Declaration of Personal Income Tax In Danang

I. Taxable Period

The tax year in Vietnam is the same as the calendar year. However, if an individual resides in Vietnam for less than 183 days in a calendar year, their tax year is calculated as the 12-month period beginning from their date of arrival. Following this initial period, the tax year then aligns with the calendar year.

II. Tax Codes

Anyone with taxable income in Vietnam needs a tax code. Employees should submit a tax registration form to their employer, who will then file it with the tax office. Individuals with other types of taxable income must submit their tax registration file directly to the district tax office where they reside.

III. Tax Declarations and Payment

1. Employment Income:

Tax declarations and provisional payments for employment income are due monthly or quarterly.

- Monthly payments are due by the 20th of the following month.

- Quarterly payments are due by the last day of the month after the quarter ends.

At the end of the year, taxpayers must reconcile their provisional payments with their total tax liability. An annual tax return must be filed by the last day of the third month of the following tax year for employer returns, and by the last day of the fourth month for individual returns. Any outstanding tax is due with the annual return. Expatriate employees must also finalize their tax obligations by filing a final tax return upon leaving Vietnam permanently. Tax refunds are only available for those with a tax code.

2. Non-Employment Income:

Individuals must declare and pay tax for each type of non-employment income upon receipt.

III. Tax Residents and tax non-residents in Vietnam:

Residents are those individuals meeting one of the following criteria: 

- Residing in Vietnam for 183 days or more in either the calendar year or the period of 12 consecutive months from the date of arrival.

- Having a permanent residence in Vietnam (including a registered residence that is recorded on the permanent/temporary residence card or a rented house in Vietnam with a lease term of 183 days or more in a tax year in case of foreigners) and unable to prove tax residence in another country.

Individuals not meeting the conditions for being tax residents are considered tax non-residents in Vietnam.

IV. Tax Residents:

1. Tax residents:

Tax residents are taxed on their worldwide income from all sources, regardless of where it's paid or received. This includes income from employment, investments, and other sources.

- Employment income is taxed at progressive rates.

- Non-employment income is taxed at various rates depending on the income type.

2. Non-Residents:

- Non-residents are taxed at a flat rate on income from work in Vietnam or Vietnam-related sources.

- Various rates apply to non-employment income.

- Double taxation agreements may affect tax obligations.

V. Employment Income

Taxable employment income includes all forms of compensation, such as salary, wages, bonuses, and benefits. However, some items are exempt, such as:

- Certain phone, stationery, and business trip expenses

- Overtime premiums

- Relocation allowances

- Daily commute costs

- Annual home leave airfare (once per year) for expatriates and Vietnamese working overseas

- School fees (up to high school) for children of expatriates and Vietnamese working overseas

- Training costs

- Certain meal provisions

- Collective benefits (e.g., memberships, entertainment, healthcare)

- Airfares for employees on rotation in specific industries

- Employer contributions to certain non-mandatory insurance schemes

- Allowances for special occasions (subject to limits)

- The taxable value of employer-provided accommodation is capped at 15% of total taxable income (excluding rental) under certain conditions.

Equity Compensation

Share awards and stock options are taxed upon sale, with taxes applied to both employment income and non-employment income. This process is complex, and taxpayers are advised to seek guidance from a tax professional.

VI. Non-Employment Income

The following types of non-employment income are subject to tax:

- Business income (including rental income exceeding VND 100 million/year)

- Investment income

- Gains from the sale of shares or real estate

- Inheritances and gifts exceeding VND 10 million

- Income from copyrights, franchising, royalties

- Exempt Income

VI. Non-taxable income includes:

- Interest from bank deposits and life insurance policies

- Insurance payouts

- Retirement pensions

- Income from property transfers between direct family members

- Inheritances and gifts within direct families

- Monthly pensions from voluntary schemes

- Income of Vietnamese vessel crew members working for foreign or international companies

- Casino winnings

VII. Personal Deductions

- Social, health, and unemployment insurance contributions are deductible.

- Contributions to approved charities are deductible.

- Personal allowances are granted:

+ VND 11 million per month for all tax residents

+ VND 4.4 million per month per dependent (registration and documentation required)

VIII. Tax Rates 

Tax residents: Employment income

Annual taxable income (million VND*)	Monthly taxable income (million VND)	PIT rate (%)
0 to 60	0 to 5	5
60 to 120	5 to 10	10
120 to 216	10 to 18	15
216 to 384	18 to 32	20
384 to 624	32 to 52	25
624 to 960	52 to 80	30
More than 960	More than 80	35

* Vietnamese dong

Tax residents: Non-employment income

Type of taxable income	Tax rate (%)
Business income	0.5 to 5 (based on the type of business income)
Interest (but not bank interest)/dividends	5
Sale of shares	0.1 (of sales proceeds)
Capital assignment	20 (on net gain)
Sale of real estate	2 (of sales proceeds)
Income from franchising/royalties	5
Income from inheritances/gifts/winning prizes (excluding income from casino winning prizes)	10

Tax residents: Business income*

Type of taxable income	Tax rate (%)
Distribution and supply of goods	0.5
Services, construction without provision of raw materials	2.0
Lease of assets	5.0
Production, transport, services attached to goods, construction including provision of raw materials	1.5
Other business operations	1.0

* Individuals earning business income from VND 100 million per calendar year and below shall not be subject to PIT on their business income.

Tax non-residents

Type of taxable income	Tax rate (%)
Employment income	20
Business income	1 to 5 (based on the type of business income)
Interest (but not bank interest)/dividends	5
Sale of shares/capital assignment	0.1 (of sales proceeds)
Sale of real estate	2 (of sales proceeds)
Income from royalties/franchising/copy rights	5
Income from inheritances/gifts/winning prizes (excluding income from casino winning prizes)	10

IX. Conclusion

Understanding Vietnam's personal income tax system is crucial for all taxpayers, whether they are residents or non-residents. By familiarizing themselves with the rules regarding taxable income, deductions, and tax rates, individuals can ensure they meet their tax obligations and avoid potential penalties. For complex situations, such as equity compensation or significant non-employment income, seeking professional tax advice is highly recommended.

 

This information contained herein is of a general nature and is intended to provide updates on the Laws for information purposes only. DB Legal shall not be liable for any use or application of the information for any business purpose.

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