Legal Basis

The personal income tax (PIT) policy for foreigners working in Vietnam is regulated in Circular No. 111/2013/TT-BTC and its amendments and supplements. This legal basis helps determine whether an individual is a resident or non-resident in Vietnam based on the number of days present in Vietnam within the tax year or in a continuous 12-month period from the first day of arrival in Vietnam.

Official dispatch No. 85039/CT-TTHT from the Hanoi City Tax Department provides detailed guidelines on the PIT policy for foreigners in Vietnam, including regulations on determining residency status, the tax period, and tax withholding.

Conditions for Determining Residency Status

“…1. A resident individual is someone who meets one of the following conditions: a) Present in Vietnam for 183 days or more within a calendar year or in a continuous 12-month period from the first day of arrival in Vietnam, where the arrival and departure days are counted as one (1) day. The arrival and departure days are based on the certification from the immigration authority on the individual’s passport (or travel document) when entering and leaving Vietnam. In case of entering and leaving Vietnam on the same day, it is counted as one day of residence. …”

According to Article 1 of Circular No. 111/2013/TT-BTC, an individual is considered a resident of Vietnam if they meet at least one of the following conditions:

1. Present in Vietnam for 183 days or more in a calendar year or in a continuous 12-month period from the first day of arrival in Vietnam.
2. Having a permanent residence in Vietnam, including cases of renting accommodation for 183 days or more during the tax year.

Tax Period

• Article 6, Clause 1, Point a, stipulates the tax period as follows: “The tax period for the year: applies to income from business activities and income from wages and salaries. In case an individual is present in Vietnam for 183 days or more in a calendar year, the tax period is calculated based on the calendar year. If an individual is present in Vietnam for less than 183 days but a total of 183 days or more in a continuous 12-month period from the first day of arrival in Vietnam, the first tax period is determined as 12 consecutive months from the first day of arrival in Vietnam. From the second year onwards, the tax period is based on the calendar year…”

1. For foreign individuals who are residents:

• The tax period is determined based on the calendar year if the individual is present in Vietnam for 183 days or more in the tax year.
• If the individual is present for less than 183 days but a total of 183 days or more in a continuous 12-month period, the tax period will be calculated based on a 12-month cycle starting from the first day of arrival in Vietnam.

Example: Mr. B, a foreigner, first arrived in Vietnam on April 20, 2014. By December 31, 2014, he had been in Vietnam for a total of 130 days. In 2015, by April 19, 2015, he had been in Vietnam for 65 days. His first tax period is from April 20, 2014, to April 19, 2015. The second tax period is from January 1, 2015, to December 31, 2015.

Example: Mr. X worked in Vietnam from 2013-2015 (during which he met the residency conditions according to Article 1 of Circular No. 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance) and filed PIT according to regulations before leaving Vietnam. On November 1, 2016, Mr. X returned to Vietnam to work until the end of 2018. His first tax period is from November 1, 2016, to October 31, 2017. The second tax period is from January 1, 2017, to December 31, 2017.

If Mr. Y came to Vietnam on a business trip for one week in February 2017 and later returned to work officially under a labor contract, his tax period will start from the date he came to Vietnam for his business trip in February 2017.

2. For foreign individuals who are non-residents:

• The tax period is determined based on each month or each time income is paid in Vietnam.

Conclusion

Determining the tax period for foreigners in Vietnam is essential to ensure tax obligations are met in accordance with the regulations. Whether an individual is classified as a resident or non-resident will affect how tax is calculated and the amount of tax payable. Foreign individuals working in Vietnam should be aware of and actively monitor relevant tax regulations to avoid risks and ensure compliance with tax obligations.

Ngân Hồ