Complete Guide to Income Tax for Expats Working in Vietnam 2024

As Vietnam continues to attract international talent, understanding the country’s tax system becomes crucial for expatriates working here. This comprehensive guide will walk you through everything you need about income tax obligations in Vietnam for 2024.

Understanding Tax Residency in Vietnam

Tax residency status is the cornerstone of determining your tax obligations in Vietnam. Personal income taxpayers include residents who earn taxable incomes inside and outside the Vietnamese territory and non-residents who earn taxable incomes inside the Vietnamese territory. You are considered a tax resident if you meet any of these conditions (Article 2 Law on Personal Income Tax):

• 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-residents don’t meet these criteria and are subject to different tax rates.

2024 Tax Rates and Brackets

For tax residents, Vietnam applies a progressive tax rate system (Article 22 Law on Personal Income Tax):

Non-residents are subject to a flat tax rate of 20% on their Vietnam-sourced income (Article 18.1 Circular 111/2013/TT-BTC).

What Income is Taxable?

Taxable income for expatriates includes (Article 2 Law on Personal Income Tax):

• Business activities
• Salaries and wages
• Capital investment
• Capital transfer
• Transfer of real estate
• Won prizes
• Copyright
• Commercial franchising
• Inheritances that are securities, capital holdings in economic organizations or business establishments, real estate, and other assets subject to ownership or use registration.
• Gifts that are securities, capital holdings in economic organizations or business establishments, real estate, and other assets subject to ownership or use registration

Tax Deductions and Exemptions

Vietnam offers several deductions to reduce your taxable income:

Personal Deductions 

The resident taxpayer deducts the personal deduction amount from their taxable earnings before calculating the tax on income from businesses, salaries, and wages. (Article 19 Law on Personal Income Tax; Article 1 Resolution Changes to personal income tax exemptions)

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

Personal tax deductions promote fairness by adjusting taxes based on individual financial circumstances. They encourage responsible social behavior, provide economic relief, offer incentives for certain expenditures, and simplify the tax calculation process. These deductions help create a more equitable and efficient tax system that reflects the taxpayer’s actual financial situation.

Other Eligible Deductions (Article 9 Circular 111/2013/TT-BTC; Article 15 Circular 92/2015/TT-BTC).

• Insurance premiums
• Contributions to the voluntary pension fund
• Charitable donations

Other eligible deductions encourage financial responsibility, promote social welfare, and support public health and safety. They provide taxpayers with financial relief by reducing their taxable income, while aligning individual spending with government goals, such as boosting retirement savings, improving healthcare, and fostering charitable contributions. These deductions help create a more secure, socially responsible, and equitable tax system.

Double Taxation Agreements (DTA)

Vietnam has signed double taxation agreements with over 80 countries. These agreements prevent double taxation of income and may provide relief through:

• Tax credits for taxes paid in other countries: 

Under the DTA, individuals or businesses may receive tax credits for taxes paid in the country of origin. For example, suppose a Vietnamese resident earns income in Singapore and pays tax on that income in Singapore. In that case, the individual can claim a credit for the Singapore tax paid when filing their Vietnamese tax return. 

This prevents double taxation, as the Vietnamese tax authorities will allow the individual to offset the amount already paid in Singapore against their Vietnamese tax liability.

• Tax exemptions on certain types of income: 

Some types of income may be exempt from tax in one of the two countries under the DTA. For example, the Vietnam-Singapore DTA may exempt certain types of income, such as dividends or interest, from Vietnamese tax if Singapore has already taxed them.

• Reduced tax rates for specific income categories: 

DTAs often provide for reduced tax rates on certain income types, such as royalties, interest, and dividends. The Vietnam-France DTA, for example, may provide a reduced tax rate for French residents receiving income from Vietnam.

Tax Filing Process

Registration Requirements

There are 3 ways to register for a personal tax code for taxpayers:

• Register directly at the Tax Authority
• Register through the income payer
• Register online through The General Department of Taxation e-portal 

The time limit for first-time taxpayer registration (Article 33 Law on Tax Administration):

Filing Deadlines (Article 44 Law on Tax Administration)

• For taxes declared monthly: the 20th of the month succeeding the month in which tax is incurred;
• For taxes declared quarterly: the last day of the first month of the succeeding quarter.
• For annual personal income tax statements prepared by income earners: the last day of the 4th month from the end of the calendar year;
• If a foreigner is considered a resident individual up to the date of departure, they must finalize their tax obligations for income from salaries and wages: The deadline is the 45th day from the date of departure.(Article 21.3.a.5 Circular 92/2015/TT-BTC)

Compliance and Penalties

Failing to comply with tax obligations can result in:

• Late payment interest: 0.03% per day on unpaid tax (Article 59.2.a Law on Tax Administration)
• Late filing penalty: Depending on the delay of the submission of tax declaration dossiers, a warning may be issued or a fine of up to 25,000,000 VND may be imposed. (Article 13 Decree 125/2020/ND-CP)
• Tax evasion penalties: Depending on the severity of the violation, individuals or businesses committing tax evasion may be subject to administrative penalties or face criminal liability for the crime of tax evasion. (Article 17 Decree 125/2020/ND-CP and Article 200 Criminal Code)

Tips for Tax Compliance

• Keep detailed records of all income sources: Accurate tracking of income sources ensures proper reporting and reduces errors during tax filing.
• Maintain supporting documents for at least 5 years: Keeping supporting documents for at least 5 years helps taxpayers address audits or disputes efficiently.
• Consult with tax professionals for complex situations: Consulting tax professionals is crucial for navigating complex scenarios, minimizing risks, and ensuring compliance.
• Stay informed about tax law changes: Awareness of changes in tax laws helps taxpayers adapt quickly and avoid penalties.

Frequently Asked Questions

• Can I pay my taxes in foreign currency?
  
  The tax declaration and payment use Vietnam dong (VND) (Article 7 of the Law on Tax Administration), except in cases where tax declaration and payment allow the use of freely convertible foreign currencies.
  
  The tax declaration and payment use Vietnam dong (VND) (Article 7 of the Law on Tax Administration), except in cases where tax declaration and payment allow the use of freely convertible foreign currencies. (Article 4 Circular 80/2021/TT-BTC)
  
• What happens if I leave Vietnam before the tax year ends?
  
  You must file a final tax return and settle any outstanding tax obligations before departure. If you have not made a tax statement before exit, you may authorize the income payer or another entity to make the tax statement according to Civil Code. The authorized entity is responsible the tax authority for the PIT payable by the foreign resident. (Article 21.3.a.5 Circular 92/2015/TT-BTC)
  
• Are housing allowances taxable?
  
  Yes, housing allowances count as taxable income unless your employer pays the landlord directly. However, they must not exceed 15% of your total taxable income (excluding the rent). (Article 11.2 Circular 92/2015/TT-BTC)

For specific guidance on your tax situation, consult with a qualified tax professional or contact the local tax authority directly.

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