There is no distinction between regular and irregular income. Almost all of types of income are taxable. It includes 10 categories as following:

1. Business income:

• Income from production and business in goods and services accordance with Law.

• Income from independent professional activities of individuals with a license and practising certificate in accordance with law.

2. Employment income:

All salaries, wages, allowances and bonuses regardless of cash or non cash nature, include:

• Salary, wages, and items in the nature of salary and wages.

• Remuneration in the nature of compensations for services rendered such as commissions, compensation for participation into project, royalties.

• Money receivable from participation in business associations, on boards of management, inspection committees, management committees and from other organizations.

Benefits in kinds, includes:

• Accommodation, utilities, and associated services. Note that if an individuals stays in a working office, the taxable income shall be based on the rent, or on depreciation expense and payment for utilities and associated services allocated at a ratio between the area used by the individual over the total  area of the working office

• Memberships and subsidies for individuals health care, entertainment, sports and beauty.

• Other benefit as expense for public holidays, consulting fees, tax declaration services and expense for personal purpose.

• Monetary and non monetary awards on a monthly, quarterly, annually. Except the awards following:

• Monetary awards attached to titles bestowed by the State;

• Monetary awards attached to national awards and international awards;

• Monetary awards for technical improvements, inventions and innovations recognized by the State authorities; and monetary awards to individuals who detect and report breaches of law to the State authorities

Non taxable allowances and bonus, must be pre-defined by law including:

• Allowance and subsidies stipulated by law being preferential treatment for people with achievements

• National defence and security allowances

• Allowance for toxic and danger applicable to trade or work with toxic or dangerous labour conditions

• Subsidies being one-off payments for difficult situations, for employee accidents or for occupational disease, and subsidies being one-off payments on the birth or adoption of a child; subsidies due to decrease in ability to work, being one-off payments on retirement, monthly subsidies, and retrenchment or loss of work subsidies in accordance with the Labour Code; other subsidies paid by social insurance; and

• Subsidies to resolve social evils.

3. Income from capital investment

• Interest receivable from lending ( except interest received from bank deposit)

• Dividends

• Others income except Government bond’s interest

4. Income from transfer of commercial right

• Income from transfer of capital contribution portion in an economic organization

• Income from transfer of securities

• Income from transfer of capital in all other forms.

5. Income from real estates transfer

• Income from transfer of a land right

• Income from transfer of a land use right and assets attach to the land

• Income from transfer of ownership of or use right to residential housing

• Income from transfer of a lease right to land or water surfaces

• Other items of income received from real estate transfers.

6. Income from prizes-wining

• Lottery winnings.

• All forms of promotional prizes.

• Winnings from all forms of betting and casino gambling

7. Income from royalties

8. Income from franchises

9. Income from inheritance

10. Income from receipt of gift

Tax resident

A tax resident of Vietnam is defined as an individual who falls in one of the following tests:

The 183-day test

An individual is deemed to be a tax resident of Vietnam if he or she is present in Vietnam at least 183 days within a calendar year or in the period of 12 consecutive months from the first date of presence in Vietnam.

For the purpose of this test, the following rules will apply:

• Each date of arrival and each date of departure are counted as one day;

• Where arrival and departure are in the same date, it is counted as one day;

• The dates of arrival and departure are based on the immigration stamps on the invididual’s passport; and

• Presence in Vietnam means physical presence.

The domicile test

An individual is deemed to be a tax resident of Vietnam if his or her domicile is in Vietnam. Domicile is determined in accordance with the Law on Domicile as follows:

• If the individual is a Vietnamese citizen, domicile is a fixed place in which he or she habitually lives or settles indefinitely and which is registered as his or her domicile in accordance with the Law on Domicile;

• If the individual is a foreigner, it is the domicile as stated in the residence card or temporary residence card issued by the relevant competent agency of the Ministry of Public Security.

An individual is deemed to be a tax resident of Vietnam if his or her domicile (as defined above) is in Vietnam, even if he or she spends less than 183 days in Vietnam in a tax year, if he or she cannot prove that he or she is a tax resident of any other country.

For the purpose of this test, the proof of being a resident of another country is based on the cerficate of residence issued by the relevant country.  However, where a tax treaty applies and such a tax treaty does not require certificate of residence, the length of residence is based on the individual’s length of stay in individual’s passport.

The accommodation test

An individual is deemed to be a tax resident of Vietnam if he or she has a place or places of accommodation in Vietnam as defined by Law on Housing which are leased for a period or periods in the aggregate of 183 days or more during a tax year, whether or not his or her domicile (as defined above) is in Vietnam. 

For the purpose of this provision, accommodation means a hotel, motel, lodge, place of work, office’s accommodation etc. whether such accommodation is leased by the individual or by his/her employer. 

Tax non-resident

An individual is deemed to be a non-resident if he or she does not fall in any of the above tests. 

Tax residency is a vital concept within the tax systems of nations, directly influencing the scope of an individual's taxable income. This concept determines where an individual is obligated to pay taxes and what income is subject to taxation.

In general, individuals deemed tax residents of a country are required to pay taxes on their worldwide income. This means that all earnings they generate, including income from foreign sources, are considered taxable income. Conversely, individuals who are not considered tax residents are only taxed on the Vietnam's source income, highlighting a notable difference in tax approaches.

Additionally, tax residency is subject to the influence of double taxation agreements between countries. These agreements aim to protect individuals from being taxed on the same income in multiple countries, offering a clearer legal framework for addressing tax residency issues. As a result, these treaties not only prevent double taxation but also facilitate international transactions, encourage investment, and promote economic cooperation among nations. Therefore, individuals must thoroughly understand the tax residency regulations not only in their country of residence but also in nations where they have income sources.

In Vietnam, the progressive tax rates from 5% to 35% are appliable to employment income for tax residents.

In Vietnam, the tax rates for employment income differ significantly between residents and non-residents based on their taxable income and residency status. While tax residents are subject to progressive tax rates from 5% to 35% on woldwide incomes, the tax non-residents are subject to flat tax rate of 20% on Vietnam's source income.

In Vietnam, Personal Income Tax (PIT) regulations provide several deductions and allowances for tax residents. These are designed to reduce taxable income, fostering a fairer tax system. Here's what taxpayers can claim:

1. Personal Deductions

Each taxpayer is entitled to a standard personal deduction of 11 million VND/month, or 132 million VND/year.

2. Dependent Deductions

Taxpayers can claim 4.4 million VND/month for each qualified dependent.

Dependents include children under 18 years old, adult children unable to work due to disabilities, or elderly parents who meet certain financial dependency conditions.

To claim this deduction, dependents must be properly registered with the tax authority.

3. Compulsory Insurance Contributions

Contributions to social insurance, health insurance, and unemployment insurance, which are mandatory by law, are deductible from taxable income.

4. Non-Taxable Benefits

Certain types of income and benefits are tax-exempt and reduce taxable income:

• Overtime wages: The additional wages paid for overtime hours beyond the standard rates.

• Benefits in kind: Such as employer-provided training fees, welfare payments (e.g., expenses for employee healthcare), or uniform allowances (within regulated limits).

5. Charitable Contributions

Donations made to approved charitable organizations in Vietnam, as recognized by government regulations, are deductible.

6. Contributions to Voluntary Retirement Programs

Contributions to approved voluntary pension schemes are deductible up to a limit of 1 million VND/month.

Important Notes:

• Deductions and allowances are applicable only to tax residents of Vietnam. Non-residents are not eligible for these benefits.

• Claims for deductions, particularly for dependents, require documentation and registration with the local tax office.

In Vietnam, both employers and employees are obligated to contribute to the mandatory social insurance system, which includes contributions for social insurance, health insurance, and unemployment insurance. These contributions are designed to provide benefits such as healthcare, pensions, maternity leave, and unemployment support. Here's how the system works:

1.Contribution Rates

a. Social Insurance

• Employer's obligation: 17.5% of the employee's gross salary.

• Employee's obligation: 8% of their gross salary.

b. Health Insurance

• Employer's obligation: 3% of the employee's gross salary.

• Employee's obligation: 1.5% of their gross salary.

c. Unemployment Insurance

Employer's obligation: 1% of the employee's gross salary.

Employee's obligation: 1% of their gross salary.

Note: Unemployment insurance is only applicable if the employee is working under a labor contract with a term of 3 months or more.

2. Total Contribution Rates

Together, the contribution rates are as follows:

For employers: 21.5% of gross salary.

For employees: 10.5% of gross salary.

3. Reporting and Payment Responsibilities

Employers' Responsibilities:

• Register employees with the social insurance authority upon hiring.

• Calculate and withhold the employees' portion of the contributions from their gross salary.

• Contribute both the employer's and employees' portions to the respective authorities by the mandated deadlines.

• Submit monthly or quarterly reports to the social insurance authority regarding salaries and contributions.

Employees' Responsibilities:

• Ensure that their personal information is correctly registered with the social insurance system through their employer.

• Regularly check their social insurance account to confirm contributions are being made on their behalf.

4. Ceiling for Contributions

Contributions are capped based on 20 times the statutory minimum monthly salary as regulated by the government. For instance, if the minimum monthly salary is 1.5 million VND, contributions are only required on income up to 30 million VND (20 times) per month.

5. Consequences of Non-Compliance

• Employers: Subject to penalties, including fines or legal action, for failing to register employees, underpaying contributions, or late payments.

• Employees: Misrepresentation of information or evasion of contributions may result in penalties.

Double Taxation Avoidance Agreements (DTAs) between Vietnam and other countries play a crucial role in preventing individuals and businesses from being taxed twice on the same income. These agreements establish a legal framework to coordinate tax obligations for income that may fall under the jurisdiction of both Vietnam and another country. Here's how DTAs help in avoiding double taxation:

1. Defining Tax Residency

• DTAs outline clear standards to determine the tax residency of individuals and entities, ensuring they are not unfairly taxed in both countries.

• If a person qualifies as a tax resident in both Vietnam and another country, tie-breaker rules in the DTA (e.g., place of permanent residence or center of vital interests) decide which country has primary taxing rights.

2. Allocating Tax Rights

DTAs allocate taxing rights between Vietnam and its partner country for various types of income, such as:

• Business profits

• Salaries and wages

• Dividends, interest, and royalties

• Capital gains

For example, business profits are typically taxed only in the country where the business is established unless the company has a permanent establishment in the other country.

3. Tax Exemptions and Reductions

DTAs often provide exemptions or reduced tax rates for specific types of income:

• Dividends, interest, and royalties: Frequently subject to reduced withholding tax rates under DTAs.

• Employment income: May be exempt from Vietnamese PIT if certain conditions, such as duration of stay, are met.

4. Tax Credits

Under a DTA, if income is taxed both in Vietnam and the other country, the country of residence usually allows a tax credit. This credit offsets taxes paid in the source country against the taxpayer's obligations in their residence country.

Example:

A Vietnamese tax resident earning income from a DTA partner country pays 15% tax abroad. In Vietnam, if the applicable tax on that income is 20%, the taxpayer only needs to pay the 5% difference (20% - 15%), thanks to the tax credit mechanism.

5. Avoiding Tax Evasion

DTAs include provisions for information exchange between tax authorities to prevent tax evasion and ensure compliance. By providing transparency, DTAs act as tools to regulate and oversee cross-border financial activities.

6. Encouraging International Trade and Investment

By eliminating tax barriers, DTAs create a favorable business environment:

• Businesses benefit from reduced tax burdens on cross-border transactions.

• Individuals engaged in international work benefit from legal clarity and compliance.

Conclusion

DTAs between Vietnam and other countries enhance tax fairness and efficiency while facilitating international trade and investment. They ensure taxpayers are not penalized unfairly due to their cross-border economic activities, fostering economic cooperation between nations

As a general rule, PIT is a liability of the income earner, rather than the payer, but the obligations to withhold, file tax returns and pay the PIT withheld initially rest with the payer, except for business income and some other non-employment income where the income earners are largely responsible for their own tax filing and payment under specific tax collection mechanism.

The timing of tax filings varies depending on the type of income and the circumstances in which payments are made.  The tax filing schedule (which is also the tax payment schedule, unless otherwise specified) is as follow. 

Employment income

• 20th day of the following month for monthly tax returns

• 31st March of the following year for annual tax finalisation

• 45th day following the last day of employment for tax finalisation

• 30th day of the first month of the next quarter for quarterly tax returns (where the total monthly tax withheld is less than VND5 million)

Business income

• Last day of the 1st month of the following quarter, for quarterly tax returns

• 31st March of the following year for annual tax returns

Income from sale of real property or capital assignment

• Upon submission of the application for transfer of ownership.  Tax payment is due as noticed by the tax authority

Income from sale of securities

• PIT is withheld upon sale and tax is finalised by 31st March of the following year.

Income from inheritance or gifts

• Ad hoc tax return and payment are due upon receipt of income

For expatriate assignees to Vietnam, the first year of tax assessment is 12 consecutive months from the date of first entry into Vietnam and the subsequent years of tax assessment are calendar years.  In addition, effective 2010 an expatriate assignee who arrives in Vietnam in the middle of a calendar year and becomes a tax resident is required to report pre-arrival income earned from the beginning of the calendar year of arrival.