PIT advisory for foreign employees in Vietnam

Foreigners working in Vietnam for 183 days or more per year are subject to personal income tax according to a 5-tier progressive tax rate from 5% to 35% and are entitled to a personal allowance of VND 15.5 million/month. Those working below that threshold are subject to a fixed tax rate of 20% on all income earned in Vietnam, with no allowance. The difference between the two tax regimes is up to VND 4.75 million/month for the same salary level; this figure changes significantly when businesses optimize contract signing times and allowance structures. Read the article below about personal income tax law vietnam 2026:

1. Tax for resident foreign workers

To ensure compliance with tax residency rules vietnam update, businesses need to understand the Vietnamese tax system. Tax regulations for resident foreign workers apply to those who meet one of the following criteria:

  • Residing in Vietnam for 183 days or more in one year or 12 consecutive months from the date of entry.
  • Having a permanent residence in Vietnam (e.g., registered address, rented house, office address).

2. Personal Income

Foreign workers residing in Vietnam must pay personal income tax (PIT) on all sources of income, both in Vietnam and abroad. Taxable income includes salary, business income, investment income, capital gains, real estate, lottery winnings, inheritance, gifts, etc.

PIT compliance for expatriates vietnam

Workers are entitled to family deductions to reduce taxable income, applicable to themselves and dependents (spouse, children) living with them in Vietnam. The deduction is calculated from the month they become residents and ends when their residency status ends. The deduction will be adjusted if there are changes in the number of dependents. From January 1, 2026, the personal allowance will be significantly increased from 11 million dong to 15.6 million dong compared to the previous period.

3. Personal Income Tax Calculation

Formula for calculating PIT compliance for expatriates vietnam:

Personal Income Tax = Tax Rate x Taxable Income

  • Taxable income: Income after deducting personal allowances and eligible expenses (social insurance, health insurance, charity). The calculation method may vary depending on the type and source of income.
  • Progressive tax rate: Vietnam applies a progressive tax system, meaning the tax rate increases gradually as income increases.

Practical example: A foreign expert with a gross income of VND 50 million/month, a tax resident, and one dependent:

Gross: VND 50,000,000
Deducting Social Insurance (9.5%, ceiling rate): VND 4,446,000
Deducting Health Insurance (1.5%, ceiling rate): VND 702,000
Deducting Personal Deduction: VND 15,500,000
Deducting Dependent Deduction: VND 6,200,000
Taxable income: approximately VND 23,152,000
Personal Income Tax Payable: approximately VND 2,630,400/month
The business is responsible for deducting and declaring personal income tax monthly according to the prescribed tax payment deadline.

PIT advisory for foreign employees

4. Taxation for Non-Resident Foreign Workers

Non-residents are foreign workers who do not meet the criteria to be considered tax residents in Vietnam. Specifically:

  • They are present in Vietnam for less than 183 days in a tax year or 12 consecutive months.
  • They do not have a permanent residence in Vietnam.
  • Tax Responsibilities of Non-Resident Foreign Workers

Non-resident foreigners must pay tax on income earned in Vietnam. However, they are not entitled to personal deductions like residents. Their taxable income includes salaries and wages earned within Vietnam. Unlike resident taxpayers who are subject to a progressive tax rate, non-residents are taxed at a fixed rate of 20% on their taxable income.

Budgetary risks often go unnoticed: foreign experts typically start as non-residents in the middle of the year and then transition to resident status after completing 183 days. The tax difference during the six months of non-resident status amounts to VND 4.75 million per month, equivalent to VND 28.5 million in additional tax liability in the first year alone. This is a variable that needs to be factored into the personnel budget before signing the contract, not afterward.

5. Exclusions from Taxable Income

Not all income and benefits received by foreign workers in Vietnam are subject to personal income tax. Some types of income and benefits are tax-exempt, meaning they do not need to be declared and taxed, including:

Company-purchased insurance: Health, life, or accident insurance premiums paid by the company for foreign workers are generally tax-exempt. However, there are some important exceptions: compensation or benefits that the employee directly receives from the insurance contract (e.g., health insurance) are taxable.

Medical assistance: When the company provides free or subsidized healthcare services (examinations, treatment), the value of this assistance is generally not taxed. This may include company clinics or insurance at outside clinics. However, cash subsidies for medical expenses are considered taxable income.
Meal allowances: Mid-shift meals and lunches provided by the company at the company canteen or outside locations are generally not taxed. Meal allowances are considered taxable income.

Airfare and tuition: In some cases, round-trip airfare paid by the company for overseas employees’ visits home or tuition for their children studying in Vietnam may be tax-exempt. Specific limits and conditions usually apply.

These tax residency rules vietnam update apply to both resident and non-resident foreign workers, provided they meet the conditions stipulated by the tax authorities. When advising foreign employees on tax settlements, it is important to consider the potential impact of Double Taxation Avoidance Agreements (DTAs). These agreements aim to prevent double taxation and tax evasion and may supersede certain provisions of Vietnamese tax law, including withholding tax obligations on salary.

Collaborating with tax experts and services helps ensure that foreign employees receive accurate and up-to-date information on their tax obligations and exemptions. This support helps foreign workers make informed decisions and comply with both Vietnamese and personal income tax audit risk.

The Vietnamese tax system for foreign workers has specific regulations, particularly regarding residency status and deductions. To provide comprehensive support to foreign workers, it is crucial to regularly update them on the latest tax information, guide them on proper record keeping, and connect them with reputable tax consultants when they encounter problems. By assisting foreign employees in fulfilling their tax obligations correctly and completely, you not only help them work with peace of mind but also contribute significantly to the company’s sustainable development in the Vietnamese market.

For support and consultation, please contact S4B Vietnam.

>>>Read more: Corporate tax vietnam – Small business accounting services Vietnam

S4B Vietnam

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