What Permits Are Required for Foreigners Working in Vietnam?

Key Takeaways

• PIT audits are formal procedures conducted by tax authorities to evaluate the accuracy, completeness, and truthfulness of tax declarations, as well as a corporate entity’s regulatory compliance.
• The thorough preparation of accounting files, tax records, payroll data, and original supporting documents is instrumental in mitigating the risks of tax arrears or administrative penalties.
• Under prevailing regulations, enterprises retain the legal right to submit supplementary tax declarations prior to the official announcement of a tax audit decision.
• Data regarding payroll, PIT, benefits, and other allowances granted to employees and their families are subject to rigorous scrutiny by tax authorities during an audit.
• Proactively reviewing and standardizing data ahead of an audit serves as an effective mechanism to minimize tax compliance risks.

In essence, a tax audit is an enforcement mechanism leveraged by tax authorities to verify potential irregularities and substantiate legal evidence. However, many enterprises currently conflate tax audits with tax inspections. While a tax inspection is a routine, operational activity performed by tax authorities to assess the adequacy and accuracy of tax profiles or gauge overall taxpayer compliance; a tax audit, conversely, is a high-level administrative action aimed at examining statutory adherence, investigating discrepancies, and gathering definitive evidence to establish tax violations based on advanced data analytics and taxpayer profiles.

Cases that triggers a corporate tax audit

Pursuant to Article 113 of the Law on Tax Administration 2019, an enterprise may be subject to a formal tax audit under the following circumstances:

• Upon detection of indicators suggesting non-compliance or statutory violations by an organization or individual.
• To resolve tax-related complaints, denunciations, or disputes.
• During corporate restructuring events, including divisions, separations, mergers, consolidations, dissolutions, bankruptcies, or equitization.
• Upon direct instructions from the Heads of Tax Authorities at all levels or the Minister of Finance.
• In response to recommendations from the State Audit Office, or conclusions drawn by the Government Inspectorate and other competent state authorities.

Consequently, the scope of tax audits is strictly confined to enterprises demonstrating explicit signs of tax non-compliance.

Common Pitfalls Leading to PIT Back-Taxes and Arrears

During the audit process, tax authorities heavily scrutinize areas that directly impact an enterprise’s PIT liabilities. Frequent non-compliance issues include:

• Incorrectly determining the tax residency status of employees, particularly expatriates.
• Inappropriate income allocation for cross-border employees working across multiple jurisdictions.
• Failure to capture the full scope of taxable income, especially the global income of tax residents.
• Improper or unsubstantiated application of Double Taxation Agreements (DTA) due to deficient documentation.
• Lack of sufficient supporting documentation for tax-exempt income or non-taxable benefits.
• Non-compliant registration and management of dependents.
• Omission of taxable benefits, particularly off-payroll expenses or payments made to non-employees.
• Discrepancies arising from a failure to reconcile withholding tax, declared amounts, and actual tax remittances.
• Non-compliant tax treatment of business travelers, short-term experts, or cross-border remote workers.
• Inaccurate tax declarations and finalizations, including incorrect filing periods or flawed finalization methodologies.
• Failure to promptly integrate updates in tax policies, or inconsistent application of regulations in areas subject to ambiguous interpretations.

Conducting a comprehensive health check on these areas prior to the tax audit will significantly minimize the risk of tax reassessments and punitive fines.

Strategic Preparedness for PIT Audits and Inspections

Proactive and meticulous preparation before engaging with tax authorities is the “golden key” that allows enterprises to protect their legitimate interests and avert unnecessary legal liabilities.

To sustainably mitigate PIT compliance risks, enterprises must transition from reactive handling to building an active, continuous tax risk management framework. Recommended best practices include:

• Conducting periodic reviews of internal tax control systems to ensure that payroll computation, withholding, declaration, and finalization processes are fully, consistently, and legally executed.
• Implementing routine “Tax Health Checks” or “Payroll Health Checks” to swiftly detect and rectify compliance gaps, while identifying lawful tax optimization opportunities.
• Integrating tax risk governance into core business operations through seamless cross-functional collaboration between HR, Payroll, Accounting, Finance, and Operations, alongside continuous statutory updates to ensure uniform execution.

Essential Documentation for PIT Audits and Inspections

In practice, tax authorities do not merely audit whether the declarations are correct, but rather whether the enterprise possesses sufficient documentary evidence to substantiate them. Therefore, maintaining a well-organized, logically aligned dossier across HR, Payroll, Accounting, and Finance will enable the enterprise to:

• Expedite the audit timeline.
• Minimize the risk of non-deductible expenses or PIT arrears due to missing documentation.
• Demonstrate robust corporate governance and tax compliance maturity.

Tax Declaration and Remittance Dossier

• Monthly/Quarterly PIT declaration forms.
• Annual PIT finalization dossiers.
• Tax payment vouchers remitted to the State Budget.
• PIT withholding certificates (if applicable).

Labor and Payroll Documentation

• Labor contracts and subsequent addenda.
• Internal policies governing salary, bonuses, and employee benefits.
• Payroll sheets and PIT calculation working files.
• Payslips.
• Corporate resolutions or decisions regarding salary increments, bonuses, appointments, and internal transfers.
• Termination dossiers and final settlement records for departing employees.

Accounting Records and Payment Vouchers

• General ledgers and detailed sub-ledgers for payroll-related accounts.
• Accounting vouchers (accounting journals).
• Bank transfer records for salaries and bonuses.
• Payment vouchers for allowances, subsidies, and welfare benefits.
• Audited Financial Statements (for payroll expense reconciliation).

Documentation for Tax Exemptions and Non-Taxable Income

• Dependent registration profiles.
• Supporting documents for tax-exempt items (airfares, tuition fees, per diems, statutory allowances, etc.).
• Evidentiary files for items excluded from taxable income.

Expatriate Employee Dossier

• Passports, visas, work permits, or work permit exemption certificates.
• Documentation validating tax residency status.
• Business travel itineraries and physical presence tracking logs in Vietnam.
• Labor contracts executed both in Vietnam and overseas (if applicable).
• Certificates or vouchers proving global income (where applicable).

Documentation for Short-Term Experts, Business Visitors, and Independent Contractors

• Service agreements or consulting contracts.
• Detailed working schedules in Vietnam.
• Bank remittance and payment vouchers.
• Tax liability determination files for operations in Vietnam.

Internal Audit Readiness Dossier

• Standard Operating Procedures (SOPs) for payroll processing and tax withholding.
• SOPs for annual PIT finalization.
• Comprehensive reconciliation matrices mapping:
  • Payroll sheets;
  • Tax declarations;
  • Tax remittance vouchers;
  • Accounting ledgers;
  • Financial statements.