Personal income tax (PIT) is the amount of money that individuals with income from wages and salaries must deduct and pay into the state budget according to the provisions of the law in 2022.
Individuals with income from wages and salaries in Vietnam, whether resident or non-resident, are obligated to pay personal income tax. However, each category of individual has a different method of calculating income tax.
1. How to calculate personal income tax for resident individuals
A resident individual is an individual who has a permanent residence in Vietnam as defined by regulations on residency, or who rents a house in Vietnam in accordance with the law, with a rental period of 183 days or more per year or within 12 consecutive months from the first day of arrival in Vietnam (arrival and departure days are counted as 1 day). For individuals with a permanent residence, income tax is further divided into those with employment contracts of more than 3 months and those with contracts of less than 3 months.
1.1. Individuals who sign employment contracts for more than 3 months.
For individuals who sign employment contracts of 3 months or more, personal income tax is calculated as follows:
Personal income tax payable = Taxable income x Tax rate
In which:
- Taxable income
Taxable income = Taxable revenue – Deductions
= (Total income – Exemptions) – Deductions
Tax-exempt income includes the following:
- The difference in wages resulting from working at night or overtime compared to the legally stipulated wage for working during regular hours.
- Income from salaries and wages of Vietnamese seafarers working for international shipping companies.
Personal deductions include:
- A deduction of VND 11 million per month is granted to the taxpayer themselves (VND 132 million per year).
- A deduction of VND 4,4 million/month/person is granted for dependents.
In addition, insurance premiums, voluntary pension fund contributions, charitable contributions, educational and humanitarian donations are also deductible expenses.
- Tax rate:
Tax rates for individuals with employment contracts of 3 months or more are applied according to different tax brackets, specifically:
| Tax bracket | Taxable income/year (million VND) | Taxable income/month (million 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 |
Once you know your taxable income and tax rate, there are two methods to calculate the amount of tax payable:
Method 1: The method of calculating the tax payable based on each tax bracket and then adding them up, also known as the progressive method.
Method 2: The simplification method is detailed in the following table:
Step |
Taxable income/month (million VND) | Tax rate (%) | Calculate the amount of tax payable. | |
| Option 1 | Option 2 | |||
| 1 | Go to 5 | 5 | 0 million VND + 5% tax-free | 5% TNTT |
| 2 | On 5 to 10 | 10 | 0,25 million VND + 10% of the total tax on a total of over 5 million VND. | 10% of the taxable income – 0,25 million VND |
| 3 | On 10 to 18 | 15 | 0,75 million VND + 15% of the total tax on a total of over 10 million VND. | 15% of the taxable income – 0,75 million VND |
| 4 | On 18 to 32 | 20 | 1,95 million VND + 20% of the total tax on a total of over 18 million VND. | 20% of the taxable income – 1,65 million VND |
| 5 | On 32 to 52 | 25 | 4,75 million VND + 25% of the total tax on a total of over 32 million VND. | 25% of the taxable income – 3,25 million VND |
| 6 | On 52 to 80 | 30 | 9,75 million VND + 10% of the total tax on a total of over 52 million VND. | 30% of the taxable income – 5,85 million VND |
| 7 | On 80 | 35 | 18,15 million VND + 35% of the total tax on a total of over 80 million VND. | 35% of the taxable income – 9,85 million VND |
1.2. Not signing an employment contract or signing an employment contract for less than 3 months.
Individuals residing in Vietnam who sign employment contracts for less than 3 months, or who do not sign employment contracts but receive total income payments of 2 million VND or more per payment, are subject to a 10% withholding tax on their income (deducted before payment) as per point i, clause 1, Article 25 of Circular 111/2013/TT-BTC. However, if they meet the eligibility requirements and provide a commitment form (Form 08/CK-TNCN), no withholding tax is required.
The amount of personal income tax payable in 2022 for those without an employment contract or with an employment contract of less than 3 months is calculated as follows:
Personal income tax payable = 10% x Total income before taxes
1.3. What salary level is subject to tax?
- Individuals with no dependents are required to pay taxes if their salary exceeds 11 million VND per month.
- Individuals with one dependent are required to pay taxes if their monthly salary exceeds 15,4 million VND.
- Individuals with two dependents are required to pay taxes if their monthly salary exceeds 19,8 million VND.
- Individuals with three dependents are required to pay taxes if their monthly salary exceeds 24,2 million VND.
In summary, each dependent will receive a tax exemption of 4,4 million VND, so individuals will pay taxes when their salary income exceeds 11 million VND + 4.4 million VND multiplied by the number of dependents.
The income mentioned above is income from salaries and wages after deducting the following amounts:
- Mandatory insurance contributions, voluntary retirement funds, charitable and humanitarian donations, etc.
- Income tax exemption.
- Tax-exempt items include allowances, subsidies, clothing, lunch, etc.
2. How to calculate personal income tax for non-resident individuals
Taxable income for individuals who are not residents of Vietnam is income arising in Vietnam, regardless of where the income is paid and received.
2.1. Having income in Vietnam
For non-resident individuals with income from salaries and wages in Vietnam in 2022, personal income tax is calculated according to the following formula:
Personal income tax = Taxable income from salaries and wages x 20%
In which:
The taxable income of non-resident individuals is determined in the same way as the personal income tax of resident individuals.
The time when an organization or individual pays income to the taxpayer is the time when taxable income is determined. However, for insurance premium payments, the time when the insurance company or pension fund management company pays out the insurance benefits is the time when the insurance company or pension fund management company pays out the insurance.
2.2. Having income simultaneously in Vietnam and abroad.
For individuals who have income from salaries and wages simultaneously in Vietnam and abroad but cannot separate the income, personal income tax is calculated according to the following formula.
Foreign individuals not present in Vietnam:
Total income generated in Vietnam = (Number of working days for work in Vietnam / Total number of working days in the year) x Global salary and wage income (before tax) + Other taxable income (before tax) generated in Vietnam.
The total number of working days in a year is calculated according to the regulations in Vietnam.
For individual cases involving foreigners present in Vietnam:
Total income earned in Vietnam = (Number of days present in Vietnam / 365 days) x Global salary and wage income (before tax) + Other taxable income (before tax) earned in Vietnam.
Other taxable income (before tax) arising in Vietnam includes benefits that employees receive in addition to their salaries and wages, paid by the employer or paid on behalf of the employee.
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