Worldwide Personal Income Tax Declaration in Vietnam

Foreign employees working in Vietnam must pay attention to worldwide personal income tax declaration in Vietnam to comply with legal requirements, avoid penalties, optimize tax liabilities, and maintain good standing with tax authorities in both their host and home countries.

Step-by-Step Guide on Worldwide Personal Income Tax Declaration in Vietnam

Worldwide Personal Income Tax Declaration in Vietnam For Income From Vietnam

The company with which the foreign employee has a working contract can either submit the tax declaration on behalf of the employee; if not agreed upon, the employee may authorize an individual or another organization to submit the Personal Income Tax (PIT) on their behalf.

Since the employee has additional income from another country, they fall under the category requiring direct tax declaration to the tax authorities.

For individuals needing to declare taxes directly, if the employee has an electronic tax account, they can declare the tax directly with the tax authorities without submitting physical documents.

Employees can register for an electronic tax transaction account. After obtaining the account, employees can proceed to declare taxes on the Electronic Tax Portal.

Next, the employee will select the tax settlement category through online declaration.

The steps for online Personal Income Tax declaration in Vietnam are as follows:

Step 1:

– Access the Electronic Information Portal of the Vietnam General Department of Taxation using the registered electronic tax transaction account.

Step 2:

– Under the “Tax Settlement/Online Declaration” section, select the Personal Income Tax Settlement Form.

– Complete the online declaration form for Personal Income Tax, input all necessary information, and submit supporting documents as required.

– Enter the verification code (OTP) sent to the registered phone number with the tax authorities.

Step 3:

– After completing the tax settlement submission, the Electronic Information Portal of the General Department of Taxation will send an acknowledgment notification via email and SMS to the registered phone number.

Deadline for PIT declaration submission is the last day of April the following year.

Worldwide Personal Income Tax Declaration in Vietnam For Income From Countries with Double Tax Avoidance Agreements

In this scenario, even if the employee resides in Vietnam, if there is income from another country, they can declare and pay taxes in that country.

If the employee has already paid personal income tax in the foreign country, the amount paid can be deducted from the tax payable in Vietnam.

The procedure for directly deducting tax paid abroad from the tax payable in Vietnam is as follows:

The taxpayer submits a request dossier for tax deduction of foreign-paid taxes into taxes payable in Vietnam directly to the Tax management authority.

The dossier for worldwide personal income tax declaration in Vietnam includes:

1) A request letter for deducting foreign taxes from the tax payable in Vietnam using the prescribed form.

2) A certified copy of the foreign income tax declaration form by the taxpayer.

3) A certified copy of the foreign tax payment documents with the taxpayer’s certification.

4) The original confirmation from the foreign tax authority regarding the amount of tax paid.

Worldwide Personal Income Tax Declaration in Vietnam For Income From Countries Without Double Tax Avoidance Agreements

For income earned from a foreign country without a double taxation agreement, the taxpayer needs to conduct worldwide personal income tax declaration in Vietnam and pay taxes in Vietnam. 

As there are no double tax avoidance agreements, the taxpayer needs to check with the foreign country on the tax compliance process at the same time.

Why Comply with Worldwide Personal Income Tax Declaration in Vietnam

Foreign employees need to pay attention to worldwide personal income tax declaration in Vietnam for several important reasons:

1. Legal Compliance:
Many countries, including Vietnam, have tax regulations that require individuals to declare and pay taxes on their global income. Failing to comply with these regulations can result in legal consequences and penalties.

2. Residency Status:
Understanding and declaring worldwide income is crucial for determining residency status in the host country. Residency status often affects the applicable tax rates and the types of income subject to taxation.

3. Avoidance of Penalties:
Non-compliance with tax regulations can lead to penalties and fines. By accurately declaring worldwide income, foreign employees can avoid legal repercussions and financial penalties imposed by tax authorities.

4. Tax Credits and Deductions:
Some countries provide tax credits or deductions for foreign taxes paid on income earned abroad. By properly declaring worldwide income, foreign employees may be eligible for these credits, reducing their overall tax liability.

5. Double Taxation Avoidance:
Worldwide personal income tax declaration in Vietnam is essential to identify cases where double taxation may occur. Double taxation can happen when the same income is taxed in both the host country and the home country. Understanding and addressing this issue often involve utilizing tax treaties or credits.

6. Immigration and Visa Status:
Compliance with tax obligations is often linked to immigration and visa status. Failure to fulfill tax requirements may impact the renewal or approval of visas, potentially affecting the foreign employee’s ability to remain in the host country.

7. Maintaining Good Standing:
Complying with personal income tax obligations is crucial for maintaining a good standing with the host country’s tax authorities. This, in turn, can positively influence the overall relationship between the foreign employee and the host country.

8. Financial Planning:
Worldwide personal income tax declaration in Vietnam is fundamental for effective financial planning. It allows foreign employees to assess their global tax liabilities, plan for tax payments, and optimize their financial strategies to minimize tax burdens.

9. Avoidance of Legal Issues:
Non-compliance with tax regulations can lead to legal challenges, including investigations and audits. By paying attention to worldwide personal income tax declaration in Vietnam, foreign employees reduce the risk of facing legal issues related to taxation.

10. Enhanced Financial Transparency:
Accurate declaration of worldwide income contributes to financial transparency. It ensures that foreign employees are fully aware of their tax obligations and can make informed decisions regarding their financial affairs in both the host and home countries.

ANT Lawyers, law firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.