Vietnamese work culture insights you need to know!
Remote working is increasingly being applied, especially since the Covid-19 pandemic. Currently, it is very common for employees in one country to work remotely under a labor contract (LC) with an employer in another country, and Vietnamese employees are no exception.
Currently, there are many Employers that are enterprises established under foreign law, have registered headquarters abroad, and do not have a commercial presence in Vietnam, but recruit Vietnamese workers to work for them. In that situation, many employers and employees do not have a correct legal perspective to comply with labor laws in Vietnam and therefore, the legitimate rights and interests of employees are not guaranteed, and employers also have potential legal risks. In this article, let S4B Vietnam find out more about Vietnamese work culture insights and Freelancing opportunities in Vietnam.
1. Are foreign employers subject to Vietnamese labor laws?
Article 3.2 of the 2019 Labor Code (LLC 2019) defines employers as any enterprise, agency, organization, cooperative, household, or individual that hires or employs employees to work for them under an agreement; if the employer is an individual, he or she must have full civil act capacity. There is no provision mentioning whether the enterprise, agency, organization, or cooperative is established and operates under Vietnamese law or foreign law. Therefore, if foreign employers aim to build a team in Vietnam, business will be subject to Vietnamese labor laws.
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2. Who must declare, pay and settle employee income tax?
The first issue to discuss in this case is the obligation to declare, pay and settle personal income tax (PIT) for employees. Circular 80/2021/TT-BTC stipulates that individuals residing in Vietnam with income from wages paid abroad must declare tax directly to the competent tax authority. Regarding the obligation to deduct, pay and finalize personal income tax of employees, Circular 80/2021/TT-BTC and Circular 111/2013/TT-BTC stipulate that employers have this obligation, which must be performed with the competent tax authority.
However, because employers do not have a commercial presence in Vietnam, they are not granted a tax code or open a bank account in VND to deduct and pay personal income tax to the tax authority. Therefore, when many employers do freelancing opportunities in Vietnam, they agree with their employees that employees are responsible for registering, declaring and paying personal income tax on any income they pay and the employees are fully responsible.
However, despite the above agreement, legal risks for employers still exist. In fact, Vietnam has signed many tax agreements with countries such as Singapore, Japan, Korea, the United Kingdom, etc., which include provisions on double taxation avoidance.
In these agreements, tax payment is usually based on the length of stay of the employee, and in most cases, the employee resides for more than 183 days (in a calendar year) in Vietnam, and thus, the obligation to declare, pay and settle taxes in Vietnam arises.
If Vietnamese employees do not declare and pay personal income tax, or do pay but due to incorrect or insufficient declaration, leading to a shortage of tax payable, the tax authority may take the view that the employer is required by Vietnamese labor law to fulfill this obligation.
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In the worst case, that is, a dispute arises from this tax obligation, the decision on who is obliged to withhold, pay and settle personal income tax for the employee will be decided by a competent court in Vietnam. In practice, competent courts often hold that foreign employers are obliged to deduct, pay and settle taxes for Vietnamese employees (1).
3. Do employers have to pay compulsory insurance for employees?
According to current labor laws, foreign employers are responsible for paying compulsory insurance for employees working for them under labor contracts. Thus, even if they do not have a commercial presence in Vietnam, employers must still comply with this obligation; otherwise, they may be subject to an administrative fine of up to VND 150 million and must pay interest on the unpaid portion of the above insurance.
That said, in reality, the employers mentioned here are not granted social insurance codes to be able to carry out the process of paying compulsory insurance for Vietnamese employees, so even if they want to comply, they cannot.
Above are all Vietnamese work culture insights and tax obligations for enterprises who want to open business in Vietnam, or hiring freelancing opportunities in Vietnam, or building a team in Vietnam. If your business needs support, please do not hesitate to contact us. Established in 2007, S4B Vietnam has been known by many people specializing in human resource outsourcing services. Currently, S4B Vietnam is also developing a Corporate Legal service to support businesses setting up a company in Vietnam.
>>>Read more: Vietnam talent acquisition strategies for foreign workers
S4B Vietnam
- Address: Unit 701B – 701C, Tower A, Handi Resco 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam.
- Tel: + 84 24 3974 4181
- Email: service@s4b.com.vn
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