Many digital nomads are a fan of Southeast Asia and Vietnam is one of those countries that many nomads have on their shortlist to visit. However, would tax residency in Vietnam for digital nomads also be a good idea? In this article we’ll have a closer look at the tax system of Vietnam and how you can optimize your taxes there.
Living in Vietnam
Before we talk about taxes in Vietnam, we’ll have a look at how to be able to actually spend time in the country. Most people who want to visit will need a visa to actually enter Vietnam. The most common option is to get a tourist visa. This visa is valid for up to 90 days and you can apply online yourself.
For now, Vietnam doesn’t have a digital nomad visa (yet).
Vietnamese 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 residency in Vietnam because you think it can help you save some taxes. We’ll go over the most important tax rules regarding tax residency in Vietnam for digital nomads.
Tax Residency in Vietnam
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, 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 residency 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.
Tax Residency in Vietnam for Digital Nomads: Tax Rates
Once you qualify as a Vietnamese tax resident, the question remains which tax rates apply to you.
First of all, you need to know that Vietnam taxes you on your 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.
The actual 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%.
Tax Residency in Vietnam for Digital Nomads: Social Contributions
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. Given that the minimum salary in Vietnam is rather low, this means in practice that you currently calculate the social contribuions on a maximum income of around €1.500 per year. The rate of social contributions amounts to 30%. Consequently, you will pay a few hunderd euros in social contributions at most.
Setting up a company in Vietnam
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 burder more.
Tax Residency in Vietnam for Digital Nomads: Conclusion
Tax residency in Vietnam for digital nomads is definitely worth considering. As discussed, the country offers low tax rates for self-employed individuals. Furthermore, the taxes on investment income are also very low.