What is the personal income tax deduction for individuals working as Vietnamese freelancers for foreign clients?

What is the personal income tax deduction for individuals working as Vietnamese clients for foreign organizations?

Pursuant to Clause 1.i Article 25 of the Circular 111/2013/TT-BTC stipulating tax deduction and certificate of tax deduction as follows:

Tax deduction and certificate of tax deduction

...

1. Tax deduction

Tax deduction is an act of calculating and withholding the tax payable from the taxpayer’s income by the income payer before the income is paid to the tax payer.

...

i) Withholding tax in other cases

The organization or person that pays a total income from 2 million VND to a resident that does not sign a labor contract (as guided in Point c and Point d Clause 2 Article 2 of this Circular) or that signs a labor contract for less than 03 months shall withhold 10% tax on the income before it is paid to the person.

For the person that earns only a taxable income as stated above but the total taxable income estimated after personal deductions are made does not reach the taxable level, the person shall make and send a commitment (the form is provided in the guiding documents on tax administration) to the income payer as the basis for temporarily exempting the income from personal income tax.

Based on the commitment made by the income earner, the income payer shall not withhold tax. At the end of the tax year, the income payer shall make a list of persons that earn incomes below that taxable level (the form is provided in the guiding documents on tax administration) and send it to the tax authority. The persons are responsible for the commitments they made. Any deceit discovered shall be penalized in accordance with the Law on Tax administration.

The persons that make commitments as guided in this Point shall obtain tax registration and have tax codes when the commitments are made.

...

In this case, if a freelancer working for foreign clients without a labor contract has a total income of 2 million VND or more per payment, they are still required to pay personal income tax (PIT) at a rate of 10% on their income.

If the freelancer only has income subject to the mentioned tax deduction rate, but the total taxable income after deducting allowances is below the threshold for PIT payment, they can provide a commitment letter (Form 08) to the organization to temporarily receive income without tax deduction.

What is the personal income tax deduction for individuals working as Vietnamese freelancers for foreign clients? - image from internet

Is the tax period for income from salaries and wages of residents in Vietnam determined on an annual basis or per-instance basis?

Pursuant to Article 7 of the Law on Personal Income Tax in 2007 stipulating tax period as follows:

Tax period

1. For residents, tax period is specified as follows:

a/ Annual tax period, which is applicable to incomes from business, salaries and wages.

b/ Tax period upon each time of income generation, which is applicable to incomes from capital investment; incomes from capital transfer, except for incomes from securities transfer; incomes from real estate transfer; incomes from prizes; incomes from copyright; incomes from commercial franchising; incomes from inheritances; and gifts.

c/ Tax period upon each transfer or annual tax period, which is applicable to securities transfer. Individuals who apply the annual tax period shall register with tax offices at the beginning of the year.

2. For non-residents, the tax period counted upon each time of income generation is applicable to all their taxable incomes.

As regulations above, the tax period for income from salaries and wages of residents in Vietnam is determined on an annual basis.

What is the time of determination of a taxable income from salary or wage in Vietnam?

Pursuant to Article 7 of the Law on Personal Income Tax in 2007 stipulating tax period as follows:

Taxable incomes from salaries or wages

1. A taxable income from salary or wage is determined to be equal to the total of incomes specified in Clause 2, Article 3 of this Law and earned by a taxpayer in a tax period.

2. Time of determination of a taxable income from salary or wage is the time when an organization or individual pays income to a taxpayer or when a taxpayer receives income.

As regulations above, the of determination of a taxable income from salary or wage is the time when an organization or individual pays income to a taxpayer or when a taxpayer receives income.

Best regards!