What are regulations on PIT withholding for Vietnamese non-residents in Vietnam?

Who is a Vietnamese non-resident?

According to Article 2 of Decree 65/2013/ND-CP it is stipulated:

Taxpayer

1. Personal income taxpayers include resident and Vietnamese non-residents with taxable income as prescribed in Article 3 of the Personal Income Tax Law and Article 3 of this Decree. The scope of determining taxable income for taxpayers is as follows:

a) For resident individuals, taxable income is income arising within and outside the territory of Vietnam, regardless of the place of payment;

b) For Vietnamese non-residents, taxable income is income arising in Vietnam, regardless of the place of payment.

2. A resident individual is a person who meets one of the following conditions:

a) Present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day of presence in Vietnam;

An individual present in Vietnam under this point is considered to be physically present within the territory of Vietnam.

b) Has a permanent residence in Vietnam in one of the following two cases:

- Registered permanent residence in accordance with the law on residence;

- Leased house for residence in Vietnam according to the housing law, with lease contracts lasting 183 days or more in the tax year.

In the case where an individual has a permanent residence in Vietnam under this point but is actually present in Vietnam for less than 183 days in the tax year and cannot prove residency in another country, the individual is considered a resident in Vietnam.

3. A Vietnamese non-resident is someone who does not meet the conditions specified in Clause 2 of this Article.

According to Article 2 of Decree 65/2013/ND-CP, a Vietnamese non-resident is a person who does not meet the criteria to be considered a resident individual in Vietnam. Specifically, an individual is identified as a non-resident when failing to satisfy the following two conditions:

(1) Number of days present in Vietnam

Individual is present in Vietnam for fewer than 183 days in a calendar year or 12 consecutive months from the first day of presence.

(2) Permanent residence in Vietnam

- Has no registered permanent residence according to the law on residence, or

- Does not have a leased house for residence in Vietnam with a lease contract lasting 183 days or more in the tax year.

Note: If an individual has a permanent residence in Vietnam but is actually present in Vietnam for fewer than 183 days in the tax year and cannot prove being a resident of another country, then that individual is still considered a resident in Vietnam.

For Vietnamese non-residents, taxable income is the income arising in Vietnam, regardless of the place of payment.

What are regulations on PIT withholding for Vietnamese non-residents in Vietnam? (Image from the Internet)

Is the income of Vietnamese non-residents subject to tax withholding?

According to Article 28 of Decree 65/2013/ND-CP it is prescribed as follows:

Tax Withholding

1. Tax withholding is when the organization or individual that pays income deducts the payable tax amount from the taxpayer's income before payment.

2. Types of income subject to tax withholding:

a) Income of Vietnamese non-residents, including cases of non-presence in Vietnam;

b) Income from salaries, wages, remuneration, including brokerage commissions;

c) Income from activities as an insurance agent, lottery agent, multi-level marketing;

d) Income from capital investment;

đ) Income from transfer of capital by Vietnamese non-residents, transfer of securities;

e) Income from winnings;

g) Income from royalties;

h) Income from franchise transactions.

Income of Vietnamese non-residents, including cases of non-presence in Vietnam, is subject to tax withholding.

What are procedures for PIT withholding for Vietnamese non-residents?

Based on point a, clause 1, Article 25 of Circular 111/2013/TT-BTC, Tax withholding is when the organization or individual that pays income deducts the payable tax amount from the taxpayer's income before payment.

For the income of Vietnamese non-residents, organizations or individuals paying taxable income to Vietnamese non-residents are responsible for withholding personal income tax before payment.

The method for calculating withholding tax is implemented according to detailed guidance from Article 17 to Article 23, Chapter III of Circular 111/2013/TT-BTC. Specifically, as follows:

(1) Income from business:

Withholding tax = Revenue × Tax rate.

* Applicable tax rates:

- 1%: Trading in goods.

- 5%: Service business.

- 2%: Manufacturing, construction, transport, other sectors.

If a Vietnamese non-resident has revenue from various fields, industries, and trades but cannot segregate the revenue of each field, industry, the applicable personal income tax rate is the highest rate applicable to the actual operational field, industry on the entire revenue.

(2) Income from salary, wages

Withholding tax = Taxable income × 20% tax rate.

(3) Income from capital investment

Withholding tax = Total income from investment × 5%.

(4) Income from capital transfer

Withholding tax = Transfer price × 0.1%.

(5) Income from real estate transfer

Withholding tax = Transfer price × 2%.

(6) Income from royalties,

Withholding tax = (Income exceeding 10 million VND) × 5%.

(7) Income from franchise transactions

Withholding tax = (Income exceeding 10 million VND) × 5%.

(8) Income from winnings, inheritance, gifts

Withholding tax = (Income exceeding 10 million VND) × 10%.

Note that Vietnamese non-residents are not allowed to apply deductions for family circumstances, mandatory insurance reductions, or any other deductions. Therefore, PIT is calculated directly on total taxable income without any deductions.