Vietnam's Tax System for Foreign Workers: What You Need to Understand

Key Takeaways

• Foreign workers in Vietnam are taxed under two completely different regimes: tax residents (183+ days/year) pay progressive PIT from 5–35% with family deductions, while non-residents pay a flat 20% on Vietnam-sourced income with no deductions.
• From January 1, 2026, Vietnam’s PIT brackets were reduced from 7 to 5 under PIT Law No. 109/2025/QH15. The personal deduction increased from VND 11M to VND 15.5M/month, and each dependent deduction from VND 4.4M to VND 6.2M/month.
• Tax residency status creates a difference of up to VND 4.75 million per month in PIT on the same VND 50 million salary. This variable needs to be determined at contract design stage, not after signing.
• Housing, children’s tuition and annual home leave flights are fully tax-exempt if the employer pays the third party directly. Adding them to salary and letting employees pay themselves makes the full amount taxable.
• Vietnam has 81 active Double Taxation Agreements (DTAs), allowing eligible foreign specialists to avoid being taxed twice on the same income.

Vietnam offers exciting opportunities for foreign workers, but navigating its tax system can present challenges. It’s essential to familiarize yourself with the tax obligations that apply to your foreign employees, whether they are long-term expatriates or short-term consultants. By understanding Vietnam’s tax system for foreign workers, you can provide valuable support to your expatriate staff, ensure compliance with local regulations, and help create a smooth working experience for your foreign talent in Vietnam.

Tax for resident foreign workers

Managing foreign workers in Vietnam must have a solid understanding of the country’s tax system to ensure payroll compliance and avoid potential liabilities. This guide focuses on tax regulations for resident foreign workers, who meet either of the following criteria:

• Resides in Vietnam for 183 days or more within a calendar year or 12 consecutive months from the date of arrival.
• Has a permanent residence in Vietnam (e.g., registered address, leased house, office location).

Personal income

Resident foreign workers are subject to Personal Income Tax (PIT) on their worldwide income –  earnings within Vietnam and abroad. This includes income from employment, business, investment, capital transfer, real estate transfer, lottery winnings, inheritance, gifts, and more.

Resident foreign workers are subject to family deductions to reduce their taxable income. These deductions apply to the worker and dependents (spouse and children) living with them in Vietnam. Deductions begin the month the worker gains residency status and end the month residency ceases. Adjustments occur if dependents join or leave during the year.

From January 1, 2026, personal deductions increased significantly under PIT Law No. 109/2025/QH15:

Deduction	Before 2026	From January 1, 2026	Change
Personal (self)	VND 11M/month	VND 15.5M/month	+VND 4.5M (+41%)
Per dependent	VND 4.4M/month	VND 6.2M/month	+VND 1.8M (+41%)

Tax calculation for resident foreign workers

Calculate PIT for resident foreign workers using this formula:

Personal income tax payable = Tax rate x Taxable income

• Taxable income: Income after family deductions and other permissible expenses (social/health insurance, charitable donations). Components vary based on income type and source.
• Progressive tax rates: Vietnam’s system means tax rates increase as income rises. The 2024 Vietnam tax rate for foreigners is:

Bracket	Monthly taxable income (VND)	Tax rate (%)
1	Up to 5 million	5
2	Over 5M to 10 million	10
3	Over 10M to 18 million	15
4	Over 18M to 32 million	20
5	Over 32 million	35

Practical example: expat earning VND 50 million gross/month, tax resident, 1 dependent:

• Gross salary: VND 50,000,000
• Less SI contribution (9.5%, capped): VND 4,446,000
• Less HI contribution (1.5%, capped): VND 702,000
• Less personal deduction: VND 15,500,000
• Less dependent deduction: VND 6,200,000
• Taxable income: approximately VND 23,152,000
• PIT payable: approximately VND 2,630,400/month

Companies are responsible for withholding and declaring PIT on time. Understanding Vietnam’s PIT filing deadlines is a core compliance obligation for all employers of foreign workers.

Tax responsibilities for non-resident foreign workers

Non-resident individuals are defined as foreign workers who do not meet the criteria to be considered tax residents in Vietnam.  Primarily, this means they:

• Are present in Vietnam for less than 183 days in a tax year or 12 consecutive months.
• Do not have a permanent residence in Vietnam.

Tax responsibilities for non-resident foreign workers

Non-resident foreigners are subject to tax on their income earned in Vietnam. However, they are not eligible for family deductions, which are available to resident taxpayers. The taxable income for non-resident individuals consists of their salaries and wages earned within Vietnam’s borders. Unlike resident taxpayers who are subject to progressive tax rates, non-resident individuals are taxed at a fixed rate of 20% on their taxable income.

Criteria	Tax resident (183+ days)	Non-resident (<183 days)
Tax rate	Progressive 5–35%	Flat 20%
Personal deduction	VND 15.5M/month	None
Dependent deduction	VND 6.2M/month per person	None
Scope of taxation	Worldwide income	Vietnam-sourced income only
PIT payable (VND 50M gross)	~VND 2.6–4.2M/month	~VND 8.97M/month

A budget risk that is often missed: expats arriving mid-year typically start as non-residents and transition to residents after 183 days. The tax difference during the non-resident period can reach VND 4.75 million per month. For a VND 50 million salary, an expat starting July 1 pays approximately VND 28.5 million more in tax during Year 1 than an expat who starts January 1 as a full-year resident. This should be factored into the compensation budget before the contract is signed.

Calculating tax for non-resident workers

Non-resident foreign workers face a flat PIT rate of 20% applied to their Vietnam-sourced income. The calculation of PIT for non-resident workers is straightforward:

Personal income tax payable = 20% x income

Their taxable income is calculated directly from their gross salary and wages – no deductions for social insurance or other expenses are applicable. The tax year for non-residents follows the calendar year (January 1 – December 31).

Special considerations apply when a non-resident worker performs work both inside and outside Vietnam. Here’s the breakdown:

• If a non-resident worker is employed by a Vietnamese entity, all income received from that employer is subject to Vietnamese PIT, regardless of where the work is actually performed. This simplifies calculations for HR teams.
• If the non-resident is employed by a foreign entity, only the portion of income directly related to workdays physically spent within Vietnam is subject to PIT. This requires careful calculation: divide the number of days spent working in Vietnam by the total number of workdays in the tax year, then apply that percentage to the worker’s total salary to determine the taxable portion.

Exclusions from taxable income

Not all income and benefits that you receive as a foreign worker in Vietnam are subject to PIT. Some types of income and benefits are excluded from taxable income, meaning that you do not have to pay tax on them or report them in your tax declaration. These include:

• Employer-purchased insurance: Premiums paid by the employer for health, life, or accident insurance on behalf of the foreign worker are generally excluded from taxable income. However, important exceptions exist: any compensation or benefits received by the worker directly from the insurance policy (e.g., medical reimbursement) are taxable.
• Medical support:  When the employer provides free or subsidized medical care (examinations, treatments), the value of this support is typically non-taxable.  This could include on-site company medical facilities or coverage at third-party clinics. Cash allowances for medical expenses, however, are treated as taxable salary income.
• Meals: Mid-shift meals and lunches provided by the employer are often non-taxable, whether served in a company canteen or an external location.  Cash allowances for meals are considered taxable salary income.
• Tickets and tuition:  In some cases, employer-paid round-trip air tickets for a foreign worker’s home visits, or tuition fees for children studying in Vietnam, may be excluded.  Specific limits and conditions often apply.

Whether an allowance is tax-exempt depends on how it is paid, not what type of allowance it is. The employer must pay the third party directly. Housing paid to the landlord is exempt. Tuition paid to the school is exempt. Flights purchased and paid by the company are exempt. But if these amounts are added to the employee’s salary for them to handle personally, the full amount becomes taxable income.

Allowance	Exemption condition	Note
Housing	Paid directly to landlord	Cash to employee = taxable
School tuition (preschool to high school)	Paid directly to school	University not included
Annual home leave airfare	Company purchases ticket, once/year	Cash to employee = taxable
One-time relocation allowance	Paid once upon arrival, in contract	Must be specified in contract
Company health insurance	Premium paid directly to insurer	Direct reimbursement to employee = taxable

These exclusions from taxable income are applicable to both resident and non-resident foreign workers, as long as they meet the conditions and requirements specified by the tax authorities. When advising your expatriate employees on tax finalization, it’s important to consider the potential impact of DTAs. These agreements are designed to prevent double taxation and fiscal evasion, and their provisions may supersede certain aspects of Vietnam’s domestic tax laws, including some of the exclusions from taxable income.

By collaborating with tax professionals and services, you can ensure that you provide accurate and up-to-date information to your expatriate staff about their tax obligations and the availability of exclusions. This support can help your foreign workers make informed decisions and remain compliant with both Vietnamese and international tax laws.

Vietnam’s tax system for foreign workers has unique aspects, including residency rules and deductions. To support your foreign workers effectively, it’s essential to stay informed about their taxes in Vietnam for foreigners, help them keep accurate records, and provide access to professional advice when needed. By assisting your expatriate staff in fulfilling their tax responsibilities, you can help them focus on their professional goals and contribute to your organization’s success in Vietnam.