Managing personal income tax for foreign workers has always been a challenge for accounting and human resources departments. Recently, Official Letter No. 3363/TNI-QLDN1 dated December 4, 2025, from the Tay Ninh Provincial Tax Department provided specific guidance to clarify issues regarding residency status.
This article will provide a detailed analysis of the regulations in Circular 111/2013/TT-BTC and related documents to help businesses comply with tax laws in 2026.
Identify the taxpayer and the scope of income.
According to Article 1 of Circular 111/2013/TT-BTC, an individual's tax obligations in Vietnam depend entirely on whether they are a resident or non-resident.
Individuals residing in Vietnam
A resident individual is someone who meets one of the following conditions:
- Regarding the duration: You must be present in Vietnam for 183 days or more in a calendar year or within 12 consecutive months from the first day of arrival in Vietnam. The arrival and departure dates are counted as one day each (based on the entry and exit stamps on your passport).
Regarding residence: Having a permanent residence in Vietnam under one of the following two circumstances:
- Having a registered permanent residence address indicated on the Permanent Residence Card or Temporary Residence Card.
- Having a rented house in Vietnam with a lease term of 183 days or more in the tax year.
Income scope: Resident individuals are required to pay tax on income earned both within and outside Vietnam (global income), regardless of where the income is paid.
Non-resident individuals
Those who do not meet the above conditions are subject to tax. The scope of income subject to tax only applies to income earned in Vietnam, arising from work performed in Vietnam, regardless of where the income is received.
Basis and Method for Calculating Personal Income Tax
Differences in residency status lead to completely different tax calculation methods as stipulated in Articles 7 and 18 of Circular 111/2013/TT-BTC.
For resident individuals
Taxes are calculated according to a progressive tax rate schedule (7 brackets from 5% to 35%).
Recipe:
|
Personal income tax payable = Taxable income x Tax rate |
In there:
|
Taxable income = Taxable revenue – Deductions |
For non-resident individuals
Taxes are calculated according to the full tax schedule.
Recipe:
|
Personal income tax payable = Taxable income from salaries and wages x Tax rate 20% |
Note: Non-resident individuals are not eligible for personal deductions or insurance deductions.
Deductions: Special notes for foreigners
Based on Article 9 of Circular 111/2013/TT-BTC, resident individuals are entitled to the following tax deductions:
Personal deductions
To help cover essential living expenses, tax laws allow resident foreign workers to deduct specific personal allowances from their taxable income before calculating tax:
- For myself: 11,000,000 VND/month.
- For dependents: VND 4,400,000/person/month.
Note: Foreign nationals need to register tax identification numbers for dependents and provide supporting documents (birth certificates, guardianship certificates, etc.) that have been legalized by the consulate and translated by a certified translator.
Mandatory personal deductions abroad
This is important content in point c, clause 2, Article 9 of Circular 111/2013/TT-BTC. Foreign nationals who are resident individuals and pay mandatory insurance contributions (such as social insurance, health insurance, unemployment insurance, or similar mandatory insurance) in their country of citizenship are entitled to deduct these contributions from their taxable income in Vietnam.
Required: Documentation from the income-paying organization or competent authority in the foreign country confirming the amount of insurance premiums paid is required.
The responsibility of the enterprise to deduct and declare taxes.
According to Article 25 of Circular 111/2013/TT-BTC, the organization paying the income is responsible for:
- Temporary withholding: When paying income, businesses must base their provisional withholding on the contracted and actual working time according to the progressive tax rate (if resident is expected) or form 20% (if non-resident).
- Issuing tax deduction certificates: When requested by employees, businesses must issue certificates so that they can complete their tax settlements later.
Tax settlement for the first year
The guidelines in Decree 126/2020/ND-CP and Official Letter 3363 emphasize the case where an individual is present in Vietnam for less than 183 days in the first calendar year, but the total number of days in 12 consecutive months is 183 days:
- First tax year: Settlement must be completed within 90 days from the date of completion of 12 consecutive months.
- Second tax year: Settlement is based on the calendar year. To avoid double taxation, the tax paid in the first year (the overlapping portion) will be deducted from the tax payable in the second year.
Compliance checklist for accountants when a business has foreign employees.
To ensure there are no errors during a tax audit, businesses should pay attention to the following documents:
- Passport tracking: Take photos of all passport pages with entry and exit stamps to accurately calculate the number of days of stay for each year.
- Residence records: Keep records of rental agreements or temporary residence permits valid for more than 183 days.
- Foreign documents: Ensure that documents from abroad (income confirmation, insurance documents) are legalized by the consular office to be legally valid in Vietnam.
- Direct tax settlement: Remind employees if they are required to settle their taxes directly with the tax authorities.
Conclude
Incorrectly determining residency status can lead to under- or over-calculation of taxes for employees. Businesses need to adhere closely to the actual length of stay and guidelines such as Circular 3363/TNI-QLDN1 to fulfill their personal income tax obligations as accurately as possible.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Source of information:
- Official document 3363/TNI-QLDN1
- Circular 111/2013/TT-BTC
- Decree 126/2020/ND-CP
- Article by LuatVietnam
