Distinguishing Personal Income Tax for Resident and Non-Resident Individuals in Vietnam: How is it Different?
Distinguishing Personal Income Tax for Resident and Non-resident Individuals in Vietnam
The determination of whether an individual is a resident or non-resident is crucial in determining personal income tax from salaries and wages as follows:
| Criteria | Resident Individual | Non-resident Individual || --- | --- | --- || Tax Calculation Period | - Tax year: Applied to income from business and income from wages and salaries.
- Each time income arises: Applied to income from capital investment, income from capital transfer, income from real estate transfer, income from winnings, income from royalties, income from franchising, income from inheritance, income from gifts.
- Each time income arises or annually applies to income from securities transfer | - The tax period for non-resident individuals is calculated each time income arises.
- In the case of non-resident business individuals with a fixed business location such as stores, stalls, the tax period is applied as for resident individuals with business income. || Taxable Income | Income generated inside and outside the territory of Vietnam, regardless of where the income is paid from | Only income generated in Vietnam, regardless of where the income is paid from or received || Tax Calculation Basis for Income from Wages and Salaries | - For resident individuals with labor contracts of 3 months or more: Personal Income Tax (PIT) is calculated according to the progressive tax schedule.
- For resident individuals without labor contracts or with contracts of less than 3 months: PIT = Total Income x 10% Total Income: Income includes both wages and allowances from 2 million VND or more. | PIT = Taxable Income x 20% || Mandatory Insurance/Family Deduction | Deductible | Not deductible || Tax Deduction to Avoid Double Taxation | Deductible | Not deductible |
Distinguishing Personal Income Tax for Resident and Non-resident Individuals in Vietnam
What is a Resident Individual? What is a Non-resident Individual?
(1) Resident Individual:
According to Clause 1, Article 1 of Circular 111/2013/TT-BTC, a resident individual is a person who meets one of the following conditions:
- Present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day present in Vietnam, in which:
+ Arrival and departure days are counted as 01 day. If entry and exit occur on the same day, it is counted as one day of residence.
+ Arrival and departure days are based on the certification of the immigration authority on the passport (or laissez-passer) of the individual upon arrival and departure from Vietnam.
(2) Non-resident Individual:
A non-resident individual is one who does not meet the conditions for a resident individual.
Determining whether a person is a resident or non-resident is significantly important when determining the tax period and rate of personal income tax for that individual.
When is the Deadline for Personal Income Tax Finalization?
According to Clause 2, Article 44 of The Law on Tax Administration 2019, the following is stipulated:
Tax declaration submission deadlines:
1. The deadline for submitting tax declaration dossiers for taxes declared monthly, quarterly is as follows:
a) No later than the 20th day of the following month for monthly declarations;
b) No later than the last day of the first month of the following quarter for quarterly declarations.
2. The deadline for submitting tax declaration dossiers for taxes calculated annually is as follows:
a) No later than the last day of the third month from the end of the calendar year or fiscal year for annual tax finalization; no later than the last day of the first month of the calendar year or fiscal year for annual tax declarations;
b) No later than the last day of the fourth month from the end of the calendar year for personal income tax finalization by individuals directly finalizing tax;
c) No later than December 15 of the preceding year for the tax declaration of fixed business households and individuals paying presumptive tax; for new business households and individuals, the deadline for the tax declaration is no later than 10 days from the commencement of business.
Thus, individuals self-finalizing personal income tax must do so by April 30.
However, since April 30 annually falls into the holidays of April 30 and May 1, based on the detailed annual holiday schedule, the latest deadline for individuals self-finalizing personal income tax is the next working day after the holidays of April 30 and May 1.
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