Personal Income Tax (PIT) for foreign employees in Vietnam is an important issue for both businesses and individuals. During employment, investment, or residence in Vietnam, understanding the rules helps employees comply with the law and allows employers to avoid legal risks. This article gives a concise overview of PIT rules applicable to foreigners in Vietnam.
1. Who Is Subject to Personal Income Tax?
According to Article 2 of the Law on Personal Income Tax 2007 and Circular No. 111/2013/TT-BTC, foreign individuals are classified as either residents or non-residents.
- Resident individuals are those who:
- Stay in Vietnam for at least 183 days in a calendar year, or within 12 consecutive months from the first day of entry; or
- Have a regular place of residence in Vietnam, such as a permanent residence under the law on residence, or a leased house with a term of 183 days or more.
Residents are taxed on their worldwide income.
- Non-resident individuals are foreigners with income arising only in Vietnam. They are taxed on that Vietnam-sourced income only.
2. How to Calculate PIT for Foreign Individuals
The PIT calculation for foreign individuals depends on their tax residency status and the type of taxable income. The general formula is as follows:
PIT payable = Taxable income × Tax rate
Taxable income is determined as total assessable income minus allowable deductions (including family circumstance-based deductions, compulsory insurance contributions, and charitable, humanitarian, or educational contributions).
The applicable PIT rate varies depending on the type of taxable income and tax policies applicable from time to time. Taxpayers are therefore advised to stay updated with the latest regulations to ensure accurate tax compliance.
2.1. Resident Individuals
- Income earned inside and outside Vietnam.
- Methods of calculation:
- If the labor contract is 3 months or more, PIT is calculated using the progressive tax tariff.
- If the contract is under 3 months, PIT is withheld at a flat rate of 10%.
Pursuant to Article 22 of the Law on Personal Income Tax 2007, the progressive tariff applicable to income from business, salaries, and wages is as follows:
| Tax Bracket | Annual Taxable Income (million VND) | Monthly Taxable Income (million VND) | Tax Rate (%) |
| 1 | Up to 60 | Up to 5 | 5 |
| 2 | Over 60 – 120 | Over 5 – 10 | 10 |
| 3 | Over 120 – 216 | Over 10 – 18 | 15 |
| 4 | Over 216 – 384 | Over 18 – 32 | 20 |
| 5 | Over 384 – 624 | Over 32 – 52 | 25 |
| 6 | Over 624 – 960 | Over 52 – 80 | 30 |
| 7 | Over 960 | Over 80 | 35 |
Pursuant to Article 23 of the Law on Personal Income Tax 2007, as amended by Clause 7, Article 2 of the Law on Amendments to Certain Tax Laws 2014, the flat tax rates (applicable to taxable income from capital investment, capital transfer, real estate transfer, winnings, royalties, franchising, inheritance, and gifts) are prescribed as follows:
| Type of Taxable Income | Tax Rate (%) |
| Income from capital investment | 5 |
| Income from royalties and franchising | 5 |
| Income from winnings | 10 |
| Income from inheritance and gifts | 10 |
| Income from capital transfer | 20 |
| Income from securities transfer | 0.1 |
| Income from real estate transfer | 2 |
2.2. Non-Resident Individuals
According to Clause 1, Article 18 of Circular No. 111/2013/TT-BTC, the personal income tax (PIT) payable by a non-resident Individual is determined as follows:
PIT payable = Taxable income × Tax rate of 20%
Taxable income includes salaries, wages, remuneration, and other income of a wage or salary nature earned in Vietnam.
- The taxable period is determined when the organization or individual pays the income.
- For insurance products with an accumulated value, taxable income is determined when the insurance company or pension fund management company pays out the proceeds.
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