Personal income tax is a tax calculated on an individual’s income sources earned from business activities and other sources such as salaries and wages paid by employers, from capital investments, capital transfer, real estate transfer, prize-winning, copyright, and inheritance gifts. Regardless of whether one is Vietnamese or a foreigner, depending on residence status, and income level, an individual may have to pay from 5% to 35% of the income earned,… Among these, income from salary and wages is the most common and also has the most detailed regulations.
Determining resident or non-resident status will be the first legal ground that determines taxable income, tax declaration methods, and different tax obligations. To avoid violations and serious administrative fines, employers shall review and manage each foreign worker’s resident records accurately to identify and prevent risks in advance.
DETERMINATION OF TAXABLE INCOMES IN VIETNAM
Depending on resident or non-resident status, the taxable income of foreigners working in Vietnam is determined according to the following principles:
- Taxable incomes earned by residents are the incomes earned within or outside Vietnam’s territory, regardless of location or payment and receipt. This means resident expats shall declare and do annual settlement personal income tax on global incomes, pay tax on progressive rate from 5% to 35%.
- Taxable incomes earned by non-residents are the incomes earned within Vietnam’s territory, regardless of the location of payment and receipt. This means resident expats shall declare and pay 20% on any income in Vietnam.
DETERMINATION CASE OF RESIDENTS
A resident is a person who meets one of the following conditions:
- He/she has been present in Vietnam for at least 183 days in a calendar year or 12 consecutive months, depending on the certification of the immigration agency on the passport.
- He/she has a regular residence in Vietnam demonstrated by:
- He/she has a regular residence, based on the permanent residence written in the permanent residence card or the temporary residence when applying for the temporary residence card issued by a competent authority.
- He/she rents a house in Vietnam according to regulations of law on housing under a contract that has a term of at least 183 days in the tax year.
Notes:
- The rented houses can be hotels, guesthouses, motels, offices, etc,. whether they are rented by the person or their employer.
- If the person has a regular residence but his/her actual presence in Vietnam is shorter than 183 days in the tax year, and he/she fails to prove his or her residence in any country, that person will be considered a resident of Vietnam.
Since 2006, VIVA Business Consulting has been supporting thousands of expats to be fully compliant with local tax regulations in optimal ways. Please contact our experts for any queries.
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Read more:
- Personal income tax in Vietnam – Comprehensive guide to finalization procedures 2024
- Personal income tax 2024 for foreign investors – managers – experts in Vietnam
- Expats in Vietnam – what you need to know
- Personal income tax and payroll services in Vietnam
- Managing labor relations for EXPATS in Vietnam
- Taxable incomes from wages and remunerations for expats in Vietnam
- Foreign investor, legal rep and chief rep in Vietnam – The local procedures in Vietnam | manage your personal income tax and tax planning
- Optimize payable amount of personal income tax in Vietnam
- Manage the annual personal income tax settlement in Vietnam
- The proactive management of wage labor compliance procedure
- Expats working in Vietnam – What you shall keep in mind
