Enterprises employing foreign workers in Vietnam should be aware of issues on visa, work permit, liability of enterprise related to Personal Income Tax (PIT) of the foreign employee as declaration, payment and finalization to ensure legal compliance.
Foreigners eligible working in Vietnam are foreign investors whom contribute capital to set-up company in Vietnam, chief representative of NGO, lawyers licensed by Vietnam Ministry of Justice, foreigners workers with valid working permits in Vietnam. Working visa in Vietnam is granted to foreigner working legally in Vietnam. Working visa for foreigner in Vietnam has maximum length of 12 months. In the case the foreigner wishing to stay longer, he/she could apply for temporary residence card for a period of up to three years. The application must be submitted to the provincial Immigration Department, and may include supporting documents such as a housing lease contract and an employer’s certificate of incorporation.
Decree No. 102/2013/ND-CP elaborating some articles of the Labour Code on foreign workers in Vietnam states that for foreigners that requires work permit in Vietnam, the employing enterprises will have to apply for work permit for such employee before they start working. The head of the provincial People’s Committee will have to approve the necessity to hire foreigners before the Vietnam Department of Labour, Invalid and Social Affairs (DOLISA) grants work permit in Vietnam. For foreigners belonging to one of the cases exempted from work permit, the employing enterprises will have to request the provincial DOLISA where foreign workers regularly work to certify that such foreign workers are exempted before the day on which they start to work.
Personal Income Tax obligation
Foreigners whom are subject of Personal Income Tax (PIT) in Vietnam are resident and non-resident workers. Foreigners who reside in Vietnam for less than 183 days in a tax year are considered non-residents for tax purposes. The first tax year is the consecutive 12 months period from arrival date in Vietnam, and the second tax year will follow the calendar year. Non-resident foreigners working and earning income in Vietnam are subject to PIT at a flat rate of 20%. Foreigners who reside in Vietnam for 183 days or more in a tax year are considered tax residents in Vietnam and subject to PIT at progressive rates on their world-wide employment income. Incomes of foreign workers in Vietnam are based on salaries, wages, allowances and other benefits such as housing allowances, memberships at sport and health clubs, personal entertainments. The expenses not being subject to PIT are including return air tickets between Vietnam and home country of the foreigners, school tuition fees of children of foreigners which employing enterprises pay on their behalf.
Vietnam has signed double tax agreements (DTA) with a number of countries, in which tax exemptions may be applied in specified circumstances. To request for tax exemptions, the application has to submit the request to the Ministry of Finance.