Answer:
Pursuant to the PIT law, any foreign Employee working in Vietnam for one year will be considered as a resident individual because he or she has resided in Vietnam for 183 days or more calculated according to 12 consecutive months from the first day of his or her presence in Vietnam[1]. Accordingly, the said foreign Employee will be required to declare and finalise tax on all worldwide income, including salaries received abroad and meal, transport and lodging allowances received in Vietnam in accordance with the law[2]. In addition, because the foreign Employee is a resident individual earning income from wages, salaries paid by foreign organisations and individuals, the Employee must declare PIT in Vietnam on a quarterly basis[3]. The PIT calculation for the foreign Employee as a resident individual earning income from salaries, wages will also be applied similarly to the one applied for the Vietnamese Employee. Particularly, in this case, the PIT calculation will be based on taxable income, deductions, and tax rates as per the partially progressive tariff.
Where a resident individual with arising income abroad have calculated and paid PIT pursuant to foreign tax law, the resident individual will be entitled to deduct the taxes already paid abroad. The taxes to be deducted must not exceed the payable taxes calculated according to the Vietnamese tariff and allocated on the generated income abroad. The ratio of allocation is determined by the ratio of generated income abroad and the total taxable income[4]. Accordingly, the abroad generated income is understood as any income generated in any other place than Vietnam, rather than the one paid for operations in any other place than Vietnam. Therefore, if the foreign Employee works in Vietnam but is paid salary and pays taxes abroad, the already paid taxes will be correspondingly deducted from his or her tax liability in Vietnam. This content was also instructed by the Ho Chi Minh City Tax Department in Official Letter No. 948/CT-TTHT dated 23/01/2015. In addition, the agreement between Vietnam and foreign countries (if any) and Vietnamese regulations on the avoidance of double taxation often stipulate that PIT overseas will be deducted from the tax payable according to the tax calculation method prescribed by the Vietnamese law as allocated above[5].
Failure to grasp the PIT regulations applicable for the foreign Employee may result in legal risks. Therefore, in order to comply with the tax law and prevent all case of wrong tax returns from leading to any tax underpayment, the tax return preparer should voluntarily remedy the consequences by disbursing tax payables in full before the competent agency’s detection. For these cases, the preparer will have to settle the late payment without being sanctioned for violation of tax administrative procedures, tax arrears or tax evasion[6].
[1] Article 2.2 of the Law on Personal Income Tax
[2] Article 2.1 (a) of Decree 65/2013/ND-CP of the Government dated 27 June 2013
[3] Article 16.2 (a1) Circular 156/2013/TT-BTC of Ministry of Finance dated 06 November 2013 and Article 21.3 (a.2) of Circular 92/2015/TT-BTC of Ministry of Finance dated 15 June 2015
[4] Article 26.2 (e1) of Circular 111/2013/TT-BTC of Ministry of Finance dated 15 August 2013
[5] Article 48 Circular No. 205/2013/TT-BTC of Ministry of Finance dated 24 December 2013
[6] Article 59 of the Law on Tax Management and Article 17 of Decree 152/2020/ND-CP of the Government
