Does VAC give any documents about tax payment over there? I will need it here. Anyway it was not so sure for me after reading the standard contract version if tax is already paid with the salary or not. I asked the agency again, I will see what they say. Before I was sure payment would be after tax. Now I am not.
VAC will provide a document stating that Tax Obligations in Vietnam have been satisfied (I’ve received them in the past). Several countries have “bi-lateral” tax treaties with Vietnam, therefore a PORTION of whatever taxes levied against you by your home country would be off-set, subject to the information which follows:
Firstly, a word about Tax Treaties
Tax treaties set out clear ground rules that govern tax matters relating to trade and investment between the two countries. A tax treaty is intended to mesh the tax systems of the two countries so that there is little potential for dispute regarding the amount of tax that should be paid to each country. The goal is to ensure that taxpayers do not end up caught in the middle between two governments, each of which claims taxing jurisdiction over the same income. A treaty with clear rules addressing the most likely areas of disagreement minimizes the time the two governments (and taxpayers) spend in resolving individual disputes.
One of the primary functions of tax treaties is to provide certainty to taxpayers regarding the threshold question with respect to international taxation: whether a taxpayer’s cross-border activities will subject it to taxation by two or more countries. Tax treaties answer this question by establishing the minimum level of economic activity that must be engaged in within a country by a resident of the other country before the first country may tax any resulting business profits; wages; salaries; allowances; etc. In general terms, tax treaties provide that if the branch operations in a foreign country have sufficient substance and continuity, the country where those activities occur will have primary (but not exclusive) jurisdiction to tax. In other cases, where the operations in the foreign country are relatively minor,(i.e; salaried workers) the home country retains the sole jurisdiction to tax its residents.
Personal income tax (From Ministry of Finance of Vietnam)
Effective April 21, 2008
Personal Income Tax
There are currently four categories of taxpayers in Vietnam:
• Vietnamese citizens residing in Vietnam,
• Vietnamese citizens working, or on business trips, outside of Vietnam,
• Individuals who do not have Vietnamese citizenship but reside in Vietnam indefinitely, and
• Foreigners working in Vietnam including those who do not live in Vietnam but have income which is sourced in Vietnam.
Foreigners are deemed to be resident for tax purposes if they reside in Vietnam for an aggregate of 183 days or more within 12 consecutive months since their arrival in Vietnam,
although this may be substantially changed by tax treaties.
Resident foreigners are subject to progressive tax rates;
those who are not resident are liable to a single 25% tax on income earned in Vietnam if they spend between 30 days and 182 days in Vietnam.
Only foreigners who spend fewer than 30 days in Vietnam are exempt from income tax.
Taxable Income
Incomes which are subject to personal income tax include the following:
Regular income in the form of:
salaries, wages, allowances and bonuses; income derived from scientific or technical services, technology transfer, licensing of rights to use inventions or trademarks, IT services, consultancy or training services or agency services; income from royalties; broking commissions; and other income not included in salaries or wages derived from business production or provision of services which is not subject to corporate income tax.
Irregular income derived from technology transfer and lottery winnings.
Non-Taxable Income
Non-taxable income includes:
• Traveling allowances;
• Allowances for toxicity and danger;
• Allowances for positions, allowances for responsibility with respect to officials and State employees;
• Regional allowances, incentive allowances and special allowances for work in offshore islands and border areas which have extremely harsh living conditions;
• Allowances for seniority with respect to the armed forces, customs, and cipher;
• Special allowances for certain industries and trades as stipulated by law;
• Allowances for officials who carried out revolutionary activities prior to 1945;
• Other allowances from the State Budget;
• Allowances for business trips;
• Fixed meal allowances for certain special industries and trades in accordance with regimes stipulated by the State;
• Social benefits for those entitled to social security and other benefits from the State Budget;
• Insurance compensation payments in respect of personal and property insurance policies;
• Retrenchment payments in accordance with regimes stipulated by the State;
• Allowances for relocation of production establishments, including one-off allowances for transferring to another region;
• Monetary prizes for technical innovations and inventions, international awards, and national awards organized by the State of Vietnam;
• Monetary prizes accompanying titles bestowed by the State, such as professor, people's teacher, workers' hero, and hero of the people's armed forces and other titles bestowed by the State; awards or other benefits from the State Budget;
• Money paid into social insurance or health insurance from salaries and wages of workers;
• Profits of the owner of a private business which is subject to corporate income tax.
Temporary Exemption
Interest income received from bank deposits and bank savings, profits from purchases of term bonds, ordinary bonds and Government bonds, income from investment in securities, and the difference on purchase and sale of securities are temporarily exempted from income tax.
Progressive Rates - Regular Income
For Vietnamese citizens and other individuals residing in Vietnam:
Level Average monthly per capita income (unit: 1,000 VND) Rate (%)
1 to 5,000 0
2 over 5,000 up to 15,000 10
3 over 15,000 up to 25,000 20
4 over 25,000 up to 40,000 30
5 over 40,000 40
For foreign residents in Vietnam and Vietnamese citizens working or on business trips overseas:
Level Average monthly per capita income (unit: 1,000 VND) Rate (%)
1 to 8,000 0
2 over 8,000 up to 20,000 10
3 over 20,000 up to 50,000 20
4 over 50,000 up to 80,000 30
5 over 80,000 40
For foreigners who are not residents of Vietnam, the flat tax rate is 25% of the total taxable income.
Contractually, your taxes obligations are clearly stated in the following clauses:
The Contractor undertakes and accepts responsibility to discharge promptly all Income Tax, National and Social Security and all other tax obligations arising in any jurisdiction (With the exception of Vietnam) in connection with his earnings hereunder and shall Keep (Name of Agency) fully indemnified in this respect.
Vietnam Airlines has warranted to (Name of Agency) that all tax obligations in connection with the contractors earnings hereunder imposed by the Vietnamese Government shall be borne in full by Vietnam Airlines.
There are some interesting things to note with regards to the Taxes.
• The following statement is of great interest; "...foreigners working in Vietnam including those who do not live in Vietnam
but have income which is sourced in Vietnam…”
- This statement would indicate that since your salary comes from monies that are paid to your agency, by Vietnam Airlines, that those monies could be considered as “Sourced” from Vietnam.
- Another argument could be, that your salary is paid BY YOUR agency, thus it could be considered as sourced elsewhere.
- What’s the answer? Honestly, I don’t know.
- It’s also interesting to note, that your “…salary and ALLOWANCES…” are considered taxable in Vietnam.
- In many countries, “Allowances” are not taxed, therefore the 25% obligation in Vietnam, would seem to go further in many other countries:
I.e.: An example from my home countries tax system – (Tax Treaty with Vietnam.)
• Vietnam Salary and Allowances = $96,000 (25% = $24,000)
• Home country calculation - salary only - $60,000 = (35% = $21,000)
• Result = I pay no additional taxes in my home country.(has worked this way for the past several years)
Conclusion
What does appear absolute is that your salary in Vietnam is taxed, and that rate is 25%. Furthermore, Vietnam Airlines has a contractual obligation to pay that tax on your behalf.
Therefore, if your country has a “Tax Treaty” with Vietnam, you should be able to consider 25% of your home countries tax obligation as “Fulfilled”. With the additional costs associated with working outside of your home country, it’s likely that these costs would reduce your taxable income to below the 25% threshold of your home country.
Some good advice is - as “Lost in Saigon” indicated - check with a Certified Tax Accountant or an Attorney in your home country.