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Expats in Vietnam, who work and are tax residents there, must pay personal income tax (PIT) according to the relevant Vietnamese tax laws and regulations. When calculating the amount of tax due, the tax residents can apply a number of deductions in order to reduce the taxable income base. First, however, one must be aware of how the tax residency status is defined.
Vietnam applies the residency-based taxation system. An individual is defined as a tax resident if he/she resides in Vietnam for more than 182 days in a calendar year or for 1 year from the date of arrival. Tax residents of Vietnam are subject to taxation on their worldwide income from employment. Similarly to China, Vietnam applies progressive PIT rates which increase accordingly with the level of personal income. Companies must finalize their employees’ PIT liabilities for the previous year at the beginning of the year.
In Vietnam, some of individuals’ incomes are exempt from PIT. Among such incomes are:
– Interest on bank deposits and life insurance contracts;
– Scholarship and pension;
– Overtime wages which are higher than wages for prescribed working hours;
– Approved income received for charity purpose.
Furthermore, as for foreign workers, some of their work-related benefits can be tax exempt if they meet certain requirements set by the regulations:
– Relocation allowance (once) in Vietnam;
– Round-trip air tickets (once per year) for employees on annual leave;
– Tuition and school fees paid by the company for its foreign workers’ children in Vietnam;
– Training fees;
– Allowances for meals;
– Allowances for transportation.
Finally, an expat has the right to register one qualified dependent with the tax authority in order to claim the tax reduction of USD 190 for the dependent. A dependent can be a spouse or a parent who are unable to work, a child below 18 years old, or a child over 18 whose earning income is less than USD 43 per month.
At PHC Advisory, we continuously monitor for the recent updates of the tax policy in Vietnam. Please feel to contact us at info@phcadvisory.com for more information.
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