In this article, we will provide you with valuable insights and essential information to help you navigate the complexities of payroll management in Vietnam. Whether you are an employer or an employee, understanding the intricacies of payroll management is crucial for ensuring compliance and a smooth payroll process. So, let’s delve into the world of payroll management in Vietnam and explore its key aspects and regulations.
Employment taxes in Vietnam
Employment taxes for Vietnamese employees
For Vietnamese employees, the employment taxes are the following:
- Personal income tax
- Resident taxpayers (foreign and Vietnamese) have to pay taxes on all the money they earn from working, no matter where they earn it, and the tax rates go up as their income increases, starting from 5% and reaching a maximum of 35%.
- Non-resident taxpayers, on the other hand, are taxed at a fixed rate of 20 percent on the money they earn in Vietnam.
| Tax Bracket | Monthly taxable income (million VND) | Monthly taxable income (US$) | Tax rate |
| 1 | Up to 5 | Up to 215 | 5% |
| 2 | Over 5 to 10 | Over 215 to 430 | 10% |
| 3 | Over 10 to 18 | Over 430 to 774 | 15% |
| 4 | Over 18 to 32 | Over 774 to 1,377 | 20% |
| 5 | Over 32 to 52 | Over 1,377 to 2,237 | 25% |
| 6 | Over 52 to 80 | Over 2,237 to 3,442 | 30% |
| 7 | Over 80 | Over 3,442 | 35% |
- Social security
- Health insurance: 3% employer, 1.5% employee
- Social insurance: 17.5% employer, 8% employee
- Unemployment Insurance: 1% employer, 1% employee
- Trade union fee
- 2%: Only individuals falling within the categories specified in Article 4 of Decree No. 191/2013/ND-CP are eligible to pay trade union dues.
What is a tax resident in Vietnam?
A tax resident in Vietnam refers to an individual or entity that is subject to taxation in Vietnam based on their residency status. In Vietnam, the taxation system is based on the concept of “tax residency,” which determines whether an individual or entity is liable to pay taxes on their income earned within the country.
For individuals, the determination of tax residency in Vietnam is generally based on the following criteria:
- Physical Presence:
- Stay in Vietnam for 183 days or more during a calendar year.
- Stay continuously for 12 months starting from the first day of arrival in Vietnam.
- This applies to individuals physically present within Vietnam’s borders.
- Regular Place of Residence:
- Have a consistent place of residence in Vietnam, falling under either of these cases:
- Possess a registered permanent residence as per the residency law.
- Occupy a rented dwelling in Vietnam following the housing law, with the lease lasting for 183 days or more within the tax year.
These criteria determine an individual’s tax residency status in Vietnam. If an individual meets any of these conditions, they are considered a tax resident and are subject to taxation on their income earned within the country. It’s important to note that these criteria are subject to change and may be influenced by bilateral tax treaties between Vietnam and other countries. For accurate and up-to-date information, it’s recommended to consult with a tax professional or contact MD law firm to speak to one of our experts in this field for more information.
Employment taxes for foreign employees
The employment taxes for foreign employees starting from 1 December 2018 are:
- Personal income tax
- Resident taxpayers have to pay taxes on all the money they earn from working, no matter where they earn it, and the tax rates go up as their income increases, starting from 5% and reaching a maximum of 35%.
- Non-resident taxpayers, on the other hand, are taxed at a fixed rate of 20 percent on the money they earn in Vietnam.
- Social security
- Health insurance: 3% employer, 1.5% employee
- Social insurance: 17.5% employer, 8% employee
- Trade union fee
- 2%: Enterprises pay, foreign employees are not required to pay trade union fees. This is because they are not members of Vietnam Trade Union organizations. Therefore, they are exempt from contributing to trade union fees.
| Tax Bracket | Monthly taxable income (million VND) | Monthly taxable income (US$) | Tax rate |
| 1 | Up to 5 | Up to 215 | 5% |
| 2 | Over 5 to 10 | Over 215 to 430 | 10% |
| 3 | Over 10 to 18 | Over 430 to 774 | 15% |
| 4 | Over 18 to 32 | Over 774 to 1,377 | 20% |
| 5 | Over 32 to 52 | Over 1,377 to 2,237 | 25% |
| 6 | Over 52 to 80 | Over 2,237 to 3,442 | 30% |
| 7 | Over 80 | Over 3,442 | 35% |
Taxable and non-taxable employee benefits
In Vietnam, certain employee benefits are tax-free, while others remain taxable:
| Taxable benefits in Vietnam | Non-taxable benefits in Vietnam |
| Utility payments | Petrol, Telephone, Childcare, Transportation, Entertainment |
| Life insurance | Healthcare |
| Meal allowance (amount exceeding VND 730,000) | Meal allowance up to 730,000 VND (~USD 30) |
| Private sports club membership | Sports membership for a group of employees |
| Housing |
Insurance caps in Vietnam
As of 2023, the caps for health and social insurance in Vietnam are 36,000,000 VND (~US$ 1,286), and for unemployment insurance, it is 93,600,000 VND (~US$ 3,800).
Eligibility for social insurance in Vietnam for foreign employees
Not all foreign employees are eligible for compulsory social insurance in Vietnam. Social insurance applies if:
- The employment contract is for at least one full year.
- The employee possesses a work permit, practicing certificate, or practicing license.
However, certain conditions may exclude foreign employees from social insurance coverage, such as being internally transferred to Vietnam or reaching the retirement age of 60 for men and 55 for women.
Paid and unpaid leaves in Vietnam
Maternity and paternity leaves
In Vietnam, paid maternity leave lasts for six months. Mothers with more than one child receive an additional month for each additional child. Pregnant employees are entitled to five prenatal check-ups, with a full day off granted for each check-up. Moreover, pregnant employees residing far from health establishments or experiencing pregnancy complications can take a two-day leave for each prenatal check-up.
It is essential to note that during maternity leave, employees are entitled to receive their average salary, which is fully covered by the insurance fund and capped at 36 million VND (~US$ 1,286).
Fathers in Vietnam also have the right to take paternity leave for at least five days.
Sick leave
The duration of paid sick leave depends on the number of years the employee has contributed to the social insurance fund. For employees who have contributed for less than 15 years, it is 30 days. For those with 15-30 years of contributions, it is 40 days, and for those with 30 years or more, it is 60 days.
Starting from 1 December 2018, foreign employees are also eligible for sick leave, maternity leave, and paternity leave as per Decree 143.
Annual leaves
After one year of work, employees are entitled to at least 12 days of annual leave. Depending on the working conditions, this may increase to 14 or 16 days, with an additional day granted for every five years of consecutive service. Foreign employees also receive an extra paid day off for their home country’s national day and traditional New Year holiday.
Public holidays in Vietnam
There are 11 paid public holiday days in Vietnam. If a public holiday falls on a weekend, employees are entitled to have the following day off as well.
| Public holidays in Vietnam in 2023 | |
| 1 day (January 1 of the solar calendar) | New Year’s Day |
| 5 days | Lunar New Year |
| 1 day (April 30 of the solar calendar) | Reunification Day |
| 01 day (May 1 of the solar calendar) | International Labor Day |
| National Day: 02 days (September 2 of the solar calendar and 01 day immediately before or after) | Independence Day |
| 01 day (March 10 of the lunar calendar) | Hung Kings Commemoration Day |
Note: Apart from the designated holidays, foreign employees working in Vietnam are also eligible for an extra day off to celebrate both their own country’s National Day and the traditional New Year. This means they can take time off to celebrate these special occasions from work.
In addition to the standard leaves, employees in Vietnam can avail of paid days off for various events as stipulated by the Labor Law. Such events may include a death in the family, marriage, and others as specified by the law.
Furthermore, there are provisions for additional unpaid days off, which are subject to special arrangements agreed upon between the employer and the employee. These arrangements can be tailored to individual circumstances and needs.
Minimum wages in Vietnam in 2023
In Vietnam, there are two types of minimum salaries:
- Common minimum wage
- Regional minimum wage
The difference between the common minimum wage and the regional minimum wage
Common minimum wage
- This is the lowest salary used as a starting point for calculating pay for government officials, civil servants, and public employees.
- It applies to specific individuals listed in Decree No. 24/2023/D-CP.
- The initial salary is set at 1,800,000 VND per month.
- When this base salary goes up, the salaries of officials, civil servants, and public employees also increase accordingly.
Regional minimum wage
- This is the lowest wage given to workers doing simpler jobs under regular work conditions.
- It’s for employees in private companies.
- The pay varies based on different regions: Regions 1, 2, 3, and 4.
- If the minimum pay in a region increases, workers earning less than that get a raise.
- Other workers, usually, don’t get affected by this minimum pay increase.
Common minimum wage
As per Decree 24, the common minimum wage has witnessed a 21% rise, elevating it from 1,490,000 VND per month to 1,800,000 VND per month. This adjustment comes into force on July 1, 2023, marking the initial increase in four years since the onset of the Covid-19 pandemic. The prevailing rate of VND 1,490,000 per month has been in effect since July 1, 2019, as stipulated by Decree 38/2019/ND-CP.
Regional minimum wage
The regional minimum wage applies to four regions in Vietnam. The monthly minimum wages for each region, as of 2022, are as follows:
- Region I: 4,680,000 VND (~US$ 202)
- Region II: 4,160,000 VND (~US$ 179)
- Region III: 3,640,000 VND (~US$ 157)
- Region IV: 3,250,000 VND (~US$ 140)
The minimum monthly wage increased by 260,000 VND (~US$ 8.4) on average, a 6% climb compared to the previous year.
Getting started with payroll services in Vietnam
MD Law Firm offers various options for managing company payroll in Vietnam, including complete payroll management services and employer-of-record services. For personalized solutions for your company, get in touch with us through the form below.
[INSERT_ELEMENTOR id=”1017″]