– Pursuant to Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax and Decree No. 65/2013/ND-CP dated by the Government detailing a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax.
+ Article 1 provides for Taxpayers:
“…Taxable incomes earned by non-residents are the incomes earned within Vietnam’s territory, regardless of the location of payment and receipt….
…2. A non-resident is a person who fails to meet any of the conditions specified in Clause 1 of this Article.”
+ Clause 2, Article 2 stipulates the taxable incomes:
“2. Incomes from wages and remunerations
Incomes from wages and remunerations (hereinafter referred to as wages) are incomes paid to employees from employers, including:
a) Wages, remunerations, and the other amounts paid as wages or remunerations in cash or not in cash.
…
dd) Other benefits in cash or not in cash apart from wages paid to the taxpayer by the employer in any shape or form…”
…dd.1) Payments for housing, electricity, water supply and ancillary services (if any).
…dd.4) Flat expenditures on stationery, business trips, phone calls, costumes, etc. that are in excess of the limits prescribed by the State. Flat expenditures are not included in taxable income in the cases below:
…dd.4.2) For the employees working in businesses and representative offices: the flat expenditure shall conform to the income that incurs corporate income tax and guiding documents of the Law on Enterprise income tax. ”
… dd.7) Other benefits…”
+ Clause 1, Article 18 stipulates:
“The rate of personal income tax on incomes from wages earned by a non-resident equals the taxable income from wages multiplied by (x) 20% tax.”
+ Clause 2, Article 18 provides for foreigners present in Vietnam:
“2. The taxable income from wages earned by a non-resident is similar to that of a resident guided in Clause 2 Article 8 of this Circular.
The taxable income from wages earned in by a non-resident that works both in Vietnam and overseas without being able to separate the income earned in Vietnam shall be calculated as follows:
…b) Where the foreigner is present in Vietnam:
| Total income earned in Vietnam | = | Number of days in Vietnam | x | Pre-tax global income from wages | + | Other pre-tax taxable income earned in Vietnam |
| 365 days |
Other pre-tax taxable incomes earned in Vietnam mentioned in Point a and Point b above are other benefits in cash or not in cash apart from wages that are provided for the employee or paid on the employee’s behalf by the employer”.
+ Article 25 stipulates tax withholding and certificate of tax withheld at source:
“1. Tax withholding
Tax withholding is the income payer’s calculating and withholding the tax payable from the taxpayer’s income before paying the income to the taxpayer:
a) Incomes earned by non-residents
The organization or individual that pay taxable incomes to the non-resident shall withhold the personal income tax from the income before it is paid. The determination of tax being withheld is guided in Chapter III (from Article 17 to Article 33) of this Circular.
b) Incomes from wages
…b.3) The income payer shall withhold tax from the incomes earned by the foreigners working in Vietnam based on the duration of work in Vietnam written in the contract or letter of introduction according to the progressive tax table (if the person has worked in Vietnam for at least 183 days in the tax year) or the whole income tax table (if the person has worked in Vietnam for fewer than 183 days in the tax year).
– Article 27 stipulates the Responsibilities of Vietnamese organizations that sign service contracts with foreign contractors that do not operate in Vietnam:
“When an organization established and operated within Vietnam’s law (hereinafter referred to as Vietnamese party) signs a contract to purchase services of a foreign contractors that signs labor contracts with foreign employees in Vietnam, the Vietnam party shall notify the foreign contractor of the obligations to pay personal income tax incurred by the foreign employees, the obligations to provide information about the foreign employees, including their names, nationalities, passport numbers, working duration, positions, and incomes for the Vietnam party. The Vietnam party shall provide such information for the tax authority at least 07 days before the foreign employee starts to work in Vietnam.”
– Pursuant to Article 31 of Circular 205/2013/TT-BTC dated December 24, 2013 of the Ministry of Finance guiding the implementation of the Agreements on double taxation avoidance and prevention of tax evasion with respect to taxes on income and property between Vietnam and other states and territories and in force providing guidelines for determination of tax obligation for incomes from dependent individual services:
“Article 31. Determination of tax obligation for incomes from dependent individual services
1. Under the Agreements, an individual, who is a resident of a Contracting State to an Agreement concluded with Vietnam, derives income from his/her employment in Vietnam, shall have to pay income tax in Vietnam in accordance with Vietnam’s current regulations on personal income tax…
2. If the individual mentioned in Clause 1 simultaneously satisfies all three of the following conditions, remuneration earned from work performed in Vietnam will be exempt from income tax in Vietnam:
a) That individual is present in Vietnam for less than 183 days in a period of 12 months starting or ending within the taxable year concerned; and
b) The employer is not a resident of Vietnam, regardless of whether that remuneration is directly paid by the employer or through the employer’s representative; and
c) This remuneration is not borne and paid by the Vietnam-based permanent establishment set up by the employe”
– Pursuant to Article 13 of Circular 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance guiding the implementation of a number of articles of the Law on Tax Administration; The Law amending and supplementing a number of articles of the Law on Tax Administration and Decree No. 83/2013/ND-CP of the Government as follows:
“13. Where the foreigner that earns taxable income is eligible for tax exemption or reduction according to a Double taxation agreement between Vietnam and another country/territory:
a) If the individual is a resident of another country/territory, even when he is a resident of another country/territory and earns income as mentioned in Point b.1 Clause 1 (from self-employments and other sources), Clause 3, Point b Clause 4, Clause 5, Point b Clause 10, and Clause 9 of this Article:
15 days before performing the contract with the Vietnamese entity, the foreigner must send the Vietnamese party a dossier. The Vietnamese party shall submit it the supervisory tax authority together with the first declaration. The dossier consists of:
– The Notice of eligibility for tax exemption or reduction (form 01/HTQT enclosed herewith);
– The original or certified true copy of the Certificate of residence (consularly legalized) issued by the tax authority of the home country before the year in which the Notice of eligibility for tax exemption or reduction is issued;
– A photocopy of the labor contract with the overseas employer, which bear the individual’s signature;
– A photocopy of the labor contract with employer in Vietnam (if the income is from wages or business), or photocopies of documents proving the origin of the income (other incomes), which bear the individual’s signature;
– A photocopy of the passport showing the arrival in Vietnam, which bears the individual’s signature;
– A photocopy of the business registration and/or practice certificate, tax registration certificate issued by the authority of the home country if the individual earns income from self-employment (physicians, lawyers, engineers, architects, dentists, accountants);
– A photocopy of the business registration and/or practice certificate issued by the Vietnamese authority to the individual that earns income from self-employment (physicians, lawyers, engineers, architects, dentists, accountants);
– A photocopy of the contract with the Vietnamese entity, which is certified by the taxpayer. In particular:
+ Real estate transfer: a photocopy of the real estate transfer contract.
+ Capital transfer: a photocopy of the capital transfer contract, a photocopy of the certificate of investment of the Vietnamese company to which the foreign investors contribute capital, which are certified by the taxpayer.
+ Securities transfer: a photocopy of the securities transfer contract. If securities are traded without a contract, the taxpayer shall submit the certificate of depository account, which is certified by the depository bank or the securities company (form 01/TNKDCK enclosed herewith).
– The Letter of attorney if the taxpayer authorizes a legal representative to carry out the procedure.
If a notice of eligibility for tax exemption or reduction has been sent in the previous year, only the photocopies of labor contracts with new Vietnamese and foreign entities shall be submitted.
15 days before the expiration of the labor contract in Vietnam or the end of the tax year (whichever occurs first), the individual shall send a Certificate of residence in that tax year and a photocopy of the passport to the Vietnamese party that signs the contract or pays income. Within 03 working days from the receipt of the Certificate of residence, the Vietnamese party shall submit it to the tax authority.
If such certificate is not received by the deadline, the foreigner must make a commitment to send it right after the ending day of the tax year.
If the individual’s home country, which has signed a Tax Agreement with Vietnam, does not issue the certificate of residence, the individual shall provide the photocopy of the passport instead of the certificate of residence.
if the individual is not identified as a residence of any country/territory, the individual must make a commitment to send a photocopy of the passport in Q1 of the next year.
If the taxpayer fails to provide sufficient information or documents, explanation must be provided in form 01/HTQT mentioned above.”
– Pursuant to the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income:
+ Article 1 stipulates:
“Article 1. Personal scope
This Agreement shall apply to persons who are residents of one or both of the Contracting States.”
+ Article 15 stipulates:
“Article 15: Dependent personal services
1/ Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2 / Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable in the first-mentioned State if:
1. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and
2. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
3. the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
3/ Notwithstanding the preceding provisions of this Article; remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State shall be taxable only in that State.”
– Pursuant to the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income:
+ Article 1 stipulates:
“Article 1. Personal scope
This Agreement shall apply to persons who are residents of one or both of the Contracting States.
+ Article 15 stipulates:
“Article 15. Dependent personal services
1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable in the first-mentioned State if;
(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any consecutive 12-month period commencing or ending in the fiscal year concerned, and
(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
3. Notwithstanding the preceding provisions of this Article; remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State shall be taxable only in that State.”
– Pursuant to Article 4 of Circular 96/2015/ T T-BTC dated June 22, 2015 of the Ministry of Finance amending and supplementing Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 2, Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) as follows:
“Article 6. Deductible and non-deductible expenses when calculating taxable income
“1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:
a) The actual expense incurred is related to the enterprise’s business operation.
b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.
c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT)…“
Based on the above regulations, refer to the following principles:
- Regarding personal income tax:
In case a Company in Vietnam incurs airfare and hotel expenses for officials and experts of a foreign joint venture group with the Company abroad (non-residents) to come to Vietnam to support the Company’s production and business activities, airfare and hotel expenses for experts foreign income in Vietnam is income subject to personal income tax; The company is responsible for withholding 20% before paying the above officials and experts according to the provisions of Article 18 of Circular No. 111/2013/TT-BTC of the Ministry of Finance.
In case the above-mentioned foreign officials and experts are residents in the Contracting States to the Double Taxation Avoidance Agreement with Vietnam (for example Singapore, Hong Kong), the income arises in Vietnam will be exempt from personal income tax in Vietnam if the officials and experts from Singapore and Hong Kong simultaneously satisfy all 3 conditions stated in Clause 2, Article 15 of the Agreement between the Government of the Socialist Republic of Vietnam Vietnam and the Government of Singapore, Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income as prescribed in Article 31 of Circular 205/2013/TT-BTC of the Ministry of Finance. Tax exemption procedures according to a Double taxation agreement between Vietnam and another country/territory are carried out according to the principles specified in Article 13 of Circular 156/2013/TT-BTC of the Ministry of Finance stating above.
- Regarding corporate income tax:
In case a Company in Vietnam incurs accommodation and travel expenses for officers and experts of a foreign joint venture group with the Company abroad invited by the Company to Vietnam to support the Company’s production and business activities, if the agreement between the Company in Vietnam and the foreign joint venture group with the Company stipulates that the Company in Vietnam pays these expenses for officers and experts of the foreign joint venture group with the Company, these expenses will be accounted as deductible expenses when calculating income subject to corporate income tax if it meets the provisions of Article 4 of Circular 96/2015/TT-BTC of the Ministry of Finance