Background:

On October 16, 2023, the General Department of Taxation received inquiries from SumiRiko Vietnam Co., Ltd. regarding PIT policies on deducting mandatory insurance contributions paid abroad. Specifically, Mr. Kimata Shigeo, dispatched by the Japanese company to work in Vietnam under intra-company transfer, received income from both the Vietnamese and Japanese companies. His salary paid by the Japanese company included mandatory insurance contributions paid in Japan and was fully reimbursed by the Vietnamese company. The query sought clarification on whether these mandatory insurance contributions could be deducted when calculating PIT in Vietnam.

General Department of Taxation’s Responses:

1. Initial Response (Official Letter No. 6002/TCT-DNNCN, December 29, 2023)

• For foreigners working in Vietnam under intra-company transfer arrangements and receiving income from both Vietnamese and foreign companies, mandatory insurance contributions paid abroad were not deductible if the salary costs, including these contributions, were reimbursed by the Vietnamese company.

2. Revised Response (Official Letter No. 684/TCT-DNNCN, February 27, 2024)

• After reviewing the company’s explanation, the General Department of Taxation provided updated guidance:
  Foreign residents in Vietnam dispatched under intra-company transfer agreements, who pay mandatory insurance contributions abroad in compliance with their home country’s regulations, are eligible to deduct these contributions when calculating taxable income for PIT in Vietnam.
• The revised response does not consider salary cost reimbursement between Vietnamese and foreign companies as a factor in determining the deductibility of such insurance contributions.

Key Takeaways

• Mandatory insurance contributions paid abroad by foreign residents are deductible from taxable income in Vietnam if:
  1. The individual is a resident taxpayer in Vietnam.
  2. The insurance contributions comply with the regulations of the foreign country and are equivalent to Vietnam’s mandatory insurance schemes.
• Salary cost reimbursement arrangements between Vietnamese and foreign companies do not affect the deductibility of these contributions.

Conclusion

Foreign individuals working in Vietnam under intra-company transfer arrangements can deduct mandatory insurance contributions paid abroad when calculating PIT in Vietnam. This applies regardless of whether the contributions are reimbursed by the Vietnamese company.

For further inquiries regarding PIT finalization for wages and salaries, please contact TPM through our website or directly via hotline at (+84) 28 3505 1800 for prompt support.

Quyen Nguyen