Employment or Leaving Vietnam?
PIT finalization is the process of reconciling:
- Total taxable income earned in Vietnam during the period of employment or residency vs.
- Total PIT already withheld by the employer
This ensures:
- Overpaid tax → refunded
- Underpaid tax → paid to tax authority before exit
Foreign employees leaving Vietnam permanently (not returning within the same fiscal year) must finalize PIT before departure, unless a registered tax agent completes it on their behalf.
2. Who Must Finalize PIT Upon Contract Termination or Exit?
✔ Required to finalize:
Foreign employees terminating employment during the tax year
Foreign workers leaving Vietnam permanently
Foreign individuals with multiple income sources in Vietnam
Individuals who have not registered dependents in time and need adjustments
✔ Cases where the employer finalizes on behalf of the employee:
Only one income source
Employee authorizes the employer
Employee remains in Vietnam through year-end
✔ Cases where employer cannot finalize:
Employee has income from multiple companies
Employee leaves Vietnam before year-end without authorization
Employee is a non-tax resident
3. Legal Basis (Updated to the Newest Regulations)
Law on Personal Income Tax (amended)
Decree 65/2013/NĐ-CP
Circular 111/2013/TT-BTC
Circular 92/2015/TT-BTC
Circular 80/2021/TT-BTC (new guidance on tax finalization & PIT procedures)
Law on Tax Administration 38/2019/QH14
4. Required Documents for PIT Finalization
For the Employee
Passport (copy + notarized translation if required)
Work permit or work visa copy
Employment contract(s)
Confirmation of income from employer(s)
PIT withholding statements (Form 05-1BK-QTT-TNCN)
Banking details for tax refund
Exit confirmation (if leaving Vietnam)
Letter of Authorization (if using a tax agent)
For the Employer
Form 05/QTT-TNCN
Monthly/Quarterly PIT declarations
List of PIT withheld
Employee income statement
Dependent registration confirmation (if applicable)
Personal Income Tax Finalization Upon Termination of Employment or Departure from Vietnam
5. Step-by-Step Procedures for PIT Finalization
Case 1: Employee terminating contract but staying in Vietnam
Step 1: Prepare required documents
Employee provides personal documents + employer prepares income statements.
Step 2: Verify income & tax withholding data
Ensure all salary, allowances, bonuses, and taxable benefits are recorded correctly.
Step 3: Submit PIT finalization form
Submit form 05/QTT-TNCN
Submit to the tax authority managing the employer
Can submit online via ETAX (https://thuedientu.gdt.gov.vn )
Step 4: Pay additional tax (if underpaid)
Step 5: Receive refund (if overpaid)
Refund transferred directly to the registered bank account.
Case 2: Employee permanently leaving Vietnam
This is a stricter procedure with earlier deadlines.
Step 1: PIT Finalization Before Departure
Employee or employer (if authorized) must finalize PIT at least 10 days before exit.
Step 2: Obtain Tax Confirmation Letter
Tax authority issues confirmation that the employee has no outstanding PIT obligations.
Step 3: Immigration Procedures
Immigration may check tax compliance for certain cases.
6. Timeline & Deadlines
✔ If employee leaves Vietnam:
Must finalize before the departure date.
✔ If employee terminates employment:
Late submission may result in penalties under the Tax Administration Law.
7. Important Notes & Compliance Tips
1. Distinguish resident vs. non-resident tax status
≥183 days in Vietnam → resident, taxed on worldwide income <183 days → non-resident, taxed at a flat 20%
2. Include all taxable benefits
Many companies violate this by not declaring:
Housing provided by employer
School fees for children
Visa/work permit fees
Membership fees (gym, club, golf)
Phone & transportation allowances
These must be included in taxable income unless specifically exempted by law.
3. Dependent registration must be timely
Late registration → dependents not accepted → tax not refunded.
4. PIT refund account must be in the employee’s name
Tax authority rejects joint or company accounts.
5. Keep original invoices for deductible expenses
Especially:
- Social insurance
- Health/life insurance
- Charity donations
8. Common Mistakes Employers & Foreign Employees Often Make
- Filing PIT after the employee has already left Vietnam
- Losing documents due to termination without proper handover
- Incorrect tax residency determination
- Not declaring taxable benefits
- Wrong tax withholding calculation
- Employee uses multiple employers but expects one to finalize on their behalf
- No Letter of Authorization submitted before exit
These mistakes often lead to penalties, delays in refunds, and complications with immigration.
9. Professional Tips from Cases That Violated Regulations
Always prepare PIT finalization as soon as employee submits resignation
Conduct internal income reconciliation monthly to avoid discrepancies
Issue PIT withholding statements immediately when employment ends
Encourage foreign employees to authorize employer if they will not return to Vietnam
Use a legal/tax service provider to prevent errors and reduce penalties
10. Conclusion
PIT finalization for foreign employees upon contract termination or exit from Vietnam is a mandatory procedure governed by strict deadlines and documentation requirements. Ensuring accurate income records, timely submission, and legislative compliance will protect both the employer and the expatriate employee, avoiding penalties and ensuring smooth departure or correct tax closure.
Source: Asia Legal Group
Phone: 028 6674 3333 -0945 009002 ( P.TGĐ)
Website: https://dinhgiaav.com/
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