How to calculate personal income tax (PIT) for foreigners

Instructions on how to calculate personal income tax for foreigners who are residents and non-residents in Vietnam. There is a specific personal income tax calculation formula for each case. 

For foreigners, to determine the taxable income, it will be based on whether the individual is a resident or non-resident to determine the tax obligations arising in Vietnam. Below, fdiinvietnam.com will guide you on how to calculate personal income tax for foreigners.

I. How to calculate personal income tax for foreigners who are resident individuals

Taxable income of resident individuals is income arising within and outside the territory of Vietnam, regardless of where the income is paid or received.

1. Conditions for being a foreign resident

A foreign individual only needs to meet one of the following conditions to be identified as a resident individual:

• Foreign individuals present in Vietnam for 183 days or more in a calendar year or for 12 consecutive months from the first date of arrival in Vietnam;
• Have a permanent residence stated in the permanent residence card or a temporary residence upon registration issued by a competent authority under the Ministry of Public Security;
• Renting a house to live in Vietnam with a rental period of 183 days or more in a tax year according to the provisions of the law on housing.

>> See more: Procedures for temporary residence card registration for foreigners.

2. How to calculate personal income tax for foreign residents

For individuals who are foreigners working in Vietnam – identified as resident individuals, enterprises shall deduct tax according to the progressive tax schedule according to the formula:

– Total income: total salary that an individual receives during the tax period arising within and outside the territory of Vietnam.

– Tax exemptions:

• Business trip expenses, telephone expenses, office supplies (clearly stated in company regulations);
• For uniforms paid to employees not exceeding VND 5,000,000/person/year; clothing expenses in kind;
• Income from overtime/overtime work in excess of the normal working day’s level;
• Expenses for transportation of workers to and from work;
• Payment for training expenses according to the employer’s plan to improve qualifications and skills to suit the job;
• The cost of buying a round-trip air ticket for annual leave once a year;
• Tuition fees for employees’ children, from preschool to high school – paid by the unit;
• Maximum personal income tax-exempt lunch allowance: VND 730,000/month, some expenses for common use of the labor collective in kind;
• Airfare expenses for business trips for employees whose jobs require rotation;
• Expenses for funerals and weddings.

– Deductions:

• Personal deduction: VND 11,000,000/month and is calculated as personal deduction from January or from the month of first arrival in Vietnam to the month of contract termination or departure from Vietnam in the tax year – calculated in full monthly;
• Dependent deduction: VND 4,400,000/month;
• Deductions from insurance contributions to employees’ salaries at the following rates in 2022: Pension fund (8%); Health insurance (1.5%);
• Deductions include educational incentives, charitable and humanitarian contributions.

– Tax rates – progressive tax schedule:

 

II. How to calculate personal income tax for foreigners who are non-resident individuals

For non-resident individuals – foreigners, the calculation of personal income tax is prescribed as follows:

• The time for calculating personal income tax will be based on each time the individual’s income arises;
• Income subject to personal income tax is income arising in Vietnam, regardless of where the income is paid and received;
• Method of tax deduction: calculate tax at full tax rate.

• In case a non-resident individual has income generated in and outside Vietnam, but cannot separate the income generated in Vietnam. The determination of total income generated in Vietnam will be calculated according to 1 of the 2 following cases:

➢ Case 1: Foreign individuals not present in Vietnam:
In which: Total number of working days in the year – calculated according to the provisions of the Vietnamese Labor Code

➢ Case 2: Foreign individuals present in Vietnam:

>> See more: How to register for a personal tax code online.

III. Frequently asked questions about calculating personal income tax for foreigners