Notes on Personal Income Tax for Foreigners Working in Vietnam
1. How to determine tax residency status in Vietnam?
Tax residency status in Vietnam is the foundation for foreigners to understand their personal tax obligations. According to regulations, a foreigner is considered a tax resident if they:
Are present in Vietnam for 183 days or more within a calendar year or 12 consecutive months from the date of arrival in Vietnam; or
Have a regular place of residence in Vietnam, such as based on a long-term house rental contract or a temporary/permanent residence card.
Conversely, if these criteria are not met, the individual is considered a non-resident and is only subject to tax on income earned in Vietnam.
2. Applicable tax rates for residents and non-residents – Detailed calculation
2.1. Tax Residents
Subject to tax on their worldwide income, including income earned both inside and outside Vietnam.
Personal income tax (PIT) is calculated using a progressive tax rate schedule, ranging from 5% to 35% depending on the income level.
The PIT formula is:
PIT = (Total income – Deductible expenses – Tax-exempt amounts) × Applicable tax rate
Common deductible items include: personal deduction, dependent deductions, mandatory insurance, charitable contributions, and education/training support.
2.2. Non-Residents
Only taxed on income generated within Vietnam, and are not eligible for family deductions.
A fixed tax rate of 20% is applied on taxable income.
If it is not possible to separate income earned in Vietnam, tax is calculated based on the number of working days or days present in Vietnam within the year.
3. Responsibilities of Employers and Employees – Key considerations
Employers in Vietnam are responsible for withholding, declaring, and paying PIT as well as handling year-end tax finalization.
For tax residents, employers should assist with year-end finalization procedures to ensure accurate deductions and exemptions are applied.
For non-residents, if tax has already been fully withheld, finalization upon exit is generally not required. However, employers should still maintain proper records to avoid future legal risks.
An important note: Vietnam has signed double taxation agreements (DTA) with many countries. Employees and employers should check these treaties to avoid double taxation—once in Vietnam, once in the home country.
4. Practical notes to minimize legal risks in Vietnam
Accurately determine tax residency status from the start – errors can lead to underpayment or overpayment of taxes.
Apply the correct tax rates: 5–35% progressive for residents, 20% fixed for non-residents.
Keep full records of invoices, employment contracts, and deduction documents to support year-end finalization.
Pay attention to realistic exemptions for residents, especially benefits such as housing, tuition support, and business travel allowances.
Employers should be proactive and transparent in withholding and reporting, while supporting employees in fulfilling their tax duties in Vietnam.
Conclusion
Understanding personal income tax regulations for foreigners working in Vietnam—from identifying tax residency status to calculating tax and fulfilling withholding obligations—is a crucial step for both businesses and employees to minimize risks and operate smoothly and legally in Vietnam.
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