Vietnam tax residence is something to look into as a digital nomad if you spend a lot of time in the country or if you like to have a base in South East Asia.
Reach out if you want to get a better understanding of the different options for tax residency and structuring of your tax affairs.
Key Points on Vietnam Tax Residency
- Vietnam offers interesting personal income tax rules for self-employed individuals and passive income
- Social contributions are capped at low amounts
- You become a tax resident by spending 183 days in the country. Yet, you can also become a tax resident by renting long-term.
- The challenge for becoming a tax resident is to get a visa or residency permit
Understanding Vietnam Tax Rules
If you are planning to live in Vietnam you need to be aware of the tax rules. Or, maybe, you are even looking to proactively set up your tax residence in Vietnam because you think it can help you save some taxes. We’ll go over the most important tax rules regarding Vietnam tax residence.
Vietnam Tax Residence: Personal Income Tax Rates
The income tax rates depend on what kind of income you receive. We make a distinction between income from employment, self-employment and investments.
Progressive tax rates apply to income from employment. The rates start at 5% and go up to 35% for an income of around €35.000. However, most nomads will probably not start working for a local employer as the wages are rather low.
More likely you act as a freelancer or have a business. Consequently, the rates for self-employment apply. The tax rates differ depending on your activity. However, most digital nomads will fall in the category of service providers. The applicable tax rate in this case is 2%. This tax rate is applied to your revenue though and not your net profit after expenses. Nevertheless, for most service providers their revenue and profit won’t differ too much as their deductible expenses are rather limited.
If you receive dividend or interest payments, a tax rate of 5% applies. The tax on capital gains for publicly traded securities equals only 0,1%.
Social Contributions in Vietnam
If you receive professional income, you’ll also have to pay social contributions. Unfortunately, the rules regarding social contributions in Vietnam are complex.
Nevertheless, the social contributions are calculated on a maximum amount of twenty times the minimum salary. However, the minimum salary in Vietnam is rather low. This means in practice that you currently calculate the social insurance on a maximum income of around €1.500 per year. The rate of social contributions amounts to 30%.
Consequently, you will pay a few hundred euros in social contributions at most.
Vietnamese Corporate Tax
Another way to structure your taxes through Vietnam is to set up a Vietnamese company.
The corporate tax rate in Vietnam amounts to 20%.
Although this isn’t a crazy high rate, there are probably other setups out there that can limit your tax burden more.
Tax Implications for Residents and Non-Residents
Vietnam taxes its residents on their worldwide income. A rather unusual system as most countries in Asia (Thailand, for example) apply a territorial tax system. However, this doesn’t necessarily mean you will be off worse in Vietnam.
If you are not a tax resident of Vietnam but still get income from Vietnamese source you are a non-resident taxpayer. People with non-resident status only need to pay tax on their Vietnamese income.
Tax Exemptions and Deductions for Expats in Vietnam
Vietnam doesn’t offer specific tax exemptions or deductions for expats.
Yet, there are some personal and dependent deductions which will lower taxable income.
Filing Requirements and Deadlines
If you qualify as a tax resident of Vietnam, you’ll have to file a tax return.
In case you work as an employee, your employer will actually have to do this on your behalf by 31 March of the next year.
If you also have other income than employment income, you will need to file a tax return yourself. You need to take care of this by 30 April of the next year.
Yet, throughout the tax year you’ll have to make provisional tax declarations and PIT (personal income tax) payments on a monthly or quarterly basis depending on your situation.
For non-resident similar obligations exist but they only need to declare their Vietnamese source income.
How to Become Tax Resident in Vietnam
If you want to become a tax resident in Vietnam you need to take into account a few considerations.
Meet Vietnam Tax Residence Criteria
As a first step, we need to analyze when Vietnam considers you a Vietnamese tax resident.
As a first criteria, Vietnam applies the days test. This means that Vietnam will have a look at the amount of days you spend in the country to assess whether or not they consider you a tax resident.
If you spend 183 days or more in the country during a twelve month period, you qualify as a tax resident. Obviously, if you spend less days, you don’t qualify as a tax resident based on this criteria.
Nevertheless, the fact that you spend less than 183 days in Vietnam, doesn’t exclude you from being liable to taxes in Vietnam.
The reason is that there is another criteria which can apply. This is the case when you have a permanent residence available in Vietnam which is recorded on your residence card.
Yet, even if this is not the case, you are deemed a tax resident if you have a lease for a place in Vietnam for 183 days or more.
This doesn’t necessarily need to be a long-term lease. A combination of different leases, and even stays in hotels etc., qualifies in this respect.
However, if you fall within the scope of this second criteria, you can still refrain from paying Vietnamese taxes if you can prove you actually spend less than 183 days in the country and are a tax resident in another country.
Apply for Tax Code
If you meet one of the criteria to get Vietnam tax residence, you’ll have to apply for a tax identification number or tax code with the General Department of Taxation.
You’ll need this tax code to file your tax returns in Vietnam.
Is Tax Residency in Vietnam Convenient for Nomads? (My Unbiased Opinion)
As you could read, Vietnam does offer some interesting tax rates. Furthermore, the social contributions are very low. This offers a overall low tax environment.
Yet, you probably want to incorporate your business outside of Vietnam in order to minimize your administrative burden in Vietnam.
Moreover, the most common issues digital nomads run into is getting the appropriate residency permit. Before becoming a tax resident, you’ll need a visa which allows you to stay in Vietnam long term. Currently, Vietnam doesn’t offer a digital nomad visa. Therefore, you’ll have to look for alternative routes. Overcoming this burden seems to be hard for most digital nomads.
How is Vietnam for Digital Nomads?
Vietnam is attracting more and more digital nomads for various reasons:
- Cost of living: Vietnam offers one of the lowest costs of living for digital nomads.
- Community: growing digital nomad community to satisfy your social needs.
- Coworkings: because of the growing digital nomad community, more and more coworking start to open and will welcome you with open arms.
- Infrastructure: apart from the coworkings, the internet infrastructure in Vietnam generally tends to be good. And mobile date as a backup is dirt cheap.
- Climate: Vietnam offers a nice climate. However, you would want to make sure you check out the (rain) seasons upfront to avoid those depending which part of the country you want to spend time in.
Let Me Help You With Your Tax Setup
Do you want to discuss if Vietnam tax residence is the right solution for you? Maybe you’re not sure about the different options that are available to you?
Book a consultation to get a detailed assessment.