As a popular destination for expats, Vietnam has taxes that are relatively low globally. The country operates on a progressive income tax system.
Tax residents are subject to Vietnamese personal income tax (PIT) on their worldwide taxable income, wherever it is paid or received. Employment income is taxed on a progressive tax rates basis. Non-employment income is taxed at a variety of different rates.
Non-residents are subject to PIT at a flat tax rate on the income received as a result of working in Vietnam/on Vietnam-related income in the tax year, and at various other rates on their non-employment income. However, this will need to be considered in light of the provisions of any double taxation agreement (DTA) that might apply.
Personal Income Tax (PIT)
The Personal Income Tax (PIT) rate is progressive from 5 to 35 per cent, depending on your revenue. This tax applies to all forms of income, including dividends (except government bonds), interests (except bank deposits and life insurance), winnings, prizes and transfer of land.
If you are deemed a resident in Vietnam, then you will be taxed on your worldwide income, meaning from both within and outside the country.
You are a resident if you have been in Vietnam for 183 days or more, maintain a residence in the country or lease a residence for 90 days or more.
The rates are as follows:
- VND 0 – 60,000,000: 5%
- VND 60,000,001 – 120,000,000: 10%
- VND 120,000,001 – 216,000,000: 15%
- VND 216,000,001 – 384,000,000: 20%
- VND 384,000,001 – 624,000,000: 25%
- VND 624,000,001 – 960,000,000: 30%
- Above VND 960,000,001: 35%
There are certain deductions available, including for children under 18, unemployed spouses, elderly parents and charitable donations.
If you are a non-resident, you will be taxed at a flat rate of 20 per cent on any Vietnamese-sourced income.
There are some specific taxes that will apply from certain sources of revenues, such as capital investments, franchises, real estate, incomes from business & production of goods or services.
Note that personal income tax is different from corporate income tax, in which companies are generally taxed a flat rate of 20 per cent, with some exceptions being taxed between 32 to 50 per cent.
Social, health, and unemployment insurance contributions: Mandatory employee Social insurance, health insurance, and unemployment insurance contributions are deductible for PIT purposes. Contributions to local voluntary pension schemes are deductible (subject to a cap). Contributions to mandatory overseas social and health insurance schemes can also be deducted.
Charitable contributions: Contributions to certain approved charities can be deducted.
Personal allowances are allowed as follows:
- Personal allowance: VND 9 million per month. All tax resident individuals are automatically entitled to this allowance.
- Dependent allowance: VND 3.6 million per month. The dependent allowance is not automatically granted, and the taxpayer needs to register qualifying dependents and provide supporting documents to the tax authority.
The definition of taxable employment income is broad and includes all cash remuneration and various benefits-in-kind. However, the following items are not subject to tax:
- Payments for business trips;
- Payments for telephone charges / stationery costs;
- Office clothes (subject to a cap if the office clothes are provided in cash);
- Overtime premium (i.e. the additional payment above the normal wage, not the full amount of the overtime / nightshift payment);
- One-off allowance for relocation – from Vietnam for Vietnamese working overseas – to Vietnam for expatriates working in Vietnam – to Vietnam for Vietnamese residing overseas on a long term basis friand returning to Vietnam to work;
- Transportation to and from work;
- Once per year home leave round trip airfare for expatriate employees and Vietnamese working overseas;
- School fees up to high school in Vietnam / overseas for children of expatriates / Vietnamese working overseas;
- Training; Mid-shift meals (subject to a cap if the meals are provided in cash);
- Certain benefits in kind provided on a collective basis (e.g. membership fee, entertainment, healthcare);
- Airfares for employees working on a rotation basis in a number of industries (e.g. petroleum, mining);
- Employer’s contributions to certain local and overseas non-mandatory insurance schemes without payout of accumulated premiums to the employees (e.g. medical insurance, accident insurance); and
- Allowances / benefits for wedding, funeral (subject to a cap).
There are a range of conditions and restrictions applicable to the above exemptions.