Legal News

[Taxation] Tax policies regarding visas, residence cards, work permits, and repatriation expenses for foreign workers

2024/10/18

The tax authorities have repeatedly issued documents expressing their views on tax policies regarding personal income tax (PIT) and corporate income tax (CIT) on visas, residence cards, work permits, and repatriation expenses for foreign workers.
On August 28, 2024, the Bac Giang Provincial Tax Department issued Official Letter 6121/CTBGI-TTHT regarding this matter. The contents are as follows.

1. PIT tax policy regarding the costs associated with obtaining visas, residence cards, and work permits for foreign workers

・If a company pays the costs associated with applying for a work permit required for a foreign worker to work in Vietnam, the responsibility lies with the company (not the worker’s benefit), and such costs are not included in the foreign worker’s taxable income.
・Expenses paid by the company on behalf of foreign workers for visa or residence card applications are included in the worker’s taxable income as wages or allowances, and PIT reporting and payment are required.

2. CIT Tax Policy Regarding Transportation Expenses for Foreign Workers Returning Home

・If a company pays for round-trip airfare for foreign workers once a year, the expenses are not included in the worker’s taxable income and are recognized as a deductible expense for corporate tax purposes if the following conditions are met:
(1) There are appropriate and sufficient invoices or other supporting documents in accordance with the law.
(2) There is a bank transfer statement (if the payment exceeds 20 million dong).
(3) The expense is specified in the employment contract, financial regulations, or collective labor agreement.

・If a company pays for transportation expenses incurred abroad by foreign workers (such as train or bus fares), these expenses are included in the foreign workers’ taxable income and are not recognized as deductible expenses for corporate tax purposes.

Note that the Bac Giang Provincial Tax Office has not explicitly stated whether transportation expenses related to the return of foreign workers (such as airfare, train fares, or bus fares) are considered expenses related to annual leave or expenses for returning after the termination of the employment contract.

In our opinion, this matter is understood to be related to annual leave expenses; however, we recommend considering the company’s specific circumstances and consulting the relevant tax authority’s interpretation while adhering to the law.

References:
Official Letter No. 6121/CTBGI-TTHT dated August 28, 2024