Taxes

As an expat living or working in Vietnam, you need to understand the tax regulations to stay compliant. Failing to do so can result in hefty penalties and legal consequences. The good news is Vietnam's tax code for foreigners is relatively straightforward. However, the rules can seem opaque if you're not familiar with them. This comprehensive tax guide will provide an overview of Vietnam's tax system and walk you through the specific requirements for expats and digital nomads. You'll learn about income taxes for employees and the self-employed, VAT and other consumption taxes, tax residency rules, tax filing procedures, and more. It is important to consult with a tax advisor who is familiar with the tax laws in Vietnam. A tax advisor can help you to calculate your tax liability and ensure that you are compliant with the law.

Vietnam's Income Tax Rates for Expats

As an expat living in Vietnam, your residency status will determine how much income tax you owe to the Vietnamese government. Vietnam has a progressive income tax system with tax rates ranging from 5% to 35% for residents.

Resident Taxpayers

If you stay in Vietnam for 183 days or more in a tax year, you are considered a resident taxpayer. Residents are taxed on their worldwide income, meaning income earned in Vietnam as well as income from other countries. The tax rates for residents are:

• 5% on the first VND 60 million

• 10% on the next VND 60 million

• 15% on the next VND 120 million

• 20% on the next VND 240 million

• 25% on the next VND 384 million

• 30% on the next VND 624 million

• 35% on income above VND 1.44 billion

In addition to income tax, residents also owe a value-added tax of 10% on goods and services. Residents can claim certain deductions and allowances to lower their tax burden, such as contributions to social and health insurance, mortgage interest, and dependent care.

Non-resident Taxpayers

If you stay in Vietnam for less than 183 days in a tax year, you are considered a non-resident. Non-residents are only taxed on income earned in Vietnam. The flat tax rate for non-residents is 20% of gross income with no deductions or allowances. Non-residents are also exempt from paying value-added tax.

The key is to determine your residency status in Vietnam to figure out which income tax rates apply to you and your tax obligations. Be sure to keep records of the days you spend in Vietnam each year and report your income and taxes accurately to avoid potential penalties.

Do I Need to Pay Taxes if I Have a Work Permit in Vietnam?

If you have obtained a proper work permit in Vietnam, you will generally be required to pay income taxes on income earned in Vietnam. As an expatriate working in Vietnam, you will be considered a tax resident and subject to Vietnam's tax laws.

Income Tax Rates in Vietnam

Vietnam has a progressive income tax system with tax rates ranging from 5% to 35% for tax residents. The tax rates for 2020 are:

• 5% for taxable income up to VND 60 million

• 10% for taxable income from VND 60 million to VND 120 million

• 15% for taxable income from VND 120 million to VND 216 million

• 20% for taxable income from VND 216 million to VND 384 million

• 25% for taxable income from VND 384 million to VND 624 million

• 30% for taxable income from VND 624 million to VND 960 million

• 35% for taxable income over VND 960 million

What Income is Taxable?

As a tax resident with a work permit, your taxable income will include:

• Salary and wages from your Vietnam employer

• Bonuses, commissions, and other cash allowances

• The value of any taxable benefits or perks provided by your employer like a company car, housing, etc.

• Income from business activities conducted in Vietnam

• Royalties, interest, and dividends earned in Vietnam

• Capital gains from the sale of assets in Vietnam

Any income you earn outside of Vietnam will not be subject to taxation in Vietnam. You will need to declare your income and pay taxes in the country where the income was earned.

Filing Tax Returns in Vietnam

As an expatriate employee working in Vietnam, your employer will typically withhold income taxes from your salary and file quarterly tax returns on your behalf. However, you are still responsible for filing an annual personal income tax return for your total income earned in Vietnam. The deadline for filing annual tax returns is March 31st of the following year.

Other Taxes for Expats to Know: VAT, Import Duties, and More

As an expat living in Vietnam, you will need to pay several additional taxes beyond just income tax. Understanding your full tax liability and obligations will help you avoid penalties and navigate Vietnam's tax system successfully.

Value Added Tax (VAT)

Vietnam's value-added tax or VAT is a broad-based tax on most goods and services. The standard VAT rate is 10% on most items. Some essential goods and services like food, medicine, and education are VAT-exempt. As an expat, you will pay VAT on most of your purchases.

Import Duties

If you ship household goods, vehicles, or other personal belongings to Vietnam, you may have to pay import duties. Import duties are levied based on the type of item and value. The exact duty rate depends on the item's classification in Vietnam's tariff schedule. You will need to work with a customs broker to properly declare and pay any import duties on goods you ship to Vietnam. Failure to do so can result in heavy fines and penalties.

Excise Taxes

Excise taxes apply to specific goods like petroleum, tobacco, and alcohol. Excise tax rates in Vietnam are high, up to 75% for tobacco products. As an expat, you will pay these taxes whenever you purchase excise-taxed goods. The exact excise tax is built into the retail price of the product.

Property Taxes

If you purchase real estate in Vietnam, you will need to pay an annual property tax. Property tax rates vary from 0.03% to 0.15% of the property's assessed value. The tax rate depends on the type of property. Residential property has a lower tax rate than commercial property. You must pay property taxes annually to avoid penalties and interest charges.

Stamp Duty

Certain documents like property transfers, contracts, and registrations require payment of stamp duty in Vietnam. Stamp duty rates range from 0.5% to 2% depending on the type of document. As an expat, you may incur stamp duty when signing an apartment lease, purchasing property, or registering a business. Stamp duty is a one-time tax paid when the document is signed or registered.

How to File Your Taxes

You have two options for filing your taxes in Vietnam:

1. File online through the General Department of Taxation’s online portal. This requires obtaining a digital signature to access the system.

2. File a paper tax return by submitting Form 05/LD-TNCN along with supporting documents to your local tax office. The tax office may require additional information to verify the details in your return.

When filing your return, be sure to include details on your Vietnam-sourced income, deductions, and credits you are eligible to claim, as well as information on your spouse and dependents. Keep records of all documents that support the information in your return.

It's best to get your company (if you have a working permit), or a tax expert to help you deal with all these documents.

Using Tax Treaties to Reduce Your Tax Burden in Vietnam

Vietnam has signed double taxation agreements with over 80 countries, including most major trading partners. These tax treaties aim to eliminate or reduce international double taxation for individuals and corporations. As an expat living in Vietnam, you can take advantage of these tax treaties to lower your tax burden.

To claim tax treaty benefits, you must meet certain conditions, such as being a tax resident of a treaty partner country and deriving income from Vietnam that is covered under the treaty. The specific terms of each treaty differ, so you will need to check the details of the particular treaty between Vietnam and your country of residence.

In general, the tax treaties Vietnam has signed cover income from employment, business profits, dividends, interest, and royalties. The treaties typically reduce the Vietnamese withholding tax rates on passive income like dividends, interest, and royalties. For employment income and business profits, the treaties often exempt such income from tax in one country if tax was already paid in the other country.

To claim tax treaty benefits in Vietnam, you will need to provide the tax authority with certain documents, such as:

• A tax residency certificate issued by the tax authority of your country of residence

• A declaration that you qualify as a tax resident under the tax treaty

• Evidence showing the source of income (e.g. employment contract, dividend payment notice)

• Evidence of tax paid in your country of residence (if relevant)

You will need to submit these documents when filing your annual personal income tax return in Vietnam. The tax authority will then review your claim and grant tax treaty benefits if your application is approved.

Using the available tax treaties can substantially reduce your tax liability as an expat living in Vietnam. However, the rules can be complex, so it is best to consult a tax professional to determine how you can properly claim tax treaty benefits and minimize your taxes. With proper planning and by providing the necessary documentation, you can avoid paying taxes twice and keep more of your hard-earned income.