9th Floor Diamond Plaza Building, 34 Le Duan, Ben Nghe Ward, District 1, Ho Chi Minh City
info@bkclaw.vn
0901 333 341
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The current personal income tax (PIT) situation for foreigners in Vietnam is relatively clear, with specific regulations outlined in the Personal Income Tax Law. Foreigners must comply with tax obligations either through withholding at source or self-declaration. Vietnam has double taxation avoidance agreements that help minimize duplicate taxation. However, the tax system can be quite complex, and tax policies may change, creating challenges in predicting costs and fulfilling tax obligations.
Personal Income Tax (PIT) is a direct tax, representing the amount that individuals with taxable income must deduct and remit from their salary or other sources of income to the state budget after applicable deductions.
Personal income tax is not imposed on individuals with low income; therefore, this tax is equitable across different income groups and contributes to reducing income inequality among social classes.
Pursuant to Article 1 of Circular 111/2013/TT-BTC (as amended and supplemented by Article 2 of Circular 119/2014/TT-BTC) regarding taxpayers of personal income tax:
Taxpayers
Taxpayers are resident individuals and non-resident individuals as defined in Article 2 of the Personal Income Tax Law and Article 2 of Decree No. 65/2013/ND-CP dated June 27, 2013 of the Government detailing certain provisions of the Personal Income Tax Law and the Law amending and supplementing certain articles of the Personal Income Tax Law (hereinafter referred to as Decree No. 65/2013/ND-CP), who have taxable income as stipulated in Article 3 of the Personal Income Tax Law and Article 3 of Decree No. 65/2013/ND-CP.
The scope of taxable income for taxpayers is determined as follows:
For resident individuals, taxable income includes income arising both within and outside the territory of Vietnam, regardless of the place of payment;
For individuals who are nationals of countries or territories that have signed double taxation avoidance agreements with Vietnam to prevent double taxation and tax evasion with respect to taxes on income, and who are resident individuals in Vietnam, the personal income tax obligation is calculated from the month of arrival in Vietnam (in the case of first-time presence) until the month of termination of the labor contract and departure from Vietnam (calculated in full months) without the need to perform consular confirmation procedures to avoid double taxation under the double taxation avoidance agreement between the two countries.
For non-resident individuals, taxable income is income arising in Vietnam, regardless of the place of payment or receipt of income.”
Accordingly, foreign workers who are resident individuals in Vietnam are obligated to pay personal income tax on income arising both within and outside the territory of Vietnam.
Pursuant to Clause 2, Article 2 of the Personal Income Tax Law 2007, a resident individual is a person who meets one of the following two conditions:
– Present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first date of presence in Vietnam.
– Has a regular place of residence in Vietnam, including a place of permanent residence registration or a rented house in Vietnam under a lease contract (for residential purposes).
For foreigners working in Vietnam who are determined to be resident individuals, the enterprise shall withhold tax according to the progressive tax table per part using the following formula:
| PIT Payable = Taxable Income × Tax Rate |
Taxable income is determined as follows:
Deductions include:
For non-resident workers, taxable income is income arising in Vietnam, regardless of the place of payment or receipt.
Clause 1, Article 18 of Circular 111/2013/TT-BTC provides that the personal income tax amount for non-resident individuals is determined by the following formula:
| Personal Income Tax Payable = 20% × Taxable Income |
In addition, pursuant to Point a, Clause 4, Article 7 of Circular 111/2013/TT-BTC, as amended by Clause 1, Article 4 of Circular 92/2015/TT-BTC, the conversion of income not including tax into taxable personal income for foreigners residing in Vietnam is regulated as follows:
– The income used as the basis for conversion into taxable income is the actual income received (excluding exempt income) plus (+) any benefits paid by the employer on behalf of the employee (if any) minus (–) deductions.
In cases where the employer applies the “notional tax” or “notional housing” policy, the income used as the basis for conversion into taxable income does not include “notional tax” or “notional housing”.
Where rental payments are included among the benefits paid on behalf of the employee, the rental amount included in the income used as the basis for conversion shall be the actual amount paid but shall not exceed 15% of the total taxable income arising at the entity, regardless of the place of payment (excluding actual rental, electricity, water, and accompanying services, and “notional housing” (if any)).
Pursuant to Clause 1, Article 19 of the Personal Income Tax Law 2007, as amended and supplemented by Clause 4, Article 1 of the Law Amending and Supplementing Certain Articles of the Personal Income Tax Law 2012, personal and dependent deductions are amounts deducted from taxable income before calculating tax on income from salaries and wages for resident individual taxpayers.
In summary, foreigners who are resident individuals are entitled to personal and dependent deductions when calculating tax on income from salaries and wages, and the same PIT calculation rules applicable to Vietnamese individuals shall apply.
For additional support and free consultation from attorneys at BKC Law, please contact us:
Phone: 0901 3333 41
Email: info@bkclaw.vn
Office in District 1: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, District 1, Ho Chi Minh City
Office in Binh Tan: 41 Ten Lua Street, Binh Tan District, Ho Chi Minh City
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41 Rockets, Binh Tri Dong B, Binh Tan District, Ho Chi Minh City.
info@bkclaw.vn
0901 3333 41
9th Floor, Diamond Plaza Building, 34 Le Duan, Ben Nghe Street, District 1, Ho Chi Minh City.
info@bkclaw.vn
0901 3333 41