Providing guidance on personal income tax settlement for foreigners returning to their home countries is one of the most complex tasks for accounting and human resources departments in foreign-invested enterprises (FDI). According to statistics from the General Department of Taxation, the number of foreign experts working in Vietnam is growing at an average rate of 10-15% per year.
This growth has led to a high demand for processing tax refunds and closing tax identification numbers. Incorrect procedures not only lead to the risk of administrative penalties but also... Decree 125/2020/ND-CP It also directly affects the reputation of the business and the rights of individual employees.
Legal basis and importance of providing guidance on personal income tax settlement for foreigners.
In the Vietnamese tax legal system, regulations on personal income tax for foreigners are governed by various legal documents. A thorough understanding of these circulars and decrees is a prerequisite for correctly following the prescribed procedures. personal income tax settlement for foreigners without encountering administrative procedural obstacles.
Key legal documents include:
- Tax Administration Law No. 38/2019/QH14General regulations regarding the deadline, location, and responsibilities for filing tax returns.
- Circular 111/2013/TT-BTCGuidelines for implementing the Personal Income Tax Law.
- Circular 80/2021/TT-BTCInstructions for implementing certain provisions of the Law on Tax Administration regarding tax declaration forms.
- Decree 126/2020/ND-CP: Regulations detailing certain provisions of the Law on Tax Administration.
Complying with the personal income tax settlement guidelines for foreigners helps individuals accurately determine the amount of tax owed for supplementary payment or the amount of tax overpaid for tax refund procedures.
This is especially important when foreigners are preparing to leave Vietnam. Immigration authorities may check the fulfillment of tax obligations before allowing departure in certain special cases to ensure the rule of law is upheld.
Identify the type and residency status of foreigners.
Before we delve into the settlement instructions... personal income tax For foreigners, accountants need to clearly determine whether the individual is a "resident" or a "non-resident". Residency status directly determines the applicable tax rate.
Resident
According to regulations, a foreigner is considered a resident individual if they meet one of the following two conditions:
- Being present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day of arrival.
- Having a permanent residence in Vietnam (permanent/temporary residence card or rental agreement for 90 days or more in the tax year).
Non-resident individuals
Non-resident individuals are those who do not meet the above conditions. For this group, guidance on personal income tax settlement for foreigners is usually simpler.
They are only subject to a 20% withholding tax on their taxable income at source. Generally, this group is not required to file an annual tax return, except in certain exceptional cases involving global income.
| Criteria | Resident Individual | Non-resident individual |
| Time of arrival | From 183 days or more | Not more than 183 days |
| Applicable tax rate | Progressive Rate Schedule (5% – 35%) | Full tax rate 20% |
| Family deduction | Personal/dependent deductions are applicable. | No personal allowance deductions are allowed. |
| Settlement obligations | It is mandatory to settle accounts upon returning to the country. | No settlement (withholding tax) |
Cases where guidance on personal income tax settlement for foreigners is mandatory.
Not all cases of foreigners returning to their home country follow the same procedure. Depending on the contract termination date and total annual income, businesses need to consider specific scenarios.
Foreigners whose contracts end and return to their home countries in the middle of the year.
This is the most common scenario when guidance is needed on personal income tax settlement for foreigners. Individuals must settle their taxes up to the time of departure. If the individual authorizes the paying company or entity to file the tax return on their behalf, the company will do so according to regulations.
Tax settlement for foreigners residing in Vietnam during their first year.
If a foreigner is present in Vietnam for less than 183 days in their first year, but their total stay exceeds 183 days within a 12-month period, the first tax year will be the 12 consecutive months. From the second year onwards, the standard calendar year will apply.
Case of foreigners quitting their jobs but remaining in Vietnam.
If an individual leaves their previous company but continues working for another entity in Vietnam, the former employer cannot file the tax return for the entire year on their behalf. The employer will only issue a tax deduction certificate, and the individual will be responsible for filing their own personal income tax return at the end of the year.
Tax calculation method and applicable tax rate schedule.
Incorrect application of the tax rate schedule is the most common error that leads to tax returns being rejected by the tax authorities. When providing guidance on personal income tax settlement for resident foreigners, the calculation formula is based on average taxable income.
Calculation formula:
|
Personal income tax payable = (Taxable income x Tax rate) – Tax bracket deductions |
In this calculation, Taxable Income = Total Taxable Income – Deductions (Family allowances, insurance, charitable contributions).
The progressive tariff schedule for 2026:
- Level 1: Up to 5 million VND/month – 5%
- Level 2: Over 5 to 10 million VND – 10%
- Level 3: Over 10 to 18 million VND – 15%
- Level 4: Over 18 to 32 million VND – 20%
- Level 5: From 32 to 52 million VND – 25%
- Level 6: Over 52 to 80 million VND – 30%
- Level 7: Over 80 million VND – 35%
Accountants should note that foreign currency income should be converted to VND using the actual exchange rate of the bank where the individual has an account at the time the income is generated.
Documents required for implementing the personal income tax finalization guidelines for foreigners.
Businesses and individuals need to prepare the following documents in accordance with the General Department of Taxation's guidelines for personal income tax settlement for foreigners:
- Tax return form: Form No. 02/QTT-TNCN (self-assessment) or Form No. 05/QTT-TNCN (paying organization).
- Appendix to the listForms 05-1/PBT-TNCN, 05-2/PBT-TNCN, 05-3/PBT-TNCN.
- Tax deduction certificate: Original tax deduction certificate for personal income tax issued by the business to the individual during the year.
- Income verification letterFor income payments received from overseas, a confirmation accompanied by a notarized translation is required.
- Copy of passport: Take photos of the pages with entry and exit stamps to accurately determine the number of days of stay.
- Power of attorneyIf an individual authorizes a business to handle tax procedures on their behalf.
Please note that filing is currently primarily done through the Etax portal. However, hard copies still need to be stored or submitted in person, depending on the specific requirements of each tax office.
The step-by-step process for settling taxes upon returning to the country.
The process for guiding foreigners returning to their home country on personal income tax settlement typically includes four basic steps that accountants must strictly adhere to:
Step 1: Gather information and determine the date of residence.
Check your passport to accurately count the number of days you will be in Vietnam. Calculate your total income, including salary, bonuses, housing allowances, transportation allowances, and mandatory insurance premiums.
Step 2: Submit online declaration
Use the HTKK software or file directly on the electronic portal. Choose the correct tax return form based on whether you are filing your tax return yourself or authorizing someone else to do it. Ensure you fill in all dependent information to optimize your tax liability.
Step 3: Submit the documents and additional tax payment.
After submitting the tax return, individuals/businesses pay the outstanding tax amount to the state budget. According to the guidelines for personal income tax settlement for foreigners, late payment will incur interest of 0.031 TP3T/day on the outstanding tax amount.
Step 4: Tax refund or offsetting procedure
If the amount of tax paid is greater than the amount due, the individual files for a tax refund. This is an important step in the personal income tax settlement guide for foreigners, helping to ensure the financial rights of professionals before they leave.
Deadline for submitting tax return documents for foreigners
Deadlines are crucial in professional accounting. According to the guidelines for personal income tax settlement for foreigners returning to their home country, the deadline for submission is no later than the 45th day from the date of the individual's departure.
Unlike regular annual tax settlements, returning to Vietnam in the middle of the year requires immediate tax settlement. This helps to close the tax identification number or fulfill obligations before leaving Vietnamese territory.
If the deadline for filing personal income tax returns for foreigners is not met, the sponsoring enterprise may be held jointly liable. Current administrative penalties for late filing are very high.
Common mistakes when filing personal income tax returns.
During the process of advising and guiding foreigners on personal income tax settlement, MAN has noted the following common errors:
- Determine the error in the number of days of residence.: Excluding the entry and exit days, the total duration is considered a full day as per regulations.
- Missing global income records.Foreign residents are subject to tax on income earned both in Vietnam and abroad. Declaring only income earned in Vietnam is a major oversight that can lead to retroactive tax collection.
- Income paid on behalf of others cannot be converted.Amounts paid by companies, such as rent and tuition fees, are often overlooked when calculating taxable income.
- Forgot to close the tax code.After the tax settlement is complete, it is necessary to close the tax identification number to avoid problems with future declaration obligations.
Conclude
The guide to personal income tax finalization for foreigners is not just about filling in the data, but also a comprehensive legal review process. Understanding the differences between resident categories and adhering to the 45-day deadline is crucial. In the context of increasingly stringent tax regulations, attempting this process independently without professional advice can lead to significant penalties.
If your business is struggling with processing paperwork or needs a standardized process for handling personal income tax returns for foreigners, let us help. MAN – Master Accountant Network We stand by your side. We pride ourselves on being a leading provider of the most professional solutions.
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Personal Income Tax Finalization Guidelines for Foreigners
Yes, it is possible. According to the guidelines for personal income tax settlement for foreigners, individuals can authorize the paying organization or a professional accounting service provider to handle the process.
The paying company is responsible for settling the tax on behalf of the individual before they leave the country. If they have already returned to their home country, receiving the tax refund will be very difficult if the individual no longer has a bank account in Vietnam.
Rent is included in taxable income based on the actual amount, but not exceeding 15% of total taxable income (excluding rent). Can foreigners authorize another individual to handle their tax settlements?
What should be done if a foreigner has returned to their home country without settling their tax obligations?
How is rental income taxed?
