Tax returns and compliance

Tax rates

Residence rules

Termination of residence

Economic employer approach

Types of taxable compensation

Tax-exempt income

Expatriate concessions

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?
 

The timing of tax declaration on various income elements varies depending on the type of income and circumstances.

• For employment income, the 20th of the following month for monthly tax declarations, the 30th of the first month of the following quarter for the quarterly tax declarations and ….the 120th day of the following year for the annual tax return under individual tax code/90th day of the following year for the annual tax return under corporate tax code.
• If someone leaves Vietnam during the year, a finalization return will be due within 45 days of the departure date.
• For business income, the finalization due date depends on the type of business income.
• For income from real property transfer and from capital assignment, at the same time as conducting the relevant procedures of transfer or assignment.
• For income from transfer of securities, generally withholding tax is applicable at the time of receiving the income.
• For income from in heritance and gifts, at the time of receiving the income.

What is the tax year-end?
 

The first tax year is either (i) the first calendar year if the foreigner stays for more than 182 days in such calendar year or (ii) 12 consecutive months from the first arrival date in Vietnam if the foreigner stays in Vietnam for 182 days or less in the first arriving calendar year but more than 182 days in 12 consecutive months. In case someone arrives from a country/jurisdiction 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.

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 legalese 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 who are paid from an overseas entity may opt to declare and settle their own tax directly with the tax authority, the local tax authorities can require deemed employers in Vietnam 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 finalizes PIT on behalf of the employees at year-end provided that the employees have income only from this employer (or any irregular income from other sources not exceeding 10,000,000 Vietnamese dong (VND) per month and 10 percent PIT of which has been withheld) and that the employees authorize the employer to finalize 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 finalization 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 company must undertake 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.

• For income from investment capital, capital assignment, transfer of securities, royalties, winnings/prizes and franchises, tax declaration and payment is carried out on a withholding basis. Income paying bodies are required to withhold tax at source and then pay to the relevant tax authority within the statutory deadlines mentioned previously.
• For other income, individuals are required to handle their tax declaration at the time mentioned previously.
• Each payment from VND2,000,000 to individual sale agents or individual service providers is subject to 10 percent withholding tax. In case they provide a commitment indicating they have income less than the personal and dependent relief; no withholding tax is required.

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.

Tax non-residents of Vietnam: A flat tax rate of 20 percent is applicable to Vietnam-sourced employment income.

Business income

From 2015, Individuals’ business income exceeding VND100 million per year is subject to PIT at the deemed rates (percent) on the revenue from sale of goods and provision of services (applicable to tax residents only, different rates exist for non-residents).

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.

• The foreign individual was physically present in Vietnam for 183 days or more during a calendar year or 12 consecutive months from the initial date of arrival in Vietnam.
• Having a permanent residential place in Vietnam.
  • In the case of a Vietnamese citizen, a residential location for which permanent residence has been registered means the specific place where such citizen lives and earns their living on a regular and stable basis and not only for a term, and for which such citizen has conducted registration pursuant to the Law on Residence.
  • In the case of a foreigner, a residential location for which permanent residence has been registered (the registered place recorded in the resident card or temporary resident card issued by the authority under the Ministry of Public Security). It also includes the situation in which an individual has a leased house or the like (that includes a hotel room, guest house, location of office and so on) in Vietnam with a total lease term of 183 days or more in the tax year, and the individual is not able to provide a certificate of tax residency of a country/jurisdiction other than Vietnam.

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/jurisdiction for more than 10 days after their assignment is over and they repatriate.

The arrival date and the departure date are counted as 1 day. There is no de minimus number of days rule in Vietnam.

What if the assignee enters the country/jurisdiction before their assignment begins?

There is no specific rule in relation to the period from the date the assignee enters the country/jurisdiction 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, unless they are from a country/jurisdiction with a Double Tax Agreement with Vietnam in which case only income from arrival month is subject to tax. For tax non-residents of Vietnam in such a year, the first arrival day is the start date of their first tax year.

Are there any tax compliance requirements when leaving Vietnam?
 

The employee’s tax finalization return for the income earned up to the termination of employment contract date must be filed within 45 days after their departure. A foreigner who fails to settle their personal income tax liability could be prevented from leaving the country/jurisdiction. In addition, any tax shortfall per the tax finalization 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 purpose 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/jurisdiction but who have an outstanding tax debt, have been known to have been denied leaving the country/jurisdiction by the Immigration Department until they settle their tax liability.

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction 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 Organisation for Economic Co-operation and Development (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 / legalized / 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:

• salary, wages, and items in the nature of salary and wages
• allowances including living allowances receivable by employees
• remuneration receivable in all forms such as brokerage commission, payment for participation in a scientific or technological research project; royalties for written books or newspaper articles or for translating documents and so forth; payment for participation in teaching activities; cultural and artistic performances, sports and games and so forth; and payment receivable from advertising and other services
• payments receivable as a result of participation in professional and business associations, on corporate boards of management and inspection committee, on project management boards, on management and corporate councils and other organizations
• other monetary or non-monetary benefits other than salary to which an employee is entitled, and which are paid to or on behalf of an employee by the employer
• monetary or non-monetary bonuses (including bonus in form of stocks).

Intra-group statutory directors
 

Will a non-resident of Vietnam who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Vietnam) trigger a personal tax liability in Vietnam, even though no separate director's fee/remuneration is paid for their duties as a board member?

Yes. Where there is no separate director’s fee/remuneration is paid, their total income package will be assessed to determine their Vietnam-sourced income.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Vietnam?

Yes. Non-residents are taxed even in cases they are not present in Vietnam.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Vietnam (i.e. as a general management fee where the duties rendered as a board member is included)?

No. Where the cost is charged without mark-up, it can be used as Vietnam-sourced income for the employee’s tax calculation. Otherwise, their actual worldwide income will be assessed to determine their Vietnam-sourced income.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

Taxable income (Vietnam-sourced income) is determined by prorating the employee’s worldwide income over the number of the employee’s present days in Vietnam. Where the employee is not present in Vietnam, their working days for Vietnam company during the tax year will be used.

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 include the following:

• income being part of overtime or night shift which is higher than the normal working hour salary
• mid-shift meal or lunch allowance, uniform allowance and per diem which are in line with certain regulations / company policy
• allowances for people having contributed to the revolutionary cause in accordance with the law on preferential treatment for such people
• national defense and security allowances as stipulated by law
• allowances as stipulated in the Labor Code, comprising allowances for toxicity and danger applicable to trades, lines of business or jobs at workplaces involving toxic or dangerous elements; attraction allowances for new economic zones, economic establishments, and remote islands with specially difficult living conditions; and regional allowances as stipulated by law for people working in remote or unfrequented areas with an unfavorable climate
• allowances as stipulated in the Law on Social Insurance and Labor Code, like subsidies for one-off difficulties, subsidies for labor accidents and occupational diseases; one-off subsidies on the birth or adoption of a child; subsidies due to reduction in ability to work; one-off subsidy on retirement, monthly widow’s subsidies; retrenchment or loss of work subsidies, unemployment subsidies; other subsidies paid by the Social Insurance Fund; and allowances to resolve social evils in accordance with law
• bonuses/awards attached to titles bestowed by the State or to national and international awards recognized by the State of Vietnam; awards for technical improvements, inventions and innovations recognized by the competent State authorities; awards for detecting and reporting breaches of law to the competent State authorities 
• stationery and telephone allowance, per diem allowance, uniform allowance and meal allowance which are in line with the current regulations of the State and the Company policy.

Are there any concessions made for expatriates in Vietnam?
 

Generally, there is no concession made for expatriates in Vietnam except for tax exemption on 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/jurisdiction. Accommodation of employees provided by employers is taxable based on the actual rental amount but not exceeding 15 percent of total gross assessable income (excluding the housing benefit cost). 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/jurisdictions. In this regard, if the taxpayer has already paid tax in one country/jurisdiction which has DTA with Vietnam, they 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/jurisdiction must be lodged with the tax authority in Vietnam in order to get a tax 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.

• Under current regulations, dividends are treated as income from capital investments and taxed at a flat tax rate as mentioned above.
• Interest income from banks and credit institutions is exempted from PIT. Other forms of interest are taxed as income from capital investment.
• Rental income is considered as business income and subject to tax as stated above.

The taxation treatment of employee stock option programs (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 which are subject to ownership registration (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 (note, transfer of real property is subject to different rates also provided above). The CGT treatment shall be determined on a case-by-case basis.

Not applicable.

Not applicable.

What are the general deductions from income allowed in Vietnam?

The following deductions are applicable to employment income only. In addition, the personal and family relief and deductible donations are granted to resident individuals only.

• For individual taxpayers: VND9 million per month.
• For taxpayer’s dependents: VND3.6 million per month for each qualifying dependent (if required documents are submitted).
• Donations to certain approved charities, human aid, and education funds.
• Payments for compulsory insurance contribution (including social security contributions).

The taxpayer 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 3 months after registration). Each dependent can only be assessed for deduction once in respect of one taxpayer 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.

Taxpayers 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/jurisdictions 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/jurisdictions 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.

Income tax paid overseas may be credited in Vietnam.

This calculation assumes a married taxpayer resident in Vietnam with two children whose 4 - year assignment begins 1 January 2017 and ends 31 December 2020. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 4 years.

Exchange rate used for calculation: USD1.00 = VND22,000

• All earned income is attributable to local sources.
• Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
• Housing benefit is paid in cash to the assignee and no house leasing contract and invoices for rental are supported.
• Interest income is derived from deposit/savings at registered banks or credit institutions.
• The company car is used for business and private purposes and originally cost USD50,000, but it is paid in cash to the assignee.
• Moving expense reimbursement relates to the assignee’s personal purposes.
• The employee is deemed resident throughout the assignment.
• Tax treaties and totalization agreements are ignored for the purpose of this calculation.
• Education fee is paid by the Company and supported with invoices of the school in Vietnam from primary school level to high school level.
• Home leave is for one round home trip of the assignee provided with copies of air tickets and invoices.
• The remuneration is agreed on a gross basis.
• Two children qualify the statutory conditions for tax relief.

Calculation of taxable income (in italics are amounts not included in taxable income)

Calculation of tax liability