Other Briefings
Q&A: Personal Income Tax Finalization in Vietnam
We discuss the personal income tax (PIT) finalization obligations of employers and employees in Vietnam, including deadlines.
Taxpayers who are required to finalize their annual personal income tax (PIT) directly with the tax authorities in Vietnam should submit PIT returns before the end of April of the following year. With more efficient filing methods and heavy penalties for non-compliance, it’s vital for both employers and individuals to understand the requirements of PIT filing clearly and prepare in advance.
What is the purpose of annual personal income tax finalization?
It is a common statutory obligation by individuals to accurately assess the taxpayers’ liabilities or entitlements. It is also done to schedule tax payments, tax refunds, or any other purposes as necessary.
All tax residents are required to summarize their assessable income earned between January 1 and December 31 and calculate the tax payable on such income. Once assessed, PIT must be reported and filed with the tax authorities which completes the annual finalization.
Who is subject to annual personal income tax finalization in Vietnam?
For tax purposes, this means a resident who has stayed in Vietnam for 183 days or more in a calendar year. The length of stay in Vietnam does not have to be continuous. Individuals who have residency in Vietnam are also subject to annual PIT finalization.
Who is not required to finalize PIT?
Non-residents are not required to finalize their PIT in Vietnam.
PIT finalization is not required if the payable PIT amount is less than VND 50,000 (US$2.0) or the payable PIT amount is less than the provisional tax paid or tax withheld, but the taxpayers choose not to receive the refund.
In addition, PIT finalization is not required for individuals who have salary and wages from multiple sources that is less than VND 10 million (US$392.70) and subject to 10 percent PIT withholding.
Our advice is to request your employer to provide you with your monthly pay slips, which include your PIT withholding to estimate your estimated tax payable using progressive tax rates. This will help you assess your taxable income. It is always safer to finalize your PIT rather than face steep fines by the tax authorities.
What is subject to annual PIT finalization?
Below are income categories subject to annual PIT finalization:
- Salary and wages;
- Bonus;
- Allowance in cash, such as housing allowance, meals, and travel allowances; and
- Benefits-in-kind, such as house rental paid by the employer to lessor, health insurance and consulting services fee.
Income sources, such as rental income from investment properties, dividends, royalties, and capital gains as well as other types like lottery and inheritance are not subject to annual PIT finalization; however, they are taxed separately using different tax forms with different deadlines.
What are the typical allowances and benefits subject to PIT?
In Vietnam, several allowances and benefits are subject to PIT. For instance, housing allowances, including rent and utilities, are taxable. However, the assessable amount for housing is capped at 15 percent of the employee’s assessable income. For example, if an employee earns an annual income of US$100,000, the taxable housing allowance is limited to US$15,000 per year.
Other allowances subject to PIT include lunch allowances exceeding VND 730,000 (US$29). Payments for specific memberships, such as golf, healthcare, or spa services, may also be taxable for certain employees. Consulting and tax service benefits provided to employees are similarly subject to PIT.
Flight tickets for foreign employees to their home country once a year are tax-exempt. However, if the employer also covers flight expenses for the employee’s family members, these benefits are subject to PIT.
How do you calculate taxable income for PIT?
The taxable income for PIT determination is to determine the assessable income which includes salary and wages, allowances, other benefits-in-kind, and performance bonuses. However, employees are eligible for personal deductions equivalent to VND 11 million (US$478) as well VND 4.4 million (US176) per dependent. Other deductions include social insurance, health insurance and retirement funds, and any donations to approved charities and humanitarian organizations.
Who can be registered as dependents?
Dependents that can be registered include the taxpayer’s children, which include biological children, adopted children, illegitimate children, and stepchildren. The children should be less than 18 years old, or if they are 18 and over but suffer from some disability or are currently enrolled in a university with a monthly income within a year that is less than VND 1 million (US$39.28).
Other eligible dependents include spouses, parents, stepparents, nieces, and nephews, however these are subject to certain conditions.
Can you describe the general procedures to finalize your annual PIT?
Taxpayers should review their total income earned during the year and do a self-assessment. They can then estimate their total PIT payable and compare with the payable PIT amount to the withheld PIT and provisional PIT paid during the year.
Taxpayers should also be prepared to provide clarifications or supporting documents if requested by the tax authorities.
What are the deadlines for filing?
The deadline for organization and employee salaried individuals is March 31 of every year. For individuals submitting directly to the tax authorities it is typically April 30, so the last day of the fourth month of the calendar year. However, the deadline excludes public holidays and weekends, and as such, the deadline in 2024 is May 2.
Where can you finalize your PIT?
Taxpayers with a single source of employment income from January to December can authorize their employer to finalize their PIT and submit it to the tax authorities on their behalf.
For individuals with income from multiple employers, they can select one tax office for finalizing their PIT. This is typically either the tax office where the employer contributing the most income is located or the tax office corresponding to the taxpayer’s place of residence.
Taxpayers also have the option to engage a specialized tax consultant or professional firm to handle and finalize their PIT obligations.
Why are tax refunds sometimes difficult for foreign employees?
Foreign employees often receive higher salaries than their local counterparts, which translates to a higher tax liability and, consequently, increased scrutiny from tax authorities. To ensure accurate tax collection, authorities carefully review all documents to verify that the assessed PIT is correct, particularly for foreign employees.
Additionally, foreign employees may receive more benefits than local employees, have salary arrangements split between multiple countries, or encounter inappropriate salary structuring. These complexities can lead to discrepancies in tax assessments, prompting tax authorities to conduct thorough checks, which may result in delays in processing tax refunds.
What are the tax compliance requirements for foreign employees leaving Vietnam?
Foreign employees whose employment contracts are expiring must finalize their PIT obligations before leaving Vietnam. They can either handle the process themselves or authorize their employer to do so on their behalf. The deadline for compliance is within 45 days of departure.
It is important for departing taxpayers to fully comply with tax requirements, as this could facilitate future reentry into Vietnam or provide necessary confirmation of tax remittance for filing obligations in other countries.
READ MORE: Stuck in Vietnam? A Guide to Exit Delays Over Tax Obligations
US$1=VND 25,457.47
(This article was originally published in April 2022. It was last updated December 19, 2024.)
About Us
Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Asia, including ASEAN, China, and India. For editorial matters, contact us here and for a complimentary subscription to our products, please click here. For assistance with investments into Vietnam, please contact us at vietnam@dezshira.com or visit us at www.dezshira.com.
Dezan Shira & Associates assists foreign investors throughout Asia from offices across the world, including in Hanoi, Ho Chi Minh City, and Da Nang. We also maintain offices or have alliance partners assisting foreign investors in China, Hong Kong SAR, Dubai (UAE), Indonesia, Singapore, Philippines, Malaysia, Thailand, Bangladesh, Italy, Germany, the United States, and Australia.
- Previous Article Overtime Regulations and Compensation in Vietnam
- Next Article
