Different types of taxes in Vietnam

If you're coming to Vietnam to work for a company, your employer will almost certainly take care of any tax responsibilities. As long as you are a resident of this country, tax applies to numerous types of compensation and capital. This article gives you a brief overview of the most common policies and procedures. However, should you need additional clarification, the wisest action would be to consult with a local accountant or tax advisor.

Read also Working in Vietnam

The tax system in Vietnam

Since the mid-70s, Vietnam has been transforming itself into a market-oriented economy. Its positive GDP growth over the past decade has made this country a hub for international business ventures. Since joining the World Trade Organisation (WTO) in 2007, Vietnam has maintained a firm anchor with the global market. The average annual Growth of Domestic Product (GDP) between 2016 and 2020 was 5.8%. According to economics, Vietnam should reach 430.88 USD billion in its GDP by the end of 2023.

Throughout this article, we will delve into employment income and other topics such as investment and capital gains tax. We will also discuss the various deductions that are applicable to taxpayers. Whilst tax law in Vietnam can be initially challenging to understand, we have tried to break things down into simple terms. All taxes in Vietnam are imposed on a National level, and there are no local, city, or different provincial taxes you need to worry about.

How to determine if you're a resident in Vietnam

Any foreign individuals can be regarded as Vietnamese residents by the government if they have been present for 183 days or more within a 12-month period. Additionally, if the individual maintains a place of residency in Vietnam for more than half of any given tax year, they are deemed as residents. This place of residence can include a guest house or hotel room. However, if the individual can demonstrate tax residency in another country, they may be considered a tax non-resident. Tax certificates bearing the jurisdictional details of said country would be appropriate evidence.

Unfortunately, Vietnam doesn't have legislation regarding a minimum number of days. Put another way, the date of arrival and date of departure are counted as one day each by the taxman. This means that if you worked in Vietnam for 175 days but then were unable to leave the country for a further ten days, your residency would be considered 185 days. This would mean you are liable for income tax.

Moreover, there are no guidelines to determine the significance of the period from arrival in Vietnam to the beginning of an assignment. As a general rule of thumb, if a foreign individual is considered a tax resident, then tax payments would be calculated from the month they arrived in Vietnam. This means that if you arrived on March 25th but didn't begin work until April 5th, you would be liable for paying tax for March, too.

Are there any tax concessions for expatriates in Vietnam?

There is generally little in the way of concessions for expats who qualify as tax residents in Vietnam. There is one exception, however. Anything that would constitute a one-off relocation allowance payment is overlooked by the government. This tax exemption takes into consideration the following factors:

• Stipulations and parameters of the labor contract;
• School fees for children of the assignee - this includes all dependents from kindergarten age to high school level;
• Airfares for the assignee only for one round-trip home per tax year;
• Insurance contributions that are compulsory in the assignee's home country.

Furthermore, should accommodation in Vietnam compose part of the benefits package, the assignee may be liable for additional tax payments. This tax contribution is calculated by considering the actual rental amount. However, liability would not exceed 15% of the total gross income to be assessed.

Read also Setting up a business in Vietnam

Types of taxable income in Vietnam

In general circumstances, most categories of remuneration from employment in Vietnam are considered taxable. This is regardless of where such remuneration is paid. The following are garden variety examples of taxable, employment-based income:

• Wages, salary, and anything that could fall under the umbrella of such categories;
• Living allowances that are receivable by individual employees;
• Brokerage commissions;
• Remuneration from clinical trials or participation in scientific or technological research pursuits;
• Royalties from books or other creative endeavors such as music sales;
• Payments from business associations or corporate councils;
• Employment bonuses, whether monetary or not. This includes stocks and shares.

How is a salary from abroad calculated in Vietnam?

Income from other countries or jurisdictions is taxed at a progressive rate for residents in Vietnam. On the other hand, non-residents are only liable to pay tax on any income earned in Vietnam. Anything earned abroad is not taxable for non-residents.

Double tax treaties (DTAs) have been signed by the Vietnamese government in cooperation with other jurisdictions. This provides that if the taxpayer has made tax contributions in a country that has a DTA with Vietnam, they may avoid paying tax here. The same applies vice versa. Unfortunately, this process is not automatic. The taxpayer must acquire the appropriate documentation to prove that tax has been paid in another country. This certificate must then be presented with the necessary tax authority in order to receive the tax credits.

The following 80 countries have signed DTAs in cooperation with the Vietnamese authorities:

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How employment income is calculated in Vietnam

Individual foreigners are at liberty to declare their own taxes to the authorities in Vietnam. However, the local tax authorities can insist that Vietnamese employers collect tax contributions on behalf of the foreign assignee. The main purpose of this is simply to ensure a timely declaration and submission of the assignee's tax contributions.

In these circumstances, the employer would be responsible for holding a proportion of the assignee's salary back. This would be in accordance with the personal tax liabilities of each individual foreign assignee. The withheld amounts must be deposited with the State Treasury following statutory deadlines.

Tax residents in Vietnam are not subject to more than 10,000,000 VND per month, depending on their salary. If you make 5 million VND or less (USD 205), you will be taxed 5%. For every 5 million VND increase in your salary, the tax also raises 5%. For example, 10 million VND (USD 411) is 10% tax, and 15 million VND (USD 616) is 15%. The highest level of income tax is 35% for annual salaries over 80 million VND (USD 3,288).

Regarding business income in Vietnam, the following rates are applied to entities whose income exceeds 100,000,000 VND per year.

Investment and Capital Gains Tax in Vietnam

Anything of this nature is regarded as non-employment income and is susceptible to tax. This is under personal income tax legislation, which was passed in January 2009.

Dividends are regarded as a source of income from capital investments and are subject to 20% tax. Aside from anything offered by banks and credit institutions, any form of interest payment is treated as a form of income from capital investment. It is, therefore, subject to income tax. Inbound rental payments fall under the same taxable income category.

Good to know:

Gains and losses from foreign exchanges are not subject to tax. Nor are gains and losses from the principal residence. While personal use items cannot be subject to personal income tax, gifts from an employer to an employee are. This is because they are considered as employment income and, thus, are taxed appropriately.

Other forms of taxes in Vietnam

While there is no provincial tax added to goods and services in Vietnam, we encourage you to keep these two forms of tax in mind as well.

Business licenses tax

If you operate and own a business in Vietnam, you will pay an annual tax to keep your license up-to-date. As of 2023, the taxable amount ranges from 1 million VND(41 USD) to 3 million VND (123 USD) per year.

Value-added tax (VAT)

As of July 2023, the VAT rate has been decreased from 10% to 8% until December 2023. If you are a tourist in Vietnam, then you may be eligible for an 85% refund on VAT paid during your trip. In order to receive a refund, you must have your passport at the time of purchase and ask the retailer for an original tax refund receipt.

Read also Traveling to Vietnam

Property tax

If you have a rental in Vietnam, you will pay a rental fee for the land the building is on versus property tax. If you own your home in Vietnam, then property taxes range from 0.03% to 0.15%, priced by square meter of land. You will need to speak with regional ward police to understand the current rates at the time of purchase.

Read also Buying a property in Vietnam

Deductions from income in Vietnam

It must be stressed that these deductions are only applicable to employment income in Vietnam. Individual tax residents can write off up to 9 million VND per month, providing such claims are supported with the appropriate evidence. An additional 3.6 million VND may be deducted per qualifying dependent of the taxpayer. Furthermore, donations to education funds and charities can be written off under Vietnam's tax laws. Lastly, insurance contributions also fall under tax deductions in Vietnam.

Any resident taxpayer wishing to claim dependent relief must submit their claims to the local tax authorities by January 30th. If this is not feasible, then said claims should be submitted before the last day of the month they begin their labor contract. Supporting documentation must be registered within 3 months of the dependency claim. Only one taxpayer is eligible to claim a deduction for a single dependent.

Types of income that are exempt from tax in Vietnam

Regardless of coming under the classification of employment income, there are a number of exemptions. Even if these aren't based on current tax legislation in Vietnam, they are at least practiced by the local tax authorities.

• Income as a result of night shifts or overtime, which is paid at a higher hourly rate than normal;
• Allowances for uniforms and mid-shift meals that correspond with company policies;
• Legally stipulated national defense and security allowances;
• Allowances for anyone contributing to the revolutionary cause;
• Allowances for those employed at workplaces that contain dangerous chemicals or elements. Additionally, allowances for those working in dangerous climates;
• Allowances for social insurance, one-off difficulties, subsidies given for industrial accidents, occupational disease or reduction in ability to work;
• Subsidies for the adoption or birth of a child, retirement, unemployment, or widowhood;
• Any bonuses or awards which are linked to titles bestowed by the Vietnamese government. This includes awards for inventions, innovations and technological improvements;
• Awards for reporting breaches of the law to the state authorities;
• Telephone and stationery allowances.

The following types of expenditure are also not susceptible to tax:

• Any expenses incurred during business trips, regardless of whether they are in Vietnam or abroad;
• Standard commutes for employees to their workplace from home and vice versa;
• Airfares for anyone working on a rotational basis throughout industries such as mining and petroleum;
• Work-based training and education.

Lastly, there are a number of remuneration categories outside of employment income that are not subject to tax:

• Any interest earned on deposits with life insurance policies and credit institutions or banks;
• Compensation received from insurance policies, regardless of whether they are a life or non-life scheme;
• Retirement pensions that are recognized under the SI law or any international equivalent;
• Any income gleaned from the transfer of properties between direct family members. Inheritance and gifts from these same family members are also exempt from tax,
• Income from casino winnings.

Useful links:

Vietnam - Individual - Taxes on personal income

Vietnam Personal Income Tax - Vietnam Guide - Doing Business in Vietnam