For foreign teachers working in Vietnam, understanding the local tax system is essential for ensuring legal compliance and managing diverse sources of income efficiently. This comprehensive guide aims to help you navigate Vietnam’s complex tax landscape.
1. Residency Status and Its Impact on Tax Obligations
Under Article 2 of the Law on Tax Administration, taxpayers include individuals subject to tax in accordance with the provisions of tax laws.
Your tax liability in Vietnam largely depends on your residency status. There are two main categories (pursuant to Article 2 of the Law on Personal Income Tax and Clause 1, Article 1 of Circular No. 111/2013/TT-BTC, as amended):
Tax Residents
An individual is considered a tax resident if they meet either of the following conditions:
- Present in Vietnam for 183 days or more in a calendar year or for 12 consecutive months from the first date of arrival; or
- Have a permanent residence in Vietnam, including a registered permanent address or a leased residence under a lease contract with a term.
Non-Residents
An individual who does not meet the above conditions is classified as a non-resident.
- Tax residents are subject to progressive tax rates on their worldwide income;
- Non-residents are subject to a flat tax rate of 20% on income sourced from within Vietnam (pursuant to Clause 1, Article 26 of the Law on Personal Income Tax).
See also: Optimizing Tax Deductions for Foreign Employees in Vietnam
2. Understanding Multiple Sources of Income
As a foreign teacher in Vietnam, you may receive income from various sources, including:
- Regular salary from educational institutions;
- Private tutoring fees;
- Online teaching income;
- Educational consulting fees.
These types of income are taxable, specifically categorized as income from salaries and wages, which are defined under the following legal instruments:
- Clause 2, Article 3 of the Law on Personal Income Tax;
- Clause 2, Article 3 of Decree No. 65/2013/NĐ-CP;
- Clause 2, Article 2 of Circular No. 111/2013/TT-BTC, as amended.
3. Tax Rates and Tax Calculation Method
3.1 Tax Rates
Resident taxpayers are subject to Personal Income Tax (PIT) based on a progressive tax rate schedule applied to their worldwide taxable income.
The progressive tax rates are prescribed in Article 22 of the Law on Personal Income Tax and Clause 2, Article 7 of Circular No. 111/2013/TT-BTC, as amended. The applicable rates are as follows:
| Tax Bracket | Taxable Income per Year (VND million) | Taxable Income per Month (VND million) | Tax Rate (%) |
| 1 | Up to 60 | Up to 5 | 5% |
| 2 | Over 60 to 120 | Over 5 to 10 | 10% |
| 3 | Over 120 to 216 | Over 10 to 18 | 15% |
| 4 | Over 216 to 384 | Over 18 to 32 | 20% |
| 5 | Over 384 to 624 | Over 32 to 52 | 25% |
| 6 | Over 624 to 960 | Over 52 to 80 | 30% |
| 7 | Over 960 | Over 80 | 35% |
3.2 Tax Calculation Method
Pursuant to Clause 3, Article 7 of Circular No. 111/2013/TT-BTC, as amended:
Personal Income Tax (PIT) = (Total Income − Tax-Exempt Income − Deductions) × Applicable Tax Rate
Tax-Exempt Income
Tax-exempt income is stipulated under:
- Article 4 of the Law on Personal Income Tax;
- Article 4 of Decree No. 65/2013/NĐ-CP; and
- Article 3 of Circular No. 111/2013/TT-BTC, as amended.
Deductions
- Personal deduction (stipulated in Article 19 of the Law on Personal Income Tax and Article 1 of Resolution No. 954/2020/UBTVQH14):
- Personal deduction: VND 11 million per month (equivalent to VND 132 million per year);
- Dependent deduction: VND 4.4 million per dependent per month.
- Other eligible deductions (stipulated in Article 15 of Circular No. 92/2015/TT-BTC), including:
- Compulsory social, health, and unemployment insurance contributions paid by the employee from their salary;
- Charitable donations, humanitarian contributions, and educational support donations.
4.2 Compliance Requirements
To ensure proper tax compliance in Vietnam, foreign teachers should maintain comprehensive documentation for tax purposes, including:
- A valid work permit or certificate of work permit exemption;
- Employment contract;
- Monthly payslips;
- Invoices and receipts for private tutoring services;
- Bank statements showing income received;
- Certificate of tax residency;
- Supporting documents for any claimed deductions;
- Previous tax declarations (if any).
To remain compliant with Vietnamese tax regulations, the following steps are recommended:
- Maintain complete records of all sources of income;
- Register a personal tax identification number (TIN) with the local tax authority;
- File monthly or quarterly tax declarations for regular employment income;
- Submit an annual tax finalization return to report total income and settle any outstanding tax obligations.
5. Step-by-Step Tax Filing Procedure
5.1 Tax Registration
For first-time taxpayers who are employees, the tax identification number (TIN) must be registered through the employer with the local tax authority. This procedure is specified under Clause 9 Article 7 of Circular No. 105/2020/TT-BTC and includes:
- A power of attorney;
- A valid copy of the passport;
- The income-paying entity must complete Form 05-ĐK-TCT.
5.2 Monthly/Quarterly Tax Declaration
Typically, the employer will file monthly or quarterly personal income tax (PIT) declarations on behalf of foreign employees. However, understanding the process remains crucial. Relevant regulations are provided in Article 44 of the Law on Tax Administration and Article 7 of Circular No. 105/2020/TT-BTC:
- Deadline:
- By the 20th of the month following the month when tax liability arises;
- No later than the last day of the first month of the following quarter.
- Required Form: Form 05/KK-TNCN;
- Payment Requirement: Tax must be paid in Vietnamese Dong (Article 7, Law on Tax Administration).
Further reading: Step-by-Step Guide – Tax Filing Requirements for Foreign Employees in Vietnam
Conclusion
Understanding the personal income tax (PIT) obligations applicable to foreign teachers in Vietnam is essential for ensuring legal compliance and managing multiple sources of income effectively. Teachers should pay special attention to their residency status, applicable tax rates, filing and payment procedures, and maintain complete documentation to avoid unwanted legal or financial risks.
Strict compliance with Vietnamese tax laws will help foreign teachers maintain stable and lawful teaching activities in the country.
For personalized advice tailored to your specific circumstances—especially in cases involving multiple income streams or international tax matters—please contact a tax advisor at Harley Miller Law Firm.
Harley Miller Law Firm
- Email: [email protected]
- Website: luatminhnguyen.com or hmlf.vn
- Hotline: + 84 9372 15585