Vietnam Personal Income Tax

Under the Personal Income Tax (PIT) Law, taxpay­ers are resident and nonresident individuals who have income that is subject to tax.

The following individuals are considered to be residents for tax purposes:

  • Persons residing in Vietnam for an aggregate of 183 days or more in a calendar year or in a continuous 12-month period, beginning on the first date of arrival. In calculating the number of days, the arrival and departure dates are counted as one day in total.
  • Persons having a permanent residence in Vietnam, including a registered residence that is recorded on the Permanent or Temporary Resident Cards of foreigners.
  • Persons having a house lease that has a total term of 183 days or more. The total term of a lease equals the sum of the lease terms for different leased locations in a tax year, including hotels, motels, working places and offices.

If an individual has a permanent residence as mentioned in the second and third bullets above, but stays in Vietnam for less than 183 days in a tax year and can prove that he or she is a tax resi­dent of another country, he or she is treated as a Vietnam tax nonresident in that tax year. The document required to prove tax residency of a foreign country is the original tax residency cer­tificate issued by the foreign tax authority.

Tax year. The Vietnamese tax year is calendar year. However, if an individual stays in Vietnam for fewer than 183 days in the calendar year of first arrival, the first tax year is the 12-month period from the date of arrival. Subsequently, the tax year is cal­endar year.

For tax-resident individuals who are citizens of countries having double tax treaties with Vietnam, their tax obligation is calculated from the month in which they arrive in Vietnam to the month in which their Vietnam assignment is terminated, and they leave Vietnam.

Income subject to tax. Residents are taxed on their worldwide income, while nonresidents are taxed on their Vietnam-source income.

Under the PIT Law, the following 10 types of income are subject to tax:

  • Income from business
  • Income from employment
  • Income from capital investment
  • Income from capital transfers
  • Income from transfers of real property
  • Income from royalties
  • Income from franchising
  • Income from winnings or prizes
  • Income from the receipt of inheritances
  • Income from the receipt of gifts

The taxation of various types of income is described below.

Income from employment. Employment income includes all cash remuneration and benefits in kind (for example, salaries, wages, bonuses, allowances, premiums, directors’ fees and remunera­tion, housing benefits [with a tax concession; see next para­graph], income tax and benefits paid by the employer, and other payments for employment services rendered). Progressive tax rates ranging from 5% to 35% apply to both Vietnamese and expatriate residents (see Tax rates), while a flat rate of 20% applies to nonresidents. Income received in foreign currency is converted to Vietnamese dong when calculating taxable income. If the income is remitted to an individual’s bank account in Vietnam, the actual buying exchange rates of the bank where the individual’s income is received must be used. If the individual’s bank account is maintained outside Vietnam, the buying exchange rate of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) on the payment date must be used.

Rental payments, including utilities and related services, made by an employer on behalf of an employee are taxable based on the lower of the amount actually paid or 15% of total taxable income (excluding taxable housing, utilities and service fees). A housing benefit is considered to be net income if the company pays the tax and accordingly a tax-on-tax calculation is required.

Hypothetical tax and the housing norm are deductible before grossing up the net-of-tax income to the gross-of-tax income.

Life insurance is taxed at the time of payout and a withholding by the insurance company at a flat tax rate of 10% is required if the insurance company is established in Vietnam. If the employer buys life insurance for its employees from an insurance company that is not established in Vietnam but allowed to sell in Vietnam, the employer must withhold tax of 10% of the premium before paying the net income to its employees.

The following are the principal categories of employment income that are exempt from tax:

  • One-off allowance for relocation to Vietnam for an expatriate employee and from Vietnam to overseas for a Vietnamese national based on a labor contract or an assignment letter. The exemption also extends to a Vietnamese individual residing overseas on a long-term basis and returning to Vietnam to work.
  • School fees paid by the employer for kindergarten to high school education in Vietnam, for the children of expatriate employees and Vietnamese nationals working overseas.
  • Home leave round-trip air tickets for expatriate employees and Vietnamese nationals working overseas once a year.
  • Payment for housing, electricity, water supply and associated services (if any) for housing built by the employer to provide for employees at industrial parks or for housing built by the employer in an economic zone, a disadvantaged area or an extremely disadvantaged area, to provide for its employees.
  • Certain benefits in kind provided on a collective basis if the beneficiaries of such benefits cannot be determined (for exam­ple, membership fees, entertainment and health care).
  • Mid-shift meals arranged directly by the employer or paid in cash to employees up to the amount stipulated in the labor regulations.
  • Stationery, per diem for business trips and telephone expenses per the company’s policies.
  • Uniforms within the limits of the prevailing regulations.
  • Cost of training for the improvement of the professional skills of employees.
  • Rotation cost (for example, airfare, expenses related to use of helicopters to transport rotators from the mainland to a rig off­shore and vice versa and hotel costs incurred during the days waiting for the flight to a rig offshore) for expatriate employees working in Vietnam in a number of specific industries, such as petroleum and mining.
  • Retrenchment, redundancy and unemployment allowances, in accordance with the guidelines stipulated in the labor code.
  • Financial support from an employer’s after-tax fund for an employee and his or her family members with respect to cures or medical treatment for fatal diseases.
  • Cost of transportation for employees from home to work and vice versa in accordance with the company policy.
  • The voluntary and non-accumulated insurance premiums paid by the employer (for example, health insurance and accident insurance, including voluntary insurance bought from an insur­ance company that is not established and operating under the Vietnamese law but is allowed to sell insurance in Vietnam). The exemption does not apply to insurance schemes under which the participants are entitled to receive accumulated pre­miums.
  • Funeral and wedding support provided by employers to their employees and their employee’s family under the company policy. The exemption is limited to the amount prescribed in the corporate income tax regulations.

Income from business. Business income is income derived from production and business activities, including agriculture, forest­ry, salt production, aquaculture and fishing, as well as income from independent practice in the fields that are licensed or cer­tificated as prescribed.

Taxpayers who are tax resident, including individuals and groups of individuals and households who engage in production and trading activities with respect to goods and services in all fields as stipulated by laws, are subject to tax on business income (including value-added tax (VAT) and PIT). An exception applies to individuals with total annual revenue equal to or less than VND100 million.

Effective from 1 January 2015, income from business activities is no longer subject to progressive rates but is subject to a flat tax rate (see Tax rates), which varies by sector. The requirement to combine business income and employment income has been eliminated.

Various methods for tax calculation, declaration and remittance exist for individuals having business income including the pay­ment of tax on a deemed basis, payment of tax on ad hoc transac­tions and payment of tax for individuals having income from asset leasing, as well as for individuals deriving income as insur­ance agents, lottery agents or multilevel sales agents.

The amount of tax payable is determined using the following calculations:

  • VAT payable = VAT taxable income x VAT rate
  • PIT payable = PIT taxable income x PIT rate

For purposes of the above calculations, the following rules apply:

  • Taxable income equals the gross revenue from sales, commis­sions and services rendered in the production and trading of goods and services in the relevant tax period.
  • The tax year is the calendar year.
  • Tax rates applied on revenue vary depending on the business sectors (see Tax rates).

An individual engaged in business who hires 10 employees or more is required to set up a corporation in accordance with the Enterprise Law, prepare documentation and invoices in accor­dance with the Vietnamese accounting regulations, and pay cor­porate income tax.

Income from capital investment. Income from capital investment includes the following:

  • Interest on loans granted to organizations, enterprises, business households in accordance with loan agreements, except for interest paid by banks and credit institutions
  • Dividends
  • Profits from other forms of capital contributions, including capital contributions in the form of commodities, reputation, land-use rights and inventions, except for income after payment of corporate income tax of private companies and single-member limited liability companies under the ownership of individuals (this applies from 1 January 2015)
  • Interest on bonds, treasury bills and other valuable instruments, except for bonds issued by the Vietnamese government

Income from capital investment paid to tax resident and tax non­resident individuals is taxed at a rate of 5%.

Income from capital transfers. Income from capital transfers includes the following:

  • Gains derived by individuals from the transfer of capital contri­butions in limited liability companies, partnerships and share­holding companies. The assessable income from transferring contributed capital equals the transfer price minus the purchase price of the transferred capital and reasonable expenses related to the generation of the income from the transfer of capital. A 20% tax rate is applied to the gains of tax resident individuals and 0.1% tax is applied to the sales proceeds of tax nonresident individuals.
  • Income from security transfers, which includes income from the transfer of shares in joint stock companies established under the Law on Securities, stock options, bonds, treasury bills, fund certificates and other securities according to the Law on Securities. A 0.1% tax rate is applied to the sales proceeds from each transaction for both tax residents and tax nonresidents.

Income from the transfer of real property. Income from the trans­fer of real property includes the following:

  • Income received from the transfer of land-use rights, residential houses and other assets attached to land
  • Transfer of ownership or rights to the use of residential houses, lease rights to land or water surfaces and other rights to real property

Assessable income from real property transfers is the price agreed in the transfer contract at the time of transfer. A tax rate of 2% is applied to the transfer price.

Income from royalties. Income from royalties is income derived from the assignment or transfer of the right to use intellectual property rights or objects including literary, artistic and scientific works, copyrights, inventions, industrial designs, trademarks, technical know-how and similar items. Assessable income equals the amount of the royalties in excess of VND10 million, accord­ing to the transfer contract, regardless of the number of payments the taxpayer receives.

Income from franchising. Income from franchising is income derived by an individual from a franchising contract under which the franchisor authorizes the franchisee to purchase and sell goods or provide services in accordance with conditions imposed by the franchisor. Assessable income equals the amount of the franchise fee in excess of VND10 million based on the contract, regardless of the number of payments the taxpayer receives.

Income from winnings or prizes. Income from winnings or prizes is income derived from winnings in cash or in kind in excess of VND10 million from lotteries, betting, casinos, promotional prizes and similar items. Assessable income equals the amount of the prize in excess of VND10 million, determined on a transac­tion basis.

Income from the receipt of inheritances or gifts. Income from the receipt of inheritances or gifts is income in excess of VND10 million derived by an individual under a testament or law from the receipt of inherited or gifted assets, including securities, contributed capital, real property and other assets that are required to be registered. The amount of assessable income is determined when the procedures are completed for the transfer of ownership or the transfer of the right to use the asset or when the taxpayer receives the gift.

Tax exemptions. Certain types of income are exempt from tax, including the following:

  • Income from the transfer of real property by inheritance or gifts between husband and wife, parents and children including adoptive parents and adopted children, parents-in-law and children-in-law and grandparents and grandchildren, and between siblings
  • Income from the transfer of a residential house or right to use residential land and assets attached to land by an individual who has one sole residential house and/or land-use right in Vietnam
  • Interest on money deposited at banks or credit institutions, interest from life insurance policies and interest from govern­ment bonds
  • Income in foreign currency received from Vietnamese residing overseas
  • Overtime premium amount over the normal wage or salary
  • Pensions paid by the Social Insurance Fund under the Law on Social Insurance, and monthly pensions from voluntary pen­sion funds
  • Scholarships
  • Compensation payments from life and non-life insurance con­tracts, compensation for labor accidents and other state com­pensation payments
  • Income received from charitable funds or from foreign-aid sources for charitable or humanitarian purposes

Tax reduction. Resident and nonresident individuals working in certain economic zones are entitled to a 50% tax reduction.

Foreign experts working for official development assistance proj­ects or with respect to programs or plans of non-governmental organizations in Vietnam are exempt from tax if they meet certain conditions. They must submit an application for exemption as required by law.

Taxation of employer-provided shares. Securities provided to employees are taxable as employment income. Share awards are treated as employment income (bonuses) and taxed on transfer or sale. Taxable income equals the value of the shares recorded in the accounting books of the employer. Income from the transfer of the awarded shares is also subject to capital gains tax (see Income from capital transfers).

Deductions. The deductions described below are available to tax residents who have employment and/or business income.

Personal and dependent relief. Personal relief of VND9 million per month is automatically granted to resident individuals who derive employment income. Dependent relief of VND3,600,000 is granted for each eligible dependent. No limit is imposed on the number of dependents. However, an eligible dependent must meet certain conditions with respect to income, age and his or her relationship with the taxpayer. A registration dossier for qualified dependents is also required to be submitted to the tax authorities.

Mandatory contributions. Mandatory social, health and unem­ployment insurance contributions are deductible from employ­ment income for PIT purposes.

Contributions to charity. Certain contributions to registered charitable, humanitarian or study promotion funds are deduct­ible.

Contributions to voluntary retirement funds. Contributions to voluntary pension funds, which are established in accordance with the Ministry of Finance’s guidance, are deductible from tax­able income. However, the deduction is capped at VND1 million per month for both employer and employee contributions.

Foreign tax credit. Tax paid in other countries may be claimed as a credit against the tax liability in Vietnam. However, the amount of the credit may not exceed the amount payable in accordance with the Vietnamese tax scale that is assessed and allocated to the part of the income arising overseas. To claim the foreign tax credit, an application and required supporting documents must be filed with the tax authorities together with the year-end finaliza­tion dossier.

Tax rates

Employment income. The table below presents the progressive tax rates on employment income of resident individuals. To cal­culate the tax due by using the table, multiply the taxable income by the tax rate and then subtract the bracket adjustment. The fol­lowing is the table.

Residents’ average montly assessable income      
Exceeding Not exceeding Tax rate Bracket adjustment
VND (thousands) VND (thousands) % VND (thousands)
0 5000 5 0
5000 10000 10 250
10000 18000 15 750
18000 32000 20 1650
32000 52000 25 3250
52000 80000 30 5850
80000 35 9850

Business income. The following table presents the PIT rates on business income for various activities, which apply to both tax residents and tax nonresidents.

Business activities Rate (%)
Leasing and rental 5
Insurance and multilevel sales and lottery agent 5
Distribution and supply of goods 0.5
Services and construction without materials (no supply of materials) 2
Production, transportation, services associated with goods, and construction with materials 1.5
Other business activities 1

Other income. The following fixed tax rates are imposed on income derived by resident individuals other than employment and business income.

 

Type of income Tax rate (%)
Income from capital investment 5
Income from royalties and franchising (exceeding VND10 million) 5
Income from winnings or prizes (exceeding VND10 million) 10
Income from inheritances (exceeding VND 10 million) 10
Income from capital transfers 20
Income from security transfers 0.1
Income from property transfers 2

The following tax rates apply to nonresident individuals.

Type of income Tax rate (%)
Income from employment 20
Income from capital investment 5
Income from royalties and franchising (exceeding VND10 million) 5
Income from winnings or prizes (exceeding VND10 million) 10
Income from capital transfers 0.1
Income from transfers of real property 2

 

Social security

The following are the statutory contribution rates for employers and employees with respect to social security, health insurance and unemployment insurance.

Social
insurance
%
Health
insurance
%
Unemployment
insurance
%
Employer 18 3 1
Employee 8 1.5 1
Total 26 4.5 2

The social and health insurance contribution is calculated based on the salary or wage stated in the labor contract. However, it does not exceed 20 times the common minimum salary provided by the government. Effective from 1 May 2016, the capped sal­ary for the social and health insurance contribution is VND24,200,000 (VND1,210,000 x 20). The common minimum salary may change from year to year according to the govern­ment’s decision.

The unemployment insurance contribution is calculated based on the salary or wage stated in the labor contract. However, it does not exceed 20 times the regional minimum salary, which ranges from VND2,400,000 to VND3,500,000 and varies for each city and province.

Social and unemployment insurance contributions do not apply to foreigners. Foreigners who sign labor contracts with Vietnamese entities with a term of three months or more are required to contribute to the Vietnamese health insurance. The contribution rate and salary base is the same as that applicable to Vietnamese individuals.

Effective from 1 January 2015, Vietnamese employees working under labor contracts with a term of three months or more are subject to social insurance, health insurance and unemployment insurance. Even an enterprise that has only one employee must contribute unemployment insurance for each employee.

Tax filing and payment procedures

Organizations and individuals must withhold income tax from income paid to resident and nonresident individuals with respect to income from employment, capital investments, capital trans­fers (including transfers of securities), royalties, franchising, and winnings and prizes.

Declaration and payment of tax on employment income by income payers must be made on a monthly basis by the 20th day of the following month. If the income payer has monthly tax pay­able of less than VND50 million, the payer is not required to file the monthly tax return. Instead, quarterly tax filing is required and the due date is the 30th day of the first month of the follow­ing quarter.

Individuals receiving salary from overseas are required to file tax returns on a quarterly basis by the 30th day of the 1st month of the following quarter. A year-end finalization of income tax is also required and any amounts due must be paid within 90 days after the end of the first tax year or the end of the calendar year.

Finalization is required if any of the following circumstances exist:

  • The tax payable is greater than the tax withheld or paid.
  • The individual is eligible for a tax refund.
  • The individual is a resident foreigner who terminates a Vietnam assignment.

An individual deriving income from the transfer of real property must declare tax and file a tax return together with the documents relating to transfer of ownership or right to use the real property. The tax must be paid in accordance with the tax notice.

An individual deriving income from the transfer of capital must declare tax when he or she performs procedures for the transfer of the capital. The tax must be paid in accordance with the tax notice.

An individual deriving income from inheritances or gifts must declare tax each time the income arises. The tax declaration must be submitted when the procedures for the transfer of ownership or rights to the use of the inherited or donated assets are conducted.

For resident individuals deriving income arising from overseas, employment income is declared on a quarterly basis and an annual basis. Other types of income (capital investment, capital transfer, transfer of real property, royalties, franchising, win­nings, inheritances and gifts) must be declared within 10 days after the date the income arises or is received.

Tax treaties

Vietnam has entered into double tax treaties with the jurisdictions listed below. Exemption under double tax treaties is not auto­matic in Vietnam and an application must be filed before relying on the exemption.

Algeria*                       Israel                               Romania

Australia                      Italy                                 Russian

Austria                         Japan                               Federation

Bangladesh                  Kazakhstan*                    San Marino*

Belarus                         Korea (North)                  Saudi Arabia

Belgium                       Korea (South)                  Serbia*

Brunei                          Kuwait                             Seychelles

Darussalam                  Laos                                Singapore

Bulgaria                       Luxembourg                    Slovak Republic

Canada                         Malaysia                          Spain

China                           Mongolia                         Sri Lanka

Cuba                            Morocco*                        Sweden

Czech Republic            Mozambique*                 Switzerland

Denmark                      Myanmar                         Taiwan

Egypt*                         Netherlands                     Thailand

Finland                         New Zealand*                 Tunisia*

France                          Norway                           Ukraine

Germany                      Oman                              United Arab

Hong Kong SAR         Pakistan                           Emirates

Hungary                       Palestinian Authority* United Kingdom

Iceland                         Philippines                      United States*

India                             Poland                             Uzbekistan

Indonesia                     Qatar*                             Venezuela

Ireland

* This treaty is not yet in force.

Entry visas

The sections below provide only the general standard business immigration requirements for a foreigner to work in Vietnam. Many varied requirements and practices are not described in this book. Professional advice should be obtained on a case-by-case basis.

All foreigners must have a passport or passport substitute papers that are valid for at least six months and a visa granted by the competent Vietnamese agencies, except for citizens of countries that have visa exemptions included in bilateral consular agree­ments with Vietnam (Association of Southeast Asian Nations [ASEAN] member countries and Kyrgyzstan) or unilateral agree­ments with Vietnam (Denmark, Finland Japan, Korea (South), Norway, the Russian Federation and Sweden).

To legally enter Vietnam, foreigners must apply for a visa corre­sponding to the entry purpose and provide supporting documents. After the visa is granted, the foreigner is responsible for acting in accordance with the registered purpose of entry, and this purpose may not change during the stay in Vietnam.

Foreigners entering Vietnam to work must submit the work per­mits in the visa application dossiers. Consequently, work permits must be obtained before the labor visa application dossiers are filed.

The validity of each visa type differs and corresponds to the sup­porting documents in the visa application. For example, the maximum duration of a labor visa is 2 years, the maximum dura­tion of an investor visa is 5 years, and the maximum duration of a business visa is 12 months.

The current processing time is five working days from the date of filing.

Work permits

A work permit is required for a foreign national to legally work in Vietnam, except for cases of work permit exemptions. This docu­ment is granted only to a foreign national who is sponsored by an entity in Vietnam.

Procedure and standard timeline. The sponsoring entity in Vietnam must submit the demand for using foreign nationals working in Vietnam to the local Department of Labour, Invalids and Social Affairs (DOLISA) at least 30 days before recruiting or transfer­ring the foreign nationals to work in Vietnam. Within 15 days after receiving the demand, the local DOLISA responds to the sponsor­ing entity in writing regarding the acceptance or refusal of the demand. This letter is considered to be a pre-approval for using foreign employees in Vietnam. This pre-approval letter is one of the compulsory documents for application dossiers for work per­mit issuances or work permit reissuances.

A work permit application must be filed with the local DOLISA at least 15 business days before the expected commencement date for the employee. The current processing time at the local author­ity is seven business days.

Required documents in work permit application dossiers that are issued in foreign countries must be legalized in the country of issuance to be recognized in Vietnam. Depending on the diplo­matic relations between Vietnam and the country of issuance, the steps required to legalize the documents may vary. Consequently, the total processing time for work permit applications may take two to three months or more.

A work permit can be granted with a maximum validity period of two years. A work permit can be renewed.

Qualification requirements. A foreign national who wants to work in Vietnam must meet the required qualifications for a pre-approval position. The following are the three main categories of positions that foreign nationals may apply for a work permit in Vietnam and the related qualification requirements:

  • Management experience is required for executives or higher positions.
  • Bachelor degree or above and at least three years of relevant professional experience is required for specialists.
  • A minimum one year-training certificate and three years of relevant experience is required for technicians.

Work permit exemptions. Under the Labor Code and the decree on work permits, 19 cases of work permit exemptions exist. The fol­lowing are typical examples of individuals who are exempt from the requirement to obtain a work permit in Vietnam:

  • A foreigner who is a contributing member or owner of a limited liability company.
  • A foreigner who is a member of the board of directors of a joint stock company.
  • A foreigner who comes to Vietnam for a period of less than three months to offer services.
  • A foreigner who is an intracompany transferee of corporations operating within 11 service industries listed under Vietnam’s World Trade Organization commitments.
  • A foreigner who enters Vietnam for less than 30 days to work as a manager, executive director, expert or technician. However, the cumulative period of working in Vietnam in a year cannot exceed 90 days.

To satisfy the work permit exemption, at least seven business days before the date the foreign national is supposed to begin work, the sponsoring entity must submit the work permit exemption appli­cation to the respective local DOLISA for the place where the foreign national will work regularly.

The local DOLISA issues a written certificate to the employer within three working days after the date on which a sufficient application is received. A written response and explanation are provided if the work permit exemption application is rejected.

Temporary residence card

A temporary residence card is granted to a foreigner who has a valid work permit or work permit exemption and to his or her eligible accompanying dependents. Documents proving the rela­tionship between the applicant and the dependents must be legal­ized and translated into Vietnamese. The maximum duration of the temporary residence card is the duration of the valid work permit or work permit exemption.

The current processing time at the local authority is five business days.