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Payroll & Tax in Vietnam

Vietnam payroll & taxation

Foreign companies operating in Vietnam may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Vietnam are: Individual income tax (IIT) for employees in Vietnam, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.

Your Payroll Options in Vietnam

Remote Payroll

A remote payroll in Vietnam is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Vietnam. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Vietnam is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Vietnam under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Vietnam may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Vietnam payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Vietnamese employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in India to a GEO, like Shield GEO. This is possible for both foreign workers and Cypriot nationals. This is the easiest, fastest and safest way to payroll staff in India.

Shield GEO manages all aspects of payroll for workers in India, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Vietnam

Information Explanation
Currency ?

Vietnamese dong, ₫

Social Security Registration ?
The Social Department provides social security protection to employees and their dependents through social security schemes and by increasing awareness of occupational safety and health for the well being of employees and their families.

Tax Figures

Information Explanation
Corporate Income Tax ?

The current corporate income tax rate is 22%, which will be reduced to 20% from 2016 onwards. Enterprises operating in the oil and gas and natural resource sectors are subject to taxes of 32% to 50%, depending on the project.

Income Tax Rate ?
Grossed income Tax Rate (%)
0 - VND 5,000 5
VND 5,001 - 10,000 10
VND 10,001 - 18,000 15
VND 18,001 - 32,000 20
VND 32,000 - 52,000 25
VND 52,001 - 80,000 30
Above VND 80,001 35

*The following rates only apply to business and employment income.

**Non-residents are taxed at a flat rate of 20% on employment income. Vietnam-sourced business income is taxed at 1%, 2% or 5%, depending on business activities.

***All income is in VND (‘000)

Payroll Tax ?

No

Sales Tax ?

VAT is imposed on the supply of taxable goods and services in Vietnam. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods  which they receive (input tax).

The current standard rate of VAT imposed on taxable goods and services is 10%, with reduced rates of 0% (exports) or 5% (essential goods/services).

In addition to VAT, a Special Sales Tax (SST)  is also imposed on the production or import of certain luxury goods and services. The current SST rates range from 10-70%.

Withholding Tax ?

Vietnam imposes withholding tax (WHT) on certain classes of income earned by non-residents:-

  • Dividends: No WHT applies unless paid to an individual, where a 5% WHT would apply.
  • Royalties: 10%
  • Interest: 5%
  • Foreign contractor tax on the provision of goods and services from overseas organisations (except for pure trading transactions), which comprises corporate income tax and VAT at a total combined rate: Ranges from 0.1-15%
 A reduced rate may be available under an applicable Double Tax Treaty.
Income Tax (Personal Allowance) ?
  • The resident individual that has a labour contract will be subjected to the following rates. Current PIT
    personal relief is 9,000,000VND, and dependent relief is 3,600,000VND
  • The resident individual who has no labour contract will be subjected to the PIT rate of 10%
  • The non-resident individual will be subjected to the PIT rate of 20%
Employee Social Security (EE SS)

Employees are required to make the following contributions: 8% to social insurance, 1.5% to health and 1% for unemployment. Foreign employees are only required to contribute to health insurance. For more details, please refer to the section on Employment.

Employer Social Security (ER SS)

Employers are required to make the following contributions: 18% to social insurance, 3% to health and 1% for unemployment.For more details, please refer to the section on Employment.

Employee’s Provident Fund (EPF) ?
The Social Insurance (SI): compulsory for both Vietnamese only
Medical Insurance (MI): compulsory for both Vietnamese and expat
Unemployment Insurance (UI): only applied to Vietnamese and for a company that has more than 9 employees.
The current SI, MI, UI rate contribution is based on basic monthly salary (but doesn’t exceed the cap basic salary 23,000,000 VND that is defined by the (Vietnam Social Department)

Payments

Information Explanation
Invoice / Payslips required ?

Yes. Monthly available as pdf.

Minimum Wage ?

Annual (US$)614

Reporting Requirements ?

Monthly Payroll/PIT/SIMIUI

Yearly Accounting/Audit

Monthly Starters & Leavers, as it occurs

Monthly EPF filing, every 10th of the month

Annual Tax Filing:

  • Employers to file income tax return by 31st March of the year
  • Employees to file income tax return by 30th April of the year

 

Employee Entitlements

Information Explanation
Working on Sundays ?

No.

Medical Leave ?
An employee is entitled to paid sick leave (75% salary contributed SI), where no hospitalization is necessary
(i) 30days if the employee has been employed for less than 15 years
(ii) 40 days if the employee has been employed for more than 15 years
but less than 30 years
(iii) 60 days if the employee has been employed for more than 30 years
Maternity Leave :
180 days (6 months) 100% salary contributed SI.
Annual Leave ?
An employee is entitled to paid annual leave of:
• 12 days for every twelve months for normal working condition.
• 14 days for every twelve months for hard working condition.
• 16 days for every twelve months for special hard working condition.
• For every 5 years working, 1 more day annual leave will be added.
Holiday Allowance ?

Full-time employees are paid for public holidays.

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