When working in Vietnam, foreign experts need to clearly understand their tax obligations to avoid the risk of back taxes or administrative penalties. Depending on residential status, types of income, and the form of engagement (employment contract or independent consultancy), foreign experts may be subject to various taxes and social contributions.
This article, prepared by DNP Viet Nam Law Firm and updated according to 2025 tax regulations, provides an overview of the taxes that foreign experts must pay when working in Vietnam, principles for determining tax liability, and key compliance considerations.
1. Determining residential status
Legal basis: Clauses 1 and 2, Article 1 of Circular 111/2013/TT-BTC (as amended by Article 2 of Circular 119/2014/TT-BTC); Article 2 of the Draft Personal Income Tax Law.
An individual is considered a Vietnam tax resident if:
- They are present in Vietnam for 183 days or more in a calendar year or any 12-month period from the first date of arrival;
- Or they have a permanent residence in Vietnam under one of the following:
- (i) Under residence law: a permanent residence (as shown on the permanent residence card) or a temporary residence (as shown on the temporary residence card issued by the Ministry of Public Security).
- (ii) Under housing law: leased accommodation for 183 days or more in a tax year, regardless of the number of leased places or whether the lease is paid personally or by the employer.
2. Taxable income subject to personal income tax
2.1. Income from salaries and wages
Legal basis: Articles 10 and 22 of the Draft Personal Income Tax Law.
- For tax residents, taxable income includes income arising within and outside Vietnam. A simplified 5-bracket progressive tax system is proposed, with rates from 5% to 35%, instead of the current 7 brackets. The two proposed options are:
- Option 1: 5 brackets with gaps of 10 – 20 – 20 – 30 million VND; the highest rate of 35% applies to monthly taxable income over 80 million VND.
- Option 2: 5 brackets with increasing gaps of 10 – 20 – 30 – 40 million VND; the highest rate of 35% applies to monthly taxable income over 100 million VND.
- For non-residents, taxable income is Vietnam-sourced income only, subject to a flat tax rate of 20%.
2.2. Income from service contracts, consultancy, and freelance work
Legal basis: Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC.
- A tax resident who does not have a labor contract or has a labor contract of under 3 months and receives payments of 2,000,000 VND or more per payment must pay a 10% tax on such income.
2.3. Income from capital transfer
Legal basis: Clause 1, Article 11 of Circular 111/2013/TT-BTC.
- Tax payable = Taxable income × 20%
Where taxable income = Transfer price – Purchase price – Allowable expenses.
2.4. Income from real estate transfer
Legal basis: Article 12 of Circular 111/2013/TT-BTC.
Two methods apply depending on the ability to substantiate costs:
- If costs and taxable income can be determined: Tax = Taxable income × 25%
- If costs cannot be substantiated: Tax = Transfer price × 2%
2.5. Income from royalties and franchising
Legal basis: Articles 13 and 14 of Circular 111/2013/TT-BTC.
- The tax rate for royalties and franchising income is 5%.
3. Responsibilities for tax withholding, declaration, and payment
Legal basis: Point d, Clause 6, Article 8 of Decree 126/2020/ND-CP.
- Vietnamese enterprises employing foreign experts are responsible for withholding tax at source, declaring, and paying tax on their behalf.
- Foreign experts must keep employment contracts, payroll records, and withholding certificates for year-end tax finalization.
“The above content is provided by DNP Viet Nam Law Firm for reference purposes only. For detailed, accurate, and tailored legal advice that meets your specific needs, please contact us using the information provided below.”
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