VietnamTax Obligations Detailed

In Vietnam, employers have various tax obligations related to payroll, social insurance, and health insurance.

Employer Tax Obligations in Vietnam for 2025

As of February 5, 2025, the following employer tax obligations are in effect in Vietnam:

Personal Income Tax (PIT)

• Withholding: Employers are responsible for withholding PIT from their employees' salaries, both local and foreign. The tax is withheld based on the employee's residency status (resident or non-resident).
• Declaration and Payment: PIT withheld from employee salaries must be declared and paid to the tax authorities monthly or quarterly. Monthly payments are due by the 20th of the following month. Quarterly payments are due by the last day of the first month of the following quarter.
• Annual Finalization: Employers must file an annual PIT finalization return for their employees by the last day of the third month following the calendar year-end. This finalization can be done on behalf of employees if they have income only from that employer and authorize the employer to do so.

Social Insurance (SI)

• Contributions: Employers are required to contribute to SI for their employees. The employer contribution rate is 17.5% of the employee's salary. For foreign employees under specific circumstances, the rate remains at 17.5%, inclusive of retirement, sickness, maternity, occupational diseases/accidents, and death benefits. Note: temporary rate reductions may occur due to extenuating circumstances.
• Payment: SI contributions must be paid by the last day of the month.

Health Insurance (HI)

• Contributions: Employers are required to contribute to HI for their employees. For foreign employees under certain conditions, the employer's contribution rate is 3% of the employee's salary.
• Payment: HI contributions, similar to SI, must be paid by the last day of the month.

Other Considerations

• Tax Residency: An individual is considered a tax resident in Vietnam if they meet one of the following criteria:
  • Present in Vietnam for 183 days or more in a calendar year or 12 consecutive months.
  • Have a registered permanent residence in Vietnam.
  • Have a rented dwelling and other factors indicating their intention to stay in Vietnam for 183 days or more in a calendar year or 12 consecutive months.
• Tax Rates:
  • Residents: Progressive rates ranging from 5% to 35% apply to employment income.
  • Non-residents: A flat rate of 20% applies to Vietnam-sourced employment income.
• Foreign Contractor Withholding Tax (FCWT): If an employer hires foreign contractors, they must withhold FCWT. The due date for declaration and payment is within 10 days of payment to the contractor, and finalization is due 45 days after contract completion.

This information is current as of February 5, 2025, and may be subject to change. It is recommended to consult with a tax professional for the most up-to-date information and specific guidance for your situation.

In Vietnam, employees are subject to various tax deductions and contributions from their salaries, primarily focusing on Personal Income Tax (PIT) and social insurance contributions.

Personal Income Tax (PIT)

PIT is calculated on an employee's assessable income, which is the total taxable income after deductions. A progressive tax system is applied, ranging from 5% to 35% based on income brackets. Tax residency determines the scope of income subject to PIT. Residents are taxed on worldwide income, while non-residents are taxed only on Vietnam-sourced income. As of 2025, the following deductions apply:

• Personal Allowance: VND 11 million per month.
• Dependent Allowance: VND 4.4 million per month for each qualifying dependent (children under 18, disabled children over 18 unable to work, spouses or parents unable to work or with income not exceeding VND 1 million). Supporting documentation is needed to claim this allowance.

Social, Health, and Unemployment Insurance (SHUI)

These are mandatory contributions deducted directly from the employee's salary. The 2024 rates are:

• Social Insurance: 8% (capped at 20 times the base salary of VND 1,600,000 or VND 32,000,000 and subject to change for 2025)
• Health Insurance: 1.5% (capped at 20 times the base salary)
• Unemployment Insurance: 1% (capped at 20 times the base salary)

Other Deductions and Allowances

• Charitable Contributions: Donations to approved charities are deductible.
• Foreign Employee Benefits: Certain benefits for foreign employees, such as relocation allowances, annual home leave airfare, and children's education expenses (preschool to high school), may be tax-exempt. Specific requirements and documentation apply.
• Business Travel Expenses: Deductions for business travel expenses require proper documentation, including assignment decisions, invoices, and boarding passes. Different scenarios exist depending on how tickets are purchased.

Tax on Other Income

Income from sources other than employment (e.g., subcontracting) exceeding VND 2 million may be subject to a 10% withholding tax. This requires the individual to have a tax registration and code.

General Information

Employers are responsible for calculating, deducting, and remitting employee taxes and social insurance contributions to the relevant authorities. It is crucial to maintain accurate records and comply with all reporting deadlines and procedural requirements to avoid penalties. Specific regulations and rates are subject to change, so staying updated with current tax laws and consulting with tax professionals is advisable. Note that the base salary used for calculating social insurance contribution caps might differ in 2025. The information provided here is based on the latest available data as of February 5, 2025, and may be subject to updates.

Value Added Tax (VAT), known as Thuế giá trị gia tăng (GTGT) in Vietnam, is a consumption tax levied on the value added at each stage of production and distribution.

VAT Rates

• Standard Rate: 10% (This is a temporary reduction from the previous 10%, effective until June 30, 2025. From July 1, 2025, the standard rate will revert to 10%. Certain sectors, including telecommunications, IT, finance, banking, insurance, and real estate, are excluded from this temporary reduction and remain subject to 10% VAT).
• Reduced Rate: 5% (Applies to essential goods and services like certain food items, clean water, medicine, medical equipment [excluding items within medical service packages], teaching tools, and the sale/lease of residential housing.)
• Zero Rate (0%): Applies to exports, international transportation, and specific goods/services outlined in Article 5 of the Law on Value Added Tax. This includes goods sold to duty-free shops, exported services, and certain construction/installation for export processing enterprises.

VAT Registration

There is no threshold for VAT registration in Vietnam. Businesses, including domestic, non-established, and non-resident digital service providers, are generally required to register for VAT upon receiving their business license.

VAT Filing and Payment

• Monthly Filing: Businesses with a turnover exceeding VND 50 billion in the previous year must file and pay VAT monthly by the 20th of the following month.
• Quarterly Filing: Businesses with a turnover of VND 50 billion or less in the previous year can choose between monthly or quarterly filing. The deadline for quarterly filing is the last day of the first month of the following quarter.
• E-invoicing: Mandatory for most businesses, economic organizations, business households, and individuals since July 1, 2022 (certain exceptions apply).

Exempt Goods and Services

Several goods and services are exempt from VAT, including specific agricultural products (raw produce, livestock); some fertilizers (until June 30, 2025); certain leased equipment (e.g., drilling rigs, aircraft, and ships not produced in Vietnam); land use right transfers; various financial and insurance services; healthcare and elderly/disabled care; education, publishing, and public transportation; and exports of unprocessed natural resources. Note that the list of exemptions is subject to change. For example, from July 1, 2025, fertilizers and clean water for production and domestic use (excluding bottled water and beverages) will become subject to 5% VAT. It's crucial to consult the latest regulations for the most current exemption list.

VAT for Foreign Suppliers of Digital Services

As of January 1, 2022, foreign digital service providers are required to register, charge, and remit VAT on both B2B and B2C sales in Vietnam. If a foreign provider doesn't register, financial intermediaries are obligated to withhold taxes on B2C transactions, while Vietnamese VAT-registered businesses should withhold VAT on B2B transactions from unregistered foreign suppliers. The VAT rate for these services was initially 5%, but increases to 10% from July 1, 2025.

Recent Developments

• Reduced VAT Rate Extension: The 8% reduced VAT rate, initially set to expire at the end of 2024, has been extended until June 30, 2025.
• New VAT Law: A new VAT law will take effect on July 1, 2025, introducing various changes including the updated VAT rates mentioned above.
• Increased Threshold for Business Households: From January 1, 2026, the annual revenue threshold for VAT exemption for business households and individuals will double from VND 100 million to VND 200 million.

This information is current as of February 5, 2025, and might change due to ongoing legislative updates. Consulting the latest official sources is recommended for the most up-to-date information.

Vietnam offers a range of tax incentives to attract investment and promote specific industries. These incentives typically encompass corporate income tax (CIT) benefits, import duty exemptions, and reductions in land rent and levies.

Corporate Income Tax (CIT) Incentives

• Standard CIT Rate: The standard CIT rate in Vietnam is 20%. However, specific sectors like oil and gas and resource extraction may have higher rates ranging from 32% to 50%.
• Reduced CIT Rates: Depending on the industry, location, and project size, businesses can qualify for reduced CIT rates. These are often available in designated economic zones, high-tech parks, and areas with challenging socio-economic conditions. Specific sectors like high-tech enterprises, software development, education, healthcare, and renewable energy often qualify for these reductions. Extremely disadvantaged areas may offer a 10% CIT rate for the first 15 years, while disadvantaged areas may provide a 17% rate for 10 years.
• Tax Holidays: Tax holidays provide complete exemption from CIT for a specified period. The duration can vary from 2 to 4 years, often followed by a period of reduced CIT (e.g., 50% reduction for the following 4-9 years). Eligibility depends on factors like industry, location, and project scale.
• Investment Support Fund: Beginning in 2024, an investment support fund has been established to offset the impact of new global minimum tax rules. This fund will offer grants to businesses in priority sectors, thus maintaining Vietnam's attractiveness for foreign direct investment (FDI).
• Large-Scale Manufacturing Projects: Substantial tax incentives are offered to large manufacturing projects outside natural resources, particularly those with significant capital investment.

Other Incentives

• Import Duty Exemptions: Certain industries and projects may be eligible for exemptions from import duties on specific goods. This primarily targets sectors aligning with national development priorities.
• Land Rent and Levies Reductions: Businesses operating in designated zones or specific sectors may qualify for reductions or exemptions from land rent and levies.

Value Added Tax (VAT) Reduction

• As of 2025, a 2% VAT reduction is in effect for a range of goods and services typically subject to a 10% VAT rate. This excludes certain sectors like telecommunications, finance, real estate, and goods subject to special consumption tax.

Recent Updates Affecting Businesses

• E-commerce Tax Obligations (Effective April 1, 2025): E-commerce platforms and digital platforms with payment functions will need to declare and pay taxes on behalf of individual sellers and business households. Foreign e-commerce suppliers are also now required to register, declare, and pay taxes directly in Vietnam.
• End of De Minimis for Imports (Effective February 18, 2025): The tax exemption for imported goods valued under VND 1 million via express delivery has ended. All imported goods are now subject to relevant taxes and duties.

Applying for Incentives

The specific criteria and application procedures for these incentives are detailed in Vietnam's Law on Investment and related decrees and circulars. It's crucial to consult these resources for the most up-to-date information. Given the evolving nature of tax regulations, staying informed about the latest changes is vital for businesses operating in or considering investing in Vietnam. As of today, February 5, 2025, this information reflects the current tax landscape in Vietnam. However, it's essential to remember that tax laws and regulations can change, so keeping up-to-date with the latest developments is recommended.