Understanding Tax Implications for Foreign Teachers in Vietnam: A Guide to Multiple Sources of Income

For foreign teachers working in Vietnam, understanding the local tax system is essential for ensuring legal compliance and managing diverse sources of income efficiently. This comprehensive guide aims to help you navigate Vietnam’s complex tax landscape.

1. Residency Status and Its Impact on Tax Obligations

Under Article 2 of the Law on Tax Administration, taxpayers include individuals subject to tax in accordance with the provisions of tax laws.

Your tax liability in Vietnam largely depends on your residency status. There are two main categories (pursuant to Article 2 of the Law on Personal Income Tax and Clause 1, Article 1 of Circular No. 111/2013/TT-BTC, as amended):

Tax Residents

An individual is considered a tax resident if they meet either of the following conditions:

• Present in Vietnam for 183 days or more in a calendar year or for 12 consecutive months from the first date of arrival; or
• Have a permanent residence in Vietnam, including a registered permanent address or a leased residence under a lease contract with a term.

Non-Residents

An individual who does not meet the above conditions is classified as a non-resident.

• Tax residents are subject to progressive tax rates on their worldwide income;
• Non-residents are subject to a flat tax rate of 20% on income sourced from within Vietnam (pursuant to Clause 1, Article 26 of the Law on Personal Income Tax).

See also: Optimizing Tax Deductions for Foreign Employees in Vietnam

2. Understanding Multiple Sources of Income

As a foreign teacher in Vietnam, you may receive income from various sources, including:

• Regular salary from educational institutions;
• Private tutoring fees;
• Online teaching income;
• Educational consulting fees.

These types of income are taxable, specifically categorized as income from salaries and wages, which are defined under the following legal instruments:

• Clause 2, Article 3 of the Law on Personal Income Tax;
• Clause 2, Article 3 of Decree No. 65/2013/NĐ-CP;
• Clause 2, Article 2 of Circular No. 111/2013/TT-BTC, as amended.

3. Tax Rates and Tax Calculation Method

3.1 Tax Rates

Resident taxpayers are subject to Personal Income Tax (PIT) based on a progressive tax rate schedule applied to their worldwide taxable income.

The progressive tax rates are prescribed in Article 22 of the Law on Personal Income Tax and Clause 2, Article 7 of Circular No. 111/2013/TT-BTC, as amended. The applicable rates are as follows:

The personal income tax rates in Vietnam are divided into 7 brackets as follows:

• Bracket 1: For the portion of taxable income up to VND 60 million per year (equivalent to up to VND 5 million per month), the applicable tax rate is 5%.
• Bracket 2: For the portion of income over VND 60 million to VND 120 million per year (over VND 5 million to VND 10 million per month), the tax rate is 10%.
• Bracket 3: For the portion of income over VND 120 million to VND 216 million per year (over VND 10 million to VND 18 million per month), the tax rate is 15%.
• Bracket 4: For the portion of income over VND 216 million to VND 384 million per year (over VND 18 million to VND 32 million per month), the applicable tax rate is 20%.
• Bracket 5: For the portion of income over VND 384 million to VND 624 million per year (over VND 32 million to VND 52 million per month), the tax rate is 25%.
• Bracket 6: For the portion of income over VND 624 million to VND 960 million per year (over VND 52 million to VND 80 million per month), the applicable tax rate is 30%.
• Bracket 7: For the portion of income exceeding VND 960 million per year (over VND 80 million per month), the highest tax rate of 35% is applied.

3.2 Tax Calculation Method

Pursuant to Clause 3, Article 7 of Circular No. 111/2013/TT-BTC, as amended:

Personal Income Tax (PIT) = (Total Income − Tax-Exempt Income − Deductions) × Applicable Tax Rate

Tax-Exempt Income

Tax-exempt income is stipulated under:

• Article 4 of the Law on Personal Income Tax;
• Article 4 of Decree No. 65/2013/NĐ-CP; and
• Article 3 of Circular No. 111/2013/TT-BTC, as amended.

Deductions

1. Personal deduction (stipulated in Article 19 of the Law on Personal Income Tax and Article 1 of Resolution No. 954/2020/UBTVQH14):

• Personal deduction: VND 11 million per month (equivalent to VND 132 million per year);
• Dependent deduction: VND 4.4 million per dependent per month.

2. Other eligible deductions (stipulated in Article 15 of Circular No. 92/2015/TT-BTC), including:

• Compulsory social, health, and unemployment insurance contributions paid by the employee from their salary;
• Charitable donations, humanitarian contributions, and educational support donations.

4.2 Compliance Requirements

To ensure proper tax compliance in Vietnam, foreign teachers should maintain comprehensive documentation for tax purposes, including:

• A valid work permit or certificate of work permit exemption;
• Employment contract;
• Monthly payslips;
• Invoices and receipts for private tutoring services;
• Bank statements showing income received;
• Certificate of tax residency;
• Supporting documents for any claimed deductions;
• Previous tax declarations (if any).

To remain compliant with Vietnamese tax regulations, the following steps are recommended:

• Maintain complete records of all sources of income;
• Register a personal tax identification number (TIN) with the local tax authority;
• File monthly or quarterly tax declarations for regular employment income;
• Submit an annual tax finalization return to report total income and settle any outstanding tax obligations.

5. Step-by-Step Tax Filing Procedure

5.1 Tax Registration

For first-time taxpayers who are employees, the tax identification number (TIN) must be registered through the employer with the local tax authority. This procedure is specified under Clause 9 Article 7 of Circular No. 105/2020/TT-BTC and includes:

• A power of attorney;
• A valid copy of the passport;
• The income-paying entity must complete Form 05-ĐK-TCT.

5.2 Monthly/Quarterly Tax Declaration

Typically, the employer will file monthly or quarterly personal income tax (PIT) declarations on behalf of foreign employees. However, understanding the process remains crucial. Relevant regulations are provided in Article 44 of the Law on Tax Administration and Article 7 of Circular No. 105/2020/TT-BTC:

• Deadline:

– By the 20th of the month following the month when tax liability arises;

– No later than the last day of the first month of the following quarter.

• Required Form: Form 05/KK-TNCN;
• Payment Requirement: Tax must be paid in Vietnamese Dong (Article 7, Law on Tax Administration).

Further reading: Step-by-Step Guide – Tax Filing Requirements for Foreign Employees in Vietnam

Conclusion

Understanding the personal income tax (PIT) obligations applicable to foreign teachers in Vietnam is essential for ensuring legal compliance and managing multiple sources of income effectively. Teachers should pay special attention to their residency status, applicable tax rates, filing and payment procedures, and maintain complete documentation to avoid unwanted legal or financial risks.

Strict compliance with Vietnamese tax laws will help foreign teachers maintain stable and lawful teaching activities in the country.

For personalized advice tailored to your specific circumstances—especially in cases involving multiple income streams or international tax matters—please contact a tax advisor at Harley Miller Law Firm.

Harley Miller Law Firm

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