Expatriate tax ebook - Vietnam

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Vietnam imposes personal income tax on income depending on its source and the residence status of the individual.

• for Vietnamese and resident expatriates, taxable income includes income from all sources (i.e. worldwide income)
• for non-resident expatriates, taxable income includes only Vietnam source income wherever paid
  

Residence
An individual will be treated as resident in Vietnam for tax purposes if he or she stays in Vietnam for 183 days or more in the period of 12 months from the date of initial arrival in Vietnam. A foreigner who has been considered a resident in the previous year shall be considered a resident for the period of stay in the following year.

Income from employment
An individual is liable to tax on regular and irregular income. The definition of regular income includes salaries, wages, allowances and bonuses; income derived from scientific or technical services, income derived from the licensing of rights to use inventions or trademarks, IT services, consultancy or training services or agency services; income from royalties; broking commissions and other income not included in salaries or wages derived from business production or provision of services which is not subject to corporate income tax.

Irregular income comprises income from technology transfer, and lottery prizes in any form.

Source of employment
Generally, for Vietnam tax purposes, the source of employment is where the services are rendered, regardless of where the remuneration is paid. So, if employment is exercised in Vietnam, tax cannot be avoided by arranging for payment to be received outside Vietnam. Also, when an individual is considered as a resident in Vietnam, he/she is also taxed on all his/her worldwide income, regardless of whether that income originated from employment in Vietnam or from abroad.

An individual staying in Vietnam, however, for less than 183 days is taxed only on his/her income sourced in Vietnam, i.e. his non-Vietnam worldwide income is not taxable.

All foreign sourced income received by individual resident taxpayers will be taxed. Relief or reductions under applicable tax treaties may be applied for.

Benefits (in kind)
Generally for Vietnam tax purposes, all wages, salaries and payments in cash or in kind in respect of employment exercised in Vietnam are taxable in full. The benefits in kind are required to be valued in monetary terms for tax calculation purposes.

Expatriate concessions
An individual staying in Vietnam for less than 183 days is taxed only on his/her income sourced in Vietnam, i.e. his non Vietnam worldwide income is not taxable.

Relief for foreign taxes
Resident expatriates deriving income from a treaty country and paying taxes therein may apply the treaty provisions on elimination of double taxation.

Deductions against income
The law only defines taxable income and non taxable income, so there are no deductible expenses allowed for personal income tax purposes. However, certain types of income (for example passive income such as dividends and interest) are currently excluded from taxable income. Also, some expenses such as a portion of housing costs, school fees for children, air tickets etc) are considered non taxable benefits where they are covered by the employer.

However, from 1 Jan 2009, most of the passive income will be subject to tax. In addition, from 2009, the following deductions will be allowed to residents:
personal deduction of VND 4 million per month (US$250) and
dependent deduction of VND 1.6 Million per month (US$100).

Information about Vietnam:

introduction

facts and figures

basis of taxation

what taxes?

tax planning opportunities