Income tax: Residents and non-residents in Vietnam

Identifying a resident or non-resident in Vietnam plays an important role in determining their personal income tax (“PIT”) obligation, especially for expatriates working in Vietnam. The PIT obligation of such subjects has many differences. PIT of the residents levied on income arising both inside and outside Vietnam. In contrast, the non-residents are only subject to PIT on income arising inside Vietnam.

Through this article, BLawyers Vietnam would like to raise some notes.

PIT

1. Residents

A resident is a person who meets one of the following conditions:

a. Having presence in Vietnam for at least 183 days:

This period is calculated in a calendar year or for 12 consecutive months from the first day of presence in Vietnam.

For individuals who are expatriates in Vietnam, tax authorities will base on the date of arrival and departure date depending on the certification of the immigration agency on the passport (or laissez-passers) in the tax period to determine the number of days of residence in Vietnam. In which, the arrival and departure date is counted as one (01) day of residence or if entering and exiting within one day, it will be considered a day of residence.

Example 1: Mr. A is an expatriate whose date of arrival and departure in Vietnam is shown on his passport as follows:

  • First entry on 06 January 2021 and exit on 06 March 2021.
  • Second entry on 21 April 2021 and exit on 21 October 2021.

The number of present days in Vietnam for year 2021 totals 242 days, so Mr. A is identified as a resident in the tax year 2021.

Example 2: Mr. B is an expatriate whose date is to come and leave Vietnam as follows:

  • First entry on 01 December 2021 and exit on 01 November 2022.

If calculated in 2021, Mr. B is present in Vietnam for less than 183 days. However, during 12 consecutive months from 01 December 2021 to 30 November 2022, Mr. B is present for 364 days.

Thus, Mr. B is identified as a resident in the 12-month tax period continuously from 01 December 2021 to 30 November 2022.

b. Having a regular residence in Vietnam under one of the following cases:

(i) Having regular residence in accordance with the law on residence:

For Vietnamese citizens: regular residence is a regular, stable, identified place and has registered permanent residence as prescribed.

For foreigners: a permanent residence indicated in the Permanent Residence Card or temporary residence issued by a competent authority affiliated to the Ministry of Public Security.

(ii) Having a rented house to stay in Vietnam as prescribed:

Total house lease period of at least 183 days in the tax year under various lease contracts, even if renting houses in different locations.

The rented houses can be hotels, guesthouses, motels, offices, etc. whether they are rented by the person or their employer.

(iii) It cannot be proven to be an individual residing in another country:

An individual who has a permanent residence in Vietnam as prescribed but is actually present in Vietnam for less than 183 days in the tax year without proving that he or she is a resident in other countries.

The residence in another country shall be proved by the Certificate of residence. If the person is a citizen of a country or territory that has signed a tax agreement with Vietnam and does not issue the Certificate of residence, that person shall present a photocopy of the passport to prove the period of residence.

2. Non-residents

A non-resident is a person who do not meet the conditions of the resident (as mentioned above).

3. Documents guiding the identification of the resident in Vietnam

Official Letter No. 11314/CT-TTHT of the Ho Chi Minh Tax Department dated 21 November 2016

In case Mr. Kazuki Yamasaki, a Japanese who works in Vietnam from 11 May 2016, has a housing lease contract in Vietnam from 11 May 2016 to 31 July 2017, can reside effectively from 27 June 2016 to 27 June 2018, he is considered as a resident in 2016 tax year.

Official Letter No. 3604/TCT-TNCN of the General Department of Taxation dated 04 September 2015

According to the above provisions, in case Nidec Tosok Co., Ltd. has an expatriate who has a permanent residence in Vietnam indicated in the Temporary Residence Card but present in Vietnam for less than 183 days and cannot prove that he or she is residing in Japan in 2015, when paying income to individuals, the company makes a PIT deduction for resident.

In case the expatriate has a permanent residence in Vietnam written on the temporary residence card but actually present in Vietnam for less than 183 days and has a Residence Certificate of residence in Japan in 2015, when paying income to the individual, the company deducts PIT for non-resident in Vietnam.

Official Letter No. 970/TCT-TNCN of the General Department of Taxation dated 23 March 2018

Mr. Taizo Mizuno, who is a Japanese arrived Vietnam from 2012 to 24 April 2014. In 2012, 2013 and 2014, the company deducted and performed Taizo Mizuno’s PIT as prescribed in Vietnam.

On 28 October 2017, Mr. Taizo Mizuno returned to Vietnam to work and is expected to work until 27 October 2019.

Based on the above guidance and the status of residence of the individual, the first day of presence in Vietnam to determine the status of residence and the first tax year of Mr. Taizo Mizuno is 28 October 2017. The contents of the Official Letter No. 6647/CT-TTHT dated 22 December 2017 of Hung Yen Provincial Tax Department is in accordance with the prevailing regulations.

Official Letter No. 3276/TCT-DNNCN of the General Department of Taxation dated 11 August 2020

Based on the above provisions and guidance, in 2019, Mr. Nguyen Hoang Son was present in Vietnam for less than 183 days, was present in Japan for more than 183 days and was granted a residence certificate by the Japanese tax authority, Mr. Nguyen Hoang Son is a non-resident in Vietnam. Mr. Nguyen Hoang Son is responsible for declaring taxable income of PIT incurred in Vietnam in 2019 at the fixed tax rate.

In short, it is necessary to determine an individual who is a resident or non-resident before conducting such individual’s PIT obligation in Vietnam.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

Date: 28 February 2022

Writer: Thu Tran

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