A Quick Reference Guide for Employers and Employees

Personal Income Tax (PIT) in Vietnam is determined based on an individual’s tax residency status. Accordingly, the tax calculation mechanism distinguishes between residents and non-residents.

For income from wages and salaries, residents are subject to a progressive tax rate schedule. Conversely, other income sources such as investment income and capital transfers are subject to flat tax rates as prescribed by law. Non-residents are generally taxed at a fixed rate on income sourced within Vietnam. This content is updated in accordance with the regulations applicable from 2026. It aims to assist individuals and employers in staying informed about current tax policies, enabling proactive compliance with financial obligations and the development of effective tax planning strategies amidst a constantly evolving legal and economic landscape.

1. Tax Residency Status

In Vietnam, the scope of taxation varies depending on whether you are classified as a Resident or a Non-resident:

• Tax Residents: Subject to personal income tax on their global income (regardless of whether the income is sourced inside or outside of Vietnam).
• Non-residents: Subject to personal income tax only on Vietnam-sourced income.

How to determine Tax Residency Status?

An individual shall be considered a tax resident if they meet one of the following criteria:

a) Being present in Vietnam for 183 days or more:

• Calculated within a calendar year (from January 1st to December 31st); or
• Calculated within 12 consecutive months from the first day of arrival in Vietnam.

b) Holding a Temporary Residence Card or a Permanent Residence Card in Vietnam.

c) Having a residential lease agreement in Vietnam with a term of 183 days or more within the tax year.

Important note:

If you do not meet the criteria mentioned above, you will be classified as a Non-resident. However, there are circumstances where you may still be considered a tax resident of Vietnam if you are unable to provide sufficient evidence of being a tax resident in another country.

2. Taxable income

The concept of Taxable Income plays a fundamental role in determining PIT liabilities, particularly for expatriates, regardless of whether they are classified as tax residents or non-residents in Vietnam. A clear understanding of the scope of this term is essential.

For Tax Residents, taxable income encompasses all income generated on a worldwide basis (global income), irrespective of where the income is paid or received. For Non-residents, taxable income comprises all income derived from services performed within Vietnam, regardless of the location where the payment is settled.

This implies that: If an expatriate performs work under a contract in Vietnam but receives payment into an overseas bank account, such income is, in principle, still subject to Vietnam PIT (except for specific exemptions provided under applicable Double Taxation Avoidance Agreements – DTAAs).

3. Personal income tax rate

Monthly taxable income typically represents an individual’s monthly salary or wages and is subject to PIT at progressive rates ranging from 5% to 35% for Tax Residents, and a flat rate of 20% for Non-residents, as illustrated in the table below.

Monthly taxable income (VND)	Tax Resident PIT Rate	Non-residents PIT Rate
0 to 10 million	5%	20%
Over 10 million to 30 million	10%
Over 30 million to 60 million	20%
Over 60 million to 100 million	30%
Over 100 million	35%

Note:

1. Personal deduction is VND 15,500,000 per month, which reduces the corresponding monthly taxable income.
2. Dependent relief is VND 6,200,000 per dependent per month, provided they meet the eligibility requirements and have been duly registered. This further reduces the monthly taxable income.
3. Other income sources beyond wages and salaries (such as dividends, share sales, capital transfers, real estate transfers, royalties, prizes/awards, inheritances, gifts, etc.) are not subject to the progressive tax rate schedule. Instead, they are taxed at specific rates corresponding to each income category as prescribed by law.

4. Compulsory insurance

Insurance	Employee	Employer	Ceiling Amount*
Social insurance	8%	17.5%	46,800,000 VND
Health insurance	1.5%	3%	46,800,000 VND
Unemployment insurance	1%	1%	106,200,000 VND**

Notes:

• (*) The insurance salary cap (ceiling amount) is the maximum salary level used as the basis for calculating insurance contributions. Any income exceeding this cap is not subject to insurance contributions. These caps are determined based on the Statutory Reference Rate for Social and Health Insurance, and the Regional Minimum Wage for Unemployment Insurance. Effective from July 1st, 2025, the interim Reference Rate is equivalent to the current base salary of VND 2,340,000/month. However, once the base salary is officially abolished, the Reference Rate will be stipulated by the Government, provided it is not lower than the current level.
• (**) The ceiling for Unemployment Insurance varies depending on the Regional Minimum Wage. The cap mentioned above applies specifically to employees working in Region 1.
• Insurance contributions deducted from an employee’s Gross Salary are treated as deductible expenses for Personal Income Tax (PIT) purposes (i.e., they are non-taxable). Furthermore, the employer’s statutory contributions are not considered a taxable benefit for the employee.
• Foreign employees are exempt from Unemployment Insurance contributions.

5. Tax Year and Tax Finalization

Individuals apply the calendar year as the standard tax year. Employers are responsible for withholding PIT from employees’ salaries and remitting it to the State budget on a monthly or quarterly basis. Other taxes are typically required to be withheld at source (e.g., dividends) or self-declared by the individual on a per-occurrence basis.

Individuals must determine whether they are subject to annual tax finalization to ensure their tax affairs are well-managed and completed within the statutory deadlines.

• Authorized Finalization: If an individual receives income from only one single paying entity during the year (or other income within allowable limits), they may authorize that entity to perform the tax finalization on their behalf. The deadline is the last day of the 3rd month following the end of the tax year (i.e., March 31st).
• Direct Finalization by Individuals: If an individual receives income from two or more sources, has overpaid tax and claims a refund, or has a tax liability (underpayment), they must perform the tax finalization directly with the tax authorities. The deadline is the last day of the 4th month following the end of the tax year (i.e., 30^th April).
• Individuals with simple tax profiles and no overpayment or underpayment are not mandatory required to finalize. However, this may impact subsequent years if their tax status becomes more complex. Therefore, all taxpayers are encouraged to perform annual tax finalization.

Note on Service Contracts: For short-term activities conducted under a Service Contract (as opposed to a Labor Contract), PIT is not applied according to the progressive tax schedule at the time of payment. Instead, the paying entity is responsible for withholding a 10% PIT on each payment of VND 2,000,000 or more for tax residents. This withholding is considered a provisional tax payment to the State budget.

At the end of the tax year, the individual is responsible for aggregating this income into their total annual taxable income for finalization based on the progressive tax rate schedule. The 10% tax provisionally paid will be credited against the total tax liability for the year. In the event of a tax shortfall, the individual must pay the additional amount to the tax authority at the time of finalization as prescribed by law.

6. Non-taxable Income and Benefits

While the definition of taxable income is broad, certain specific benefits are excluded from the scope of taxation (tax-exempt allowances). These allowances require valid supporting documents or must be explicitly stated in company policies, depending on the nature of the benefit.

Key tax-exempt allowances include:

• Round-trip Airfare: Once a year for expatriate employees returning home or Vietnamese employees working abroad returning to visit home.
• School Fees: Tuition fees for children of expatriates working in Vietnam (applicable from kindergarten to high school).
• Mid-shift Meals: Businesses may determine a reasonable expenditure based on internal policies or Collective Labor Agreements. Additionally, the previous cap of VND 730,000/month can be referenced and updated according to the latest regulations.
• One-time Relocation Allowance: For expatriates moving to work in Vietnam or Vietnamese employees moving to work abroad.
• Wedding and Funeral Allowances: Allowances or benefits provided for weddings or funerals.
• Uniform Allowance: A tax-exempt cap of VND 5 million/year applies if paid in cash to employees.
• Collective Benefits in Kind: (e.g., membership cards) in cases where the specific individual beneficiaries cannot be identified.

Other sources of non-taxable income include:

• Interest earned on deposits at banks and credit institutions.
• Compensation payments from life and non-life insurance contracts.
• Pensions paid by the Social Insurance Fund.
• Income from real estate transfers between direct family members.
• Income from inheritances or gifts between direct family members.
• Monthly pensions from voluntary pension funds.

7. Double Taxation Avoidance Agreement (DTAA)

These agreements are established to prevent a taxpayer from being taxed twice on the same income: once in Vietnam and once in their country of residence or citizenship.

It is important to note that tax exemption or reduction in Vietnam under a DTAA is not applied automatically. Foreign taxpayers are obligated to submit a notification dossier to the Vietnamese tax authorities at least 15 days prior to the tax payment deadline to request the application of treaty benefits.

The dossier may still be submitted late within 03 years from the tax deadline; however, late filing may result in legal implications or administrative procedural risks.

The DTAAs also serve the following purposes:

• Exemption or reduction of tax payable in Vietnam for residents of the contracting states.
• Allowing Vietnamese residents to credit the tax already paid in a contracting state against their tax liability in Vietnam.
• Cooperation between contracting states in preventing tax evasion regarding income and property taxes.

8. Conclusion

As Vietnam continues to strongly attract high-quality human resources from both domestic and international markets, mastering tax compliance regulations has become an essential requirement. Whether you are a tax resident subject to progressive rates on global income or a non-resident taxed at a flat rate on Vietnam-sourced income, a well-structured tax plan will consistently yield optimal and sustainable financial benefits.

However, given the complexity and periodic updates of tax policies, individuals should proactively stay informed about the latest regulations or consult with professionals to ensure compliance tailored to their specific circumstances. Timely finalization, accurate declaration, and clear classification of taxable income are the keys to effectively managing financial obligations and ensuring the smooth operation of economic activities in Vietnam.

9. How can Russell Bedford KTC support you?

Russell Bedford KTC provides in-depth advisory services to assist individuals and businesses in achieving full compliance with Personal Income Tax (PIT) regulations in Vietnam.

Our team of experts will:

• Advise on and determine tax residency status: helping you clearly understand the distinction between residents and non-residents, as well as the resulting impact on your tax obligations.
• Perform accurate tax calculations: ensuring strict adherence to current statutory regulations.
• Support tax declaration, finalization, and documentation: minimizing the risks of errors, omissions, and delays.
• Review and advise on eligible deductions and exemptions: aimed at optimizing tax liabilities within the legal framework.

Please contact Russell Bedford KTC for professional consultation and support in managing your Personal Income Tax obligations in Vietnam.