Overview of Personal Income Tax (PIT) in Vietnam

Date: 2025.04.17

Overview of Personal Income Tax (PIT) in Vietnam

Personal income tax (PIT) in Vietnam applies not only to Vietnamese workers but also affects foreigners (including Japanese) working in Vietnam, expatriates dispatched to Vietnam (including from Japan), employees recruited in Vietnam, and even short-term business trips. Therefore, understanding the tax system is crucial for both businesses and individuals.

Here are 6 important points to consider when learning about PIT in Vietnam:

1. Definition of resident and non-resident individuals – Who is subject to tax?

2. Scope of taxable personal income.

3. Applicable tax rates and the personal income tax schedule.

4. How to calculate personal income tax – Methods for calculating tax in different cases.

5. Key points to note for applicable tax exemptions.

6. Identifying personal income taxpayers in cases beyond salaries and wages.

This article will help you understand of Vietnam’s PIT system and important considerations when working or expanding business here.

1. Definition of resident and non-resident Individuals – Who is subject to tax?

1.1 What is a Resident Individual?

An individual is considered a resident in Vietnam if they meet one of the following conditions:

a. Duration of Stay:
Present in Vietnam for 183 days or more in a calendar year or within 12 consecutive months from the date of entry. (Both the arrival and departure days are counted as one day.)

b. Permanent Residence in Vietnam:
-Vietnamese citizens: Have a stable residence and are registered for permanent residence as per regulations.
-Foreigners: Have a permanent residence card or temporary residence card issued by the Ministry of Public Security.
-Have rented accommodation in Vietnam: Lease contract of 183 days or more in the tax year, including hotels, guest houses, offices, etc.

※ If an individual has a permanent residence but does not stay in Vietnam for 183 days, they are still considered a resident if they cannot prove they are a tax resident of another country. This proof is based on a Certificate of Residence or a passport in the absence of the certificate.

1.2 What is a Non-Resident Individual?

A non-resident individual is someone who does not meet the conditions in section 1.1 above.

2. Scope of taxable personal income

– Resident individuals: Taxed on their worldwide income, regardless of the source of payment.

– Resident individuals from countries with a double taxation avoidance agreement: Taxed only from the first month of entry to the month of contract termination and departure from Vietnam, without the need for consular confirmation procedures.

– Non-resident individuals: Taxed only on income generated in Vietnam, regardless of the source of payment.

3. Applicable tax rates and personal income tax table

Personal income tax rates in Vietnam depend on the residency status:

Residents:

Non-residents:

Progressive Tax Schedule

This tax schedule applies to income from business, salaries, and wages, including total taxable income as stipulated in Articles 10 and 11 of the Personal Income Tax Law, after deducting the following:

Insurance contributions:

Progressive Tax Table (Partial Progressive Taxation)
VND–USD Exchange Rate: 25,600 VND/USD

The above tax schedule applies to resident individuals. Individuals are taxed according to the progressive tax schedule, with tax rates ranging from a minimum of 5% to a maximum of 35%.

However, for Japanese individuals working in Vietnam, even if the income originates from Vietnam, the minimum tax rate of 5% is rarely applied. In practice, the tax rate mainly applied is from 25% and above.

4. How to calculate personal income tax (PIT)

The formula for calculating PIT in Vietnam is as follows:

(1) Taxable income = Total income – Tax-exempt income
(2)Assessable income = Taxable income – Deductions
(3) Personal income tax payable = Assessable income × Progressive tax rate

*Deductions include = Personal deduction + Dependent deduction + Insurance deductions + etc

+Personal deduction: 11 million VND/month
+Dependent deduction: 4.4 million VND/month (Definition of dependents is available on this site)
+Insurance deductions: Mandatory state social insurance, health insurance, etc.

Some tax-exempt income items include:

As stipulated in Articles 2 and 3 of Circular 111/2013/TT-BTC, amended and supplemented by Circular 92/2015/TT-BTC, which regulate types of income not subject to PIT or exempt from PIT.
Examples include:
+Company-covered transportation (commuting and business travel) for Japanese employees
+Tuition fees for children of Japanese employees studying in Vietnam (only tuition is exempt; other related costs may be taxable)
+Business trip allowance for Japanese employees assigned to Vietnam
+One round-trip air ticket per year for Japanese employees to return to their home country (maximum once a year).

💡 Note: If the above allowances are not clearly stated in the labor contract or company’s internal policies, they may not be recognized as tax-exempt income.

5. Key points to note for applicable tax exemptions.

Points to Note:

Handling taxes for individuals on business trips before they become official legal representatives

Some businesses expanding to Vietnam may assume that non-residents are not obligated to pay taxes. However, non-residents are still subject to a fixed tax rate of 20%. (This tax rate only applies to income originating in Vietnam, not the entire global income.)

For example, a business purchases land use rights and builds a factory in Vietnam. During this time, the business has not officially sent personnel to Vietnam but has sent an employee who is expected to become the legal representative in the future to survey the construction progress and study the market on a short-term business trip.

In this case, the employee is still a Japanese resident and is considered a non-resident in Vietnam. However, their income generated in Vietnam is still subject to personal income tax at a rate of 20%.

In principle, it is possible to apply for tax exemption for short-term business trips, but in practice, those expected to become legal representatives are often not granted tax exemption.
Therefore, it is necessary to determine the potential income generated in Vietnam in advance, then calculate personal income tax based on the number of working days in Vietnam (calculated by day) and file the corresponding tax declaration. Please take note of this issue.

Handling taxes for short-term business travelers.

As mentioned earlier, short-term business trips are also obligated to pay taxes as per regulations.
Not only during the initial phase of setting up a factory, but even after establishing a subsidiary in Vietnam, specialized personnel from the headquarters in Japan, such as engineers, quality control staff, sales personnel, etc., will frequently travel to Vietnam for business.

These business travelers are still required to pay personal income tax in Vietnam based on the number of days they stay in Vietnam. However, according to the Double Taxation Avoidance Agreement between Vietnam and Japan, if they apply for tax exemption before the business trip, they may be exempt from personal income tax.

However, it should be noted that if these business travelers are expected to become the legal representatives of the company in Vietnam in the future, in practice, the tax exemption application for short-term business travelers is often not accepted. Therefore, businesses need to proactively consider and handle tax procedures appropriately.

Conditions for tax exemption for short-term business travelers

To qualify for tax exemption as a short-term business traveler, the following conditions must be met:

The total number of days of stay in the calendar year must be less than 183 days.
Salary and other income of the business traveler must be paid by the parent company in Japan. (The prerequisite is that the subsidiary in Vietnam does not pay any salary or expenses related to the business traveler.)
Calculation of days of stay: Both the day of entry and the day of exit are counted as one day.
The above are the important points regarding personal income tax in Vietnam.

On the next page, we will explain in detail about social insurance and income tax for Japanese people working in Vietnam. If your business has any questions about personal income tax in Vietnam or our services, please contact us for detailed consultation.

6. Determining personal income tax payers in cases other than salary and wages

✅ Individuals with business income:

If only one person is named in the Business Registration Certificate → The taxpayer is the named person.
If multiple people are named → Each named individual must pay tax.
If a household has multiple business people but only one person is named → The named person is the taxpayer.
If doing business without a Business Registration Certificate → The actual business person is the taxpayer.
If renting out houses, land, or other assets without business registration → The asset owner is the taxpayer (if there are multiple owners, each must pay tax on their share).

✅ Individuals with income from other sources:

If transferring real estate with co-ownership → Each co-owner must pay tax.
If authorizing the management of real estate with the right to transfer → The authorizer is the taxpayer.
If transferring intellectual property rights or technology transfer with multiple co-owners → Each co-owner must pay tax.
If franchising with multiple participants → Each individual receiving income from the franchise must pay tax.