1. 2025 Updates: What’s New in Vietnam’s Personal Income Tax for Foreigners
Tax finalization in 2025 will be affected by several important changes in personal income tax (PIT) regulations in Vietnam that foreigners and businesses need to pay attention to. Key updates include:
- Increased Family and Dependent Deductions: The personal relief will rise from 11 million VND/month to 15.5 million VND/month, and the dependent relief from 4.4 million VND/month to 6.2 million VND/month. This change, effective for the 2026 tax period, helps reduce the PIT burden for many taxpayers.
- Broader Deductible Expenses: The draft PIT law proposes new deductible expenses for healthcare, education, and training costs for taxpayers and their dependents, allowing further optimization of taxable income if supported by valid invoices.
- Tax Withholding for E-commerce Income: Starting from April 1, 2025, e-commerce and digital platforms (including international platforms) are required to withhold and pay PIT on behalf of individual sellers. Non-resident individuals providing services via these platforms must register and comply with PIT obligations in Vietnam.
These changes directly affect tax filing deadlines, tax calculation, and the final tax amount to be paid. Foreign investors and expatriates should prepare accordingly to ensure compliance and optimize their tax liabilities.
Foreign personnel such as experts, managers or expats working in Vietnamese companies need to clearly understand the new regulations to ensure full and timely declaration. Timely understanding of policies helps reduce the risk of administrative fines and facilitates tax refund requests or tax processing for foreign income.
2. Who Needs to File Personal Income Tax Finalization in Vietnam
Subjects required to make PIT settlement include residents and non-residents in Vietnam.
Residents are those who have a residence period of 183 days or more in a year, or have a permanent residence in Vietnam. These individuals must declare all income in and outside Vietnam.
For non-residents, the obligation to make PIT settlement only applies to income generated in Vietnam, including salaries, bonuses, and income from service contracts.
Read more about Vietnam’s personal income tax changes: https://vinatpt.com/https-vinatpt-com-personal-income-tax-in-vietnam/
In addition, foreign employees working for Vietnamese companies but also having income from abroad need to correctly identify the type of income subject to tax in Vietnam and prepare documents proving the source of income to avoid double taxation.
3. Step-by-Step: How to Handle Tax Finalization for Foreign Employees
The PIT settlement process should start with collecting all relevant documents, including:
- Employment contracts
- Payroll records
- Invoices proving deductible expenses
- Foreign income documents (if any)
To calculate Personal Income Tax (PIT) in Vietnam for 2025, it is essential to distinguish between resident and non-resident individuals, as the methods and applicable deductions differ significantly:
- Resident Individuals: An individual is considered a resident of Vietnam if he/she stays in Vietnam for 183 days or more in either the calendar year or the period of 12 consecutive months from the date of arrival or has a permanent residence as prescribed.
- Taxed on global income, including both Vietnam-sourced and foreign-sourced income.
- Eligible for personal deduction: 11 million VND/month (≈132 million VND/year in 2025; will increase to 15.5 million VND/month from 2026).
- Eligible for dependent deduction: 4.4 million VND/month per dependent (≈52.8 million VND/year in 2025; will increase to 6.2 million VND/month from 2026).
- Other deductible items include mandatory insurance contributions, voluntary pension schemes, and certain charitable donations.
- Taxable income is calculated by subtracting all eligible deductions from total income.
- Progressive tax rates apply, ranging from 5% to 35%, depending on monthly taxable income.
- Non-Resident Individuals: An individual is considered non-resident in Vietnam if he/she stays in Vietnam for less than 183 days in a year or does not have a permanent residence in Vietnam.
- Taxed only on Vietnam-sourced income.
- No personal or dependent deductions are allowed.
- Taxable income is directly subject to flat tax rates, usually 20% on employment income; other Vietnam-sourced income may be taxed from 0.1% to 20% depending on the type.
Understanding this distinction ensures correct calculation of PIT, prevents overpayment or underpayment, and keeps taxpayers fully compliant with the 2025 regulations.
Finally, declaring and submitting PIT settlement documents can be done online via the e-tax system or through the enterprise. After submitting, it is necessary to check confirmation from the tax authority and store the documents for comparison or future audit purposes.
4. Common Mistakes in Expat PIT Finalization and How to Avoid Them
4.1 Under-declaring the Number of Days of Residence
- Many foreign employees’ residence days in Vietnam are miscalculated.
- Incorrect calculation affects resident status and tax payable.
- Solution: Keep detailed records of arrival and departure dates for each employee.
4.2 Omitting Foreign Income
- Some expatriates earn income from parent companies or projects abroad.
- Failing to declare foreign income can result in additional tax collection during audits.
- Solution: Confirm all income earned during the year and provide legal proof for each source.
4.3 Incorrect Application of Family or Legal Deductions
- Family deductions and other legal deductions may be applied incorrectly if not updated.
- Using outdated deduction limits can cause overpayment or non-compliance.
- Solution: Update deductions according to the latest regulations of the General Department of Taxation and verify calculations before submission.
5. Tax Refunds and Double Taxation Agreements (DTA) in Vietnam
Foreign investors and employees can claim tax refunds if they have overpaid or been taxed twice on the same income. Vietnam has signed many double taxation agreements with countries such as Japan, Korea, Singapore, the US and Australia.
Applying for a DTA requires businesses and individuals to accurately determine their source of income, length of stay and the amount of tax paid abroad. This process includes preparing documents, submitting tax applications and contacting the tax authorities directly to confirm their rights.
6. How Vina TPT Tax Services Simplify PIT Finalization for Foreign Professionals
Vina TPT offers comprehensive Personal Income Tax (PIT) support for foreign employees in Vietnam, ensuring full compliance with local regulations while simplifying the process for businesses:
- Record Review: Carefully examine labor contracts, payrolls, tax deduction documents, foreign income records, and related invoices to ensure all data is accurate and complete.
- Tax Calculation: Compute taxable income, apply family and dependent deductions, and ensure proper application of Double Taxation Agreements (DTA) to avoid double taxation.
- Declaration Preparation & Submission: Prepare PIT finalization dossiers and submit through the e-tax system or on behalf of the business, providing bilingual Vietnamese-English reports for easy monitoring.
- Tax Refund Support: Assist with preparing and monitoring tax refund dossiers, liaising with tax authorities to secure timely and transparent refunds.
- Ongoing Consultation: Represent the business in case of audits, additional document requests, or inquiries, helping to manage administrative requirements efficiently.
Ensure full compliance and maximize tax efficiency for your foreign employees – contact Vina TPT Tax Services today!