Tax settlement is a crucial process in corporate financial management, where all income and expense figures are standardized to determine the final obligation to the State budget. In the context of tax authorities intensifying audits using AI technology and cross-referencing data, mastering legal regulations is not only a compliance obligation but also a "shield" protecting businesses from risks of tax arrears and administrative penalties amounting to tens of millions of dong.
Currently, according to the latest legal documents such as the 2019 Tax Administration Law and its guidelines. Official document No. 1296/CT-NVT, The tax settlement process has undergone significant changes in terms of submission methods and applicable subjects. For business owners and accountants, the 2026-2027 tax settlement period requires absolute accuracy in document preparation, especially in the detailed appendices for income from salaries and wages.
Summary of key points regarding tax settlement
- Tax settlement includes: Determining the amount of tax payable for the tax year or the period from the commencement to the termination of the tax obligation (according to Clause 10, Article 3 of the 2019 Tax Administration Law).
- Core values: Determine the actual tax payable based on accurate statistical data, and offset any tax already paid provisionally during the year.
- Applicable objects: Businesses, organizations that pay income, and individuals with income from salaries and wages are subject to taxation.
- Deadline for submission: No later than the last day of the third month following the end of the calendar year or fiscal year for the organization.
Compilation of the latest legal basis and guidelines on tax settlement.
A thorough understanding of the following documents is a prerequisite for proper implementation:
| Document number | Summary of content |
| Tax Administration Law 2019 | General regulations on tax declaration, payment, and settlement (Expires July 1, 2026). |
| Decree 126/2020/ND-CP | Details of the subjects and categories of tax return documents. |
| Circular 80/2021/TT-BTC | Instructions for tax settlement forms (Appendix II). |
| Official Document 1296/CT-NVT | Detailed guidance on the procedures and technical requirements for personal income tax settlement. |
| Decree 125/2020/ND-CP | Regulations specifying administrative penalties for late submission of documents. |
A precise definition of tax settlement under Vietnamese law.
Based on the provisions of Clause 10, Article 3, Chapter I of the 2019 Tax Administration Law, tax finalization is defined as the determination of the amount of tax payable for the tax year or the period from the beginning of the tax year until the cessation of activities that give rise to tax obligations.
In other words, tax settlement is the process of reviewing and consolidating all economic transactions, income, and assets generated during an accounting period. This is the time when businesses and individuals "close their books" with the tax authorities. The essence of this work is reconciliation: if the quarterly provisional tax payment is less than the actual amount due for the whole year, the taxpayer must pay more. Conversely, if there is an overpayment, the taxpayer has the right to request a refund or offset it against the next period.
The role and value of tax settlement for business entities.
At MAN, we always emphasize that tax settlement is not simply an administrative procedure, but a high-level risk management operation:
- Establishing the legitimacy of expenses: Through the tax settlement process, businesses can filter out non-deductible expenses, helping to optimize actual after-tax profits.
- Avoid accumulating risks: Complying with annual tax settlement regulations helps businesses avoid accumulating errors. If a small business waits five years to settle its tax obligations, the late payment penalty could exceed the original tax amount.
- Transparency with shareholders and partners: A clean tax return is the clearest evidence of a company's financial health and compliance in the eyes of investors.
Types of tax settlements and entities subject to mandatory settlement.
According to the Vietnamese tax legal system, there are three main types of tax settlements that businesses and individuals need to be aware of:
Personal Income Tax Settlement
According to point d, clause 6, Article 8 Decree 126/2020/ND-CP, The subjects required to perform this task include:
- Organizations and individuals that pay income from salaries and wages.
- Individuals with income may authorize the income-paying organization to file tax returns on their behalf.
- Individuals who directly settle their tax obligations with the tax authorities (those with income from multiple sources or who have overpaid taxes and wish to receive a refund).
Corporate Income Tax (CIT) Settlement
According to Clause 1, Article 2 of the Corporate Income Tax Law, taxpayers include all types of businesses, cooperatives, and public service units engaged in business activities that generate taxable income. This is the process of determining revenue and deductible expenses to calculate the amount of tax payable to the state (usually form 20%).
Value Added Tax (VAT) settlement
This applies to goods and services used for production, business, and consumption in Vietnam (according to Article 3 of the 2024 VAT Law). Businesses need to recalculate the total amount. output VAT minus deductible input costs for the entire tax period.
Procedures and methods for professional tax settlement
Based on implementation guidelines, the settlement process typically involves two main steps:
Step 1: Prepare documents Taxpayers (organizations or individuals) gather supporting documents and invoices and prepare tax returns according to the prescribed forms (such as form 05/QTT-TNCN).
Step 2: Submit and receive documents Currently, there are three common methods of submission:
- Online (Recommended): Through electronic transactions, the receipt, verification, and delivery of results are carried out via the tax authority's electronic data processing system (in compliance with Circular 19/2021/TT-BTC).
- Direct: Submit the paper copy at the one-stop service department of the tax office.
- Postal services: Submit the documents by mail to the tax authority that directly manages your case.
Components of the personal income tax final settlement dossier (Form 05/QTT-TNCN)
Based on Decree 126/2020/ND-CP, a complete set of documents for an income-paying organization includes:
- Personal Income Tax Final Settlement Declaration Form (Form 05/QTT-TNCN): Original copy (1 set).
- Appendix to the detailed list of individuals subject to progressive tax rates (Form 05-1/BK-QTT-TNCN): For workers with contracts of 3 months or more.
- Appendix to the detailed list of individuals subject to tax at the full tax rate (Form 05-2/BK-QTT-TNCN): For seasonal workers or non-resident individuals.
- Appendix to the list of dependents (Form 05-3/BK-QTT-TNCN): Basis for personal deductions.
Case Study: Risks from Forgetting to Submit Document Addendums
Situation: A mechanical engineering company in Binh Duong submitted its tax return. corporate income tax settlement On time, but negligently failed to attach the appendices on related-party transactions as required by Decree 132.
Consequence: Even though it did not result in any tax shortfall, the business was still subject to a fine ranging from VND 8,000,000 to VND 15,000,000 according to Article 13 of Decree 125/2020/ND-CP for failing to submit the required appendix.
The solution from MAN: We assisted businesses in reviewing their entire document list before clicking the "Submit" button on the Thuedientu system. Establishing a document checklist in accordance with Circular 80 is an essential step to avoid these unfortunate administrative errors.
Regulations on penalties for late submission of tax return documents.
The penalties are very strict in Article 13 of Decree 125/2020/ND-CP to deter acts of delay:
- Warning penalty: Late submission of 1-5 days (with mitigating circumstances).
- 2-5 million VND: Late submissions range from 1 to 30 days.
- 5 – 8 million VND: Late submissions range from 31 to 60 days.
- 8 – 15 million VND: Late payment of 61-90 days or over 90 days but without any tax liability arising.
- 15 – 25 million VND: Late payment exceeding 90 days, resulting in tax liability and failure to fulfill tax payment obligations to the state budget before an inspection decision is issued.
Expert opinion: Potential risks commonly faced by Vietnamese businesses.
After more than 30 years of directly handling complex tax settlement cases, I've noticed that businesses often make three core mistakes:
- Loose personnel records: This is the biggest vulnerability when personal income tax settlement. Many entities declare dependents but lack birth certificates or proof of income for dependents, leading to the exclusion of deductible expenses during audits.
- Invalid invoice: Accountants typically only check whether an invoice is genuine, but rarely check the status of the business issuing the invoice. If the supplier has "abandoned its business address" before the invoice is issued, this expense will certainly be disallowed.
- Discrepancies in data between tax returns: The figures on the annual tax return did not match the total figures on the four quarterly returns. This immediately triggered the tax authority's alert system, placing the business under重点 inspection.
Optimal experience: Businesses should conduct a "Mock Settlement" in November each year to allow sufficient time to supplement documents or correct errors before the official settlement period begins in March of the following year.
Conclude
Tax settlement is a process that demands absolute accuracy and a deep understanding of the ever-changing legal system. Thorough preparation, from documentation to declaration techniques, not only helps businesses comply with the law but also builds a solid financial foundation, avoiding economic losses due to administrative penalties.
If you are concerned about the accuracy of your current accounting records or having difficulty handling complex tax situations, let us help you. MAN – Master Accountant Network We stand by your side. With extensive practical experience, we are proud to offer solutions. tax settlement services and comprehensive tax consulting, helping businesses optimize their benefits and grow with peace of mind.
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Tax Settlement
Yes. By regulation, unless there is a notice of temporary business suspension, businesses are still required to submit annual financial statements to record establishment costs and initial operating expenses.
If there is no overpayment of tax to be refunded and no underpayment of tax exceeding 50,000 VND, individuals are not required to file a personal income tax return.
After digitally signing and submitting the tax return, you need to check for the Step 2 notification (Notification of Acceptance of Electronic Tax Return) in your Thuedientu system mailbox. Only when you receive an acceptance notification is the return considered successfully submitted.
Yes. Taxpayers are allowed to submit supplementary tax returns if they discover errors, provided it is before the tax authorities announce a decision to conduct an on-site inspection or audit at the business.
Individuals who only have income from salaries and wages at a single income-paying entity, or who have additional incidental income that has already been subject to withholding tax (10%) at source and do not require tax settlement for that portion. Do newly established businesses at the end of the year, which have not yet generated revenue, need to file a tax return?
If an individual has salary income from two sources but both are below the taxable threshold, do they need to file a tax return?
How do I know if my tax return has been successfully submitted online?
Is it possible to submit supplementary settlement documents after the deadline has passed?
What are the requirements for authorizing a company to handle personal income tax settlements?
