There are a number of taxes that foreign business owners in Vietnam should be aware of. One of these taxes is Vietnam’s personal income tax which is particularly important for foreign businesses with local employees. With this in mind, this article runs through what this tax is, what it applies, and the key elements that apply to foreign business persons.
What is the Personal Income Tax in Vietnam?
Personal Income Tax in Vietnam–locally known as the PIT–is the tax applied to income earned within Vietnam. It is codified in the Law on Personal Income Tax legislated in 2007. This includes income earned on wages or returns from local investments and depending on the situation possibly income generated overseas.
PIT for foreign employees
A tax resident for PIT purposes is a person that has been in Vietnam for 183 days or more in one calendar year; or that has a permanent residence in Vietnam either a property that they own or that the lease with a rental agreement.
This distinction is important in that non-resident taxpayers are subject to a flat 20 percent tax on their wages or salaries whereas resident taxpayers are taxed progressively.
What are Vietnam’s progressive income tax rates?
Vietnam has seven tiers in its progressive tax rates. The percentage of income tax charged increases as the income generated increases. Note that there are also flat tariffs on capital gains, prizes, and inheritances, however, these generally do not apply to foreign entities. That said, the are detailed in the linked Personal Income Tax Law in Article 23.
Progressive income tax rates, Vietnam, VND millions
| Tier | Annual | Monthly | % |
| 1 | Up to 60 | Up to 5 | 5 |
| 2 | Between over 60 and 120 | Between over 5 and 10 | 10 |
| 3 | Between over 120 and 216 | Between over 10 and 18 | 15 |
| 4 | Between over 216 and 384 | Between over 18 and 32 | 20 |
| 5 | Between over 384 and 624 | Between over 32 and 52 | 25 |
| 6 | Between over 624 and 960 | Between over 52 and 80 | 30 |
| 7 | Over 960 | Over 80 | 35 |
Double taxation agreements
Vietnam has double taxation agreements with most countries in the world. Essentially these agreements allow for two-way communication between tax departments in different countries to ensure tax payers are not taxed twice in two different jurisdictions. For example, a taxpayer from another country who pays tax in Vietnam will not be charged tax in their home country if there is a double taxation agreement in place.
What’s next?
Firstly, Vietnam’s Personal Income Tax. is just one of several taxes in Vietnam foreign firms should be aware of. Other important taxes in Vietnam include Vietnam’s Value-added Tax, Capital Gains Tax, Corporate Income Tax, Foreign Contractor Tax in Vietnam, and Special Consumption Tax. By familiarising themselves with these taxes it may foreign firms to avoid running afoul of Vietnam’s tax department.
Vietnam’s personal income tax regime is relatively straightforward in theory, however, its implementation is somewhat more complex. Vietnam’s tax bureaucracy has a lot of moving parts, and processes and procedures are not always consistent across provinces. With this in mind, foreign businesses looking to keep up with the latest developments in tax regulations should make sure to subscribe to the-shiv.