A foreign employee working in Vietnam is taxed first under Vietnamese personal income tax rules, which decide whether the person is resident — and therefore taxed on worldwide income with family deductions — or non-resident and taxed only on Vietnam-source income. A tax treaty then decides whether Vietnam may tax the salary at all. Under the employment article found in Vietnam's treaties, a short-term assignee who stays within the treaty's day-count limit, is paid by an employer that is not resident in Vietnam and whose salary is not borne by a Vietnamese permanent establishment, may be taxable only in the home country.
All three conditions matter, and the third and second are where most claims fail: groups often recharge an assignee's salary to the Vietnamese subsidiary, which makes the Vietnamese company the one bearing the cost. This guide explains the domestic layer, the treaty layer, the tie-breaker for people who are resident in two countries at once, and the documents HR and payroll should keep.
The domestic layer: resident or non-resident
Vietnam decides residence for personal income tax by a physical presence test — a day count over a defined period — and a habitual residence test based on a registered residence or a rented home in Vietnam. The PIT rules have been renewed: Decree 253/2026/NĐ-CP guides the Law on Personal Income Tax and Circular 87/2026/TT-BTC details it, both effective from 1 July 2026. Check the current day-count rule and the definition of habitual residence in those documents rather than relying on older summaries.
| Resident | Non-resident | |
|---|---|---|
| Income taxed in Vietnam | Worldwide income | Vietnam-source income only |
| Employment income | Progressive rates after deductions | A flat rate on gross Vietnam-source employment income |
| Family deductions | Yes — from the 2026 tax year, VND 15.5 million per month for the taxpayer and VND 6.2 million per month per registered dependant | No |
| Annual finalisation | Generally required, subject to the rules on who must finalise | Depends on how tax was withheld |
The family deduction figures come from Resolution 110/2025/UBTVQH15. The progressive schedule and the non-resident rate should be taken from the current PIT law and guidance.
The treaty layer: the employment article
Most of Vietnam's treaties follow the international model for employment income. Salary for work performed in Vietnam may be taxed in Vietnam, unless all of the following conditions are met, in which case it is taxable only in the country of residence:
- The employee is present in Vietnam for no longer than the day-count limit in the treaty, measured over the period the treaty specifies — a calendar year, a fiscal year or any twelve-month period, depending on the text.
- The remuneration is paid by, or on behalf of, an employer that is not resident in Vietnam.
- The remuneration is not borne by a permanent establishment or fixed base that the employer has in Vietnam.
The article protects only a resident of the other treaty country. An assignee who has become a Vietnamese resident under a treaty's tie-breaker cannot rely on it in Vietnam. Specific treaties may also contain special rules for directors, teachers, researchers, students or government service; read the text for the jurisdiction concerned.
Why recharging the salary changes the answer
Groups often keep an assignee on the home payroll for social security and pension reasons, then recharge the cost to the Vietnamese subsidiary so that it bears the expense of the person working for it. That is sensible for transfer pricing, but for the treaty it usually means the salary is borne by a Vietnamese resident employer in substance, or that the Vietnamese company is the economic employer. The second condition then fails, and Vietnam may tax the salary from the first day, whatever the day count.
Tax authorities look at substance: who directs the work, who bears the risk of poor performance, who benefits from the work, and who ultimately pays. An assignee who reports to the Vietnamese general manager and whose cost is recharged to Vietnam is hard to present as working for a foreign employer. There is nothing wrong with the recharge — but the payroll team must then treat the income as taxable in Vietnam and withhold accordingly.
A recharge also has foreign contractor tax consequences for the Vietnamese company if the parent is treated as providing a service rather than simply passing on an employee cost. Settle the characterisation before the first recharge invoice.
Resident in two countries: the tie-breaker
An assignee can be resident under Vietnamese rules and under the home country's rules at the same time. The treaty's residence article then applies a sequence of tests, stopping at the first that gives an answer:
- Where the person has a permanent home available.
- If in both, where the centre of vital interests lies — family, social and economic ties.
- If still unclear, where the person has a habitual abode.
- Then nationality.
- Finally, agreement between the two tax authorities.
The outcome decides which country taxes worldwide income and which only taxes income sourced there. A family that moves to Vietnam with the assignee, a home rented on a long lease and the home property let out tend to point towards Vietnam; a family staying behind in the home country and a home kept available tend to point the other way. Document the facts at the start of the assignment and update them if the family situation changes.
Business travellers and board members
Two groups are often forgotten because they are not on assignment at all. Frequent business travellers — regional managers visiting for a few days each month — accumulate Vietnamese workdays that count towards both the domestic residence test and the treaty day count. Their salary for days worked in Vietnam is Vietnam-source income under domestic law; whether Vietnam may tax it depends on the same three treaty conditions. A travel log kept by the Vietnamese company, not only by the traveller, is the practical safeguard.
Foreign board members of a Vietnamese company are treated differently. Most treaties contain a separate directors' fees article that lets the country of the paying company tax fees paid to members of its board, without a day-count condition. If a Vietnamese subsidiary pays board fees to foreign directors, check the treaty article and withhold accordingly; the employment article's exemption does not transfer to board fees.
A worked example
Hypothetical example. Suppose a regional company sends an engineer from a treaty country to support a plant start-up in Vietnam for a few months. The engineer's family stays at home, the home employer pays the salary, and the Vietnamese subsidiary pays only travel and hotel costs. If the engineer stays within the treaty's day-count limit and no Vietnamese entity or PE bears the salary, the employment article may exempt the salary in Vietnam — but only once the exemption has been claimed with a residence certificate for the engineer.
Change one fact: the parent recharges the engineer's salary to the subsidiary monthly. The day count has not changed, but the salary is now borne by a Vietnamese resident, the exemption fails, and payroll should withhold Vietnamese PIT from the start. Change another: the assignment is extended. The day-count limit may then be passed during the year, and withholding must begin — with the earlier months usually also becoming taxable, depending on how the treaty and domestic rules count.
What HR and payroll should keep, and where to check
- An assignment letter stating the employer, the reporting line, the duration and who bears the cost.
- A day-count log based on entry and exit stamps or travel records, updated monthly.
- The home country residence certificate for the year, when a treaty exemption is claimed, and the notification file lodged in Vietnam.
- The intercompany recharge agreement, if any, and the analysis of its effect on the treaty position.
- Evidence of family and housing arrangements relevant to the tie-breaker.
An individual who finalises personal income tax directly must file by the last day of the fourth month after the end of the calendar year under the Law on Tax Administration; check for any change in the 2026 guidance. The assignee's tax position can be followed through a personal e-tax account on the tax authority's portal or the mobile tax app, and the employer's withholding through its own e-tax account. Since 1 July 2025, personal identification numbers are used in place of personal tax codes for Vietnamese citizens; foreign employees should confirm with payroll which identifier is used for them.
Frequently asked questions
Is a foreign employee automatically non-resident in the first year?
No. Residence depends on the day-count and habitual residence tests in the current PIT rules. An assignee who rents a home on a long lease or stays long enough can be resident in the first year.
Does the treaty exemption apply if our Vietnamese company reimburses the salary?
Usually not. If the salary is borne by a Vietnamese resident, or the Vietnamese company is the economic employer, the employment article's conditions are not met and Vietnam may tax the salary.
How is the treaty day count measured?
It depends on the treaty: some count days in a calendar or fiscal year, others in any twelve-month period. Read the article for the country concerned and keep a monthly day log.
Does a tax treaty cover social insurance contributions?
No. Double tax treaties cover taxes on income. Social insurance is governed by separate rules and, for some countries, separate social security agreements.
Can a resident expatriate claim family deductions?
Yes, residents are entitled to them. From the 2026 tax year they are VND 15.5 million per month for the taxpayer and VND 6.2 million per month per registered dependant under Resolution 110/2025/UBTVQH15.
What happens if an assignment is extended past the treaty limit?
The exemption may be lost for the year, sometimes from the first day, depending on how the treaty counts. Payroll should begin withholding as soon as the extension is decided, not at year end.
