ARE FOREIGN WORKERS WORKING IN VIETNAM BUT RECEIVING SALARIES FROM ABROAD SUBJECT TO PERSONAL INCOME TAX?

Pursuant to the provisions of Article 1 of Circular 111/2013/TT-BTC, amended by Article 2 of Circular 119/2014/TT-BTC, foreign workers working in Vietnam but receiving salaries from abroad, whether resident or non-resident, may be subject to personal income tax in Vietnam.

I. Foreign employees working in Vietnam receiving salaries from abroad are subject to personal income tax in Vietnam

Pursuant to the provisions of Article 1 of Circular 111/2013/TT-BTC, amended by Article 2 of Circular 119/2014/TT-BTC stipulating foreign workers working in Vietnam receiving salaries from abroad subject to personal income tax in Vietnam as follows:

- For resident individuals, taxable income is income arising inside and outside the territory of Vietnam, irrespective of where income is paid;

- For individuals who are citizens of countries or territories that have signed an Agreement with Vietnam on avoiding double taxation and preventing tax evasion for taxes levied on income and are individuals residing in Vietnam, personal income tax liability shall be calculated from the month of arrival in Vietnam in case of individuals for the first time be present in Vietnam until the month of termination of the labor contract and leave Vietnam (calculated in full monthly) without having to go through consular certification procedures to be carried out without collecting duplicate tax twice under the Agreement on the Avoidance of Duplicate Taxation between the two countries;

- For non-resident individuals, taxable income is income arising in Vietnam, regardless of where income is paid and received

II. Conditions for foreign workers to be identified as resident and non-resident individuals

According to the provisions of Article 1 of Circular 111/2013/TT-BTC, amended by Article 2 of Circular 119/2014/TT-BTC, an employee is determined to be a resident individual if one of the following conditions is met:

- Being present in Vietnam for 183 days or more in a calendar year or for 12 consecutive months from the first day of presence in Vietnam, in which the arrival and departure dates are counted as one (01) day. The arrival and departure dates are based on the certification of the immigration authorities on the passport (or travel document) of the individual upon arrival and departure from Vietnam. In case of entry and exit on the same day, it is counted collectively as one day of residence.

- Having a permanent residence in Vietnam in one of the following two cases: Having a permanent residence in accordance with the law on residence; 

- Having a rented house to live in Vietnam in accordance with the law on housing, with the term of the lease agreement being 183 days or more in the tax year;

Note: Non-resident individuals are employees who do not meet the above conditions for identifying resident individuals

III. Examples of cases where foreign workers working in Vietnam receiving wages from abroad are exempt from Vietnamese artificial income tax

According to the provisions of Article 2 of Official Letter 855/TCT-HTQT, Personal income of foreign workers from working at representative offices will only be subject to personal income tax abroad and exempt from personal income tax in Vietnam if satisfying 03 following conditions:

- Condition 1: The recipient of the wage is present in the other country for a period or more of the combined time not exceeding 183 days in any continuous twelve-month period.

- Condition 2: The employer or the employer's representative who pays the wages is not a resident of the other country.

- Condition 3: The amount of remuneration must not be incurred at a permanent establishment or a fixed establishment that the employer has in the other country.

Above is an article providing information on the issue of personal income tax in Vietnam of foreign workers working in Vietnam receiving salaries from abroad.

----------

For more information, please contact:

Hoang Pham (James) / Managing Partner at: hoang.pham@vselawyers.com

© 2023 VSE LAWYERS LIMITED LIABILITY LAW COMPANY – All rights reserved.

Attention: This legal update is not an advice and should not be treated as such.