Vietnam Personal Income Tax

Vietnam has enacted its most significant personal income tax reform in nearly two decades.

Contributing Advisor

Hong Nguyen

Senior Manager, Payroll

For foreign-invested enterprises (FIEs), the reform changes payroll math immediately: employers must withhold at the new five-bracket schedule, and higher deductions mean lower gross-up costs on net-pay expatriate packages. For foreign professionals, the reform brings expanded exemptions, including a five-year PIT holiday for qualifying high-tech talent, alongside unchanged fundamentals such as the 183-day residency test and the 20 percent flat rate on non-residents' Vietnam-sourced income.

This guide explains who pays PIT in Vietnam, the rates and deductions, which benefits remain tax-exempt for expatriates, and the compliance steps employers and individuals need to complete, from monthly withholding to annual finalization and pre-departure filing.

Who is a tax resident in Vietnam?

A tax resident is an individual who resides in Vietnam for 183 days or more in either a calendar year or a period of 12 consecutive months from the date of arrival, or who maintains a registered permanent residence or a leased dwelling in Vietnam under a rental contract of a qualifying term.

The 90-day criterion generally pertains to visa-exempt entries or e-visas (e.g., maximum permitted stay per entry), and temporary residence declarations (which must be made within 24 hours of arrival). For tax residency under Law 109/2025, the 183-day limit applies for the presence test, but the "habitual residence/lease" test has no specific duration threshold other than requiring a fixed-term lease.

Tax residents are subject to PIT on their worldwide employment income, regardless of where the income is paid or earned, at progressive rates from 5 percent to 35 percent under the new five-bracket schedule below.

Non-residents are subject to PIT at a flat rate of 20 percent on their Vietnam-sourced employment income only.

The distinction matters most for regional executives who split time between Vietnam and other Asian hubs. Crossing the 183-day threshold mid-assignment converts a flat 20 percent liability on local income into progressive taxation of worldwide employment income, a shift that should be modeled before an assignment begins, not discovered at finalization. Where an individual qualifies as a tax resident of two jurisdictions, Vietnam's network of double taxation avoidance agreements (DTAs) provides tie-breaker rules and foreign tax credit relief.

What changed under the 2026 PIT Law?

Law No. 109/2025/QH15 replaces the 2007 PIT Law framework. Its headline measures for employers and individuals are:

The law also clarifies and extends PIT coverage to income earned through digital platforms, e-commerce, and certain digital asset transactions, and reforms the calculation methods for capital and securities transfers. Detailed procedures for several of these measures, including the education and healthcare deductions and the gold transaction threshold, await implementing decrees and circulars from the Ministry of Finance. Until that guidance is issued, taxpayers should apply the law's provisions conservatively and document positions taken.

What are Vietnam's personal income tax rates?

From the 2026 tax year, resident individuals' salary and wage income is taxed under the following five-bracket progressive schedule:

Employment income includes salaries, wages, allowances and subsidies, remuneration in all forms, benefits from participation in boards of directors and similar bodies, and bonuses in any form other than state awards prescribed by law.

Non-residents remain subject to a flat 20 percent on Vietnam-sourced employment income. Rates on non-employment income, capital investment, capital transfer, real estate transfer, royalties, franchising, prizes, inheritances, and gifts, apply separately per category.

What deductions can taxpayers claim?

Resident taxpayers deduct the following before applying the progressive schedule:

• Personal deduction: VND 15.5 million (≈US$589) per month, VND 186 million per year, up from VND 11 million.
• Dependent deduction: VND 6.2 million (≈US$236) per month per registered dependent, up from VND 4.4 million. Qualifying dependents include children under 18; children 18 or over who are disabled and incapable of working, or enrolled in university with monthly income below the prescribed threshold (VND 3 million); and spouses or parents who are unable to work or whose income falls below the prescribed threshold.
• Compulsory insurance contributions (social, health, and unemployment insurance).
• Charitable and humanitarian contributions to approved organizations.
• Education, training, and healthcare expenses in newly deductible categories, subject to conditions and documentation to be detailed in implementing guidance.

In practical terms, an individual with no dependents earning up to around VND 17 million per month pays no PIT once insurance deductions are counted; with one dependent, the effective entry point rises to roughly VND 24 million, and with two dependents to about VND 31 million.

Two operational points frequently trip up foreign employers. First, the dependent deduction is not automatic, the taxpayer must register each dependent with the tax authority and retain supporting documents, and each dependent may be claimed by only one taxpayer. Second, the new law replaces the old CPI-linked adjustment trigger with a requirement for the government to propose timely deduction adjustments as prices and incomes change, meaning deduction levels may now move more frequently than the once-in-five-years pattern of the past. Payroll systems should be built to accommodate mid-cycle changes.

What income is exempt or non-taxable in Vietnam?

Exemptions carried over from the prior framework include transfers of real estate between close family members; transfer of a sole residential property; inheritances and gifts between close family members; bank deposit and life insurance interest; overseas remittances, retirement pensions, and scholarships; insurance and charity fund compensation; qualifying agricultural income; and foreign aid income for approved charitable purposes.

New and expanded exemptions of particular relevance to investors include:

• Overtime and night-work income, now fully exempt rather than exempt only as to the premium over daytime rates;
• A five-year PIT exemption on salary and wages of qualifying high-tech professionals and high-quality digital technology workers, including roles in AI, semiconductors, and R&D, subject to certification requirements expected in implementing guidance; and
• Income from the initial transfer of carbon credits and green bonds.

The high-tech exemption is a genuine cost lever for technology, semiconductor, and R&D investors: a five-year PIT holiday on qualifying expert salaries materially changes the total cost of employing senior foreign or local specialists in Vietnam relative to regional alternatives. Qualification criteria and certification procedures should be confirmed before compensation commitments are made.

Which expatriate benefits are tax-exempt?

Certain benefits provided to foreign employees remain non-taxable when properly structured and documented:

• One-off relocation allowance for the move to Vietnam, per the amount stipulated in the labor contract;
• One round-trip home-leave airfare per year for the employee (not family members), where the ticket evidence travel to the employee's home country or family residence;
• School fees or tuition paid by the employer for expatriates' children studying in Vietnam, from kindergarten through high school, supported by school invoices and the labor contract;
• Employer-provided housing, taxable only up to 15 percent of total taxable income (excluding the housing benefit itself), amounts above the cap are effectively non-taxable to the employee;
• Collective transportation, qualifying training fees, employer-catered mid-shift meals, and per-diem/telephone/stationery allowances within prescribed limits; and
• Unnamed collective memberships (e.g., club cards for common use without named holders).

Structuring an expatriate package to maximize these exemptions, while avoiding arrangements that draw tax authority scrutiny, such as undocumented split-salary structures, is one of the highest-value planning exercises available to foreign employers in Vietnam.

How does social insurance interact with PIT?

Employers register and remit compulsory social, health, and unemployment (SHUI) contributions monthly. Contributions are based on the labor contract's salary, capped at 20 times the statutory reference level. Employee SHUI contributions are deductible when computing PIT; employer contributions are not taxable income to the employee.

 The Social Insurance Law 2024 replaces the "basic wage" with a "reference level" for calculating contributions, and expands coverage to various unsalaried managers and part-time workers.

Administrative authority falls under the Ministry of Labor, Invalids, and Social Affairs (MoLISA) alongside the restructured social security administration.

Foreign nationals working under a labor contract of 12 months or longer are subject to mandatory SI if they hold a valid work permit/certificate, are not internal intra-company transferees, and are under the statutory retirement age.

For comprehensive regulatory details, visit the official Vietnam Social Security portal.

How is PIT registered, withheld, and finalized?

Individuals subject to PIT must register for a tax identification number (TIN). Employers withhold PIT monthly (or quarterly, where eligible) from salaries at the new progressive schedule from January 2026 and remit it to the tax authority. If taxable income is received in foreign currency, it is to be converted to Vietnamese dong at the average exchange transaction rate on the inter-bank foreign exchange market announced by the State Bank of Vietnam (SBV) at the time the income arises.

Annual finalization

FIEs conduct PIT finalization on behalf of employees who authorize them to do so, covering income from the previous calendar year. Employees with income from multiple sources who finalize directly may request a withholding certificate from each income payer.

• Deadline for employer (organizational) finalization: the last day of the third month following the end of the calendar year, in practice, March 31.
• Deadline for individuals to finalize directly: the last day of the fourth month following year-end, in practice, April 30, extended to the next working day where it falls on a holiday or weekend.

Finalization is not required in limited cases, for example, where the additional tax payable after withholding is below the de minimis threshold (VND 50,000 or less), or where a refund is due but the taxpayer opts not to claim it.

Individuals are exempt from the annual finalization where the secondary income subject to 10 percent withholding, and the average monthly income does not exceed VND 15 million.

The 2025-to-2026 transition

Because the new brackets and deductions apply from the 2026 tax year, income earned in 2025 is finalized in early 2026 under the old seven-bracket schedule and the old VND 11m/4.4m deductions. Income earned from January 1, 2026 onward is withheld and finalized under the new rules. Employers should ensure payroll systems apply the correct parameters to the correct periods, and communicate the distinction to employees to preempt confusion over early-2026 payslips.

Leaving Vietnam: pre-departure finalization

Foreign employees whose Vietnamese assignment ends before the calendar year closes must finalize their PIT within 45 days of departure, or authorize their employer to do so. Non-compliance can complicate future re-entry, delay refunds, and leave gaps in the tax documentation needed for foreign tax credit claims at home. Tax authorities review foreign employees' finalizations closely — particularly where salaries are split across jurisdictions or benefits are extensive — so complete documentation is essential to avoid refund delays.

Many foreign investors underestimate how quickly Vietnam's progressive PIT brackets escalate, a tax resident earning even a modest expatriate salary can find themselves in the 30-35% bracket faster than in comparable ASEAN markets. The real compliance risk isn't the rate itself, it's miscalculating tax residency status in the first place

Hong Nguyen

Senior Manager, Payroll Solution

Talk to an expert at hong.nguyen@dezshira.com

Or request a consultation at +84 936 395 477