You will learn
- ✅ The tax responsibilities of shop owners when hiring employees
- ✅ Two methods of personal income tax calculation: progressive and flat rate
- ✅ When to withhold tax and when not to
- ✅ How to declare and pay personal income tax from salaries
1. Shop Owner's Responsibilities When Hiring Employees
According to regulations, when you pay income in the nature of salary or wages to an employee, you have the following responsibilities:
| No. | Responsibility | Description |
|---|---|---|
| 1 | Tax Withholding | Withhold personal income tax from employee salaries |
| 2 | Tax Declaration | Submit personal income tax returns to the tax authorities (if withholding is done) |
| 3 | Tax Payment | Pay the withheld tax into the state budget |
| 4 | Tax Finalization | Finalize personal income tax for the year for employees (if authorized) |
Important Notes
- Employees do NOT pay tax themselves. You (the income payer) must withhold and pay on their behalf.
- Failure to withhold correctly → You may be subject to back taxes and penalties.
2. Contract Types and Tax Calculation Methods
Summary Table
| Contract Type | Tax Calculation Method | Deductible? | Finalizable? |
|---|---|---|---|
| Employment Contract ≥ 3 months | Progressive Rate Schedule | Yes | Yes |
| Indefinite Employment Contract | Progressive Rate Schedule | Yes | Yes |
| Employment Contract < 3 months | Flat Rate (10%) Schedule | No | No |
| No Contract Signed | Flat Rate (10%) Schedule | No | No |
3. Progressive Tax Schedule
Who it applies to?
Employees who sign an employment contract of 3 months or more or an indefinite employment contract.
Calculation Method
Taxable Income = Gross 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
- Mandatory insurance contributions: 2.1 million VND (10.5%)
- 1 dependent (young child)
Calculation:
Taxable Income = 20 million - 2.1 million = 17.9 million
Deductions:
- Personal: 11 million
- Dependent: 4.4 million
- Total Deductions: 15.4 million
Income Subject to Tax = 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 who sign an employment contract of less than 3 months
- No employment contract signed
- Hiring for services or freelance work (drivers, shippers, consultants...)
Calculation Method
Personal Income Tax = Gross Income × 10%
Characteristics:
- No personal deduction
- No dependent deduction
- No annual tax finalization
- Tax is withheld only when income is > 2 million VND/transaction
Example: Hiring a Shipper for Delivery
Scenario: You hire Mr. B to deliver goods, paying 3 million VND per trip.
Tax Calculation:
Personal Income Tax = 3 million × 10% = 300,000 VND
Net 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 required.
Example: Hiring someone to clean the shop for 500,000 VND per session → No withholding.
5. When is Personal Income Tax Declared?
Principle
- Tax was withheld in the month/quarter → A tax return must be filed
- No tax was withheld (even if income was paid) → No tax return needs to be filed
Declaration Deadlines
| Declaration Period | Condition | Deadline |
|---|---|---|
| Monthly | Total tax withheld ≥ 50 million VND/year | 20th of the following month |
| Quarterly | Total tax withheld < 50 million VND/year | 30th of the first month of the following quarter |
Required Tax Forms
- Personal Income Tax Return for Salary and Wages (not the form for business households)
- Can be submitted via HTKK software or thuedientu.gdt.gov.vn
6. Annual 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 Where a Business Owner Also Works
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 Household | Calculate tax as a business household (based on revenue or profit) |
| Salary Income | Calculate personal income tax from salary (progressive or flat rate) |
These two types of income are calculated SEPARATELY, not combined.
8. Frequently Asked Questions
Is tax withholding required for salaries under 11 million VND?
If an employment contract ≥ 3 months is signed: No withholding is required (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 paid > 2 million VND per transaction.
Is there a penalty for not declaring personal income tax?
Yes. If tax was withheld but not declared → Subject to administrative penalties and late payment interest.
What about hiring relatives as employees?
According to regulations, relatives (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).
My employee wants a net salary, what should I do?
Net salary = Salary after deducting social insurance and personal income tax.
You need to calculate backwards from the net salary to the gross salary to determine the actual cost and withhold taxes.
Example: Agreeing on a net salary of 15 million VND → The actual gross salary could be 17-18 million VND (depending on deduction conditions).
Checklist: Hiring Employees 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 dependent 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)
- Submit personal income tax returns (if tax was withheld)
- Pay the withheld tax
Year-End
- Collect tax finalization authorization from employees
- Submit annual personal income tax finalization return
- 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 → Subject to administrative penalties.
-
Forgetting year-end tax finalization → Employees cannot get tax refunds (if overpaid).
-
Not keeping salary payment records → Difficult to explain during tax audits.
9. Conclusion
Hiring employees is not just a human resources matter but also a mandatory tax responsibility for shop owners. Understanding the correct contract types, personal income tax withholding methods, and declaration deadlines will help you avoid risks of back taxes and late payment penalties. By clearly managing salaries, taxes, and documents from the outset, operations will be smoother and more transparent. GTG CRM supports HR management, salary cost tracking, and data preparation for proactive and systematic tax declarations.
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