Tax Filing Requirements for Foreign Workers in Vietnam: Step-by-Step Guide

For foreign workers in Vietnam, understanding and complying with local tax regulations is crucial for maintaining legal employment status. This comprehensive guide walks you through the essential steps and requirements for tax filing in Vietnam.

Understanding Tax Residency Status

In Vietnam, your tax obligations are primarily determined by your residency status. There are two main categories (Article 2 Law on Personal Income Tax):

• Tax Residents: Individuals who either:
  • Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam;
  • Having a habitual residence in Vietnam, a registered permanent residence, or a rented house for dwelling in Vietnam under a term rent contract.
• Non-Tax Residents: Individuals who don’t meet the above criteria

Tax residents are subject to progressive tax rates on their worldwide income, while non-residents pay a flat rate of 20% on their Vietnam-sourced income (Article 26.1 Law on Personal Income Tax).

Required Documents for Tax Filing

Before beginning the tax filing process, ensure you have these essential documents:

• Valid work permit or work permit exemption certificate
• Labor contract with Vietnamese employer
• Tax registration certificate
• Personal income records and payslips
• Proof of tax-deductible expenses
• Dependent-related documents
• Previous tax declarations (if applicable)

Step-by-Step Filing Process

1. Tax Registration

First-time taxpayers, as workers, must register for a tax code through their employer with the local tax office. This involves (Article 7.9.a Circular 105/2020/TT-BTC):

• Authorization document 
• Documents of the individual (copy of unexpired citizen identification card or ID card, for a Vietnamese nationality individual; copy of unexpired passport, for a foreign national or overseas Vietnamese).
• The income payer shall complete form 05-ĐK-TCT.

2. Monthly Tax Declarations

Employers typically handle monthly tax declarations for employed foreigners. However, understanding the process is important (Article 7, 44 Law on Tax Administration, Article 7.9.a Circular 105/2020/TT-BTC):

• Due date: the 20th of the month succeeding the month in which tax is incurred
• The form required: 05/KK-TNCN
• Payment must be made in Vietnamese Dong Article 7 Law on Tax Administration)

3. Annual Tax Finalization

Taxes and other revenue types under the state budget are reported annually, including: 

• Personal income tax for individuals working as lottery agents, insurance agents, or involved in multi-level marketing, who have not had tax withheld during the year because they did not meet the threshold for tax payment, but by the end of the year, they determine that they are required to pay tax. (Article 8.3.b Decree 126/2020/NĐ-CP)
• For annual personal income tax statements prepared by income earners: the last day of the 4th month from the end of the calendar year

Common Challenges and Solutions

Language Barriers

Language barriers can be a significant challenge when dealing with tax matters, especially when most tax documents are in Vietnamese. This can make it difficult for non-Vietnamese speakers or individuals unfamiliar with the language to understand the content, comply with tax regulations, and fill out forms correctly. As a result, individuals may miss important information, face errors in their filings, or struggle to meet tax deadlines. 

Solutions include:

• Working with bilingual tax advisors
• Requesting English translations of your file from your employer
• Using professional translation services

Documentation Issues

Common problems and solutions:

• Missing documents: This can delay the filing process or lead to penalties for incomplete submissions. 

Solution: Maintain a comprehensive file of all tax-related papers throughout the year, ensuring that you keep all necessary receipts, records, and forms organized and easily accessible.

• Document authentication: Some tax documents may need to be officially authenticated for legal purposes. 
• Solution: Get documents notarized or authenticated when required, to avoid any issues with the validity of your submissions.

Tax Rates and Deductions

For tax residents, progressive rates apply (Article 22 Law on Personal Income Tax, Article 14.2 Decree 65/2013/NĐ-CP):

Available Deductions (Article 19 Law on Personal Income Tax; Article 1 Resolution 954/2020/UBTVQH14, Article 15 Circular 92/2015/TT-BTC).

• Personal deduction: 11 million VND per month (132 million VND per year)
• Dependent deduction: 4.4 million VND per dependent per month

• Insurance contributions withheld from the employee’s salary
• Charitable, humanitarian, and educational contributions

Non-resident individuals are not eligible for family deductions.

Professional Support and Resources

For complex tax situations, consider seeking professional help:

• Certified tax consultants: Offer specialized knowledge in tax compliance and optimization
• International accounting firms: Assist with cross-border tax matters
• Legal advisory services: Provide expert guidance on tax law and help navigate legal challenges

Consulting these professionals ensures informed decision-making, risk reduction, and compliance with tax laws.

Penalties for Non-Compliance

Be aware of potential penalties:

• Late filing: Late payment interest comes to 0.03% per day on unpaid tax (Article 59.2.a Law on Tax Administration)
• Tax evasion: Depending on the severity of the violation, individuals or businesses committing tax evasion may be subject to administrative penalties or face criminal liability for tax evasion. (Article 17 Decree 125/2020/ND-CP and Article 200 Criminal Code)
• Incorrect declaration: 500.00 – 8.000.000đ depends on the severity of the violation and may be applied corrective measures (Article 12.2 Circular 125/2020/NĐ-CP) 

Conclusion

Proper tax compliance is essential for foreign workers in Vietnam. While the process may seem complex, following this guide and maintaining adequate documentation will help ensure smooth tax filing. Consult with tax professionals or your employer’s HR department for guidance when in doubt.

Remember: Tax regulations can change frequently. Always verify current requirements with official sources or tax professionals.

Harley Miller Law Firm “HMLF”

Head office: 14th floor, HM Town Building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.

Phone number: +84 937215585

Website: hmlf.vn 

Email: miller@hmlf.vn