Exemption from Personal Income Tax in Vietnam for Foreign Individuals Who are Residents in France: Is it Possible?
How is the tax obligation for income derived from dependent personal services determined?
According to Article 31 of Circular 205/2013/TT-BTC on determining tax obligations for income derived from dependent personal services, it is stipulated as follows:
Determination of tax obligations for income from dependent personal services
1. According to the provisions of the Agreement, an individual who is a resident of a Contracting State that has signed the Agreement with Vietnam and earns income from employment activities in Vietnam shall pay income tax on that employment income in Vietnam according to the current regulations on personal income tax of Vietnam.
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2. If the individual mentioned in Clause 1 simultaneously satisfies all three of the following conditions, the wages received from work performed in Vietnam will be exempt from income tax in Vietnam:
a) The individual is present in Vietnam for less than 183 days in a 12-month period beginning or ending in the tax year; and
b) The employer is not a resident of Vietnam regardless of whether the wages are paid directly by the employer or through an agent of the employer; and
c) The wages are not borne and paid by a permanent establishment that the employer has in Vietnam.
Therefore, the determination of tax obligations for income derived from dependent personal services is stipulated as above.
Is a foreign individual who is a resident in France exempt from personal income tax in Vietnam? (Image from the Internet)
How are dependent personal services regulated in the Agreement on Avoidance of Double Taxation?
Based on Clause 2, Article 14 of the Agreement on Avoidance of Double Taxation between the Government of the Socialist Republic of Vietnam and the Government of France regarding dependent personal services, it is stipulated as follows:
Dependent Personal Services
1. Subject to the provisions of Articles 15, 17, and 18, wages and other similar remuneration derived by a resident of a Contracting State from employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State from employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
a) The recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; and
b) The remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and
c) The remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft in international traffic by a resident of a Contracting State may be taxed in that State.
Therefore, dependent personal services in the Agreement on Avoidance of Double Taxation are regulated as above.
What does the tax refund application dossier according to the Agreement include?
Based on Article 30 of Circular 80/2021/TT-BTC stipulating the tax refund application dossier according to the Agreement on Avoidance of Double Taxation and other international treaties:
Tax refund application dossier according to the Agreement on Avoidance of Double Taxation and other international treaties
1. In case of requesting a tax refund according to the Agreement on Avoidance of Double Taxation, the dossier includes:
a) Tax refund request form according to the Agreement on Avoidance of Double Taxation and other international treaties according to Form No. 02/HT issued together with Appendix I of this Circular.
b) Documents related to the tax refund application dossier, including:
b.1) Certificate of residence issued by the tax authority of the resident country, which has been legalized stating clearly the residence status in the particular tax year;
b.2) Copies of economic contracts, service provision contracts, agency contracts, entrustment contracts, technology transfer contracts, or labor contracts signed with Vietnamese organizations and individuals, deposit certificates in Vietnam, capital contribution certificates to companies in Vietnam (depending on the type of income in each specific case) with certification from the taxpayer;
b.3) Confirmation letter from Vietnamese organizations or individuals signing the contract about the time and actual operation status according to the contract (except for tax refund cases for foreign transport companies);
b.4) Power of attorney in cases where organizations or individuals authorize a legal representative to carry out the tax agreement application procedures. If the organization or individual establishes a power of attorney to authorize the legal representative to process the tax refund into the account of another entity, consular legalization (if the authorization is made abroad) or notarization (if the authorization is made in Vietnam) must be conducted according to regulations;
b.5) List of tax payment receipts according to Form No. 02-1/HT issued together with Appendix I of this Circular.
Therefore, the above is the regulation on the tax refund application dossier according to the Agreement on Avoidance of Double Taxation and other international treaties.
On September 21, 2022, the Hanoi Tax Department issued Official Dispatch 46348/CTHN-TTHT in 2022 on personal income tax exemption and reduction according to the Agreement on Avoidance of Double Taxation with guidance as follows:
- In cases where a foreign individual who is a resident in France concurrently satisfies the conditions stipulated in Clause 2, Article 31 of Circular 205/2013/TT-BTC and Clause 2, Article 4 of the Agreement on Avoidance of Double Taxation between the Government of the Socialist Republic of Vietnam and the Government of France, personal income tax in Vietnam can be exempted. Regarding the tax refund application dossier according to the Agreement, the Company should follow the provisions of Article 30 of Circular 80/2021/TT-BTC.
The content of Official Dispatch 46348/CTHN-TTHT in 2022 on personal income tax exemption and reduction according to the Agreement on Avoidance of Double Taxation issued by the Hanoi Tax Department is as above.
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