Pursuant to the PIT law, foreign Employees working in Vietnam for one year will be considered resident individuals because they have resided in Vietnam for 183 days or more calculated according to 12 consecutive months from the first day of their presence in Vietnam[1]. Accordingly, foreign Employees will be required to declare and finalise taxes on all global income, including salaries received abroad and meal, transport and lodging allowances received in Vietnam in accordance with law[2]. In addition, because foreign Employees are resident individuals earning income from wages, salaries paid by foreign organisations and individuals, they must declare PIT at Vietnam on a quarterly basis[3]. The calculation of PIT for foreign Employees as resident individuals earning income from salaries, wages will also be applied similarly to the one for Vietnamese Employees. Particularly in this case, the calculation of PIT will be based on taxable income, deductions and tax rates as per the partially progressive tariff.
Where resident individuals with arising income abroad have calculated and paid PIT pursuant to foreign tax law, they will be entitled to deduct the taxes already paid abroad. The taxes to be deducted must not exceed the payable taxes calculated according to the Vietnamese tariff and allocated on the generated income abroad. The ratio of allocation is determined by the ratio of generated income abroad and total taxable income[4]. Accordingly, the generated income abroad is understood as any income generated in any other place than Vietnam, rather than the one paid for operations in any other place than Vietnam. Therefore, if the foreign Employee works in Vietnam but is paid salary and pays taxes overseas, the already paid taxes will be correspondingly deducted from his/her tax liability in Vietnam. This content was also instructed by the Ho Chi Minh City Tax Department in Official Letter No. 948/CT-TTHT dated 23/01/2015. In addition, the agreement between Vietnam and foreign countries (if any) and Vietnamese regulations on the avoidance of double taxation often stipulate that PIT overseas will be deducted from the tax payable according to the tax calculation method prescribed by the Vietnamese law as allocated above[5].
Failure to grasp
the regulations on PIT for foreign Employees may result in legal risks. Therefore,
in order to comply with the tax law and prevent all cases of wrong tax return
from leading to any tax underpayment, the tax return preparer should
voluntarily remedy the consequences by disbursing tax payables in full before
the competent agency’s detection. For these cases, the preparer will have to
settle the late payment without being sanctioned for violations of tax
administrative procedures, tax arrears or tax evasion[6].
[1]Article 2.2 Law on PIT
[2]Article 2.1 (a) Decree 65/2013/NĐ-CP dated 27/06/2013
[3]Article 16.2 (a1) Circular 156/2013/TT-BTC dated 06/11/2013 and Article 21.3.a.2 Circular 92/2015/TT-BTC dated 15/06/2015
[4]Article 26.2 (e1) Circular 111/2013/TT-BTC dated 15/08/2013
[5]Article 48 Circular 205/2013/TT-BTC dated 24/12/2013
[6]Article 1.32 Law No. 21/2012/QH13 dated 20/11/2012 amending and supplementing a number of articles of the Tax Administration Law