Tax in Vietnam

filing tax return

Before you make your move to Vietnam, it would be prudent to get yourself up to speed on local tax laws. As with any country, this is likely to be the most tiresome and confusing part of the transition. However, such an important step should not be overlooked for any reason whatsoever.

If you’re coming to Vietnam to work for a company, your employer will almost certainly take care of any tax responsibilities. However, tax is applicable to numerous types of compensation and capital, so long as you’re a resident of this country. We have written this article to give you a brief overview of the most common policies and procedures. However, should you need additional clarification, the wisest action would be to consult with a local accountant or tax lawyer.

Since the mid-70s, Vietnam has been transforming itself into a market-oriented economy. Its positive GDP growth over the past decade has made this country a hub for international business ventures. Since joining the World Trade Organisation (WTO) in 2007, Vietnam has maintained a firm anchor with the global market. The average annual Growth of Domestic Product (GDP) between 2016 and 2020 was 5.8%.

Throughout this article, we will delve into employment income and other topics such as investment and capital gains tax. We will also discuss the various deductions that are applicable to taxpayers. Whilst tax law in Vietnam can be initially challenging to understand, we have tried to break things down into layman’s terms. Since nobody actually enjoys paying tax, we’re delighted to make you aware of tax-exempt income too!

How to determine if you’re a resident

Any foreign individuals can be regarded as Vietnamese residents by the government if they have been present for 183 days or more within any 12 month period. Additionally, if the individual maintains a place of residency in Vietnam for more than half of any given tax year, they are deemed as residents. This place of residence can include a guest house or hotel room. However, if the individual can demonstrate tax residency of another country, they may be considered a tax non-resident. Tax certificates bearing the jurisdictional details of said country would be appropriate evidence.

Unfortunately, Vietnam currently doesn’t have legislation regarding a de minimis number of days. Put another way, the date of arrival and date of departure are both counted as one day each by the taxman. This means that if you worked in Vietnam for 175 days, but then were unable to leave the country for a further ten days, your residency would be considered as 185 days. This would mean you are liable for income tax.

Moreover, there are no guidelines to determine the significance of the period from arrival in Vietnam to the beginning of an assignment. As a general rule of thumb, if a foreign individual is considered a tax resident, then tax payments would be calculated from the month they arrived in Vietnam. This means that if you arrived on March 25th, but didn’t begin work until April 5th, you would be liable for paying tax for March too.

READ MORE:  Vietnam Visa On Arrival

Are there any concessions for expatriates?

There is generally little in the way of concessions for expats who qualify as tax residents in Vietnam. There is one exception, however. Anything that would constitute a one-off relocation allowance payment is overlooked by the government. This tax exemption takes into consideration the following factors:

  • Stipulations and parameters of the labour contract
  • School fees for children of the assignee – this includes all dependents from kindergarten age to high school level.
  • Airfares for the assignee only for one round-trip home per tax year.
  • Insurance contributions that are compulsory in the assignee’s home country.

Furthermore, should accommodation compose part of the benefits package, the assignee may be liable for additional tax payments. This tax contribution is calculated by considering the actual rental amount. However, liability would not exceed 15% of the total gross income to be assessed.

Types of taxable compensation

In general circumstances, most categories of remuneration from employment here are considered taxable. This is regardless of where such remuneration is paid. The following are garden variety examples of taxable, employment-based income:

  • Wages, salary, and anything that could fall under the umbrella of such categories.
  • Living allowances that are receivable by individual employees.
  • Brokerage commissions.
  • Remuneration from clinical trials or participation in scientific or technological research pursuits.
  • Royalties from books or other creative endeavours such as music sales.
  • Payments from business associations or corporate councils.
  • Employment bonuses, whether monetary or not. This includes stocks and shares.

How is a salary from abroad calculated?

Income from other countries or jurisdictions is taxed at a progressive rate for residents in Vietnam. On the other hand, non-residents are only liable to pay tax on any income earned in Vietnam. Anything earned abroad is not taxable for non-residents.

Double tax treaties (DTAs) have been signed by the Vietnamese government in cooperation with other jurisdictions. This provides that if the taxpayer has made tax contributions in a country that has a DTA with Vietnam, they may avoid paying tax here. The same applies vice versa. Unfortunately, this process is not automatic. The taxpayer must acquire the appropriate documentation to prove that tax has been paid in another country. This certificate must then be presented with the necessary tax authority in order to receive the tax credits.

The following 80 countries have signed DTAs in cooperation with the Vietnamese authorities:

Algeria *GermanyMalaysiaSaudi Arabia
AustraliaHong KongMaltaSerbia
AustriaHungaryMongoliaSeychelles
AzerbaijanIcelandMoroccoSingapore
BangladeshIndiaMozambiqueSlovakia
BelarusIndonesiaMyanmarSpain
BelgiumIranNetherlandsSri Lanka
Brunei DarussalamIrelandNew ZealandSweden
BulgariaIsraelNorwaySwitzerland
CambodiaItalyOmanTaiwan
CanadaJapanPakistanThailand
ChinaKazakhstanPalestineTunisia
CroatiaKorea (North)PanamaTurkey
CubaKorea (South)PhilippinesUkraine
Czech RepublicKuwait *PolandUnited Arab Emirates
DenmarkLaosPortugalUnited Kingdom
Egypt *LatviaQatarUnited States *
EstoniaLuxembourgRomaniaUruguay
FinlandMacauRussiaUzbekistan
FranceMacedonia *San MarinoVenezuela
READ MORE:  Relocating to Vietnam

*Not currently in force.

How employment income is calculated in Vietnam

Individual foreigners are at liberty to declare their own taxes to the authorities in Vietnam. However, the local tax authorities can insist that Vietnamese employers collect tax contributions on behalf of the foreign assignee. The main purpose of this is simply to ensure a timely declaration and submission of the assignee’s tax contributions.

In these circumstances, the employer would be responsible for holding a proportion of the assignee’s salary back. This would be in accordance with the personal tax liabilities of each individual foreign assignee. The withheld amounts must be deposited with the State Treasury in accordance with statutory deadlines.

Tax residents in Vietnam are not subject to more than 10,000,000 VND per month. A more comprehensive guide is below. The following progressive tax rates apply to both foreign and Vietnamese tax residents.

In regards to business income, the following rates are applied to entities whose income exceeds 100,000,000 VND per year.

Investment and Capital Gains Tax

Anything of this nature is regarded as non-employment income and is susceptible to tax. This is under personal income tax legislation which was passed in January 2009.

Dividends are regarded as a source of income from capital investments. They are taxed at a flat rate in accordance with the table below. Aside from anything offered by banks and credit institutions, any form of interest payment is treated as a form of income from capital investment. It is therefore subject to income tax. Inbound rental payments fall under the same taxable income category.

A few additional points to note: Gains and losses from foreign exchanges are not subject to tax. Nor are gains and losses from the principal residence. While personal use items cannot be subject to personal income tax, gifts from an employer to an employee are. This is because they are considered as employment income, thus, are taxed appropriately.

Deductions from income in Vietnam

It must be stressed that these deductions are only applicable to employment income in Vietnam. Individual tax residents can write off up to 9 million VND per month, providing such claims are supported with the appropriate evidence. An additional 3.6 million VND may be deducted per qualifying dependent of the taxpayer. Furthermore, donations to education funds and charities can be written off under Vietnam’s tax laws. Lastly, insurance contributions also fall under tax deductions in Vietnam.

Any resident taxpayer wishing to claim dependent relief must submit their claims to the local tax authorities by January 30th. If this is not feasible, then said claims should be submitted before the last day of the month they begin their labour contract. Supporting documentation must be registered within 3 months of the dependency claim. Only one taxpayer is eligible to claim a deduction for a single dependent.

Examples of income that are exempt from tax in Vietnam

Regardless of coming under the classification of employment income, there are a number of exemptions. Even if these aren’t based on current tax legislation in Vietnam, they are at least practised by the local tax authorities.

  • Income as a result of night shifts or overtime which is paid at a higher hourly rate than normal.
  • Allowances for uniforms and mid-shift meals that correspond with company policies.
  • Legally stipulated national defense and security allowances.
  • Allowances for anyone contributing to the revolutionary cause.
  • Allowances for those employed at workplaces that contain dangerous chemicals or elements. Additionally, allowances for those working in dangerous climates.
  • Allowances for social insurance, one-off difficulties, subsidies given for industrial accidents, occupational disease or reduction in ability to work.
  • Subsidies for the adoption or birth of a child, retirement, unemployment, or widowhood.
  • Any bonuses or awards which are linked to titles bestowed by the Vietnamese government. This includes awards for inventions, innovations and technological improvements.
  • Awards for reporting breaches of the law to the state authorities.
  • Telephone and stationery allowances.
READ MORE:  Setting up a business in Vietnam

The following types of expenditure are also not susceptible to tax:

  • Any expenses incurred during business trips regardless of whether they are in Vietnam or abroad.
  • Standard commutes for employees to their workplace from home and vice versa.
  • Airfares for anyone working on a rotational basis throughout industries such as mining and petroleum.
  • Work-based training and education.

Lastly, there are a number of remuneration categories outside of employment income that are not subject to tax:

  • Any interest earned on deposits with life insurance policies and credit institutions or banks.
  • Compensation received from insurance policies, regardless of whether they are a life or non-life scheme.
  • Retirement pensions that are recognised under the SI law or any international equivalent.
  • Any income gleaned from the transfer of properties between direct family members. Inheritance and gifts from these same family members are also exempt from tax.
  • Income from casino winnings.

We sincerely hope this article has been of some benefit to you and have done our utmost best to ensure the information is accurate and up to date. While we have used numerous sources to research and verify information, one of the best happens to be PwC Vietnam.

Should you need expert advice on taxes in Vietnam, we would urge you to make contact with this company. Established in the early nineties, their team of over 1000 Vietnamese and international staff maintain close ties with numerous governmental entities. This includes the Ministry Of Finance, General Department Of Taxation, Ministry Of Planning And Investment, General Department Of Customs, and the Ministry Of Industry And Trade.

PwC Vietnam are experts in the fields of industry-focused assurance and tax. As one of Vietnam’s leading tax and legal entities, their wide spectrum of services includes transfer pricing, customs, advice and compliance, due diligence, and legal services.

Should you feel that we have missed anything throughout this article, please don’t hesitate to get in touch. At Expat.com, we are committed to providing you with the best possible resources in order to make your transition abroad as smooth as possible.

News related