Regulations on personal income tax with foreigners who are individuals residing in Vietnam

1. When is a foreigner a resident individual?

Clause 2, Article 2 of the Personal Income Tax Law 2007 stipulates that a resident individual is a person who meets one of the following two conditions:

- Be present in Vietnam for 183 days or more within 1 calendar year or 12 consecutive months from the first day of presence in Vietnam.

- Have a permanent residence in Vietnam, including having a place of residence according to permanent residence registration or having a rented house in Vietnam under a term rental contract (rented to live).

2. Salary subject to personal income tax

Pursuant to Article 1 of Resolution 954/2020/UBTVQH14 and Article 9 of Circular 111/2013/TT-BTC, foreigners who sign labor contracts of 3 months or more are only Must pay personal income tax if income from salary or wages is over 11 million VND/month provided there are no dependents.

In case there is 01 dependent, you only have to pay personal income tax if the income from salary or wages is over 15.4 million VND/month (for 01 additional dependent, you only have to pay tax if the income is from salary, Wages increased by 4.4 million VND/month).

3. How to calculate personal income tax for foreigners

The tax calculation for foreign individuals signing labor contracts of 3 months or more is the same as for Vietnamese people signing labor contracts of 3 months or more. In other words, when this is the case, tax will be calculated according to a partially progressive schedule (tax is calculated according to tax levels and each level has a different tax rate).

Pursuant to Article 7 of Circular 111/2013/TT-BTC, the personal income tax amount payable is calculated according to the following formula:

Personal income tax payable = Tax rate x Taxable income

In there:

(1) Taxable income is determined as follows:

Personal income taxable income = Taxable income - Deductions

Taxable income is determined as follows:

Personal income taxable income = Total income - Tax-exempt income

(2) Tax rates are partially progressive

Tax rates apply to resident individuals signing labor contracts of 3 months or more according to the partially progressive method including 07 different tax levels:

- Level 1: 5%.

- Level 2: 10%.

- Level 3: 15%.

- Level 4: 20%.

- Level 5: 25%.

- Level 6: 30%.

- Level 7: 35%.