PERSONAL INCOME TAX FOR FOREIGN EMPLOYEES

METHODS OF DECLARATION AND PAYABLE AMOUNT

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 Vietnamese or foreigners, depending on residence status, and income level, an individual may have to pay from 5% to 35% of the income earned… Among them, income from salary and wages is the most common and also has the most detailed regulations.

Personal income tax declaration, settlement, and payment are very important tasks for not only the employer but also the employee, especially when a foreign employee is recruited and working in Vietnam.

We would like to remind you of some keynotes for your Annual personal income tax – personal income tax settlement as follows:

PERSONAL INCOME TAX

There are 09 typical taxable incomes:

1/ Incomes from business are incomes earned from the production and sale, in particular

• Incomes from production and sale of goods and services that belong to all industries such as production, goods sale, construction, construction, restaurants, service provision including the lease of houses, right to use the land, water surface, and other property.
• Incomes from freelance works of individuals in the fields that are licensed or certificated as prescribed by law.

2/ 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.

3/ Incomes from capital investment

• Interest on the loans given to other organizations, enterprises, business households, business individuals, and groups of business individuals according to loan contracts or agreements.
• The dividends are earned from capital contribution to the purchase of shares.
• The incomes from capital investment in other forms, including capital contribution in kind, by reputation, rights to use the land, patents.
• Incomes from dividends paid in bonds, incomes from reinvested profit.

4/ Incomes from capital transfer

• Profits from capital contributions to limited liability companies (including single-member limited liability companies), partnerships, cooperatives, business cooperation contracts, people’s credit funds, economic organizations, and other organizations.
• Incomes from securities transfer, including incomes from transferring shares, call options on shares, bonds, treasury bills, fund certificates, and other securities according to the Law on Securities; incomes from transferring shares of the persons in the joint-stock company according to the Law on Enterprises.

5/ Incomes from real estate transfer

• Incomes from transferring rights to use land.
• Incomes from transferring rights to use land and property on the land.
• Incomes from transferring ownership of houses, including future houses.
• Incomes from transferring rights to use the land, rights to rent water surface.
• Incomes from delegating the management of the real estate, if the person delegated to manage real estate has the right to transfer real estate or similar rights to the real estate owner.

6/ Incomes from winning prizes

• Winning lottery prizes.
• Winning prizes from promotion programs when buying products or services according to the Law on Commerce.
• Winning prizes from the types of betting permitted by law.
• Winning prizes in the casino permitted by law.

7/ Incomes from copyright

Incomes from copyright are incomes from the transfer of ownership, rights to use the subjects of intellectual property rights according to the Law on Intellectual property, incomes from technology transfers according to the Law on Technology transfers. In particular:

• The subjects of intellectual property rights.
• Subjects of technology transfers.
• Incomes from franchising.

8/ Incomes from inheritance

• Inherited securities: shares, call options on shares, bonds, treasury bills, fund certificates, and other securities according to the Law on Securities; shares of the person in the joint-stock company according to the Law on Enterprises.
• Inherited capital in economic organizations and businesses: capital contribution to limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises and businesses of the person; capital in associations and funds established within the law, or the entire business if the private enterprise or business is under the ownership of the person.
• Inherited real estate: rights to use the land, rights to use land and property thereon; ownership of houses, including future houses, infrastructure, and constructions on land, including off-the-plan constructions; rights to rent land or water surface; other incomes from inheritance being real estate in any shape or form.
• The ownership and use rights of other inherited assets (cars, motorbikes, ships, barges, speedboats, towboats, yachts, airplanes, hunting guns, sporting guns) must be registered with state agencies.

9/ Incomes from receipt of gifts

• Incomes from receipt of gifts are incomes the person receives from organizations and individuals at home and overseas, in particular:
• Gifts being securities: shares, call options on shares, bonds, treasury bills, fund certificates, and other securities according to the Law on Securities; shares of the person in the joint-stock company according to the Law on Enterprises.
• Gifts being capital in economic organizations and businesses: capital contribution to limited liability companies, cooperatives, partnerships, business cooperation contracts; capital in private enterprises and businesses of the person; capital in associations and funds established within the law, or the entire business if the private enterprise or business is under the ownership of the person.
• Gifts being real estate: rights to use the land, rights to use land and property thereon; ownership of houses, including future houses, infrastructure, and constructions on land, including off-the-plan constructions; rights to rent land or water surface; other incomes from inheritance being real estate in any shape or form.
• The ownership and use rights of gifts being other assets (cars, motorbikes, ships, barges, speedboats, towboats, yachts, airplanes, hunting guns, sporting guns) must be registered with state agencies.

PERSONAL INCOME TAX STATEMENT AND TAX SETTLEMENT

The payer of taxable incomes and the person that earns taxable incomes shall declare tax and settle tax in accordance with the local procedures. Rules for declaring tax in some cases:

Foreign employees who should directly declare tax at tax authorities

• The residents that earn incomes from wages and directly declare tax at tax authorities include: 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 the tax authorities.
• If one staff not join a company full 12 months or have more personal income tax from wages /salary from other companies. In this case, these staff cannot request income payers to settle tax on their behalf but directly declare tax at tax authorities. To make the declaration, he or she must prepare a letter of income confirmation from the previous income payer + certificate of tax withheld at source on the incomes (withheld receipt). Based on income from the current company and other incomes with the withheld receipts, they should prepare the annual settlement sheet and declare it directly to the tax department. This task is not an employer’s obligation but a personal matter of every staff (it means, the annual final settlement sheets of the company will not be including his or her sheets).

Foreign employees who will pay tax on the progressive method or apply the fixed rate

• To verify a proper method of personal income tax (PIT) declaration for expats, the tax officer will base on the passport, labor contract appointment letter/tax withheld receipts, rental contract.
• Upon you are resident or non-resident, you should declare and settlement of personal income tax for the incomes inside Vietnam or either global income. Taxable amount/tax rates of residents and non-resident are completely different. Fail to apply properly declaration of personal income tax will lead to serious fines from the tax department in the coming years.
• A good consultant will support you to manage standard employee profiles / legal requirement records as well as compliance reports/declarations to go guarantee your files right thing the first time, clean and clear today, and for the next 3 or 5 years.

Typical cases that 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.

Typical cases that tax statements made by residents that earn incomes from wages and business

• The residents, groups of residents that earn incomes from business and directly declare tax at tax authorities include:
  • The businesspersons, groups of business persons that pay tax according to tax statements are the business persons, groups of business persons that comply with regulations of law on accounting and invoicing, and the business persons, groups of business persons that fail to separate expense from revenue and declare tax quarterly;
  • The business person, group of business persons that pay flat tax is the business person, group of business persons that do not comply with the regulations of law on accounting and invoicing and fail to determine revenue, expense, and taxable income shall declare tax annually
  • The nomadic business persons shall declare personal income tax every time it is incurred; The business persons that use invoices sold separately by tax authorities shall declare personal income tax every time revenue is earned; The non-business persons that sell goods and services and need to issue invoices to their customers shall declare tax when it is incurred; The person or group of persons that earn income from leasing outhouses, rights to use land, water surface, and other property shall declare tax quarterly or every time it is incurred.
  • The person that earns income from wages, a business shall settle tax when tax is incurred or overpaid or offset against the next period, except for the cases: The person whose tax payable is tax smaller than the provisional tax paid does not apply for a tax refund or offset it against tax the next period
  • The person or business household has only one source of income from business and has paid a flat tax
  • The person or household only earns income from leasing outhouses, rights to use land, and have paid tax according to a declaration in the locality where such houses or land are situated
  • The wage-earner signs a labor contract for 03 months or more with a unit and earns an average monthly income of no more than 10 million VND from other places in the year, 10% tax on which has been withheld at source by the income payer. This income shall not be declared without the request of the person;
  • The wage-earner signs a labor contract for 03 months or more with a unit, earns an average monthly income of no more than 20 million VND from leasing houses, rights to use land in the year, and has paid tax in the locality where such houses or land are situated. This income shall not be declared without the request of the person.
• 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; The income payer shall only settle tax on the income that they pay on the person’s behalf.

Rules for settling tax in some cases:

• The resident that earns an income overseas and has paid personal income tax on that income overseas shall have the tax paid overseas deducted. The amount of tax deducted shall not exceed the tax payable on the income earned overseas according to Vietnam’s tax table. The ratio is based on the ratio of income earned overseas to the total taxable income.
• The person earns incomes from wages and has been present in Vietnam in the first calendar year for fewer than 183 days, but has been present in Vietnam for 183 days or more within12 consecutive months from the date of arrival, the first tax period is 12 consecutive months from the date of arrival, the second year, the tax period is the calendar year.
  • In the first tax year: make and submit the tax settlement form by the 90th day from the end of the 12 consecutive months.
  • From the first tax year: make and submit the tax settlement form by the 90th day from the end of the calendar year. The remaining tax payable in the second tax year is calculated as follows.
• The resident that is a foreigner terminates the labor contract in Vietnam and settles tax at the tax authority before departure.
• The person that leases outhouses, rights to use the land, water surface, and other property shall settle personal income tax.
• The person that declares tax monthly or when it is incurred under a contract that is due within 01 years shall settle tax, in the same way, the persons that pay tax according to declarations do.
• The persons that earn incomes from the insurance agents, lottery agents, or network marketing shall directly settle tax at the tax authorities if required.
• The persons that earn incomes from wages, business, and are eligible for tax reduction due to natural disasters, fire, accidents, fatal diseases shall directly settle tax at tax authorities.
• The non-resident business persons, groups of business persons that have fixed business premises in Vietnam shall settle tax in the same way residents do.

TAX RATES

Who is the resident:

• The person has been present in Vietnam for 183 days or longer in a calendar year, or for 12 consecutive months from the day on which that person arrives in Vietnam (the date of arrival and date of departure are considered 01 days). The date of arrival and date of departure depends on the certification of the immigration agency on the passport (or laissez-passers) when that person enters and leaves Vietnam. If the person enters and leaves Vietnam within one day, it is considered a day of a resident.
• The person has a regular residence in Vietnam:
  • For Vietnamese citizens: the regular resident is the place where that person regularly, stable, and indefinitely lives and has been registered as a permanent resident as prescribed by regulations of law on a resident.
  • For foreigners: the regular resident is the permanent written in the permanent residence card, or the temporary resident when applying for the temporary residence card issued by competent authorities.

NON-RESIDENTS ARE THE PERSONS THAT FAIL TO MEET THE ABOVE CONDITIONS

Tax rate and calculating tax incurred by none-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% tax. The taxable income from wages earned by a non-resident is similar to that of a resident guided above.
• 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:

a. When the foreigner is not present in Vietnam:

The number of working days in the year is calculated in accordance with the Labor Code of Vietnam.

b. When the foreigner is present in Vietnam:

Other pre-tax taxable incomes earned in Vietnam mentioned above are other benefits in cash or not in cash apart from wages that are provided for the employee or paid on the employee’s behalf by the employer.

Tax rate and calculating tax incurred by residents on taxable incomes from business, wages

The basis for calculating the tax on income from a business, wages is the assessable income and tax rate. Assessable income equals taxable income minus (-) the following deductions:

• Personal deductions.
• Insurance premiums and payment to the voluntary pension fund.
• Charitable, humanitarian, and study encouragement contributions.

Tax rate

The rate of personal income tax on incomes from business, wages shall apply the progressive tax table, in particular:

LAWS, DECREES, CIRCULARS GUIDING THE IMPLEMENTATION OF THE LAW ON PERSONAL INCOME TAX EFFECTIVE UNTIL 2024

As of the end of 2024, no new regulations on personal income tax have been added, accordingly, the following regulations will continue to apply:

Personal Income Tax Laws currently effective until 2024:

• Law on Personal Income Tax 2007.
• Law on Amending Tax Laws 2014.
• Law on Amending Personal Income Tax 2012.
• Resolution 954/2020/UBTVQH14 on adjusting the family deduction level of personal income tax issued by the Standing Committee of the National Assembly.

Decrees and Circulars guiding the implementation of the Law on Personal Income Tax currently effective until 2024:

• Decree 91/2014/ND-CP amending Decrees regulating tax.
• Decree 12/2015/ND-CP guiding the Law amending and supplementing a number of articles of the Laws on Taxes and amending and supplementing a number of articles of the Decrees on Taxes.
• Decree 65/2013/ND-CP guiding the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax.
• Circular 92/2015/TT-BTC guiding the implementation of value added tax and personal income tax for resident individuals with business activities; guiding the implementation of a number of amendments and supplements to personal income tax stipulated in the Law amending and supplementing a number of articles of the Laws on Taxes 71/2014/QH13 and Decree 12/2015/ND-CP detailing the implementation of the Law amending and supplementing a number of articles of the Laws on Taxes and amending and supplementing a number of articles of the Decrees on Taxes issued by the Minister of Finance.
• Circular 151/2014/TT-BTC guiding the implementation of Decree 91/2014/ND-CP amending and supplementing a number of articles of the Decree on tax issued by the Minister of Finance.
• Circular 119/2014/TT-BTC amending Circulars 156/2013/TT-BTC, 111/2013/TT-BTC, 219/2013/TT-BTC, 08/2013/TT-BTC, 85/2011/TT-BTC, 39/2014/TT-BTC and 78/2014/TT-BTC to reform and simplify tax administrative procedures issued by the Minister of Finance.
• Circular 111/2013/TT-BTC Guiding the Law on Personal Income Tax and Decree 65/2013/ND-CP issued by the Minister of Finance.
• Circular 20/2010/TT-BTC guiding administrative procedures on personal income tax issued by the Ministry of Finance.
• Directive 22/2008/CT-TTg implementing the Law on personal income tax issued by the Prime Minister.

Read more:

• Taxable incomes from wages and remunerations for expats in Vietnam
• Annual Personal Income Tax Settlement in Vietnam
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