Taxation Services Support For Our Clients

In Vietnam, the tax system can be at times confusing and tedious, involving procedures and calculations that sometimes are complicated and hard to comprehend, particularly for expatriates and foreign individuals that have no technical knowledge on the Personal Income Tax rules and regulations that apply to salaries, wages and other income sources.

 

5 steps to help you manage your Personal Income Tax obligations in Vietnam:

 

1. Determine your residency status in Vietnam: Resident or Non-Resident?

Depending on the foreigner's residency status, Personal Income Tax calculations can be substantially different, depending on the level income the individual earns.

Foreign individuals will be defined as "Tax Residents" where they meet ONE of the conditions below:

  • Are present in Vietnam for a period of 183 days or more within either a calendar year or for 12 consecutive months, counting from the 1st arriving date, or
  • Have a permanent residence in Vietnam, representing a registered residence which is recorded on a Temporary/Permanent Residency Card, or
  • Have signed a rental contract for a period over 183 days.

If the above tests are not met, then an individual will be treated as Non-Tax Resident in Vietnam. However, care still needs to be taken as there are circumstances where an individual may still be deemed a tax resident in Vietnam if they cannot prove they are Tax Resident in another country.

 

2. Asses your Taxable Income

For Tax Residents, Taxable Income is represented by all income which is generated worldwide, regardless of where the income is paid or received. For a Non-Tax Resident, all income received for work undertaken in Vietnam, regardless where it is received. This means that if the foreign individual is engaged under a contract work in Vietnam but gets paid in an offshore account, these funds are generally liable to Personal Income Tax in Vietnam (other than where a specific Double Tax Agreement exemption applies).

 

3. Calculate your Personal Income Tax according to the progressive rates fixed by the government

The Monthly Taxable Income generally represents the monthly salary or wage of the individual and is taxed at a progressive rate from 5% to 35% for a Tax Resident, and a fixed 20% rate for a Non-Tax Resident, as in the chart below.

Monthly Taxable Income (VND)

Tax Resident

PIT Rates

Non-Tax Resident

PIT Rate

0 - 5,000,000

5%

20%

5,000,001 - 10,000,000

10%

10,000,001 - 18,000,000

15%

18,000,001 - 32,000,000

20%

32,000,001 - 52,000,000

25%

52,000,001 - 80,000,000

30%

80,000,001 +

35%

Notes:

1. a Personal deduction of VND9,000,000 is provided each month, which reduces the monthly taxable income accordingly.

2. additional dependent deductions are permitted, of VND3,600,000 per dependent per month, where they meet the requirement and are registered, further reducing monthly taxable income

3. Insurances withheld from employee gross salaries are deductible for PIT (ie, not subject to tax), and the employer contributions are not regarded as a taxable benefit for the employee.

The Personal Tax Rates on Other Income range from 0.5% to 10% and are presented in the chart below:

Type of Income

Tax Resident

Non-Tax Resident

Business Income (rates depend on the type of income)

0.5% - 5%

1% - 5%

Non-bank interest

5%

5%

Dividends

5%

5%

Sale of Shares (public)

0.1% of sales proceeds

0.1% of sales proceeds

Capital Transfers

20% of the net gain

0.1% of sales proceeds

Sales of Real Estate

2% of sales proceeds

2% of sales proceeds

Income from copyright, franchising or royalties

5%

5%

Income from prizes, inheritances or gifts

10%

10%

 

4. Understand and know your Non-Taxable Benefits & Income

Although the definition of taxable income is broad, there are certain defined benefits that are excluded from taxation. These benefits include:

• Once per year round-trip airfares for expatriate employees returning home, or Vietnamese working abroad returning.

• School fees (excluding tertiary) for children of expatriate employees or for Vietnamese working abroad.

• Mid-shift meals (subject to a cap in provided in cash).

• One-off relocation costs for expatriates coming to Vietnam for employment, and for Vietnamese working abroad.

• Uniforms (subject to a cap if provided in cash).

• Benefits provided in kind on a collective basis (eg, memberships) where an individual is not identified as beneficiary.

• Allowances or benefits for weddings or funerals.

 

Additional Income that is not taxable includes:

• Interest earned on deposits with banks and credit institutions.

• Payments from life and non-life insurance policies.

• Retirement pensions paid from the Social Insurance Fund.

• Transfers of property between direct family members.

• Inheritances and gifts from direct family members.

• Monthly retirement pensions from voluntary insurance schemes

• Income from winnings at Casinos.

 

5. Submit your Tax Year Finalisations

Foreign individuals are subject to a calendar year as their standard tax year, other than for the first year of tax-residency. Employers are required to withhold PIT from employee salaries and remit monthly or quarterly (depending on the size of the employer). Other taxes are generally required to be withheld at source (ie, dividends), or self declared on an events basis.

Within 90 days from the end of a tax year, individuals will need to determine whether they will need to undertake an annual tax finalisation. Where the individual is determined as a tax resident, they are generally required to finalize their PIT. If the total income is only from the Vietnamese employer, they are eligible to authorize the employer to finalize PIT on their behalf. However, if they receive income from more than one source, they must self-finalise the PIT, subject to the application of any Double Tax Agreements that may apply.

 

 View our Personal Income Tax Guide for 2019: 2019 Personal Income Tax Gudie

 

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