Personal income tax is required duty of any foreigner who is working in Vietnam. To avoid double taxation, companies and organizations in Vietnam using foreign workers and foreigners themselves should be clear about the way to calculate personal income tax in Vietnam for foreigners according to Vietnamese law. Before calculating the personal income tax of foreigners working in Vietnam, it is required to ascertain whether they are living in Vietnam or not. There are differences in the calculation of tax between residents and non-residents. A foreigner is considered to reside in Vietnam when he is under one of following circumstances:
Staying in Vietnam for 183 days and more in solar calendar or 12 consecutive months from the first day of entering Vietnam, the dates of entry and exit are regarded as one day. The dates of arrival and leave are based on the verification of the Immigration Department on their passports.
Having a Permanent residence in Vietnam, consisting of permanent residence registration or house in period of 90-day renting for living purpose in Vietnam, The renting house includes hotel room, motel, inn, office room, and so on.
Resident foreigners have to pay Vietnam personal income tax on wages earned in Vietnam or even earned abroad. The amount of tax is calculated according to the following progressive tariff:
The income up to 5 million VND: 5%
From 5 million VND to 10 million VND: 10%
Over 10 million VND to 18 million VND: 15%
Over 18 million VND to 32 million VND: 20 %
Over 32 million VND to 52 million VND: 25%
Over 52 million VND to 80 million VND: 30%
Over 80 million VND: 35%
For instance, if a taxpayer with two children as his dependants earns 20 million VND, the taxable income and the tax he has to pay are calculated as follows:
Taxable income = 20 million – (4 million + 1.6 million*2) = 12.8 million.
Personal income tax = 5 million x 5% + 5 million * 10% + 2.8 million * 15% = 1.17 million VND.
If he does not have any dependant, PIT = 5 million * 5% + 5 million * 10% + 8 million * 15% + 2 million * 20% = 2.35 million VND.
Along with the calculation of tax based on above tariff, foreign workers residing in Vietnam are also entitled to family deductions including: The deduction for taxpayers is 4 million VND per month. The deduction for each dependant is 1.6 million per month. In case of non-residences, personal income tax for expats in Vietnam is calculated by the fixed tax of 20% regardless of the aforementioned progressive tariff. In addition, they only have the duty to pay tax on the wages earned in Vietnamese territory, the income earned abroad are not imposed tax.
In order to avoid double taxation imposed on income of foreigners who are working in Vietnam, Vietnamese government and some other countries have signed an agreement of avoidance of double taxation on personal income tax in Vietnam for foreigners. These countries include Australia, the U.K, Poland, Laos, Malaysia, Japan, Hong Kong, India, Germany, Russia, Denmark, Netherlands, Thailand, Myanmar, Indonesia, Uzbekistan, Morocco, Canada, France, Sweden, Italia, Ireland, Saudi Arabia, Palestine, Singapore, Korea, China, Hungary and Switzerland. If people from afore-said nations are working in Vietnam should pay attention to the content of the agreement between their countries and Vietnam to avoid pay double personal income tax of two countries. In case that the labor contract of foreign resident workers terminates before leaving Vietnam, they have to inform the Tax Authorities to implement the settlement.