Answer:
Pursuant to the labour laws, the salary stated in any LC and the salary paid to an Employee will be prescribed in Vietnamese dong, if the foreign Employee works in Vietnam, the salary or salary allowances can be paid in a foreign currency such as USD[1].
Therefore, the Employer has the right to agree on the salary stated in the LC and to pay any foreign Employee who works in Vietnam salary in a foreign currency. However, when conducting PIT deduction, withholding, and paying compulsory SI, the Employer should pay attention to the following issues:
- Deducting PIT:
Any Foreign Employee who works in Vietnam and has taxable income are subject to PIT[2]. Under the PIT law, when deducting PIT, the Employer must[3]: (i) convert the taxable income to Vietnamese Dong at the actual buying exchange rate of the bank where the Employee opens a trading account at the time of generating income; (ii) where a taxpayer does not open a trading account in Vietnam, the foreign currency must be converted into Vietnamese Dong at the buying exchange rate of the Joint Stock Commercial Bank for Foreign Trade of Vietnam at the time of generating income. Any Foreign Employee who personally carries out the registration, declaration and finalisation of PIT will also comply with this provision.
2. Withholding and paying compulsory SI:
For any Employee whose salary is stated in the LC in a foreign currency, the monthly salary as the basis for SI premiums payment and being recorded in the SI book will be calculated in Vietnam Dong on the basis of the salary in the foreign currency converted into Vietnamese dong at the average transaction exchange rate on the inter-bank foreign currency market announced by the State Bank of Vietnam as of January 2 for the first six months of the year and as of July 1 for the last six months of the year. In case of being not yet announced due to the said dates falling on the public holidays not announced by the State Bank of Vietnam, the exchange rate of the adjoining following day as announced by the State Bank of Vietnam will be applied[4].
[1]Article 95.2 of the Labour Code
[2] Article 1 of Decree 111/2013/TT-BTC of Ministry of Finance dated 15 August 2013
[3]Article 13 of Circular 92/2015/TT-BTC of Ministry of Finance dated 15 June 2015 amending and supplementing of Circular 111/2013/TT-BTC of Ministry of Finance dated 15 August 2013
[4]Article 26 of Decree 115/2015/NĐ-CP of the Government dated 11 November 2015
