What Happens When a Tax Delinquent Has Their Wages Garnished?

Wage and Income Withholding for Tax Debtors

Article 130.1 of the 2019 Law on Tax Administration stipulates that the measure of partial wage or income withholding shall be applied to taxpayers who are subject to enforced administrative decisions on tax management and are working under a contract of at least six months or are receiving retirement or disability allowances.

Article 32.1 of Decree 126/2020/ND-CP provides guidance, defining administrative decisions on tax management to include:

– Decisions on administrative sanctioning for violations of tax management regulations;

– Notices and decisions on tax fixation;

– Notices of tax debt;

– Decisions on tax refund recovery;

– Decisions on extension;

– Decisions on installment payments;

– Decisions on terminating the effect of tax debt suspension;

– Decisions on applying remedial measures as per laws on handling administrative violations regarding tax management;

– Decisions on compensation for damages;

– Other administrative decisions on tax management as stipulated by law.

Withholding Rate for Wage and Income Withholding for Tax Debtors

According to Article 130.2 of the Law on Tax Administration, the withholding rate for wages, retirement, or disability allowances for individuals should not be less than 10% and not exceed 30% of their monthly total.

For other types of income, the withholding rate shall be based on actual income but must not exceed 50% of the total income.

Withholding Procedure

Based on the provisions of Article 130.3 of the Law on Tax Administration, agencies and organizations employing the taxpayers subject to enforced administrative decisions on tax management and managing their wages or income have the following responsibilities:

– Withhold a part of the wage or income of the taxpayer subject to enforced administrative decisions on tax management and transfer the withheld amount to the state budget account at the State Treasury as specified in the decision on enforcing administrative decisions on tax management, starting from the nearest wage or income payment period until the full amount of tax debt is withheld as per the decision.

– Notify the enforcing authority and the enforced taxpayer.

– In case the full amount of tax debt has not been withheld and the enforced taxpayer’s labor contract is terminated, the employing agency or organization must notify the enforcing authority of the administrative decision on tax management within five working days from the date of termination of the labor contract.

Agencies and organizations that intentionally fail to enforce administrative decisions on tax management shall be subject to administrative sanctions.