What are the differences between PIT for residents and non-residents in Vietnam?
What are the definitions of resident and non-resident in Vietnam?
(1) Residents:
Pursuant to Clause 1 Article 1 of Circular 111/2013/TT-BTC as follows:
1. A resident is a person who meets one of the conditions below:
a) He/she has been present in Vietnam for at least 183 days in a calendar year or for 12 consecutive months from the first day of his/her presence in Vietnam (the date of arrival and date of departure are considered 01 day). The date of arrival and date of departure depends on the certification of the immigration agency on the passport (or laissez-passers) when that person enters and leaves Vietnam. If the person enters and leaves Vietnam within one day, it will be considered a day of residence.
A person in Vietnam defined in this Point is the presence of that person in Vietnam’s territory.
b) He/she has a regular residence in Vietnam in one of the following cases:
b.1) He/she has a regular residence according to regulations of law on residence:
b.1.1) For Vietnamese citizens: a place where that person regularly, stably and indefinitely lives and has been registered as a permanent residence as prescribed by regulations of law on residence.
b.1.2) For foreigners: the permanent residence written in the permanent residence card or the temporary residence when applying for the temporary residence card issued by a competent authority affiliated to the Ministry of Public Security.
b.2) He/she rents a house in Vietnam according to regulations of law on housing under a contract that has a term of at least 183 days in the tax year. To be specific:
b.2.1) A person who has no regular residence defined in Point b.1 Clause 1 of this Article will be considered a resident if he/she has a total house lease period of at least 183 days in the tax year under various lease contracts, even if a he/she rents houses in different locations.
b.2.2) The rented houses can be hotels, guesthouses, motels, offices, etc. whether they are rented by the person or their employer.
If the person has a regular residence in Vietnam according to this Clause but his/her actual presence in Vietnam is shorter than 183 days in the tax year and he/she fails to prove his/her residency in any country, that person will be considered a resident of Vietnam.
The residency in another country shall be proved by the Certificate of residence. If the person is a citizen of a country or territory that has signed a tax agreement with Vietnam and does not issue the Certificate of residence, that person shall present a photocopy of the passport to prove the period of residence.
Accordingly, a resident is a person who meets one of the conditions below:
+ He/she has been present in Vietnam for at least 183 days in a calendar year or for 12 consecutive months from the first day of his/her presence in Vietnam, in which:
+ The date of arrival and date of departure are considered 01 da. If the person enters and leaves Vietnam within one day, it will be considered a day of residence.
+ The date of arrival and date of departure depends on the certification of the immigration agency on the passport (or laissez-passers) when that person enters and leaves Vietnam.
- He/she has a regular residence according to regulations of law on residence.
(2) Non-resident:
A non-resident is a person who fails to meet any of the conditions for an individual resident.
The determination of a resident or non-resident will have important implications when determining the individual's tax period and PIT rate.
How to distinguish PIT for residents or non-residents in Vietnam?
The determination of residents or non-residents is important in determining PIT on incomes from salaries and remunerations as follows:
Criteria | Residents | Non-residents |
Tax period | - Annual tax period: Applicable to income from business and income from salaries and remunerations. - Tax period according to each income generation: Applicable to income from capital investment, income from capital transfer, income from real estate transfer, income from prizes, income from royalties, income from franchising, income from inheritance, and income from gifts. - Tax period by each occurrence or by year applicable to income from securities transfer | - The tax period for non-resident individuals is calculated on a per-income basis. - In case a non-resident business individual has a fixed business location such as shops or stalls, the tax period shall apply as for resident individuals with income from the business. |
Taxable income | Income arising inside and outside the territory of Vietnam, regardless of where income is paid | Only income arising in Vietnam, irrespective of where income is paid and income is received |
Tax bases for income from salaries and remunerations | - For resident individuals who have signed a labor contract of 3 months or more: Calculate PIT according to the partial progressive schedule. - For resident individuals who do not sign a labor contract or sign but less than 3 months: PIT = Total income x 10% of Total income: income including salary and allowances from VND 02 million or more. | PIT = Taxable income x 20% |
Compulsory insurance/personal deduction | Deductible | Non-deductible |
Tax deductions avoid double taxation | Deductible | Non-deductible |
Who are the PIT payers in Vietnam?
Pursuant to Article 2 of the Personal Income Tax Law 2007 on PIT payers in Vietnam as follows:
Taxpayers
1. Personal income taxpayers include residents who earn taxable incomes specified in Article 3 of this Law inside and outside the Vietnamese territory and non-residents who earn taxable incomes specified in Article 3 of this Law inside the Vietnamese territory.
2. Resident means a person who satisfies one of the following conditions:
a/ Being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam;
b/ Having a place of habitual residence in Vietnam, which is a registered place of permanent residence or a rented house for dwelling in Vietnam under a term rent contract.
3. Non-resident means a person who does not satisfy any of the conditions specified in Clause 2 of this Article.
Thus, PIT payers in Vietnam are specified above.
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