Personal income tax (PIT) is an important duty that foreign direct investment (FDI) companies must handle for their employees when paying salaries. If they fail to report, deduct, and pay PIT, they may face heavy penalties under Vietnamese law, including fines or even criminal charges. Tax evasion also harms the economy and investment climate.
Below is an article from DNP Viet Nam Law Firm offering legal insights to help FDI enterprises comply with personal income tax regulations and mitigate risks
1. Legal Risks of Not Paying Personal Income Tax:
1.1. Administrative Penalties:
According to Article 138 of the Tax Administration Law No. 38/2019/QH14, FDI enterprises violating tax regulations may be fined between one and three times the amount of evaded tax. Moreover, companies must pay the full amount of tax owed, including incorrectly reduced, exempted, or refunded taxes.
1.2. Criminal Liability
Under Clause 5, Article 200 of the Penal Code 2015 (amended and supplemented in 2017), enterprises may face criminal prosecution if they have previously been fined administratively or convicted but have not yet had their convictions expunged. Specifically:
| Violation Level | Penalty |
| Re-offense | Fine from VND 300 million to VND 1 billion |
| Organized crime, tax evasion from VND 300 million to under VND 1 billion, abuse of position, multiple or dangerous recidivism | Fine from VND 1 billion to VND 3 billion |
| Tax evasion of VND 1 billion or more | Fine from VND 3 billion to VND 10 billion or business suspension from 6 months to 3 years |
| Severe impact on social security and failure to remedy the consequences | Fine from VND 3 billion to VND 10 billion or business suspension from 6 months to 3 years |
| Legal entity committing a crime | Fine from VND 50 million to VND 200 million | prohibition from doing business or raising capital for 1 to 3 years |
2. Impact on Labor Management and Corporate Reputation:
2.1. Employee Complaints
According to Articles 3 and 10 of Decree 24/2018/ND-CP, employees can file complaints or denunciations against FDI enterprises if they believe their legitimate rights are affected.
2.2. Damage to Corporate Reputation
Companies involved in tax evasion may lose the trust of investors, partners, and government agencies, making it difficult to obtain investment licenses for new projects.
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3. Negative Impacts on the Economy and Investment Environment
3.1. Reduction in State Budget Revenue
PIT is a crucial part of the state budget. When enterprises evade taxes, the government loses revenue, affecting public welfare policies.
3.2. Unfair Competition
Enterprises complying with tax obligations are disadvantaged compared to those evading taxes. This distorts the business environment and hinders economic growth.
3.3. Negative Impact on the Investment Environment
Vietnam is attracting foreign investment to develop its economy. If tax evasion increases, investors may lose confidence, creating a negative domino effect on the investment climate.
4. Measures for FDI Enterprises to Ensure Compliance
- Understand and adhere to Vietnamese tax laws on PIT.
- Fully declaring and paying taxes on time.
- Maintaining records and documents related to tax declarations and payments.
- Consulting tax experts to ensure compliance with regulations.
In conclusion, FDI enterprises must strictly comply with PIT declaration, deduction, and payment regulations to ensure legal and efficient business operations. For more specific consultations, enterprises can contact tax experts or local tax authorities.
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