Step-by-step Vietnam Personal Income Tax (PIT) calculation and annual finalisation for employees and employers, with the latest consolidated Law on Tax Administration, Decree 126, Circular 80, and Circular 94/2025 form updates.
1. What Personal Income Tax “calculation” vs “finalisation” means 2025 (Vietnam context)
1.1. PIT calculation (operational withholding during the year)
For most employment cases, PIT is withheld periodically by the income payer (employer) and remitted to the State budget under tax administration rules. Final PIT liability is reconciled at year-end through finalisation.
1.2. PIT finalisation (annual reconciliation)
PIT finalisation is the year-end reconciliation between:
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Actual taxable income realised in the year,
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Eligible deductions (family, compulsory insurance, donations, etc.), and
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PIT already withheld/paid.
This process determines additional PIT payable or PIT refundable (or offset) under the tax administration framework.
2. Who Must Pay Personal Income Tax (PIT) in Vietnam?
Under Vietnam’s Personal Income Tax (PIT) framework, taxpayers are individuals falling into one of two regulatory classifications: resident individuals or non-resident individuals.
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Resident individuals: PIT applies to taxable income arising inside and outside Vietnam (i.e., effectively a “worldwide income” scope).
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Non-resident individuals: PIT applies to taxable income arising within Vietnam only (i.e., Vietnam-sourced income scope).
2.1. Who is a “resident individual”?
An individual qualifies as a resident if at least one of the following conditions is met:
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Physical presence test: present in Vietnam for 183 days or more in a calendar year, or in any 12 consecutive months from the first day of arrival.
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Permanent/regular accommodation test: having a place of habitual residence in Vietnam, including:
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a registered permanent residence, or
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a rented home in Vietnam under a lease contract.
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2.2. Who is a “non-resident individual”?
A non-resident is an individual who does not satisfy the resident conditions above.
3. How to calculate PIT on salary/wages (resident individuals)
Step 1: Identify taxable income from employment
Taxable income generally includes salary/wages and salary-like benefits, subject to statutory inclusions/exemptions under PIT regulations.
Step 2: Deduct compulsory insurances and eligible deductions
Typical deductible buckets (subject to qualifying criteria and supporting documentation) include:
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Compulsory insurance contributions (e.g., social, health, unemployment, where applicable) borne by the employee and withheld via payroll.
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Family deductions:
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Personal deduction: VND 11,000,000/month
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Dependent deduction: VND 4,400,000/month/dependent
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Eligible charitable/humanitarian/education contributions, if compliant with statutory conditions.
Step 3: Determine assessable PIT base
A practical working formula used in payroll/finalisation is:
Assessable income = Taxable employment income − Compulsory insurance contributions − Family deductions − Other eligible deductions (if any)
Step 4: Apply the progressive PIT schedule (resident employment income)
Vietnam applies a progressive schedule to resident individuals’ employment income. The consolidated PIT law is the controlling source for the rate structure.
Progressive PIT table (resident employment income)
| Tax band | Monthly assessable income bracket | Rate |
|---|---|---|
| 1 | Up to 5,000,000 | 5% |
| 2 | >5,000,000 to 10,000,000 | 10% |
| 3 | >10,000,000 to 18,000,000 | 15% |
| 4 | >18,000,000 to 32,000,000 | 20% |
| 5 | >32,000,000 to 52,000,000 | 25% |
| 6 | >52,000,000 to 80,000,000 | 30% |
| 7 | Above 80,000,000 | 35% |
Under the consolidated PIT law, “other taxable income” categories apply flat (whole) tax rates (“biểu thuế toàn phần”) as follows:
| Other taxable income category | Statutory PIT rate (as per consolidated PIT law) |
|---|---|
| Income from capital investment | 5% |
| Income from capital transfer | 20% |
| Income from securities transfer | 0.1% |
| Income from real estate transfer | 2% |
| Income from prizes/winnings | 10% |
| Income from royalties and commercial franchising | 5% |
| Income from inheritance | 10% |
| Income from gifts/donations | 10% |
For business individuals/households under the revenue-based method, PIT is computed as a fixed percentage of revenue, with rates by sector/business line in Circular 40 Appendix I.
Core matrix (commonly applied categories):
| Business activity type (Circular 40) | VAT rate on revenue | PIT rate on revenue |
|---|---|---|
| Distribution / supply of goods | 1% | 0.5% |
| Services; construction without materials | 5% | 2% |
| Production; transport; services attached to goods; construction with materials | 3% | 1.5% |
| Other business activities | 2% | 1% |
| Property rental (leasing assets) | 5% | 5% |
4. How to calculate PIT on salary/wages (non-resident individuals)
For non-resident individuals, the consolidated PIT law provides Personal Income Tax rates for business income based on business type (applied on revenue, by statutory classification).
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Goods trading: 1%.
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Services: 5%.
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Production, construction, transportation and other business: 2%.
But a non-resident individual working in Vietnam, the PIT rate on salary/wage income is a flat 20%.
Governing rule (current consolidated PIT law):
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PIT payable = Taxable income from salaries/wages × 20%.
DTA (Double Tax Agreement) overlay:
If the individual is eligible under an applicable DTA, the effective tax burden may be reduced or exempted depending on treaty conditions (e.g., presence threshold, employer/PE tests). This must be assessed case-by-case with treaty documentation.
5. Statutory tax-exempt income
Under the consolidated PIT Law text, Article 4 lists the following tax-exempt income categories:
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Real estate transfer between close family members (spouses; parents–children; adoptive parents–adopted children; parents-in-law–children-in-law; grandparents–grandchildren; siblings).
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Transfer of the only residential house / residential land-use right (and attached assets), subject to the “single house/land” condition.
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Value of land-use rights allocated by the State to individuals.
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Inheritance / gifts of real estate between the same close family members as item (1).
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Income from direct agricultural/forestry/salt production; aquaculture/fishing, if unprocessed or only normally pre-processed.
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Income from exchange (conversion) of agricultural land allocated by the State for production.
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Interest on bank deposits and interest from life insurance contracts.
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Remittances.
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The premium portion of night-shift / overtime pay that is higher than normal day / standard-hours pay (only the “paid higher” portion is exempt).
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Pensions paid by the social insurance fund, and monthly pensions paid by voluntary pension funds.
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Scholarships, including those from the State budget and qualifying domestic/foreign scholarship programs.
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Insurance compensation (life/non-life), occupational accident compensation, State compensation, and other qualifying compensation under law.
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Income received from qualifying charity funds approved/recognized by competent authorities and operating on a non-profit basis.
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Foreign aid for charitable/humanitarian purposes (governmental or non-governmental) approved by competent authorities.
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Employment income of Vietnamese seafarers working for foreign shipping lines or Vietnamese lines engaged in international transport.
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Offshore fishing: income of ship owners/right-holders and on-board workers from supplying goods/services directly supporting offshore fishing/exploitation.
New statutory exemptions recently added
- Five-year PIT exemption for qualifying high-quality digital technology industry human resources (employment income) starting from the first qualifying contract date, for specific digital tech projects/activities. Effective 01 Jan 2026.
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Employment income from performing science, technology and innovation tasks. Effective 01 Oct 2025.
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Copyright income from science/technology/innovation tasks when commercialized per relevant laws. Effective 01 Oct 2025.
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Income of individual investors and experts working for innovative startup projects, startup founders, and individuals contributing capital to venture capital funds (per the referenced regime). Effective 01 Oct 2025.
6. Common “non-taxable” items in payroll practice
Separately from Article 4 exemptions, the PIT guidance for employment income clarifies several allowances/benefits that are excluded from taxable employment income—typically if they match State-prescribed categories/thresholds; any excess is generally taxable.
6.1. Allowances/subsidies that are excluded (within prescribed regimes)
Examples include: preferential allowances for meritorious persons; certain wartime/veteran regimes; defense/security allowances; hazard allowances; attraction/area allowances; sudden hardship aid; maternity and social insurance–related statutory benefits; severance/redundancy/unemployment allowances under labour and social insurance rules; certain special occupational allowances; one-time relocation allowances under qualifying conditions; etc.
6.2. Mid-shift meals
Where the employer organizes meals in kind (catering, meal purchase, meal vouchers), the benefit is treated as not included in taxable income.
If the employer pays cash instead, the guidance historically required the cash level to be consistent with the labour authority’s guidance, with any excess taxable.
6.3. Collective transport
Employer-provided collective shuttle transport (home ↔ workplace) is not included in taxable income; individual pick-up for specific persons is treated as taxable.
6.4. Employer-paid job-relevant training
Payments for training/upskilling aligned with the employee’s professional work or the employer’s plan are not included in taxable income.
6.5. Certain expat/overseas assignment items (document-driven)
The guidance also recognizes specific document-conditioned exclusions, including:
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One round-trip airfare per year paid/settled by the employer for foreign employees working in Vietnam (or Vietnamese working abroad returning home), subject to labour contract and routing conditions.
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Tuition fees for children (foreign employees’ children studying in Vietnam; Vietnamese employees’ children studying abroad), from kindergarten to high school, paid on behalf of the employee.
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Certain payments relating to rotation/mobilization patterns in specific industries (e.g., oil & gas / mining) under qualifying labour arrangements.
7. Tax code registration
7.1. Employee registers via employer (most common)
The Law on Tax Administration explicitly permits/structures:
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The employee authorizes the income payer to register the tax identifier for the employee and/or dependents; the income payer consolidates dossiers and submits to its managing tax office.
Operational outcome: The employer then uses the employee’s identifier (now typically the Personal Identification Number, PIN/CCCD, for covered persons) in withholding, declaration, and tax payment processes.
7.2. Individual registers directly with the tax authority
Where registration is not handled via an employer, the individual may register directly. The law frames the dossier at a high level as:
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A tax registration form or tax return, and
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A copy of ID card / citizen ID / passport (passport is relevant for foreign individuals).
Circular 86/2024/TT-BTC governs the detailed procedures and forms for direct registration.
7.3. Business registration “single-window” (for companies)
For enterprises registering under the single-window mechanism, the enterprise registration code also functions as the Tax Identification Number (TIN).
8. Personal Income Tax finalisation: who must finalise, who can authorise and key deadlines
8.1. Who typically must file PIT finalisation?
Under tax administration rules and implementing guidance, an individual is generally required to finalise where they have:
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multiple income sources that were not fully reconciled,
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under-withheld PIT, or
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a refund/offset position requiring formal processing (unless handled through authorised mechanisms).
8.2. Authorisation to the employer (common scenario)
Where eligible, individuals may authorise the income payer (employer) to finalise PIT on their behalf, subject to conditions prescribed in guidance and forms under Circular 80/2021 as updated.
8.3. Statutory deadlines (calendar-year PIT finalisation)
Operationally, the commonly applied deadlines are:
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For income-paying organisations (employer finalisation): end of the 3rd month after year-end (typically 31 March of the following year).
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For individuals (self-finalisation): end of the 4th month after year-end (typically 30 April of the following year).
See this article: Tax filing schedule 2026
9. PIT finalisation dossier, forms, and e-filing workflow (updated for 2025 form changes)
9.1. Core forms (individuals vs income payers)
The controlling form set is prescribed under Circular 80/2021, and Circular 94/2025 is relevant because it updates/amends certain template language and administrative form elements, including identifiers used in tax forms.
In practice, a compliant finalisation pack typically includes:
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The Personal Income Tax finalisation return (per the applicable template in Circular 80/2021, as updated)
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Withholding/tax payment documentation (tax withheld certificates / e-tax confirmations as applicable)
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Supporting documentation for dependents and deductions where required for audit defensibility.
9.2. Digital channel: eTax / eTax Mobile and operational control
Vietnam’s tax administration continues to industrialise digital processing. Notably, the General Department of Taxation has issued an administrative framework for automatic Personal Income Tax refund processing 2025 (a meaningful workflow upgrade for eligible refund cases).
Practical implication: Where the taxpayer profile, withholding data, and bank/account information are clean and consistent, refund processing may be streamlined under the automatic workflow standard. Where data quality is weak, the case is more likely to be diverted to manual validation.
