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Employing in Vietnam

At a glance

Employment in Vietnam

Vietnam’s labour laws are largely employee-friendly, particularly on issues related to the termination or dismissal of employees. As the following only aim to act as a guide in the broadest sense, it is still recommended that professional legal advice be sought when employing in Vietnam.

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Payroll & Tax in Vietnam

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.

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Immigration / Work Permits in Vietnam

Generally, obtaining a Vietnamese permit is a lengthy and difficult process due to the numerous documentation requirements. However, the Vietnamese authorities encourage the issue work permits to highly-skilled foreign applicants, namely managers and other high-level executives, skilled technicians and experts.

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Incorporation

There are three types of business forms available to foreign companies in Vietnam. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to India and the planned business activity.

When setting up a company in Vietnam, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Vietnam for business purposes. In particular, it looks at common pathways to establishing a business presence in Vietnam, generally through a corporation, branch office or liaison office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Indian economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, September 2015 or closest available dates.

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GEO Solutions or DIY Employment in Vietnam?

GEO Solutions or DIY Employment

Companies entering Vietnam must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Vietnam Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Vietnamese entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Vietnam

Payroll Vietnam
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
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)

Tax Returns Supplied

Yes

Corporate Tax Requirements

Generally, the tax year follows the company’s fiscal year and runs from 1 January to 31 December.

A company is required to make quarterly provisional corporate income tax payments based on estimates and pay their quarterly income tax within 30 days after the last day of the quarter. An annual declaration/filing must be made and any balance of income tax paid within 90 days after the fiscal year- end date. Any shortfall in excess of 20% between provisional corporate income tax payment and annual corporate income tax liability is subject to a late payment penalty.

 

 

Employers Social Security and statutory contributions

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.

Employees Social Security and statutory contributions

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.

Corporate Income Tax Rate

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.

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.
Other Tax
  • Environmental production tax:  EPT is imposed on goods that the consumption or utilisation of those goods is considered to negatively impact on the environment, namely Petrol, oil, grease; Coal; Hydro chlorofluorocarbons (HCFCs); Nylon bags; and Some limited usage chemicals (e.g. pesticides).
  • Natural resources tax: Ranges from 2-35%
  • Land rent (land-use tax); imposed annually for the use of land. The tax base is calculated by multiplying the amount of square meters of the land by land price rates, which vary by location. Higher rates apply for urban locations.
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