PIT calculation on incomes from salaries and wages of foreign employees

PIT CALCULATION ON INCOME FROM SALARY AND WAGE OF FOREGN EMPLOYEES

OUTLINES

1. How to calculate personal income tax for foreigners who are resident individuals.

2. Personal income tax calculation method for foreigners who are non-residents.

3. Items not included in taxable income for foreigners.

  Currently, businesses have many innovative policies to attract workers, including attracting foreigners to work at enterprises. According to the provisions of the Law on Personal Income Tax, foreigners who work and generate income in the Vietnamese territory are subject to personal income tax. So how is personal income tax calculated for foreigners? Are foreigners entitled to any exemptions when calculating personal income? The following article will analyze this content, helping readers understand the necessary information.

 

How to calculate PIT for foreigners (Illustration)

1. How to calculate PIT for foreigners who are resident individuals

1. Identification of foreigners as resident individuals

• According to Article 1 of Circular No. 111/2013/TT-BTC guiding foreign individuals to be identified as resident individuals who meet one of the following conditions:

• In a calendar year, an individual being a foreigner is present in Vietnam for 183 days or more.
• Calculated according to 12 consecutive months from the first day of presence in Vietnam for 183 days or more.

• The individual present in Vietnam mentioned above is defined as the presence of such individual in the territory of Vietnam in one of two cases: having a regular place of residence in Vietnam, including a registered place of permanent residence or have rented houses to stay in Vietnam in accordance with the law with the term of the lease contracts from 183 days or more in the tax year.

2. Determination of taxable personal income

• Pursuant to Resolution No. 954/2020/UBTVQH14 dated June 2, 2020 of the National Assembly Standing Committee on adjusting the family allowances of PIT, accordingly, the latest family allowances at present  is:

• The deduction for taxpayers is 11,000,000 VND/month (132 million VND/year);
• The deduction for each dependent is VND 4,400,000/month.

• Pursuant to Clause 1, Article 9 of Circular 111/2013/TT-BTC guiding foreigners residing in Vietnam who are foreigners to be eligible for family circumstance-based deduction from January 1. In case the individual is present for the first time, in Vietnam to the month of termination of the labor contract and leaving Vietnam in the tax year for which family circumstances deduction is calculated from the month of arrival in Vietnam (full monthly calculation).
• Thus, in case there are no dependents, individuals residing in Vietnam who are foreigners who sign labor contracts must pay personal income tax if their incomes from wages and salaries are over 11,000,000 VND/ month.
• In case there is 1 dependent, only personal income tax must be paid if the income from salary or wages is over 15,400,000 million VND/month.

3. How to calculate income tax for foreigners who are resident individuals

• According to Article 7 of Circular 111/2013/TT-BTC stipulating how to calculate payable personal income tax as follows:
• Tax rate x Taxable income = Payable personal income tax
• In which:

• Personal income taxable income = Taxable income - Deductions.
• Personal income taxable income = Total income - Tax-free income.

2. Calculate PIT tax for non-residents foreigners

• 1. Identification of a foreigner as a non-resident individual
• According to Clause 2, Article 1 of Circular No. 111/2013/TT-BTC guiding foreigners who do not meet the conditions of a resident as mentioned above, they shall be identified as non-resident individuals.
• Foreigners being non-resident individuals are subject to personal income tax when they have incomes from salaries and wages arising in the Vietnamese territory as prescribed.
  2. Determination of taxable personal income .

• The family allowance does not apply to foreigners who are non-resident individuals, therefore, non-resident individuals with taxable income will be subject to personal income tax.
• Income from wages and salaries subject to personal income tax is determined to be the total amount of money that a foreigner being a non-resident receives when performing a job in Vietnam, regardless of where the income is paid.
  3. How to calculate income tax for foreigners who are non-resident individuals

• According to Clause 1, Article 18 of Circular 111/2013/TT-BTC guiding the calculation of personal income tax for foreigners being non-residents as follows:
• Tax rate 20% x Taxable income = Personal income tax payable
• In which:

• Taxable income is the total amount of salary, wages, remuneration and other incomes of the nature of salary or wages received by a foreigner being a non-resident individual in a tax period.
• The time when an individual or organization pays salary or wage income to a foreigner being a non-resident is the time to determine taxable income.

 

Items not included in taxable income for foreigners (Illustration)

3. What is non taxable income for foreigners  in Vietnam

• According to point g, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC guiding items not included in taxable income, in which, for foreigners as follows:
  • The premium for buying insurance products is not included in personal income taxable income in case organizations and individuals pay income to buy insurance products for foreign employees, which are optional and do not have a positive income. Accumulation of premiums (including the purchase of insurance by insurance enterprises not established and operating under Vietnamese law that are allowed to sell insurance in Vietnam)
  • The amount of support from individuals and organizations paying incomes to the employees themselves and their relatives in the examination and treatment of dangerous diseases.
  • The money for mid-shift meals and lunches paid by individuals and organizations to employees in organizing mid-shift meals and lunches.
  • Expenses for the purchase of round-trip airfares paid by the income-paying individuals or organizations on behalf of or for the foreign employees working in Vietnam or the Vietnamese workers working abroad on their return to Vietnam. once a year.
  • Tuition fees paid by individuals or organizations for children of foreign workers working in Vietnam to study in Vietnam, children of Vietnamese workers working abroad to study abroad by grade level. from preschool to high school.
  • Payments paid by income-paying individuals or organizations to serve the transfer and rotation of foreign workers to work in Vietnam according to the provisions of the labor contract.

➤ More articles:

➤ What employees need to know about wages as stipulated in the Labor Code 2019..
➤ Where do I submit the PIT finalization file?
➤Finalization of personal income tax in Korea and frequently asked questions..
➤ Cases of issuing personal income tax documents.

• Here is the content of some regulations on Instructions on how to calculate personal income tax for foreigners earning income from salaries and wages of Thinh Tri Law Firm to send to readers. If you have any questions, please contact Hotline 1800 6365 for advice.