Foreign employees working in Vietnam are subject to pay personal income tax (PIT) on their salary.
i. Tax status
The duration of a foreign employee stay in Vietnam determines his tax status.
Tax residents are those individuals meeting one of the following criteria:
– Residing in Vietnam for 183 days or more in either the calendar year or the period of 12
consecutive months from the date of first arrival
– Having a permanent residence in Vietnam and are unable to prove tax residence in another country
Tax residents are subject to Vietnamese PIT on their world income at a progressive tax rate of 0 – 35 %.
Individuals not meeting the conditions for being tax resident are considered tax non-residents. Tax non-residents are subject to PIT at a flat tax rate of 20 % on their Vietnam related employment income.
ii. Incomes of foreign employees working in Vietnam
Incomes from wages and remunerations which paid to employees from employers, including:
– Wages, remunerations and the other amounts paid as wages or remunerations in cash or not in cash.
– Allowances and benefits.
– Occupational benefits.
– Remunerations in the forms of agent commission, brokerage commission, payments for participation in science and technology researches, payments for participation in projects and schemes, royalties according to regulations of law on royalties, payments for teaching, payments for participation in artistic performance, sports, payments for advertising, payments for other services, and other remunerations.
– Payments for participation in business associations, Boards of Directors, Control Boards, project management boards, management councils, professional associations, and other organizations.
– Other benefits in cash or not in cash apart from wages paid to the taxpayer by the employer in any shape or form: Payments for housing, electricity, water supply and ancillary services (if any); The life insurance premiums, other optional insurance premiums, contributions to the voluntary pension fund paid or made by the employer on the employee’s behalf; Membership fees and other expenditure on services serving individuals such as: healthcare, entertainments, sports, recreation; Flat expenditures on stationery, business trips, phone calls, costumes, etc. that are in excess of the limits prescribed by the State; Rewards in cash or not in cash in any shape or form, including rewards in the form of securities.
iii. Tax rate
For tax residents:
Tax rate shall be applicable in accordance with the Progressive Tax Table stipulated in Article 22 of the Law on Personal Income Tax and Article 7.2 of the Circular No. 111/2013/TT-BTC, in particular:
|Tax rate (%)|
|1||Up to 60||Up to 5||5|
|2||Over 60 to 120||Over 5 to 10||10|
|3||Over 120 to 216||Over 10 to 18||15|
|4||Over 216 to 384||Over 18 to 32||20|
|5||Over 384 to 624||Over 32 to 52||25|
|6||Over 624 to 960||Over 52 to 80||30|
|7||Over 960||Over 80||35|
For tax non-residents:
The rate of personal income tax on incomes from wages earned by a non-resident equals the taxable income from wages multiplied by (x) 20%.
The taxable income from wages earned in by a non-resident that works both in Vietnam and overseas without being able to separate the income earned in Vietnam shall be calculated as follows:
Where the foreigner is not present in Vietnam:
Total income earned in Vietnam = (Number of working days in Vietnam/ Number of working days in the year) x Pre-tax global income from wages + Other pre-tax taxable income earned in Vietnam
Where the foreigner is present in Vietnam:
Total income earned in Vietnam = (Number of days in Vietnam/ 365 days) x Pre-tax global income from wages + Other pre-tax taxable income earned in Vietnam
iv. Tax statement and tax settlement
Tax statements made by payers of taxable income:
– The income payers that withhold personal income tax shall declare tax monthly or quarterly. The income payer might not declare tax if no personal income tax is withheld in the month or in the quarter.
– The monthly or quarterly tax statement shall be made from the first month in which tax is withheld, and is applicable to the whole tax year. To be specific:
– The payer of taxable income shall declare and settle tax on behalf of the authorizing person, whether or not tax is withheld.
Tax statements made by residents:
– The residents that earn incomes from wages and directly declare tax at tax authorities including:
+ The residents that earn incomes from wages paid by international organizations, embassies, and consulates in Vietnam without withholding tax shall directly declare tax quarterly at tax authority.
+ The residents that earn incomes from wages paid by overseas organizations and individuals shall directly declare tax quarterly at tax authorities.
– The person that earns income from wages, business shall settle tax when tax is incurred or overpaid or offset against the next period
– The wage earner shall request another organization or person to settle tax on their behalf in the following cases:
+ The person that only earns incomes from wages signs a labor contract for 03 months or more in a unit and is actually working at that unit when delegating the making of tax statement, even he has not worked for 12 months in the year.
+ The wage earner signs a labor contract for 03 months or more and earns other incomes as guided in Point c.4 and Point c.5 Clause 2 of Article 26 of the Circular No. 111/2013/TT-BTC.
+ The income payer shall only settle tax on the income that they pay on the person’s behalf.