Foreign workers are citizens of foreign nationality who come to work and receive wages in Vietnam (hereinafter referred to as foreign workers) in the following forms:
- Implement the employment contract;
- Internal company transfers;
- Execute various types of contracts or agreements;
- Contracted service provider;
- Offering services for sale;
- Working for a foreign non-governmental organization or an international organization operating in Vietnam that is permitted to do so under Vietnamese law;
- Volunteers;
- The person responsible for establishing the commercial presence;
- Managers, executives, experts, technical workers;
- Participate in the execution of contracts and projects in Vietnam.
The wages and personal income tax of foreign workers are governed by the following regulations.
1. Minimum wage for foreign workers
In Vietnam, the minimum wage is understood as the lowest wage level used as a basis for negotiation between employees and businesses. This includes the wage paid to employees under normal working conditions, ensuring they work the full number of hours per month.
Here are some points to note regarding regional minimum wage levels when employing workers in Vietnam.
According to Decree 38/2022/ND-CP, from July 1, 2022, the regional minimum wage is stipulated as follows:
|
Wage |
Area of application |
|
4.680.000 VND / month |
Businesses operating in areas classified as Region I. |
|
3.920.000 VND / month |
Businesses operating in areas classified as Region II. |
|
3.430.000 VND / month |
Businesses operating in areas classified as Region III. |
|
3.070.000 VND / month |
Businesses operating in areas classified as Region IV. |
Specifically in Ho Chi Minh City:
- Region I includes Thu Duc City, District 1, District 2, District 3, District 4, District 5, District 6, District 7, District 8, District 9, District 10, District 11, District 12, Binh Thanh, Tan Phu, Tan Binh, Binh Tan, Phu Nhuan, Go Vap, Cu Chi District, Hoc Mon, Binh Chanh, and Nha Be.
- Region II includes Can Gio district.
- There are no Zone III and Zone IV.
Subjects to whom regional minimum wage applies
- International organizations, foreign organizations, and foreign individuals in Vietnam who employ workers under labor contracts.
- The enterprise is established, organized, managed, and operates in accordance with the Enterprise Law.
- Workers are employed under labor contracts as stipulated by the Labor Code.
- Cooperatives, farms, cooperative groups, households, individuals, cooperative unions, and other Vietnamese organizations that employ workers under labor contracts.
Foreign-invested enterprises in Vietnam, when applying the regional minimum wage, must ensure that... kIt should not be lower than the regional minimum wage for foreign workers performing the simplest tasks.
2. Tax-exempt income for foreign workers
When settling personal income tax, foreign workers with taxable income must declare all taxable salary income earned during the tax period.
However, some of the following income sources are not subject to personal income tax.
2.1. Expenses for clothing, lunch, travel expenses, and telephone.
For employees working in business organizations and representative offices, the fixed allowance rates applied as below are classified as income not subject to personal income tax.
2.1.1. Clothing expenses
The following amounts of clothing expenses are exempt from personal income tax:
The portion of clothing provided in kind to workers without invoices or supporting documents is fully included in the expenses.
The amount of money for workers exceeding 05 (five) million VND/person/year.
For clothing expenses, whether in cash or in kind, the maximum cash expenditure shall not exceed 05 million VND/person/year, and in-kind expenditures must be supported by invoices and documents.
2.1.2. Lunch and mid-shift meal allowances
The meal allowance for mid-shift or lunch is provided by the employer who organizes mid-shift or lunch meals for the employees.
If the company does not provide meals, the maximum allowance for mid-shift meals for employees shall not exceed 730.000 VND/person/month.
2.1.3. Business trip expenses
If a company advances travel expenses, accommodation expenses, or allowances to employees on business trips and complies with the company's financial regulations or internal rules, then these advances are exempt from personal income tax.
Therefore, if the company's financial regulations or internal rules specify the amount of business trip expenses, then personal income tax will be exempted according to those regulations.
2.1.4. Telephone charges
By law, telephone expenses are not considered taxable income for personal income tax purposes.
Businesses need to set a limit on employee telephone allowances. If actual telephone expenses exceed the amount stipulated by the business, the excess will be subject to personal income tax.
2.2. Allowances and subsidies are not included in taxable personal income.
-
Hazardous and dangerous work allowance for occupations or jobs in workplaces with hazardous or dangerous elements.
-
Attraction allowance, regional allowance.
-
Emergency hardship allowance, work accident and occupational disease allowance, one-time allowance for childbirth or adoption, maternity benefits, allowance for convalescence and health recovery after childbirth…
-
Subsidies for beneficiaries of social welfare programs.
-
One-time allowance for individuals transferring to areas with particularly difficult socio-economic conditions.
-
Special allowances for specific occupations.
2.3. Transportation costs and airfare.
-
Expenses related to transportation to and from work.
-
The cost of a round-trip airfare is paid by the employer for foreign workers working in Vietnam and Vietnamese workers working abroad who return home for annual leave.
2.4. Bonuses are not subject to personal income tax.
-
Bonuses accompanying titles awarded by the State, including bonuses accompanying emulation titles and other forms of commendation as prescribed by law on emulation and commendation.
-
The prize money accompanying national and international awards is recognized by the Vietnamese government.
-
Rewards for technical improvements, inventions, and discoveries recognized by competent state agencies.
-
Rewards for detecting and reporting violations of the law to competent state authorities.
2.5. Monetary or Non-Monetary Benefits
-
If an employer purchases non-mandatory insurance products for their employees that do not accumulate premiums, the cost of these insurance products is not included in taxable personal income.
-
Membership fees: If the card is for shared use and does not bear the name of an individual or group of individuals using it, it is not included in taxable income.
2.6. Other benefits
-
Employer's financial support for the treatment of serious illnesses for the employee and their family members.
-
Tuition fees for children of foreign workers employed in Vietnam studying in Vietnam, and children of Vietnamese workers working abroad studying abroad, from preschool to high school, are paid by the employer.
-
The money received from organizations or individuals to cover funeral and wedding expenses for the employee and their family.
-
The above are the types of income that are not subject to personal income tax that employees need to know in order to accurately calculate the amount of tax they have to pay..
3. Personal income tax for foreign workers
3.1. How to calculate personal income tax for foreign workers
Personal income tax for foreign workers in Vietnam is a matter of great concern to foreign investors and workers when engaging in business, investment, and employment in the Vietnamese market.
To determine how to calculate personal income tax for foreign workers, it is first necessary to determine whether that person is a resident or non-resident in Vietnam.
3.2. How to calculate personal income tax for resident individuals
3.2.1 Basis for determining individual residency:
a) Being present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day of arrival in Vietnam, with the arrival and departure days counted as one (01) day. The arrival and departure days are based on the certification of the immigration management agency on the individual's passport (or travel document) upon arrival and departure from Vietnam. In the case of entry and exit on the same day, it is counted as one day of residence.
An individual's presence in Vietnam, as defined in this section, refers to the individual's physical presence within Vietnamese territory.
b) Having a permanent residence in Vietnam under one of the following two circumstances:
- Having a permanent residence as stipulated by the law on residence:
- For Vietnamese citizens: permanent residence is the place where an individual lives regularly and stably without a time limit at a specific address and has registered their permanent residence in accordance with the law on residence.
- For foreigners: the permanent residence is the address recorded in the Permanent Residence Card or the temporary residence when applying for a Temporary Residence Card issued by a competent authority under the Ministry of Public Security.
- Having rented accommodation in Vietnam in accordance with the law on housing, with lease contracts lasting 183 days or more in the tax year, specifically as follows:
- Individuals who do not have or do not have a permanent residence as guided in point b.1, clause 1, of this Article, but have a total of 183 or more days of rented accommodation under rental contracts in the tax year, are also determined to be resident individuals, even if they rent accommodation in multiple places.
- Rental housing includes accommodation in hotels, guesthouses, motels, hostels, workplaces, office buildings, etc., regardless of whether the individual rents the accommodation themselves or the employer rents it for the employee.
In cases where an individual has a permanent residence in Vietnam as stipulated in this clause, but is actually present in Vietnam for less than 183 days in the tax year and cannot prove that they are a resident of another country, then that individual is considered a resident of Vietnam.
Proof of residence in another country is based on a Certificate of Residence. In cases where an individual is from a country or territory that has signed a tax agreement with Vietnam and does not have a provision for issuing a Certificate of Residence, the individual may provide a copy of their passport to prove their period of residence.
3.2.2. Basis for determining taxable income of resident individuals:
For resident individuals, taxable income includes income earned both within and outside the territory of Vietnam, regardless of where the income is paid.
For individuals who are citizens of countries or territories that have signed an Agreement with Vietnam on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income, and who are residents of Vietnam, the personal income tax obligation is calculated from the month of arrival in Vietnam (in the case of the individual's first presence in Vietnam) until the month the employment contract ends and the individual leaves Vietnam (calculated in full months). They do not need to go through consular confirmation procedures to avoid double taxation under the Double Taxation Avoidance Agreement between the two countries.
3.2.3. Formula for calculating personal income tax for resident individuals:
Personal income tax = Taxable income * Tax rate
In which:
- Taxable income = Taxable revenue – Deductions
- Taxable income = Total income – Tax-exempt income
- Total income includes income from salaries, wages, and other income of a salary or wage nature received by foreign workers during the tax period.
- Tax-exempt income refers to income that is not subject to personal income tax.
- Deductions are amounts deducted from an individual's taxable income before determining taxable income from salaries, wages, and business activities. These include: personal deductions, deductions for insurance contributions, voluntary retirement fund contributions, and charitable contribution deductions.
Tax rate:
- For foreign workers who are resident individuals and sign employment contracts for a term of 3 months or more: a progressive tax rate applies (each portion of income will have a different tax rate; the higher the income portion, the higher the tax rate).
|
Tax bracket |
Taxable income for one year (VND) |
Taxable income for one month (VND) |
Tax rate (%) |
|
1 |
Go to 60 |
Go to 5 |
5 |
|
2 |
On 60 to 120 |
On 5 to 10 |
10 |
|
3 |
On 120 to 216 |
On 10 to 18 |
15 |
|
4 |
On 216 to 384 |
On 18 to 32 |
20 |
|
5 |
On 384 to 624 |
On 32 to 52 |
25 |
|
6 |
On 624 to 960 |
On 52 to 80 |
30 |
|
7 |
On 960 |
On 80 |
35 |
For foreign workers who are resident individuals and sign employment contracts for a period of less than 3 months or do not sign contracts: a tax rate of 10% applies to total income.
3.3. How to calculate personal income tax for non-resident individuals
3.3.1. Basis for determining non-resident individuals:
An individual who does not meet any of the conditions in Clause 1, Article 1 of Circular 111/2013/TT-BTC.
3.3.2. Basis for determining taxable income of non-resident individuals:
Taxable income for non-resident individuals is income arising in Vietnam, regardless of where the income is paid and received.
3.3.3. Formula for calculating personal income tax for non-resident individuals:
Personal income tax = Taxable income * 20% tax rate
In which:
Taxable income from salaries and wages of non-resident individuals is determined in the same way as taxable income from salaries and wages of resident individuals.
The determination of taxable personal income from salaries and wages in Vietnam for foreign workers or non-residents working simultaneously in Vietnam and abroad, but where the income earned in Vietnam cannot be separated, is carried out according to the following formula:
a) For cases where foreign individuals are not present in Vietnam:
|
Total income generated in Vietnam |
= |
Number of working days for work in Vietnam |
x |
Global salary and wage income (before tax) |
+ |
Other taxable income (before tax) arising in Vietnam |
|
Total number of working days in a year |
In this context: The total number of working days in a year is calculated according to the regulations stipulated in the Vietnamese Labor Code.
b) For individual foreign nationals present in Vietnam:
|
Total income generated in Vietnam |
= |
Number of days spent in Vietnam |
x |
Global salary and wage income (before tax) |
+ |
Other taxable income (before tax) arising in Vietnam |
|
365 day |
Other taxable income (before tax) arising in Vietnam as mentioned in points a and b above includes other monetary or non-monetary benefits that employees receive in addition to their salary and wages, paid by the employer or on behalf of the employee.
3.3.4. Responsibilities of businesses when paying salaries to non-resident individuals:
Organizations and individuals in Vietnam that pay taxable income to foreign workers who are non-residents are responsible for deducting personal income tax before paying wages.