Overview of the Tax Regime Applicable to Foreign Experts in Vietnam (Updated 2025)

Vietnam applies a progressive personal income tax (PIT) regime for tax residents and a flat rate for non-residents. For foreign experts working in Vietnam, proper determination of tax residency status and income source is critical to ensuring tax compliance and implementing effective, lawful tax planning strategies.

1. Key Features of Vietnam’s Personal Income Tax (PIT) Regime

According to the Law on Personal Income Tax No. 04/2007/QH12 and its implementing guidance under Circular No. 111/2013/TT-BTC, the following principles apply:

a. PIT Rates

Tax Residents are subject to tax on their worldwide income (including income earned outside Vietnam), with a progressive tax rate ranging from 5% to 35% applied to employment income (Article 22 of the Law on PIT).
Non-Residents are subject to tax only on income sourced in Vietnam, with a flat rate of 20% applicable to employment income (Article 26 of the Law on PIT).

b. Determination of Tax Residency

As stipulated in Article 2 of the Law on PIT and Article 1 of Circular No. 111/2013/TT-BTC, an individual is considered a Vietnam tax resident if either of the following conditions is met:

The individual is physically present in Vietnam for 183 days or more in a calendar year or within any 12 consecutive months, counting both arrival and departure days as full days;
The individual has a permanent residence in Vietnam, including a registered permanent or legally permitted temporary residence.

c. Common Taxable Income for Foreign Experts

Foreign professionals working in Vietnam may be subject to PIT on the following types of income:

Employment income, including cash or non-cash benefits paid by the employer;
Capital gains and dividends (e.g., from share transfers or profit distributions);
Inheritance and gifts received in the form of assets located in Vietnam.

For further reading, refer to our article: Penalties for Tax Violations Committed by Household Businesses in Vietnam.

2. Tax Filing and Payment Obligations

Pursuant to Point d, Clause 6, Article 8 of Decree No. 126/2020/NĐ-CP, individual taxpayers have the following obligations:

Self-declare personal income tax (PIT) if they receive income from multiple sources and such income is not fully withheld at source;
Authorize the income-paying entity (e.g., employer) to perform year-end tax finalization on their behalf;
Submit annual tax finalization dossiers no later than April 30 of the following calendar year.

Classification and Tax Treatment of Diverse Income Sources

For foreign professionals working in Vietnam, income may derive not only from salaries and wages but also from independent consulting services, financial investments, and property rental. Each income stream is subject to different tax calculation methods and applicable tax rates.

3. Employment Income (Salaries and Wages)

For tax residents, progressive PIT rates ranging from 5% to 35% apply.
Employment income is typically withheld at source by the employer on a monthly basis (Article 25, Circular No. 111/2013/TT-BTC).
In cases where the individual receives income from multiple employers or from overseas sources, the taxpayer must self-finalize their annual PIT.

4. Income from Independent Consulting or Freelance Work

Where a foreign expert provides consulting services to a Vietnamese organization without signing an employment contract, such income is classified as business income under Vietnamese tax law.
If the service provider is not under a labor contract, or the labor contract is for a term of less than 3 months, the Vietnamese entity paying the service fee must withhold PIT at 10% of the remuneration (Point i, Clause 1, Article 25, Circular No. 111/2013/TT-BTC).
Accordingly, freelancers who are Vietnam tax residents and do not enter into employment contracts are subject to a 10% PIT withholding on service fees.

5. Income from Investments and Property Leasing

a. Rental Income (from leasing residential property)

Foreign experts earning income from leasing residential property in Vietnam are subject to the following taxes:

Value-Added Tax (VAT): 5%
Personal Income Tax (PIT): 5%

These tax rates are stipulated in Appendix I of Circular No. 40/2021/TT-BTC, applicable to individuals engaging in business activities, including real estate leasing.

b. Capital Gains from Transfer of Capital Contributions or Securities

Income from Transfer of Capital Contributions (Unlisted Shares/Equity in LLCs)
Tax basis: Taxable income and tax rate of 20%.
Taxable income = Transfer price – Purchase price – Reasonable expenses
Time of tax liability: When the transfer agreement becomes effective, or when capital contributions are withdrawn or exchanged in kind (e.g., in the form of assets).
Tax calculation formula:
Tax payable = Taxable income × 20%

Income from Transfer of Securities (Listed and Unlisted Shares)
Tax basis: Taxable income and applicable tax rate.
Taxable income = Selling price – Purchase price – Reasonable expenses

There are two tax calculation methods:

Based on 20% PIT rate (if taxable income is identifiable):
Tax payable = Taxable income × 20%
Flat tax at 0.1% of gross transfer value (applied per transaction):
Tax payable = Transfer price × 0.1%

Note: The 0.1% tax paid per transaction is creditable against the final PIT calculated at 20% during year-end finalization.

Time of tax liability:Upon receipt of income (for listed shares);
Upon ownership transfer (for unlisted shares);
Upon effective date of the transfer contract (for other securities);
Upon withdrawal or exchange of contributed capital in the form of securities.

6. Double Taxation Issues and Application of Double Taxation Agreements (DTAs)

Vietnam has signed Double Taxation Avoidance Agreements (DTAs) with over 80 countries and territories, aiming to prevent double taxation on the same income and to facilitate cross-border investment and employment.

1. Key Considerations for Foreign Experts

Determine the tax residence country and the source country of income. Based on that, examine whether the DTA between Vietnam and the relevant country provides for tax exemption or reduction on the corresponding income type.
In cases where a Vietnamese tax resident earns taxable income from abroad (e.g., dividends, interest income, salaries), they may be entitled to a foreign tax credit in Vietnam, provided that the conditions under the applicable DTAs are met.
Supporting documents proving foreign taxes paid are mandatory to claim relief under the DTA, including:Withholding tax certificates;
Confirmation letters from foreign tax authorities.

Some DTAs exempt certain income from Vietnamese tax if that income has already been taxed abroad, such as:Income from short-term employment assignments;
Income earned by teachers or lecturers under specific time and purpose conditions.

2. Practical Recommendations
Carefully review the full text of the DTA in force between Vietnam and the expert’s country of tax residence;
Consult international tax advisors when dealing with complex situations such as:Income derived from multiple countries;
Changes in tax residency status during the year;

Maintain complete documentation and evidence to support the application of the DTA during annual tax finalization and audits.

7. Tax Filing Obligations and Compliance with Vietnamese Tax Law

Compliance with tax filing and payment obligations is a mandatory legal requirement for all individuals earning taxable income in Vietnam, including foreign experts.

Annual Tax Filing Obligations

Pursuant to Article 44 of the Law on Tax Administration, the following deadlines apply:

Annual tax finalization dossier: No later than the last day of the third month following the end of the tax year;
Annual tax declaration dossier (where applicable): No later than the last day of the first month of the tax year;
Personal income tax (PIT) finalization: For individuals, no later than the last day of the fourth month following the end of the tax year;
Presumptive tax return (for business households or individuals):For ongoing businesses: No later than 15 December of the preceding year;
For newly established businesses: No later than 10 days from the commencement date.

Periodic (Quarterly/Monthly) Filing and Payment

Monthly declaration: No later than the 20th day of the following month;
Quarterly declaration: No later than the last day of the first month of the following quarter.

Sanctions and Penalties

Violations of tax filing and payment obligations may result in administrative sanctions under Decree No. 125/2020/ND-CP, with fines ranging from VND 500,000 to VND 25,000,000 depending on the nature and severity of the breach.

In cases of tax evasion or incorrect declarations, the taxpayer may be subject to:

Tax recovery and a fine of up to three times the amount of evaded tax under Article 17 of Decree No. 125/2020/ND-CP; or
Criminal liability under Article 200 of the 2015 Penal Code, where applicable.

8. Best Practices for Managing Tax Obligations in Vietnam

To ensure full compliance and optimize personal tax obligations in Vietnam, foreign professionals are advised to adopt the following best practices:

Maintain Proper Income Records

Maintain detailed and verifiable documentation for all sources of income from both domestic and international sources, including:

Employment contracts;
Independent service contracts;
Payment receipts;
Tax withholding certificates or foreign tax payment confirmations.

This will facilitate accurate annual tax finalization and support any claims for double tax relief under relevant Double Taxation Agreements (DTAs).

Stay Informed of Tax Policy Updates

Vietnam’s tax laws are subject to frequent changes, particularly regarding:

Regulations applicable to foreign residents in Vietnam;
Withholding tax obligations of income-paying entities;
Updates in the list of effective DTAs and changes in their interpretation or application.

Keeping abreast of these developments is essential for compliance and tax efficiency.

Engage Professional Tax Advisory Services

In cases involving:

Multiple sources of income across jurisdictions;
Complex income types such as dividends, stock options, or income from e-commerce and digital platforms;

It is highly recommended to consult with a licensed tax advisor or international tax attorney in Vietnam. Professional assistance ensures accurate tax declarations, maximizes benefits under DTAs, and minimizes the risk of tax reassessment or penalties.

9. Common Mistakes to Avoid

The following errors are frequently the cause of tax reassessments, administrative penalties, or legal risks for foreign professionals working in Vietnam:

Misclassification of Income Sources

For instance, declaring income earned under a service contract as employment income—or vice versa—is a common mistake.
Each income type is subject to different tax calculation methods and rates (e.g., Articles 22 and 23 of Circular No. 111/2013/TT-BTC). Misclassification can lead to incorrect tax declarations and underpayment.

Late Submission or Incomplete Documentation

Submitting annual tax finalization dossiers after March 31 or failing to include tax withholding certificates or other supporting income documents may result in penalties under the tax administration laws.

Failure to Apply Double Taxation Agreement (DTA) Benefits

Many individuals fail to submit the required application for tax exemption or reduction under a DTA, resulting in double taxation in both Vietnam and their country of tax residence—even though relief could have been granted.

To apply DTA benefits under Article 19 of Circular No. 80/2021/TT-BTC, individuals must prepare a complete dossier, most importantly including a valid Certificate of Tax Residency from the relevant foreign tax authority.

See also: Detailed Tax Declaration Guide for Business Households 2025

Conclusion

Proper understanding and management of tax obligations in Vietnam requires careful attention to detail and proactive planning. For foreign professionals, full compliance not only helps mitigate legal and financial risks but also enables lawful tax optimization.

Timely updates on regulatory changes, complete and accurate documentation, and engagement with qualified tax professionals are key steps for working and living legally and effectively in Vietnam.

Important Disclaimer

This document is intended for general informational purposes only and does not constitute specific legal or tax advice. Vietnam’s tax regulations are subject to change and may vary depending on individual circumstances. For personalized advice, it is recommended to consult licensed tax advisors or lawyers, such as the professional team at Harley Miller Law Firm.

Harley Miller Law Firm 

Email: info@luatminhnguyen.com or miller@hmlf.vn
Hotline: +84 9372 15585