What you will learn
- ✅ Shop owners' tax responsibilities when hiring staff
- ✅ Two methods for calculating personal income tax: progressive and flat
- ✅ When to withhold tax and when not to
- ✅ How to declare and pay personal income tax from wages
1. Shop Owner's Responsibilities When Hiring Staff
According to regulations, when you pay income in the nature of salary or wages to employees, you have the following responsibilities:
| No. | Responsibility | Description |
|---|---|---|
| 1 | Tax Withholding | Deduct personal income tax from employee salaries |
| 2 | Tax Declaration | Submit personal income tax returns to the tax authority (if tax is withheld) |
| 3 | Tax Payment | Remit the withheld tax to the state budget |
| 4 | Tax Finalization | Finalize personal income tax for employees at year-end (if authorized) |
Important Notes
- Employees do NOT pay tax themselves. You (the income payer) must withhold and pay it on their behalf.
- Incorrect withholding → You may be subject to back taxes and penalties.
2. Contract Types and Tax Calculation Methods
Summary Table
| Contract Type | Tax Calculation Method | Eligible for Deductions? | Finalization? |
|---|---|---|---|
| Employment Contract ≥ 3 months | Progressive tax schedule | Yes | Yes |
| Employment Contract with indefinite term | Progressive tax schedule | Yes | Yes |
| Employment Contract < 3 months | Flat tax schedule (10%) | No | No |
| No Contract Signed | Flat tax schedule (10%) | No | No |
3. Progressive Tax Schedule
Who it applies to?
Employees who sign an employment contract of 3 months or more or an employment contract with an indefinite term.
Calculation Method
Taxable Income = Total Income - Deductible Expenses
Deductible Expenses:
- Personal deduction: 11 million VND/month
- Dependent deduction: 4.4 million VND/person/month
- Mandatory insurance (social, health, unemployment insurance)
- Charitable or humanitarian contributions (if any)
Progressive Tax Rates
| Bracket | Taxable Income/Month | Tax Rate |
|---|---|---|
| 1 | Up to 5 million | 5% |
| 2 | Over 5 - 10 million | 10% |
| 3 | Over 10 - 18 million | 15% |
| 4 | Over 18 - 32 million | 20% |
| 5 | Over 32 - 52 million | 25% |
| 6 | Over 52 - 80 million | 30% |
| 7 | Over 80 million | 35% |
Example: Calculating tax for Employee A
Information:
- Gross salary: 20 million VND/month
- Social, health, unemployment insurance contributions: 2.1 million VND (10.5%)
- Has 1 dependent (young child)
Calculation:
Taxable Income = 20 million - 2.1 million = 17.9 million
Deductions:
- Personal deduction: 11 million
- Dependent deduction: 4.4 million
- Total deductions: 15.4 million
Taxable Income = 17.9 - 15.4 = 2.5 million
Personal Income Tax = 2.5 million × 5% = 125,000 VND/month
Net Salary = 20 million - 2.1 million (Insurance) - 125,000 (Tax) = 17,775,000 VND
4. Flat Tax Schedule
Who it applies to?
- Employees with an employment contract of less than 3 months
- No employment contract signed
- Hiring for services or contracted work (drivers, shippers, consultants, etc.)
Calculation Method
Personal Income Tax = Total Income × 10%
Characteristics:
- No personal deduction allowed
- No dependent deduction allowed
- No year-end finalization
- Tax is only withheld when income is > 2 million VND/transaction
Example: Hiring a shipper for delivery
Situation: You hire Mr. B to transport goods, paying him 3 million VND per trip.
Tax Calculation:
Personal Income Tax = 3 million × 10% = 300,000 VND
Actual payment to Mr. B = 3 million - 300,000 = 2,700,000 VND
Cases Where No Withholding is Required
If the income per transaction is ≤ 2 million VND → No tax withholding is necessary.
Example: Hiring someone to clean the shop, paying 500,000 VND per session → No withholding required.
5. When Must Personal Income Tax Be Declared?
Principle
- If tax is withheld in a month/quarter → A tax return must be filed
- If no tax is withheld (even if income is paid) → No tax return is required
Declaration Deadlines
| Declaration Period | Condition | Deadline |
|---|---|---|
| Monthly | Total withheld tax ≥ 50 million VND/year | 20th of the following month |
| Quarterly | Total withheld tax < 50 million VND/year | 30th of the first month of the following quarter |
Tax Returns to File
- Personal Income Tax Return for Salary and Wages (not a business household return)
- Can be filed via HTKK software or thuedientu.gdt.gov.vn
6. Year-End Personal Income Tax Finalization
Who Finalizes?
The employer (you) finalizes on behalf of the employee if:
- The employee has an employment contract of 3 months or more
- The employee authorizes you to finalize
- The employee only has income from you (does not work elsewhere)
Finalization Deadline
No later than March 31st of the following year (90 days from the end of the year).
When Employees File Their Own Tax Returns?
- Have income from multiple sources (working part-time elsewhere)
- Do not authorize you to finalize
7. Cases of Business Owners Also Working
Situation
You are a business owner (with income from your shop) and also work part-time for Company A (with salary income).
Handling
| Income Source | Tax Calculation Method |
|---|---|
| Income from business operations | Calculate tax as a business household (based on revenue or profit) |
| Income from wages | Calculate personal income tax from wages (progressive or flat) |
These two incomes are calculated SEPARATELY, not combined.
8. Frequently Asked Questions
Is tax withholding required for salaries under 11 million VND?
If an employment contract of ≥ 3 months is signed: No withholding (because after deducting the personal allowance, the taxable income is ≤ 0).
**If no employment contract is signed or the contract is < 3 months:** Withhold 10% if the payment is > 2 million VND/transaction.
Will there be a penalty for not declaring personal income tax?
Yes. If tax is withheld but not declared → Administrative penalty + late payment interest.
What about hiring family members as employees?
According to regulations, family members (parents, spouse, children, siblings) can work as accountants and perform other tasks for a business household.
If you pay them a salary → You must still withhold personal income tax as usual (if eligible).
Employees demand net salary, what should I do?
Net salary = Salary after deducting insurance and personal income tax.
You need to calculate backwards from net salary → gross salary to determine the actual cost and withhold taxes.
Example: Negotiating a net salary of 15 million VND → The actual gross salary might be 17-18 million VND (depending on deduction conditions).
Checklist: Hiring Staff Correctly
Before Hiring
- Determine the contract type (Employment Contract ≥ 3 months, < 3 months, or no contract)
- Calculate gross salary and deductions
- Request employees to register for family circumstances deductions (if signing an Employment Contract ≥ 3 months)
Monthly
- Calculate salary and withhold personal income tax
- Pay net salary to employees
- Keep salary payment records
Quarterly (or Monthly if applicable)
- File personal income tax returns (if tax was withheld)
- Pay the withheld tax
Year-End
- Collect tax finalization authorization from employees
- File year-end personal income tax finalization returns
- Issue tax withholding certificates to employees (if requested)
Common Mistakes
-
Paying salaries without withholding tax → Subject to back taxes and penalties.
-
Confusing employment contracts with service contracts → Applying incorrect tax calculation methods.
-
Failure to declare when tax was withheld → Administrative penalty.
-
Forgetting year-end finalization → Employees cannot claim tax refunds (if overpaid).
-
Not keeping salary payment records → Difficulty in explanation during tax authority inspections.
9. Conclusion
Hiring staff is not only an HR matter but also a mandatory tax responsibility for shop owners. Understanding the correct contract type, how to withhold personal income tax, and declaration deadlines will help you avoid risks of back taxes and late payment penalties. By managing salaries, taxes, and documentation clearly from the start, operations will be smoother and more transparent. GTG CRM supports HR management, tracking salary expenses, and data for proactive and systematic tax declarations.
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