Personal income tax to be applied for foreign employees working in Vietnam?
What are the guidelines of PIT for foreigners in Vietnam?
According to Official Dispatch 32313/CTHN-TTHT in 2022, the instructions are as follows:
"- Pursuant to the Law on Personal Income Tax No. 04/2007/QH12 dated November 21, 2007 of the National Assembly (amended and supplemented with a number of articles in Law No. 26/2012/QH13 dated November 22, 2012 and Law No. 71/2014/QH13 dated 26/11/2014):
+ In Article 2, taxpayers:
"1. Taxpayers are resident individuals whose taxable incomes specified in Article 3 of this Law arise within and outside the Vietnamese territory and non-resident individuals whose taxable incomes are specified in Article 3 of this Law arise in the territory of Vietnam.
2. A resident is a person who meets one of the following conditions:
a) Being present in Vietnam for 183 days or more in a calendar year or counting for 12 consecutive months from the first day of presence in Vietnam;
b) Having a regular place of residence in Vietnam, including a place of permanent residence registration or a rented house to live in in Vietnam under a fixed-term lease contract.
3. A non-resident individual means a person who does not satisfy the conditions specified in Clause 2 of this Article.”
+ In Article 3, taxable income:
Incomes subject to personal income tax include the following types of income, except for tax-exempt incomes specified in Article 4 of this Law:
"...2. Incomes from salaries and wages, including:
a) Salaries, wages and amounts of similar nature;
…”
PIT to be applied for foreign employees working in Vietnam? (Image from the internet)
What are the guidelines of determining taxable income of taxpayers in Vietnam?
According to Official Dispatch 32313/CTHN-TTHT, the instructions are as follows:
"- Pursuant to Article 2 of Circular 119/2014/TT-BTC dated August 25, 2014 of the Ministry of Finance, amending and supplementing gauges 1, 2, 3, 4, Article 1 of Circular No. 111/2013/TT- BTC dated 15/8/2013 of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax, the Law amending and supplementing a number of articles of the Law on Personal Income Tax and Decree No. 65/2013/ND-CP of The Government details a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax as follows:
"Article 1. Taxpayers
Taxpayers are residents and non-residents according to Article 2 of the Government's Decree No. 65/2013/ND-CP elaborating a number of articles of the Law on Personal income tax and the Law on the amendments to the Law on Personal income tax (hereinafter referred to as the Decree No. 65/2013/ND-CP) and earn taxable incomes according to Article 3 of the Law on Personal income tax and Article 3 of the Decree No. 65/2013/ND-CP.
Determination of taxable incomes earned by taxpayers:
Taxable incomes earned by residents are the incomes earned within or outside Vietnam’s territory, regardless of locations or payment and receipt.
Taxable incomes earned by non-residents are the incomes earned within Vietnam’s territory, regardless of the location of payment and receipt."
- Pursuant to Circular 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax, the Law amending and supplementing a number of articles of the Law on Personal Income Tax and the Law on Personal Income Tax. Decree No. 65/2013/ND-CP of the Government detailing a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax:
+ Clause 2, Article 2 stipulates taxable incomes from salaries and wages:
"2. Income from salary, wages
Income from wages and salaries is the income an employee receives from an employer, including:
a) Salaries, wages and other amounts of salary and wage nature in cash or non-cash forms.
... dd) Cash or non-cash benefits other than salary or wages paid by the employer, which the taxpayer is entitled to in any form:
…”
+ In Article 18, the tax base for income from salaries and wages of non-resident individuals:
"1. Personal income tax on incomes from salaries and wages of non-residents is determined by taxable incomes from salaries and wages of workers (x) at the tax rate of 20%.
2. Taxable incomes from salaries and wages of non-residents are determined the same as personal income taxable incomes from salaries and wages of resident individuals under the guidance in Clause 2 of this Article. 8 this Circular.
…”
+ In Article 25, tax deductions and tax deduction documents
"1. Tax deduction
Tax withholding is the fact that income-paying organizations and individuals deduct the payable tax amount from the taxpayer's income before paying the income, specifically as follows:
a) Income of non-resident individuals
Organizations and individuals paying taxable incomes to non-resident individuals are responsible for withholding personal income tax before paying income. The tax to be withheld is determined according to the guidance in Chapter III (from Article 17 to Article 23) of this Circular.
…”
Is PIT applied for foreign employees working in Vietnam?
According to Official Dispatch 32313/CTHN-TTHT in 2022, the instructions are as follows:
Pursuant to the above provisions, foreigners who come to work in Vietnam to study and consult the reality of Vietnam's stock market satisfy the condition that they are non-residents in Vietnam as prescribed in Article 1. Circular 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance shall:
- In case the enterprise's payments to foreign employees are determined as income from salaries, wages, monetary or non-monetary benefits in addition to salaries and wages paid by the employer. Payments that taxpayers are entitled to in any form arising in Vietnam according to the provisions of Article 2 of Circular 119/2014/TT-BTC, the enterprise is responsible for withholding 20% before making payments to individuals according to the provisions prescribed in Article 18 of Circular 111/2013/TT-BTC.
- In case the enterprise pays on behalf of the foreign worker according to the agreement on collection and payment between the two parties, the expenses for the individual foreign worker and does not generate incomes subject to personal income tax as prescribed in Article 2 of the Law on Personal Income Tax No. 04/2007/QH12 dated November 21, 2007 of the National Assembly (amended and supplemented with a number of articles in Law No. 26/2012/QH13 dated November 22, 2012 and Law No. 71/2014/QH13 dated 26/11/2014) is not subject to personal income tax in Vietnam.
Thus, in the process of implementing tax policy, if there are still problems, the unit can refer to the guiding documents of the Hanoi Tax Department posted on the website http://hanoi.gdt.gov.vn or contact the Divisions of Inspection and Checking No. 8 for assistance in resolving.
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