Personal income tax for expatriates in Vietnam - residency, non-residency, tax treaties and compulsory social insurance

An expatriate who works in Vietnam for 8 months may be taxed at a flat 20% or on a progressive scale of up to 35%, depending on residency. Getting this first step wrong means getting monthly withholding, annual finalisation and home-country obligations wrong as well. 2026 is also a transition year: the Law on Personal Income Tax (PIT) No. 109/2025/QH15 took effect on 1 July 2026, but its rules on employment income of residents apply from the 2026 tax year (Article 29.2), together with the implementing Decree 253/2026/ND-CP, which replaces Decree 65/2013/ND-CP.

Resident or non-resident: two tests

Under Article 2.2 of the PIT Law and Article 4 of Decree 253/2026/ND-CP, an individual is a tax resident if either condition is met:

• Present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day of presence. The arrival day and the departure day each count as one day; arriving and leaving on the same day counts as one day in total, based on immigration stamps in the passport.
• Has a habitual residence in Vietnam: for foreigners, the address on the Permanent Residence Card or the temporary address declared when applying for a Temporary Residence Card; or rented accommodation under lease contracts totalling 183 days or more in the tax year - including hotels, guesthouses or housing rented by the employer.

If the individual has a habitual residence but is actually present for fewer than 183 days, they are still a Vietnamese tax resident unless they can prove residence in another country. The evidence is a certificate of tax residence issued by the foreign tax authority (Article 4.3, Decree 253/2026/ND-CP).

How tax is calculated: two very different regimes

Residents are taxed on worldwide income under the five-bracket progressive scale in Article 9 of the PIT Law, after deducting compulsory insurance and the family deduction of VND 15.5 million per month for the taxpayer and VND 6.2 million per month per dependant (Article 10). Resident foreigners receive the personal deduction from January, or from their month of arrival in their first year, until the month their contract ends and they leave Vietnam.

Non-residents are taxed at 20% on total salaries and wages received for work performed in Vietnam, wherever paid, with no family deduction (Article 21). Where a non-resident works both in Vietnam and abroad and the income cannot be separated, Decree 253/2026/ND-CP provides a formula apportioning worldwide income by working days or days present in Vietnam. For monthly withholding, the employer relies on the working period stated in the contract or assignment letter: 183 days or more means the progressive scale, fewer than 183 days means the 20% rate.

Expatriate benefits: what is taxable and what is not

• Housing rent paid by the employer: taxable at the actual amount but capped at 15% of total taxable income excluding the rent (Article 8.2.h, Decree 253/2026/ND-CP).
• One annual home-leave air ticket paid by the employer for a foreign employee: not taxable.
• School fees for the children of foreign employees studying in Vietnam from kindergarten to high school, paid by the employer: not taxable.
• One-off relocation allowance for foreigners coming to reside in Vietnam, at the amount in the assignment decision or internal policy: not taxable.
• Net salary contracts: tax borne by the employer must be grossed up into pre-tax income for the calculation.

Double tax agreements

Vietnam has double tax agreements with Japan, Korea, Singapore and many other countries. The Law on Tax Administration No. 108/2025/QH15 (Article 29) sets the principle of complying with international tax treaties to which Vietnam is a party. For residents, PIT paid abroad is credited against Vietnamese tax as provided in the treaty (Article 6.3, Decree 253/2026/ND-CP). For short-term assignees, the dependent personal services article of a treaty typically allows exemption in Vietnam when all of the following are met: presence of no more than 183 days as counted under that treaty, remuneration paid by an employer that is not a Vietnamese resident, and the cost not borne by a permanent establishment in Vietnam. If the salary cost is recharged to the Vietnamese company, the third condition is usually no longer met.

Compulsory social insurance for foreign employees

Under Article 2.2 of the Law on Social Insurance No. 41/2024/QH15 (effective 1 July 2025, guided by Decree 158/2025/ND-CP), foreigners on fixed-term labour contracts of 12 months or more with an employer in Vietnam must join compulsory social insurance, with three exceptions: intra-company transferees under the rules on foreign workers; those who have reached retirement age when the contract is signed; or where an international treaty to which Vietnam is a party provides otherwise. Foreign employees are not covered by unemployment insurance under the Law on Employment No. 74/2025/QH15.

Social insurance rates follow Articles 33 and 34 of the 2024 Social Insurance Law; health insurance of 4.5% follows Decree 188/2025/ND-CP. The employee's share of compulsory insurance is deductible for PIT.

How Kaizen can help

Kaizen determines residency status, plans treaty relief, runs gross-up payroll calculations and registers social insurance for expatriates from the day they arrive in Vietnam. Start with our free tax health check to review your company's pay and benefits policy for foreign staff.