Tax returns and compliance
Termination of residence
Economic employer approach
Types of taxable compensation
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits
Sample tax calculation
When are tax returns due? That is, what is the tax return due date?
What is the tax year-end?
The first tax year is based on 12 consecutive months from the first arrival date in Vietnam. In case someone arrives from a country without a Double Tax Agreement with Vietnam, if they are present in Vietnam for more than 182 days in the first calendar year of arrival, individuals are required to report pre-arrival income earned from the beginning of such a year for Vietnamese tax purposes.
The first tax year is first calendar year, from first arrival month to December in case someone arrives from a country with a Double Tax Agreement with Vietnam.
Subsequent tax years are calendar years.
What are the compliance requirements for tax returns in Vietnam?
Tax declaration and payment is carried out on a withholding basis. The regulations encompass the concept of tax deduction at source, and legalise this by specifying that certain employers are designated entities for tax collection purposes. Such entities are required to deduct income tax at source prior to paying income to individuals.
Although individual foreigners may opt to declare and settle their own tax directly with the tax authority, the local tax authorities require employers to undertake to collect taxes on employees and ensure timely submission of the employees’ tax declarations.
Under these circumstances, the employer must withhold a percentage of their employees’ personal income equal to the respective employees’ personal income tax liabilities and deposit the withheld amount with the State Treasury within the statutory deadlines.
The employer finalises PIT on behalf of the employees at the year-end provided that the employees have income only from this employer (or any irregular income from other sources not exceeding VND 10,000,000 per month) and that the employees authorise the employer to finalise their tax on their behalf.
Each employee is required to obtain their individual tax number and to declare their dependent(s) qualifying for tax relief. On top of this, an employee must complete their tax finalisation return where their tax liability at year end is greater (or less and they wish to claim a tax refund) than the sum of tax paid during the year.
A monthly tax declaration or quarterly tax declaration, and annual tax finalization return on its employees’ taxable employment income must be submitted to the tax authority not later than the 20th of the following month or the end of the first month of the following quarter, and 90 days after the year ended.
What are the current income tax rates for residents and non-residents in Vietnam?
Tax residents of Vietnam: The following unified progressive tax rates are applicable to Vietnamese and foreign nationals.
|Average monthly income||Tax rate||Tax to be paid|
|Up to 5,000, 000||5||Income * 5%|
|5,000,000 up to 10,000,000||10||Income * 10% - 250,000|
|10,000,000 up to 18,000,000||15||Income * 15% - 750,000|
|18,000,000 up to 32,000,000||20||Income * 20% - 1,650,000|
|32,000,000 up to 52,000,000||25||Income * 25% - 3,250,000|
|52,000,000 up to 80,000,000||30||Income * 30% - 5,850,000|
|Over 80,000,000||35||Income * 35% - 9,850,000|
Tax non-residents of Vietnam: A flat tax rate of 20 percent is applicable to Vietnam-sourced employment income.
From 2015, Individuals’ business income exceeding VND100 million per year is subject to PIT at the deemed rates (%) on the revenue from sale of goods and provision of services (applicable to tax residents only, different rates exist for non-residents).
|Taxable income||Tax rate|
|Income from supply and distribution of goods||0.5%|
|Income from service, construction service without material supply
|Income from assets leasing, insurance agent, lottery agents, multi-level marketing||5.0%|
|Income from manufacturing, transportation, service with goods provision, construction service with material provision||1.5%|
|Taxable income||Tax rates|
|Income from capital investment (including interest from loans and
|5.0% No PIT payment for income from capital investment of individuals being
the owners of a private entity or one member
|Income from capital assignment||20% on net gain||0.1% on gross sale proceeds|
|Income from security transfer||0.1% on gross sale proceeds||0.1% on gross sale proceeds|
|Income from property transfer||2.0% on gross sale proceeds||2.0% on gross sale proceeds|
|Income from royalty, technology transfer/franchising with value more than VND10 million for each receipt||5.0%||5.0%|
|Income from lottery winnings, promotions, games with prizes valued more than VND10 million for each reward||10.0%||10.0%|
|Income from inheritance, gifts valued over VND10 million for each receipt||10.0%||10.0%|
For the purposes of taxation, how is an individual defined as a resident of Vietnam?
A foreign individual may be considered a tax resident of Vietnam if any one of the following conditions is met.
Individuals who do not meet the above-mentioned conditions are considered as tax non-residents of Vietnam.
Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.
There is no specific rule in relation to the period from the date the assignee enters the country before their assignment begins. Where the assignee is a tax resident, personal income tax shall be calculated from the month the individual arrives in Vietnam.
Regulations provide that if assignees are tax residents of Vietnam in the first calendar year in Vietnam, they are required to report their pre-arrival income from the beginning of such a year for Vietnamese tax purposes. For tax non-residents of Vietnam in such a year, the first assignment day is the start date of their first tax year.
Are there any tax compliance requirements when leaving Vietnam?
The employee’s tax finalisation return for the income earned up to the termination of employment contract date must be filed within 45 days after his departure. A foreigner who fails to settle their personal income tax liability could be prevented from leaving the country. In addition, any tax shortfall per the tax finalisation return should be settled by the same deadline.
What if the assignee comes back for a trip after residency has terminated?
If their return may affect the residency status (that is, change their status from non-resident to resident) then they are required to revise their tax returns based on worldwide income.
In addition, if they travel to work in Vietnam, they may also have an additional Vietnamese tax exposure in relation to the income earned during the trip back.
Do the immigration authorities in Vietnam provide information to the local taxation authorities regarding when a person enters or leaves Vietnam?
The current practice is that there is no proactive communication between the tax authorities and the immigration authorities in relation to the tax status of someone in Vietnam.
However, the tax authorities will work with the Immigration Department to check the number of residing days in Vietnam of individuals for the purposes of assessing a tax exemption under the double tax treaty and can request the Immigration Department to confirm/provide the details of entry/exit dates of a person, if necessary.
Moreover, individuals wishing to leave the country but who have an outstanding tax debt, have been known to have been denied leaving the country by the Immigration Department until they settle their tax liability.
Will an assignee have a filing requirement in the host country after they leave the country and repatriate?
If the assignee has completed all the tax returns for the period they are in Vietnam, fully paid their taxes and notified the tax authority that they repatriate, they are not required to file further tax returns in Vietnam.
Do the taxation authorities in Vietnam adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Vietnam considering the adoption of this interpretation of economic employer in the future?
Although Vietnam is not an OECD member and therefore not be bound by the guidelines, the Vietnamese tax authority appears willing to follow international practice provided in the OECD guidelines. Please note that for work permit purposes, a labor contract with a Vietnamese entity is usually required and hence for assignments to Vietnam, both the formal employer and economic employer will usually be the Vietnamese entity. Where someone comes to Vietnam on business trips, Vietnam does interpret Article 15 in such a way that where no payment is made in Vietnam, exemption under Article 15 should be possible. Please note however that in order to claim treaty exemption, an exemption application procedure needs to be adhered to and many (certified / legalised / translated into Vietnamese) documents are needed to support this application.
Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
There is no de minimus number of days applied in Vietnam.
What categories are subject to income tax in general situations?
As a rule most types of remuneration and certain benefits-in-kind earned by an individual from employment in Vietnam are generally taxable regardless of where it is paid:
Are there any areas of income that are exempt from taxation in Vietnam? If so, please provide a general definition of these areas.
Employment income which is exempt from personal income tax based on either the current tax regulations or the practice of the tax authorities in Vietnam includes the following:
Are there any concessions made for expatriates in Vietnam?
Generally, there is no concession made for expatriates in Vietnam except a tax exemption on a one-off relocation allowance for moving to Vietnam, determined based on the labor contract; school fees for expatriates’ children from Kindergarten up to high school level paid in Vietnam supported with relevant documents (tuition only, and payment should be made directly to the school); airfares for one round trip home leave per year for expatriates supported with relevant documents (not applicable to family members); and compulsory insurance contributions in accordance with the regulations of the expatriate's home country. Accommodation of employees provided by employers is taxable based on the actual rental amount but not exceeding 15 percent of total other assessable income. In addition, benefits from houses built by the employer and provided by the employer free of charge for employees who are working in industrial zones, economic zones or in disadvantaged or severely disadvantaged areas.
Is salary earned from working abroad taxed in Vietnam? If so, how?
Residents in Vietnam have to pay tax on their worldwide income at progressive tax rates. Therefore, salary earned from working abroad is taxable in Vietnam.
Non-residents in Vietnam have to pay tax on their Vietnam-sourced income only, at the flat rate of 20 percent. Salary earned from working abroad is not taxed in Vietnam.
Vietnam has double tax treaties (DTAs) signed with a number of countries. In this regard, if the tax payer has already paid tax in one country which has DTA with Vietnam, he/she may not have to pay tax in Vietnam or vice versa. This is not an automatic process. An application including a tax payment certificate from the other country must be lodged with the tax authority in Vietnam in order to get a tax refund or credit for the tax paid overseas.
Are investment income and capital gains taxed in Vietnam? If so, how?
Income from capital investments and capital assignment are treated as non-employment income and taxed under the personal income tax regime from 1 January 2009 at the tax rates indicated above.
|Residency status||Taxable at:|
The taxation treatment of employee stock option program (ESOPs) to date has not been specifically addressed in the main Vietnam personal income tax regulations, but is based on official tax rulings issued by the General Department of Taxation.
Foreign exchange gains / losses are not subject to personal income tax.
Principal residence gains and losses (from individual having only one sole residential house or land) are not subject to personal income tax.
Capital losses are not deductible for personal income tax purposes in Vietnam.
Gains and losses on personal use items are not subject to personal income tax in Vietnam. Only income from transfer of real property is taxed.
Gifts from employers to employees will be regarded as employment income and subject to personal income tax at progressive tax rates.
Other kinds of gifts and/or inheritance (such as securities, shares of economic organizations or business entities, real estate and other assets, and so on) are taxed at deemed rates as mentioned above when the income for each recipient is higher than VND10 million.
Are there additional capital gains tax (CGT) issues in Vietnam? If so, please discuss?
No additional CGT issues for individuals.
Are there capital gains tax exceptions in Vietnam? If so, please discuss?
Capital gains tax on individuals is subject to PIT at 20 percent on the net gain or 0.1 percent on sale proceeds as stated above. The CGT treatment shall be determined on a case-by-case basis.
What are the general deductions from income allowed in Vietnam?
The following deductions are applicable to employment income and income from business operation only. In addition, the personal and family relief and deductible donations are granted to resident individuals only.
The tax payer has to register their dependents for dependent relief with the tax authority (submit to the employer by 30 January or by the last day of the first month they enter into a labor contract) and submit the legitimate supporting documents proving qualified dependency (within three months after registration). Each dependent can only be assessed for deduction once in respect of one tax payer within the tax assessment year.
What are the tax reimbursement methods generally used by employers in Vietnam?
For expatriates in Vietnam, some employers apply tax equalization scheme.
How are estimates/prepayments/withholding of tax handled in Vietnam? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
Monthly provisional withholding and payments are applied which is similar to PAYE method.
Monthly provisional withholding and payments are applied which is similar to PAYE method.
Not applicable for employees with local employers. In case of working for a foreign employer, an individual is required to lodge quarterly tax calculations and pay the relevant tax due (which is similar to PAYG Instalments).
When are estimates/prepayments/withholding of tax due in Vietnam? For example: monthly or quarterly, annually, both, and so on.
Monthly withholding/tax payments should be made by the 20th of the following month. For the case of applying quarterly withholding/tax payments, the deadline is the end of the first month of the following quarter.
Tax payers should pay the outstanding tax payable based on the annual tax return by the 90th day of the following year.
Is there any Relief for Foreign Taxes in Vietnam? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
Vietnam has signed Double Tax Agreements with more than 70 countries including Australia, Belgium, Canada, China, Denmark, France, Germany, Japan, the Netherlands, Russia, Sweden, Switzerland, Thailand, and the United Kingdom. Vietnam has signed a Bilateral Trade Agreement with the United States, the Vietnam-EU Textile Agreement with the European Community, and has applied for a full membership of WTO, furthering the process of opening its market.
The personal income tax legislation appears to allow credit for tax paid in other countries and it states explicitly that in the event of any inconsistency between a treaty in force and the existing tax provisions, the treaty will take precedence. In order to claim a foreign tax credit, extensive documentation needs to be submitted, such as a completed tax exemption application form, foreign income tax return, tax payment vouchers and tax receipts (or a certificate of tax paid issued by the foreign tax authority).
Unilateral relief is available to Vietnamese citizens in the form of a deduction from Vietnamese income tax of income taxes paid abroad on foreign-sourced income that is subject to personal income tax in Vietnam.
What are the general tax credits that may be claimed in Vietnam? Please list below.
No tax credits are applicable under the regulations. Tax paid overseas may be credited in Vietnam.
This calculation assumes a married taxpayer resident in Vietnam with two children whose four -year assignment begins 1 January 2016 and ends 31 December 2019. The taxpayer’s base salary is USD100,000 and the calculation covers four years.
|Moving expense reimbursement||20,000||0||20,000||20,000|
|Interest income from non-local sources||6,000||6,000||6,000||6,000|
Exchange rate used for calculation: USD1.00 = VND22,000
|Days in Vietnam during year||365||365||365||365|
|housing allowance (paid in cash)||264,000,000
|Company car (paid in-cash)||132,000,000
|Moving expense reimbursement||440,000,000
|Interest income from non-local sources||132,000,000
|Total earned income and benefits||3,894,000,000
|Total assessable income||3,256,000,000
|Deductions (personal and dependent relief)*|| -194,400,000
|Vietnamese health insurance||-4,356,000
|Vietnamese social insurance
|Total taxable income||3,057,244,000||3,057,244,000||3,474,012,000||3,474,012,000|
Calculation of tax liability
|Taxable income as above||3,057,244,000
|Vietnamese tax thereon|
|Domestic tax rebates (dependent spouse rebate)||0||0||0||0|
|Foreign tax credits||0||0||0||0|
|Total Vietnamese tax||951,835,400
1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.
2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.
3Sample tax calculation prepared by KPMG in Vietnam.
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