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| According to the 2007 Law on Personal Income Tax, foreigner workers may authorize their employers in Vietnam to carry out personal income tax finalization on behalf of them__Photo: VNA |
I’m Japanese and currently on the payroll of a company in Japan. In last June I was sent to Vietnam to work at the company’s branch here for 12 months and during that period, I’m entitled to salary from both the company in Japan and the Vietnam-based branch. How will I carry out personal income tax finalization with Vietnamese tax authorities?
According to the 2007 Law on Personal Income Tax (PIT), amended in 2012, a foreigner will be considered a resident taxpayer if he is present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of his presence in Vietnam.
In your case, as you are assigned to work in Vietnam for 12 months, you will be considered a resident taxpayer.
As you are a foreign resident taxpayer working in Vietnam under a labor contract of a term of three months or more and earning income from two sources, under Article 25.1.b.1 of Circular 111/2013/TT-BTC issued by the Ministry of Finance (Circular 111), your employer in Vietnam will withhold your payable PIT amount according to the Partially Progressive Tax Tariff as follows:
| Tax grade | Taxed income per year (VND million) | Taxed income per month (VND million) | Tax rate (%) |
|---|---|---|---|
| 1 | Up to 60 | Up to 5 | 5 |
| 2 | Between over 60 and 120 | Between over 5 and 10 | 10 |
| 3 | Between over 120 and 216 | Between over 10 and 18 | 15 |
| 4 | Between over 216 and 384 | Between over 18 and 32 | 20 |
| 5 | Between over 384 and 624 | Between over 32 and 52 | 25 |
| 6 | Between over 624 and 960 | Between over 52 and 80 | 30 |
| 7 | Over 960 | Over 80 | 35 |
Please keep in mind that your taxable income will include incomes generated inside and outside the Vietnamese territory, specifically in both Vietnam and Japan. However, under Article 26.2.e.1 of Circular 111, if you’ve calculated and paid PIT on the income earned from your company in Japan, such PIT amount will be subtracted from the PIT amount payable in Vietnam but the deduction must not exceed the payable PIT amount on the income generated in Japan, calculated according to the above-mentioned Tariff based on the ratio between the income generated in Japan and your total taxable income.
You may also refer to Document 1568/TCT-DNNCN of the General Department of Taxation issued in 2020 to further understand the deduction of PIT amounts paid in foreign countries from taxpayers’ taxable income in Vietnam.
Accordingly, PIT on salaries and wages arising in foreign countries will be declared on a quarterly basis. Meanwhile, PIT on income from capital investment and capital transfer will be declared upon each time of income generation. When declaring PIT on income generated outside the Vietnamese territory, foreign taxpayers will be required to enclose proofs of income and tax payment receipts to serve the determination of taxable income and payable PIT amount in accordance with Vietnam’s law.
In your case, if Japanese tax authorities do not issue certificates of paid PIT amounts, you will have to photograph the tax withholding receipt or make a copy of a bank document showing the PIT amount you have paid in Japan and be held responsible for the authenticity of these papers.- (VLLF)
