Overview and Practical Notes on Vietnam's Personal Income Tax
2025/04/11
- I-GLOCAL CO., LTD. Ho Chi Minh Office
- Yuya Taniguchi
Introduction
Vietnam’s personal income tax (PIT) is a tax imposed on individuals working in Vietnam and has characteristics that differ significantly from Japan’s income tax system. In particular, for foreign expatriates, the scope of taxable income, tax rates, and filing and payment rules are complex, making proper understanding and measures essential. This article summarizes the basics of Vietnam’s personal income tax and systematically organizes and explains even tax-related risks.
1. Overview of Personal Income Tax
1.1 Methods of Determining Residency and Non-Residency
Under the tax law, regardless of the length of stay, tax liability arises in the event of even a single day of work during a business trip to Vietnam, and the methods of tax calculation and rates differ between Vietnamese residents and non-residents as follows.
|
Taxable Income
|
Tax Rates
|
|
|
Resident
|
Worldwide income (Japanese salary + Vietnam-sourced income) | Progressive tax ranging from 5% to 35% |
|
Non-resident
|
Vietnam-sourced income ① When setting Vietnam-sourced income ⇒The set amount plus the total amount of accommodation and other expenses incurred during the stay.② When Vietnam-sourced income is not set ⇒The total worldwide income allocated on a per diem basis according to the number of days stayed in Vietnam |
20% |
At this time, a tax resident is defined as an individual who meets any of the following criteria.
・Stayed in Vietnam for 183 days or more in a calendar year (January 1 to December 31).
・Stayed in Vietnam for 183 days or more within 12 months from the date of first entry into Vietnam.
・Has a rental contract in Vietnam for 183 days or more within the tax year (however, if you possess a certificate of residency issued by a tax authority outside Vietnam, you are determined to be a non-resident).
A common source of misunderstanding is confusing visa or work permit acquisition with residency requirements; however, these are not related to the conditions for determination. Judgement is based solely on whether any of the three above criteria are met.
Below is a flowchart for determining residency status. As a point of caution, although there are no legal stipulations, in practice, someone holding a residence card may be classified as a resident on the basis of having a rental contract. Therefore, if you have a residence card but your stay will be less than 183 days, it is better to obtain a certificate of residence from overseas (*).
* For specific instructions on how to obtain this, please refer to the following National Tax Agency website.
https://www.nta.go.jp/taxes/shiraberu/taxanswer/osirase/9210.htm
1.2 Tax rate
Vietnamese residents are subject to a progressive tax ranging from 5% to 35%. The tax rates themselves are lower compared to Japan, but in Japan, the maximum tax rate of 55% (income tax 45%, resident tax 10%) only applies to monthly salaries of about 3.5 million yen or higher, which is quite limited. Moreover, because many expatriates in Vietnam are subject to the higher brackets of 30% or 35% due to their broad taxable income, in reality, the tax burden often becomes greater than when working in Japan.
|
Taxable Income (per month)
|
Tax Rate
|
|
Up to 5,000,000 VND
|
5% |
|
5,000,000~10,000,000 VND
|
10% |
|
10,000,000~18,000,000 VND
|
15% |
|
18,000,000~32,000,000 VND
|
20% |
|
32,000,000~52,000,000 VND
|
25% |
|
52,000,000~80,000,000 VND
|
30% |
|
80,000,000 VND~
|
35% |
In order to avoid reducing the take-home amount due to differences in tax rates between Vietnam and foreign countries, it is common for companies to cover individual income tax and adjust salaries so that the take-home pay matches the amount received in Japan (net guarantee). In practice, most Japanese expatriates use this method, but when including tax-free benefits and allowances, the cost per expatriate requires a budget of about 2.5 times their annual salary in Japan.
1.3 Self-assessment tax filing method
Filing and payment of taxes will be carried out according to the following schedule.
Monthly filing and payment apply when the Vietnamese entity, which is the salary payer, files and pays VAT on a monthly basis (note); otherwise, and for payments from foreign entities, quarterly filing and payment will apply.
| Matters to be addressed | Deadline |
| Tax code registration | Within 10 days after entry into the country |
| Monthly filing and tax payment/ Quarterly filing and tax payment |
By the 20th of the following month/ By the last day of the month following the end of the quarter |
| Annual tax return (individual) | By the last day of the fourth month from the following fiscal year |
| Annual tax return (employer) | By the last day of the third month after the end of the calendar year |
(Note) Entities required to file and pay VAT monthly are corporations that have been operating continuously for 12 months or more and had sales exceeding 50 billion VND in the previous year.
1.4 Taxable income, deductible items
Salaried income subject to taxation covers a wide range, as various allowances, welfare benefits, and company-paid expenses for individuals are, in principle, considered taxable income. The following are typical examples:
・Housing expenses
・Health checkup and medical screening costs (non-taxable if provided for all employees)
・Assignment allowances, moving allowances (non-taxable for the assignee during assignment)
・Airfare for returning home during vacation (non-taxable once a year for the individual)
・Golf fees, membership fees for golf clubs
・Tax return preparation fee for the accounting firm
・Costs paid to children’s schools other than tuition fees
For housing expenses, if the company contracts directly with an apartment or hotel and pays the related costs, either the “actual company-borne housing expenses” or “15% of taxable income excluding housing expenses,” whichever is lower, will be added to taxable income. A calculation example is shown below.
(Example) If the monthly salary is 10,000 USD and the monthly rent is 2,000 USD (paid by the company)
15% of the salary is 1,500 USD, which is less than the rent of 2,000 USD. Therefore, the taxable income in this case becomes 10,000 + 1,500 = 11,500 USD.
In addition, the following items are subject to income deduction for tax purposes.
i. Employee contributions to mandatory social insurance, health insurance, and unemployment insurance.
ii. Basic deduction: 11 million VND per month.
iii. Dependent deduction: 4.4 million VND per person per month.
The insurance premiums in (i) also include social insurance that is continuously paid in Japan. (iii) Regarding the dependent deduction, although it is technically applicable to a spouse under the law, in practice it only applies when the spouse is over retirement age or has a handicap. For Vietnamese expatriates, the dependent deduction is most commonly applied to children under the age of 18.
2. Points to note regarding expatriate individual income tax
2.1 Taxable year and tax filing patterns for the first year of assignment In principle, the calendar year (January 1 to December 31) is the taxable year, but if the first year of assignment is less than 183 days in the calendar year, the first tax period is set as the continuous 12 months from the date of entry, and the second tax period will follow the calendar year.
Below is an example of a declaration pattern for the first year of assignment. An example declaration pattern for when the first entry into the country for business before assignment is on 2024/2/1, and the appointment date is 2024/6/10 (in this example, assumed to be the same as the actual entry date), is as follows.
| Item | Pattern① | Pattern② |
| Start date of the taxable period | The starting date is 2024/2/1, which is the initial entry date. | The appointment date of 2024/6/10 will be considered as the reference date. |
| Timing of declaration commencement | First quarter of 2024 (January–March) | Second quarter of 2024 (April–June) |
| Potential future tax risks | None | Since declarations were not made starting from the time of the business trip, there is a risk of being required to pay taxes retroactively on income earned during the business trip. |
| Final tax return | If you are determined to be a resident within the taxable period: a final tax return is required. If you are determined to be a non-resident: a final tax return is not required. | |
In practice, the timing to start filing is often calculated from the start date of work specified in the letter of appointment. Although the definition of the initial entry date is unclear under the law, if you visit Vietnam on a business trip before your official assignment, you may be required to count from the entry date during the business trip according to your passport’s entry and exit records. Therefore, if you come on a business trip for preparatory work prior to official assignment, it is recommended to conservatively treat the entry date of the first such business trip as the initial entry date (as in Pattern ① above).
2.2 Risk of being pointed out in a tax audit
Regarding additional taxation in tax audits, the following applies. Basically, you are not pointed out at each tax filing, and most cases are pointed out during tax audits that are conducted every 3 to 5 years. Please note that, since the salary amounts for foreigners are high, this is one of the items most likely to be targeted.
| Additional Tax/Penalty | Amount | Statute of Limitations |
| Additional Taxation | Correct tax amount – amount already paid | 10 years |
| Delinquency Tax | 0.03% per day（10.95％ per year） * Up to June 2016, 0.05% per day |
10 years |
| Penalty for underpayment of taxes (Under-reporting, excessive refunds) |
20% of the additional tax amount | 5 years |
| Penalty for fraudulent activities (Tax evasion, misconduct) |
100% to 300% of the additional tax amount | 5 years |
| Penalty for delayed filing | VND 15,000,000 to 25,000,000 per occurrence | 2 years |
| Administrative disposition | Up to 200 million VND (equivalent to 1.2 million yen) | – |
Below, we will organize the risks that are commonly pointed out during tax audits as a general overview. Since the calculations in practice are also complex and prone to errors, it is recommended to have an experienced practitioner handle them whenever possible.
(1) Tax risks related to expenses and allowances
・VATinvoices: If there is no VAT invoice, or if there are deficiencies, there is a high risk that the expense will be regarded as unrelated to the business and considered a benefit to an individual. In the past, there have been cases where entertainment and travel expenses advanced by expatriates were not recognized as expenses because of taxation issues, with the amounts being considered as the expatriate’s income.
・Clarification of internal regulations: While various allowances and employee benefits are generally not subject to individual income tax, there is a risk they may be deemed personal benefits and thus taxable if they are not stipulated in financial regulations or employment contracts.
(2) Taxation risks for non-residents
・Short-term resident tax exemption application: Application for exemption for non-residents based on the Japan-Vietnam tax treaty is possible if certain conditions are met. Until a few years ago, applications would sometimes be approved, but recently, the tax authority’s view on permanent establishments has changed and there is a tendency for applications to be rejected. Even if it is considered that the exemption conditions are met, it is recommended to declare and pay taxes on Vietnam-sourced income to avoid additional tax assessments or late payment interest.
・Legal representatives based on business trips: Legal representatives tend to be scrutinized more strictly compared to other expatriates. Depending on the viewpoint of the tax authorities, there is a risk that the representative will be pointed out to receive a salary even if they have not come to Vietnam, so it is recommended to set Vietnam-sourced income. At this time, if the amount set is lower than “the amount apportioned by the number of days stayed in Vietnam from worldwide income,” there is a risk that it will be deemed inappropriate, so please also pay close attention to the appropriateness of the amount.
In conclusion
Vietnam’s personal income tax system is different from Japan’s, requiring careful handling for expatriates and business travelers. In particular, since tax audits can have a significant financial impact, it is essential to understand the risks and ensure accurate filing and payment. It is recommended to stay updated on the latest regulations and practices, and to work with experts to respond appropriately.
Related reports can be found here
We present relevant reports on this topic below. Please take a look at them as well.
・Personal income tax for business travelers to Vietnam and the possibility of applying for short-term stay exemptions
・Handling of insurance premiums paid overseas and points to note regarding Vietnamese personal income tax
・How to determine the authority for personal income tax filing
