Liability for income tax for a foreign person is legally determined by his or her residence status. If he or she has been residing in Vietnam for more than 182 days in a tax year, or this individual has rented a house/ apartment/ villa without proof of being tax resident under another jurisdiction within the same period, then a tax-resident of Vietnam is determined and his individual’s worldwide income is subject to Vietnamese tax. On the other hand, an individual is regarded as a tax non-resident if these above criteria are not met by this person. Therefore, only the Vietnam-sourced income is subject to Vietnamese tax.

Types of taxable income for PIT

Extended present employees are subject to pay taxes for the following types of income consisting of: employment income, operation of a household business income capital investment income, real estate and capital transfers income, winning prizes income; royalties, franchises, inheritance, gifts income.

All of the income types are carefully assessed to determine the appropriate tax rates and particular procedures of tax compliance. Especially the most common type of income – employment income, the progressive rates are applied and the top rate is 35% of total income from employment.

Liability for social security

All Vietnamese employees are responsible for the compliance of 3 compulsory insurances including: social insurance (SI), health insurance (HI) and unemployment insurance (UI). However, foreign individuals in international organizations are only required to pay for HI.

From October 2009, any foreign person signing a Vietnam employment contract from 3 months onward with an entity in Vietnam is the statutory object of health insurance. The new rates being applied from the beginning of 2017 are 1.5 percent payable by employees and 3 percent payable by employers.

At the end of 2014, Law 58/2014/QH13 has been passed by the National Assembly, in which the applicable “object” of compulsory SI has been broaden. Accordingly, all expatriate employees working in Vietnam under practicing certificates and licenses issued by Vietnamese competent authorities are included in the new objects. Under the new law, the new object subjecting to the compulsory SI scheme will take effect from the beginning of 2018. However, until now there has been no official guidance; therefore, the contributions to SI are still put online by companies currently. For normal employers, the rate being applied at the moment is 8 percent payable by employees and 17.5 payable for employers.

In Vietnam, the base level to be used for calculating social and health insurances mentioned above has the maximum of 20 times the base salary (which is currently 26,000,0000 VND). This number is expected in increase in 2018.

Foreign employees play an important role in almost international organizations which are doing business in Vietnam. Therefore, international organizations need to fully understand their tax and insurances responsibility required by Vietnamese government. With professional staffs having years of experiences in accounting and finance field, S4B Vietnam would be your best destination to provide suitable solutions for your HR and accounting department. As a results, your human resources will be equipped with necessary benefits to drive your company to success.