The termination of an employment contract with a foreign national in Vietnam initiates a series of mandatory administrative and statutory procedures. For enterprises operating within the jurisdiction of Vietnam, compliance with the Labor Code 2019, the Law on Entry, Exit, Transit, and Residence of Foreigners in Vietnam, and the Law on Tax Administration is an absolute requirement. Failure to strictly execute these protocols exposes the sponsoring enterprise to administrative sanctions, reputational risk, and increased scrutiny from state authorities regarding future foreign labor utilization.

This exhaustive legal analysis outlines the exact statutory obligations, timelines, and procedural requirements that enterprises must fulfill when a foreign worker departs Vietnam following the cessation of employment.

1. Settling Employer and Employee Financial Issues

The fundamental obligation immediately following the termination of an employment relationship is the complete liquidation of all financial rights and duties between the enterprise and the foreign worker. The Labor Code 2019 imposes strict statutory deadlines to prevent labor disputes.

1.1. Statutory Timeframes and Legal Exceptions

Pursuant to Article 48 of the Labor Code 2019, the employer and the employee hold equal responsibility to settle all financial obligations within 14 working days from the official date of termination. The law permits an extension of this period up to a maximum of 30 days only under highly specific statutory circumstances. These circumstances include the termination of the employer’s operations, a major corporate restructuring, a merger, consolidation, or force majeure events such as natural disasters or fires. Outside of these expressly defined exceptions, failure to disburse the final salary, allowances, and statutory compensations within the 14-day window constitutes a labor violation, subjecting the enterprise to potential late-payment interest penalties and administrative fines imposed by the Department of Labor, War Invalids and Social Affairs.

1.2. Severance Allowance Obligations

Enterprises must determine the foreign worker’s eligibility for severance allowance. If the foreign employee has maintained regular employment with the enterprise for a full 12 months or more, the employer is legally obligated to disburse a severance allowance. The statutory formula dictates the payment of one-half of a month’s salary for each full year of employment. The baseline salary used for this calculation is the average monthly salary stipulated in the employment contract over the six consecutive months immediately preceding the termination date. Because foreign workers have historically been excluded from the mandatory unemployment insurance system in Vietnam, the employer generally bears the full financial burden of the severance allowance for the entire tenure of the foreign national’s employment, without any deductions for unemployment insurance contribution periods.

1.3. Unused Annual Leave and Pro-Rated Bonuses

In addition to standard wages and severance, the final financial settlement must accurately account for accrued benefits. If the foreign worker has not exhausted their statutory annual leave, the enterprise is required to compensate the employee for the specific number of untaken days. This compensation is calculated based on the employee’s daily wage rate at the time of termination. Furthermore, if the employment contract or the company’s internal labor regulations stipulate pro-rated performance bonuses, housing allowances, or relocation support upon termination, these amounts must be explicitly detailed in the final liquidation minute and paid in full.

2. Returning the Work Permit and Temporary Residence Card

The legal capacity of a foreign national to work and reside in Vietnam is contingent upon corporate sponsorship. The termination of employment severs this sponsorship, compelling the enterprise to officially cancel the corresponding labor and immigration documents.

2.1. Work Permit Revocation Procedure

According to Decree 152/2020/ND-CP and its subsequent amendments under Decree 70/2023/ND-CP, a work permit automatically loses its legal validity upon the expiration or termination of the employment contract. The enterprise is mandated to confiscate the original work permit from the departing employee. Within 15 days from the exact date of termination, the employer must submit a formal dossier to the issuing authority, which is typically the provincial Department of Labor, War Invalids and Social Affairs or the Management Board of Industrial Zones. This dossier must include the original work permit and an official written request for revocation specifying the reason for termination. The labor authority will then issue a formal confirmation receipt acknowledging the successful revocation of the work permit. If the employee claims the document is lost, the enterprise must require the employee to obtain a formal police report to submit in lieu of the original permit.

2.2. Temporary Residence Card Confiscation and Cancellation

 The Temporary Residence Card granted to a foreign worker is a derivative document, issued solely on the basis of the valid work permit and the employer’s sponsorship. Upon employment termination, the legal foundation for this residency status ceases to exist. The enterprise has a strict legal duty to recover the original Temporary Residence Card from the employee. Allowing a former employee to retain and utilize an employer-sponsored Temporary Residence Card after the labor relationship has ended places the enterprise in direct violation of immigration sponsorship regulations, risking heavy administrative fines and the potential suspension of the enterprise’s ability to sponsor foreign labor in the future.

3. Immigration and Residence Obligations

To facilitate the foreign national’s legal departure from the jurisdiction, the enterprise must interface directly with the Immigration Department to transition the individual’s residency status.

3.1. Visa Conversion for Exit Purposes

Simultaneous with the cancellation of the Temporary Residence Card, the enterprise must sponsor an exit visa to grant the foreign worker a legal, temporary period to finalize their affairs and depart the country. The employer must submit the recovered Temporary Residence Card, the employee’s original passport, the official termination decision, and the completed application form to the provincial Immigration Department. The immigration authority will cancel the Temporary Residence Card and issue a short-term visa directly into the passport. This exit visa is strictly limited in duration, typically ranging from 14 to 15 days. The foreign worker must physically exit the borders of Vietnam before 23:59 on the expiration date printed on this visa. Overstaying this allotted period results in daily administrative fines and mandates immediate deportation procedures.

3.2. Local Police De-registration of Residence

 Throughout their employment, the foreign national’s residential address must be registered with the local ward or commune-level police. Prior to final departure, the foreign worker must execute a formal de-registration of this address. While the primary execution of this task falls to the landlord or the property management company via the National Public Service Portal, the sponsoring enterprise must officially notify the employee of this requirement. Ensuring the local police registry is accurately updated severs any remaining administrative ties between the foreign national, their local residence, and the sponsoring company.

4. Tax Finalization Procedures

The General Department of Taxation exercises strict oversight regarding the revenue earned by foreign nationals. Resolving all Personal Income Tax liabilities is a prerequisite for financial repatriation.

4.1. Tax Finalization Obligations Upon Departure

 Under the Law on Tax Administration 2019, an individual classified as a tax resident in Vietnam must complete a final Personal Income Tax declaration with the direct managing tax authority prior to their permanent departure from the country. This procedure calculates the aggregate global income generated during the current calendar year up to the month of departure. The individual must reconcile the total tax liability against the cumulative amounts already withheld and remitted by the employer throughout the year. If a deficit exists, the individual must pay the remaining balance to the State Treasury. If a surplus exists, a refund claim can be initiated.

4.2. Execution and Required Documentation

The statutory deadline for submitting the tax finalization dossier is the 45th day from the official date of departure. The comprehensive dossier requires the official tax finalization declaration form, documented proof of tax amounts withheld by the employer, valid invoices for all claimed deductions, and a copy of the individual’s passport. Given the complexity and time required for tax authority review, it is standard practice for the departing foreign worker to issue a legally notarized Power of Attorney. This document authorizes the enterprise’s accounting department or a designated legal representative to execute the finalization procedures, sign declarations, and manage any resulting tax refunds or supplementary payments after the individual has left the country.

5. Closing Bank Accounts and Social Insurance Matters

The final phase involves interacting with financial institutions and state insurance agencies to close out the individual’s local financial accounts and state benefits.

5.1. Compulsory Social Insurance Claims and Withdrawals

Under the Law on Social Insurance 2024 (Law No. 41/2024/QH15, effective July 1, 2025), foreign workers who participate in the compulsory social insurance system retain the legal right to request a one-off withdrawal of their accumulated contributions when their employment is terminated and they intend to permanently leave Vietnam. The enterprise is responsible for finalizing the data with the social insurance agency and closing the employee’s social insurance book. Once the book is finalized, the employee must submit a formal dossier to the local social insurance agency, comprising the finalized book, the termination decision, and the application form for the one-off payment. The agency processes the calculation based on the specific duration of contributions and the recorded salary levels. Under the updated regulatory framework, the disbursement is expedited and typically transferred to the employee’s local bank account within 5 to 7 working days upon receipt of a complete and valid dossier.

5.2. Bank Account Closure and Outward Remittance

The State Bank of Vietnam enforces strict foreign exchange controls. For a foreign national to legally transfer their accumulated salary, severance pay, and social insurance withdrawal from a Vietnamese bank account to an overseas account, they must provide the commercial bank with irrefutable proof of legal income. The required dossier typically includes the original employment contract, the termination agreement, the official confirmation of work permit revocation, and the completed tax finalization receipts demonstrating zero outstanding tax debt. Once the bank verifies the legal origin of the funds and executes the outward remittance, the employee must immediately instruct the bank to permanently close the payroll and personal accounts to eliminate the risk of unauthorized future transactions or accumulating account maintenance fees.

6. Practical Departure Checklist

To guarantee absolute compliance and eliminate the risk of post-departure legal complications, enterprises and their foreign personnel must meticulously execute the following procedural checklists.

6.1. Employer Responsibilities Checklist

• Draft and sign the official labor contract termination agreement, explicitly detailing all financial settlements, effective dates, and mutual waivers of liability.
• Calculate the final payroll, pro-rated annual leave, and statutory severance allowance, ensuring full disbursement within the strict 14-working-day timeframe.
• Complete the finalization of the employee’s compulsory social insurance data and return the finalized social insurance book to the individual.
• Issue a comprehensive certificate of tax deduction for the current tax year to the employee.
• Confiscate the original work permit from the employee.
• Submit the official work permit revocation dossier to the competent labor authority within 15 days of the termination date and secure the confirmation receipt.
• Confiscate the original Temporary Residence Card from the employee.
• Submit the Temporary Residence Card to the Immigration Department and process the application for the 15-day exit visa on behalf of the employee.
• Maintain a complete archive of all termination documents, revocation receipts, and financial transfer records for future state audits.

6.2. Employee Responsibilities Checklist

• Surrender all company property, proprietary data, access credentials, and hardware on or before the final working day.
• Surrender the original work permit and the original Temporary Residence Card directly to the employer’s human resources or legal department.
• Submit the required application dossier for the one-off social insurance withdrawal directly to the social insurance agency.
• Execute the Personal Income Tax finalization directly with the tax authority or formally execute a notarized Power of Attorney authorizing a representative to handle the finalization post-departure.
• Submit the employment contract, termination decision, tax receipts, and work permit revocation confirmation to the local commercial bank to authorize the international outward remittance of funds.
• Formally instruct the commercial bank to close all domestic accounts once the international transfer is confirmed.
• Coordinate with the property landlord to officially de-register the local residential address with the ward police.
• Physically depart the territory of Vietnam prior to the precise expiration date and time indicated on the issued exit visa.

7. Conclusion

The termination of a foreign worker’s employment contract in Vietnam is a complex legal event requiring rigorous compliance with labor, immigration, tax, and foreign exchange regulations. The current statutory framework, updated and effective through 2026, imposes strict obligations and inflexible deadlines on both the sponsoring enterprise and the departing foreign national.

For businesses operating in Vietnam, failure to systematically execute these exit procedures carries substantial legal and operational risks. Delays in financial settlements, negligence in revoking the Work Permit or canceling the Temporary Residence Card, or incomplete Personal Income Tax finalizations will result in severe administrative sanctions. Furthermore, such infractions directly jeopardize the enterprise’s corporate compliance record with state authorities, which can restrict or entirely suspend its legal capacity to sponsor new foreign personnel in the future.

To mitigate these risks and ensure absolute statutory adherence, enterprises must establish a precise, legally grounded offboarding protocol. Strict coordination across internal departments—specifically human resources, legal, and accounting—is mandatory to manage the overlapping statutory timelines for financial liquidation, document revocation, and state agency notifications.

Given the administrative density of these procedures and the severe penalties for non-compliance, securing professional legal oversight is highly advised. Legal professionals possessing specialized regulatory expertise can assist enterprises in executing these exact exit protocols flawlessly. By ensuring every statutory requirement is met, businesses can safeguard their operational compliance status and facilitate a lawful transition for their departing foreign workforce.

HARLEY MILLER LAW FIRM

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