Vietnam tax residency: the 183 day rule explained

Vietnam tax residency decides how much personal income tax you pay and which of your income Vietnam can tax. You are a tax resident if you meet one of two tests. You spent at least 183 days in Vietnam, or you have a regular residence here. If you meet neither, you are a non-resident. The rules come from the Law on Personal Income Tax (04/2007/QH12) and from Circular 111/2013/TT-BTC, which explains how to apply it.

The 183 day test

The first test counts days. You are a resident if you are in Vietnam for 183 days or more in a calendar year. You are also a resident if you are here for 183 days or more in any period of 12 consecutive months, counted from the first day you arrive.

The second option helps people who arrive mid-year. Say you land in July. You will not reach 183 days by 31 December. But the 12 months that start on your arrival date can still pass the test.

Count days with care. Keep your passport stamps, tickets and entry records. They are your proof if the tax office asks how many days you were here.

Sources: PwC Worldwide Tax Summaries, Vietnam, "Individual: Residence" (taxsummaries.pwc.com/vietnam/individual/residence), for the two residency tests; Circular 111/2013/TT-BTC and Law on Personal Income Tax 04/2007/QH12, as the rules behind them.

The regular residence test

The second test does not depend on days. You are a resident if you have a regular residence in Vietnam. For many people that means a permanent residence registered with the authorities. For foreigners it often means a rented home.

A rented home counts when it is rented with a definite lease term. A fixed-term lease for a flat or house is the usual example. Read the dates and terms in your contract and keep a copy, and ask your tax adviser how the lease length is treated in your case.

This test can make you a resident even when you spend fewer than 183 days here. Someone who rents a flat in Ho Chi Minh City for the whole year and travels often may still be a resident. The test also means you cannot assume that fewer days always means non-resident.

How status changes the tax rate

Residents pay tax on employment income at progressive rates. The rate rises in steps from 5 percent up to 35 percent as your taxable income grows.

Non-residents pay a flat 20 percent on employment income earned in Vietnam. There is no step scale. For many people the flat rate is higher than what a resident pays on the same salary. Other types of income, such as investment or business income, follow their own rates.

This is why status matters most for people on a moderate salary. A resident with a lower income pays tax at the low steps. A non-resident pays 20 percent from the first dong.

Sources: PwC Worldwide Tax Summaries, Vietnam, "Individual: Taxes on personal income" (taxsummaries.pwc.com/vietnam/individual/taxes-on-personal-income), for the resident and non-resident treatment.

How status changes the income taxed

Status also changes what Vietnam can tax. A resident is taxed on income earned inside and outside Vietnam. That is worldwide income. A non-resident is taxed only on income that has a Vietnam source.

If you are a resident with a salary paid abroad, you may still need to declare it here. If another country also taxes the same income, a double taxation agreement between Vietnam and that country may reduce or remove the double charge. The agreement depends on the countries involved, so check the one that applies to you.

Sources: PwC Worldwide Tax Summaries, Vietnam, "Individual: Taxes on personal income" (taxsummaries.pwc.com/vietnam/individual/taxes-on-personal-income), for the resident and non-resident treatment.

A practical checklist

Follow these steps before you file.

First, count your days in Vietnam for the calendar year. Second, if you arrived during the year, also count the 12 months from your arrival date. Third, check whether you hold a lease or a registered residence. Fourth, work out which rate scale applies to you. Fifth, list any income paid outside Vietnam and check the tax treaty position. Keep your records for later questions.

This article is general information about tax rules, not tax or legal advice. Your day count, your pay and any treaty claim decide the result, so check them with a Vietnam tax adviser before you file.

Sources: PwC Worldwide Tax Summaries, Vietnam, "Individual: Residence" and "Individual: Taxes on personal income", for the tests, rates and worldwide income rule.