Vietnam’s Law on Personal Income Tax recognizes ten different categories of income, with a host of different deductions, tax rates, and exceptions applying to each of them.
A tax resident is defined as someone residing in Vietnam for 183 days or more in either the calendar year or a period of 12 consecutive months from the date of arrival. Tax residents are subject to PIT on their worldwide employment income, regardless of where the income is paid or earned, at progressive rates from five percent to a maximum of 35 percent. Non-resident taxpayers are subject to PIT at a flat rate of 20 percent on their Vietnam-sourced income
Employers register and pay insurance contributions monthly on behalf of their employees at the provincial Ministry of Labor, Invalids and Social Affairs (MoLISA). Contribution amounts are based on the employees’ monthly salary or wage as stated in the labor contract and are capped at 20 times the legal standard minimum salary.
Social insurance in Vietnam covers compensation for salary lost due to illness, maternity, working accidents, occupational diseases, retirement, and death.
Social Security Minimum Contribution
Total compulsory contribution
There are 10 types of earnings, which are subjected to PIT, including:
- Incomes from business activities;
- Wages received from employers;
- Capital investment;
- Capital transfer;
- Property transfer;
- Commercial franchising;
- Inheritances in forms of securities, capital contribution in companies or economic organizations, real estate, and other assets requiring the registration of ownership or use right; and
- Gifts in forms of securities, capital contribution in companies or economic organizations; real estate; and other assets requiring the registration of ownership or use rights.
Note: Following the passage of Circular 59/2015/ TT-BLDTBXH in late 2015, the scope of allowances used to calculate employee wages has been increased to include allowances related to position, seniority, hardship, area, mobility, and attraction.
PIT rates for employment
Resident taxpayers are subject to PIT on their worldwide employment income, irrespective of where the income is paid or earned, at progressive rates from five percent to a maximum of 35 percent. Employment income includes salaries, wages, allowances and subsidies, remuneration in all forms; benefits earned for participation in business associations, boards of directors, control boards, management boards and other organizations; premiums and bonuses in any form except those received from the government
|Personal Income Tax Rates in Vietnam|
|Tax Bracket||Monthly taxable income (million VND)||Monthly taxable income (US$)||Tax rate|
|1||Up to 5||Up to 215||5%|
|2||Over 5 to 10||Over 215 to 430||10%|
|3||Over 10 to 18||Over 430 to 774||15%|
|4||Over 18 to 32||Over 774 to 1,377||20%|
|5||Over 32 to 52||Over 1,377 to 2,237||25%|
|6||Over 52 to 80||Over 2,237 to 3,442||30%|
|7||Over 80||Over 3,442||35%|
Non-resident taxpayers are subject to PIT at a flat rate of 20 percent on their Vietnam-sourced income.
Tax exempt incomes
Incomes exempted from PIT include:
- Incomes from transfer of real estate between husbands and wives, natural or adoptive parents and their children or adopted children;
- Incomes from transfer of residential houses by individuals who possess only one residential house or land plot;
- Inheritances or gifts between husbands and wives, natural/adoptive parents and their children/adopted children;
- Interest earned on deposit from the bank or from life insurance contracts;
- Overseas remittance, retirement salary, and scholarship;
- Incomes from compensation for insurance contracts or from charity funds;
- Income from cultivation and husbandry, aquatic and marine products, which have not yet been processed into other products or have been preliminary processed and then sold by producing or fishing organizations or individuals themselves;
- Incomes from the value of land use rights of individuals who are allocated land by the government;
- Incomes from the conversion of agricultural land allocated by the government to households and individuals for production;
- Wages paid for night shift or overtime work, which are higher than those paid for day shifts or prescribed working hours in accordance with the law; and
- Incomes received from governmental or non-governmental foreign aid for charity or humanitarian purposes approved by competent state agencies.
Foreign individuals can be exempted from taxation for certain benefits such as:
- One-off relocation allowance for foreigners to relocate to Vietnam. (Based on the amount stipulated in the labor contract or agreement between the employer and the employee.);
- Round-trip airfares (applicable only for employees) paid once a year by employers for their foreign employees who are on annual leave. (The air ticket should indicate the country where these employees are nationals or where the foreigner’s family lives.); and
- General education school fee or tuition paid by the employer for the expatriates’ children (from kindergarten through high school) studying in Vietnam (based on the invoice from the school and the labor contract).
Other benefits can be treated as non-taxable incomes if certain conditions are met. These include:
- Employee housing costs exceeding 15 percent of the total taxable income (excluding housing benefit from employers);
- Expenses for the means of transportation of a group of employees to and from work are not taxable. Meanwhile, means of transportation used for the transportation of an individual are taxable;
- Membership fees for gold, tennis, cultural, art/sport or physical training clubs; or charges for other services, such as healthcare, entertainment, sports, recreation, and beauty care are taxable if the membership cards specify the names of cardholders of either individuals or groups of individuals. These are not taxable if they are for common use without specific names of individuals or groups of individuals;
- Training fee for employees relevant to employees’ professions and/or in accordance with the employers’ plan is not taxable;
- Mid-shift meal allowances are not accounted as taxable if the employers directly cater such meals for their employees; and
- Presumptive expenditures for telephone, stationery, per diem, working outfit, etc. are not subject to tax if the amounts are within the levels set out under relevant regulations.
Reductions may be taken individually as well as for those under the care of workers subject to PIT under the following allowances:
- Personal allowance: A maximum of VND 11 million (US$475) per month.
- Dependent allowance: Pegged at VND 4.4 million (US$192) per month for each dependent. Qualified dependents are children aged below 18 years old, or children over 18 years old but are disabled and incapable of working. In addition, the spouses or the parents of the taxpayers who are unable to work or have low income not exceeding VND 1 million (US$43) are also qualified dependents.
The reduction for each dependent can be claimed by only one person. The dependent allowance is not automatically granted, and the taxpayer needs to register the qualifying dependent and provide the supporting documents to the tax authority.
Individuals and organizations that are subject to PIT must register with tax offices to obtain the tax identification number (TIN).
Foreign invested enterprises (FIE) have to conduct PIT finalization on behalf of their employees at the beginning of the year for taxable income arising from the previous year. If an employee has more than one source of income and wishes to conduct tax finalization on his/her own, FIEs can issue a certificate of deduction at the request of the employee. If an expatriate’s labor contract in Vietnam expires before the end of a calendar year, they should conduct tax finalization before their departure.
PIT payment is done in the same way as CIT and paid by the taxpayer to the State Treasury in one of two ways: by cash or bank transfer. The taxpayer can pay cash directly to the State Treasury to receive the voucher from the state officials. Otherwise, they can transfer money to a tax office bank account at the State Treasury accredited operations. The deadline for tax payment is the same as tax finalization, meaning no later than 120 days from the end of the calendar year.
Conversion of taxable income
If taxable income is received in foreign currency, it must be converted into Vietnamese dong at the average trading exchange rate on the inter-bank foreign currency market published by the State Bank of Vietnam as the date when the income arose.
Frequently Asked Questions about PIT in Vietnam
What is the purpose of annual PIT finalization?
It is a common statutory obligation by individuals to accurately assess the taxpayers’ liabilities or entitlements. It is also done to schedule tax payments, tax refunds, or any other purposes as necessary.
All tax residents are required to summarize their assessable income earned between January 1 and December 31 and calculate the tax payable on such income. Once assessed, PIT must be reported and filed with the tax authorities which completes the annual finalization.
Who is subject to annual PIT finalization?
For tax purposes, this means a resident who has stayed in Vietnam for 183 days or more in a calendar year. The length of stay in Vietnam does not have to be continuous. Individuals who have residency in Vietnam are also subject to annual PIT finalization
Non-residents are not required to finalize their PIT in Vietnam.
What is subject to annual PIT finalization?
Only income of salary and wages is subject to PIT, such as your salary, wages, income on sales, allowances provided by the employer such as meals and travel allowances, and bonus in cash. Other incomes such as rental income from investment properties, dividends, royalties, capital gains, and other types such as lottery, and inheritance are not subject to PIT, however, they are taxed separately using different tax forms.
What are the typical allowances and benefits subject to PIT?
There are several. Housing allowances such as rent and gas are subject to PIT. However, the actual assessable amount is capped at 15 percent of the employee’s assessable income. For example, if an employee’s annual income is US$100,000 a year, their assessable housing allowance will be capped at US$15,000 per year.
Other allowances subject to PIT include if the portion of lunch allowance is more than VND 730,000 (US$31.76). Member payments such as golf membership, healthcare, and spa are also exempt for certain employees. Certain employees are also subject to PIT on consulting and tax services.
Flight tickets for the foreign employee to their home countries once a year is tax-free, but if the company is generous and also pays for flights for the employee’s family members, then these are subject to PIT.
How do you calculate taxable income for PIT?
The taxable income for PIT determination is to determine the assessable income which includes salary and wages, allowances, other benefits-in-kind, and performance bonuses. However, employees are eligible for personal deductions equivalent to VND 11 million (US$478) as well VND 4 million (US174) per dependent. Other deductions include social insurance, health insurance and retirement funds, and any donations to approved charities and humanitarian organizations.
Who can be registered as dependents?
Dependents that can be registered include the taxpayer’s children, which include biological children, adopted children, illegitimate children, and stepchildren. The children should be less than 18 years old, or if they are 18 and over but suffer from some disability or are currently enrolled in a university with a monthly income within a year that is less than VND 1 million (US$44).
Other eligible dependents include spouses, parents, stepparents, nieces, and nephews, however these are subject to certain conditions.
Who is required to finalize PIT?
PIT finalization is not required if the payable PIT amount is less than VND 50,000 (US$2.5) or the payable PIT amount is less than the provisional tax paid or tax withheld but the taxpayers choose not to receive the refund.
In addition, PIT finalization is not required for individuals who have salary and wages from multiple sources that is less than VND 10 million (US$435) and subject to 10 percent PIT withholdings.
Our advice is to request your employer to provide you with your monthly payslips with include your PIT withholdings to estimate your estimated tax payable using progressive tax rates. This will help you assess your taxable income. It is always safer to finalize your PIT rather than face steep fines by the tax authorities.
Can you describe the general procedures to finalize your annual PIT?
Taxpayers should review their total income earned during the year and do a self-assessment. They can then estimate their total PIT payable and compare with the payable PIT amount to the withheld PIT and provisional PIT paid during the year.
The final step is to file the PIT finalization return and pay tax payment if there is a shortfall. Taxpayers should also be prepared for any clarification if the tax authority request it.
What are the deadlines for filing?
The deadline for organization and employee salaried individuals is March 31 of every year. For individuals submitting directly to the tax authorities it is typically April 30, so the last day of the fourth month of the calendar year. However, the deadline excludes public holidays and weekends, and as such, this year’s deadline would be May 4.
Where can you finalize your PIT?
Taxpayers can ask their employers to finalize PIT and submit it to the tax authorities on their behalf. However, if individuals want to file separately, they can submit it to the local managing tax office where the employer is located. For individuals that earn income from two or more employers, they can choose one tax office where the employers are located, preferably the one where the most income is earned or the tax office where the individual resides.
Taxpayers can engage a specialized tax consultant or a professional firm to handle and finalize PIT on their behalf.
Why are tax refunds sometimes difficult for foreign employees?
Typically, foreign employees are paid higher than local colleagues, therefore higher pay equals high risk. To ensure taxes are duly collected, tax authorities scrutinize all documents and verify if PIT assessed is true, particularly for foreign employees. In addition, foreign employees sometimes have more benefits than locals or have a salary split between countries, or may have inappropriate salary arrangements. Tax authorities, therefore, look carefully to assess if there are any discrepancies, which may delay refunds.
What are the tax compliance requirements when leaving Vietnam for a foreign employee?
Foreign employees whose employment contract is about to expire are required to finalize their PIT before departure. They can also entrust their employer to do so on their behalf. The deadline to comply is within 45 days upon departure. Taxpayers should fully comply with tax requirements when leaving Vietnam as they could return to Vietnam in the future or may need confirmation of tax remittance for tax filling purposes in other countries.