Tax regulations for foreign workers working in Vietnam

Foreign workers working in Vietnam need to understand the tax regulations that apply to them. Understanding the tax system in Vietnam is important, not only for the workers themselves but also for businesses that hire foreign workers. The two main taxes that foreign workers often have to pay are personal income tax (PIT) and, in some cases, value-added tax (VAT), also known as VAT.

1. Taxes for resident foreign workers

To ensure payroll compliance and avoid debts, foreign workers managers need to understand the Vietnamese tax system. This article focuses on tax regulations for resident foreign workers, including those who meet one of the following criteria:

  • Reside in Vietnam for 183 days or more in 1 year or 12 consecutive months from the date of entry.
  • Have a permanent place of residence in Vietnam (e.g., registered permanent address, rented house, office address).


Personal Income Tax in Vietnam: Essential Guide for Foreigners

2.Personal Income

Resident foreign workers must pay personal income tax (PIT) on all sources of income, both in Vietnam and abroad. Taxable income includes salary, business, investment, capital transfer, real estate, lottery winnings, inheritance, gifts, etc.

Employees are entitled to family deductions to reduce taxable income, applicable to themselves and dependents (spouse, children) living in Vietnam. The deduction is calculated from the month they become residents and ends when this status is terminated. The deduction will be adjusted if there is a change in dependents.

3. Calculating personal income tax

Formula for calculating personal income tax for permanent foreign employees:

Personal income tax = Tax rate x Taxable income

Taxable income: Income after deducting family allowances and eligible expenses (social insurance, health insurance, charity). The calculation method may vary depending on the type and source of income.
Progressive tax rate: Vietnam applies a progressive tax system, meaning that the tax rate will increase gradually as income increases.
Vietnam’s tax rate in 2024 for foreigners is:

Taxable income/year (VND) Tax rate (%)
Up to 60 million 5
Over 60 million – 120 million 10
Over 120 million – 216 million 15
Over 216 million 20
Over 288 million 25
Over 360 million 30
Over 520 million 35

4. Taxes on non-resident foreign workers

Non-residents are foreign workers who do not meet the criteria to become tax residents in Vietnam. Specifically:

  • Present in Vietnam for less than 183 days in a tax year or 12 consecutive months.
  • Do not have a permanent residence in Vietnam.
  • Tax responsibilities of non-resident foreign workers

Non-resident foreigners must pay tax on income earned in Vietnam. However, they are not entitled to family deductions like permanent residents. Their taxable income includes salaries and wages earned within the territory of Vietnam. Unlike resident taxpayers who are subject to progressive tax rates, non-residents are taxed at a flat rate of 20% on taxable income.

Personal Income Tax In Vietnam | 2024 Guide

5. Exclusions from taxable income

Not all income and benefits received by foreign employees in Vietnam are subject to personal income tax. Some types of income and benefits are exempt from tax, i.e. do not have to be declared and taxed, including:

  • Employer-purchased insurance: Health, life or accident insurance premiums paid by the company to foreign employees are usually exempt from tax. However, there are some important exceptions: compensation or benefits received directly by the employee under an insurance contract (e.g. health insurance) are taxable.
  • Medical assistance: When a company provides free or subsidized health care (exams, treatments), the value of the assistance is usually not taxed. This may include company-based clinics or insurance at external clinics. However, cash benefits for medical expenses are considered taxable income.
    Meal allowances: Mid-shift meals and lunches provided by the company at the company canteen or off-site are generally not taxed. Meal allowances are considered taxable income.
  • Airfares and tuition fees: In some cases, return airfares paid by the company for a foreign employee to visit home or tuition fees for children studying in Vietnam may be exempt from tax. There are usually specific limitations and conditions that apply.

These exemptions apply to both resident and non-resident foreign employees, provided they meet the conditions set by the tax authorities. When advising foreign employees on tax settlements, it is important to be aware of the potential impact of double taxation agreements (DTAs). These agreements are intended to prevent double taxation and tax evasion and may override certain provisions of Vietnamese tax law, including tax exemptions.

Working with tax experts and services from S4B Vietnam who help ensure that expatriate employees are provided with accurate and up-to-date information about their tax obligations and exemptions. This support helps expatriates make informed decisions and comply with Vietnamese and international tax laws.

>>>Read more: Tax audit accounting – The basic difference between tax examination and tax inspection

S4B Vietnam

  • Address: Unit 602A, Tower A, Handi Resco Office Building. 521 Kim Ma Street, Ba Dinh District, Hanoi
  • Tel: + 84 24 3974 4181
  • Email: service@s4b.com.vn

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