Each country has its own set of unique laws and processes when it comes to employment and tax contributions. Vietnam is no different, as employers should be mindful of social security contributions, health insurance, income tax and other tax payments, when administering payroll. Therefore, it is important to ensure your business remains compliant with the relevant laws and regulations in Vietnam.
Managing payroll in Vietnam
The tax period in Vietnam starts on the first day of the calendar year and ends on the last, from 01 January to 31 December. With regards to payroll, both employers and employees are obliged to contribute to various insurances and funds. Pay slips are required to have details of the relevant pay period, deductions and tax payments. Employers have to consider deductions, tax contributions, allowances and bonuses when managing payroll.
Personal Income Tax (PIT)
The tax system in Vietnam taxes individuals on their worldwide income. Taxpayers are categorized as either ‘residents’, who are taxed on their worldwide income, or ‘non-residents’ who are taxed only on their income sourced from Vietnam. Resident foreign citizens are required to declare all of their income, regardless if it originates from a source outside of Vietnam. A foreign individual is considered a resident if:
- He/she is physically present in Vietnam for 183 days or more in a calendar year
- He/she is physically present in Vietnam for 12 consecutive months from date of arrival
- He/she has a permanent residential place in Vietnam
Social Security deductions in Vietnam
There are 3 types of employee insurance available in Vietnam:
- Health insurance
- Social insurance
- Unemployment insurance
Previously, foreign employees in Vietnam were only entitled to health insurance. However after 1 January 2018, foreign workers are eligible for social insurance contributions.
Local Employees
For local employees, payroll taxes and contributions are as follows:
| Employee | Employer | |
| Personal Income Tax | 5-35% (depending on income) | – |
| Trade Union Fee (if applicable) | 2% | – |
| Social Insurance | 8% | 17.5% |
| Health Insurance | 1.5% | 3% |
| Unemployment Insurance | 1% | 1% |
Foreign Employees
For foreign employees, payroll taxes and contributions are as follows:
| Employee | Employer | |
| Personal Income Tax | 5-35% for a resident 20% for a non-resident | – |
| Trade Union Fee (if applicable) | 2% | – |
| Social Insurance | 0% | 3.5% |
| Health Insurance | 1.5% | 3% |
Registration of employees
In terms of the Vietnam Labor Code, an employment contract is needed for all employees employed in Vietnam. The contract should carefully outline the rights and responsibilities of both the employer and employee, for the duration of the contract. The contract should also mention the specific terms and conditions of employment. Contracts also need to be made in accordance with the employment laws in Vietnam, providing for probationary periods, notice periods and cases for dismissal.
Let INS Global administer your Payroll in Vietnam
With a well-established track record of assisting companies, from various industries, administer their payroll, INS Global may be the partner for you. INS Global is fully equipped to assist your enterprise with the management of your payroll in Vietnam with consideration of cost, expertise, flexibility and efficiency in mind. With more than 15 years of experience and industry knowledge, INS Global is the leading HR consultancy in Asia. Contact us today.
