A company in Vietnam that pays salaries withholds personal income tax each month, declares it monthly or quarterly, and finalises once a year for its employees. For resident employees, tax is calculated on taxable income after family deductions, which from the 2026 tax year are VND 15.5 million per month for the employee and VND 6.2 million per month for each registered dependant under Resolution 110/2025/UBTVQH15. For payments of VND 2 million or more to individuals without a labour contract, or with one shorter than three months, the company withholds 10%.
None of this is unusual. What makes payroll in a foreign-invested enterprise (FIE) error-prone is scale and turnover: hundreds or thousands of workers, dependants registered late or not at all, allowances designed by group HR without a local tax review, and part-time or seasonal staff paid through a different process. This guide sets out the rules in the order payroll applies them.
The rules that apply
The Law on Personal Income Tax sets what is taxable, what is exempt and the rates; its implementing documents issued in mid-2026 are Decree 253/2026/ND-CP and Circular 87/2026/TT-BTC. Family deduction amounts are set by Resolution 110/2025/UBTVQH15. Filing and payment follow the Law on Tax Administration (Law 38/2019/QH14) and its implementing documents, including Circular 80/2021/TT-BTC and, from 1 July 2026, Decree 252/2026/ND-CP and Circular 89/2026/TT-BTC. Tax registration of employees and dependants was covered by Circular 86/2024/TT-BTC, and Circular 90/2026/TT-BTC now deals with tax registration.
The progressive schedule for resident employment income was revised in the reform. We do not reproduce the bands here; load them into payroll from the current text, and check the effective date carefully if you process back pay or bonuses that relate to an earlier period.
From gross pay to tax: the monthly sequence
- Taxable employment income. Salary, wages, allowances, bonuses and benefits in kind, less items the law exempts or excludes — for example certain allowances and the parts of benefits the rules exclude.
- Less compulsory insurance contributions deducted from the employee: social, health and unemployment insurance under the insurance laws.
- Less family deductions: VND 15.5 million per month for the employee and VND 6.2 million per month per registered dependant, from the 2026 tax year.
- Less other allowable deductions, such as qualifying charitable contributions and voluntary pension contributions within the limits in the rules.
- Apply the progressive rates to the result.
Hypothetical example. Suppose a resident engineer earns taxable employment income of VND 40 million a month, pays VND 4 million of compulsory insurance and has two registered children. Family deductions are VND 15.5 million plus 2 × VND 6.2 million, or VND 27.9 million. Taxable income is 40 − 4 − 27.9 = VND 8.1 million a month, to which the current progressive rates apply. Without the dependants registered, taxable income would be VND 20.5 million — the registration is worth more to this employee than most allowances.
Dependants: registration decides the deduction
The dependant deduction is available only for dependants who are registered and who meet the conditions — children below the age or in education as the rules define, and other relatives without income above the limit set in the rules, among others. The deduction runs from the month the obligation to support arises, provided registration follows the procedure.
Payroll problems cluster around three moments:
- Onboarding. Collect dependant information with the first payslip, not months later. A new hire who registers late may be able to recover the deduction at finalisation, but the monthly withholding is wrong until then.
- Double claims. A child can be claimed by only one taxpayer. When both parents work — sometimes in the same company — decide who claims and record it.
- Changes. A dependant who starts earning, finishes education or passes away stops qualifying. Build an annual confirmation into the finalisation cycle.
For Vietnamese citizens, the personal identification number is used in place of the personal tax code from 1 July 2025, which simplifies registration of employees and dependants who are citizens. Foreign employees and dependants use tax codes assigned by the tax authority. A deeper Vietnamese-language treatment of family deductions is available on KhauTru.com.
Payments to people who are not on payroll
FIEs pay many individuals who are not employees on long contracts: interpreters, trainers, event staff, seasonal workers, consultants. When the company pays such an individual VND 2 million or more per payment and there is no labour contract, or the contract is shorter than three months, it withholds 10% before paying.
An individual whose only income is this kind of payment and whose total taxable income after deductions is not expected to reach the taxable level can give the company a commitment in the form set by the current circular, and the company then does not withhold. The commitment is the individual's responsibility; the company keeps it on file. Two cautions: a commitment from someone who clearly earns more elsewhere is not a safe basis, and splitting one engagement into payments below VND 2 million to avoid withholding is exactly the pattern that draws attention.
Payments to foreign individuals who are non-resident follow the non-resident rules, not the 10% rule.
Declaring and paying
| Obligation | Deadline under the Law on Tax Administration |
|---|---|
| Monthly withholding return and payment | 20th day of the following month |
| Quarterly withholding return and payment | Last day of the first month of the following quarter |
| Employer's annual PIT finalisation | Last day of the third month after the end of the calendar year |
Whether the company declares monthly or quarterly follows the same criteria as its VAT cycle under the tax administration rules; confirm it in the company's e-tax account. A month in which no tax was withheld may still require a return depending on the rules in force. Check the 2026 guidance for any change to these dates. Late payment attracts late-payment interest calculated daily — long set at 0.03% per day; check the rate in force.
The payroll errors that cost the most
- Allowances treated as tax-free because they are tax-free elsewhere. Meal, phone, transport and housing allowances each have their own treatment in Vietnam. Review every allowance line against the current rules once a year.
- Bonuses paid in a different period from when they were earned. Withholding follows the payment, but finalisation must pick up everything for the year.
- Benefits in kind outside payroll. Gifts, company cars for private use, club memberships and employee share awards are often processed by other departments and never reach the payroll system.
- Stale rate tables. The family deductions changed for 2026 and the progressive bands were revised. Check the effective dates in the payroll system.
Large workforces: controls that scale
A plant with several thousand workers cannot run PIT one employee at a time. Four controls keep the numbers right at scale:
- Dependant data in the HR system, not in paper files. Each dependant record should carry the identification details, the start month and the registration status, and payroll should read the deduction from that record.
- Withholding documents issued electronically. Employees who leave during the year, and many who stay, need a PIT withholding document to finalise or to prove income. Withholding documents are now issued electronically under the rules on invoices and electronic documents — Decree 123/2020/ND-CP as amended by Decree 70/2025/ND-CP, and from 1 July 2026 Decree 254/2026/ND-CP and Circular 91/2026/TT-BTC. Build this into the leaver process.
- Seasonal and short-contract workers in one list. Workers on contracts under three months fall under the 10% rule or the commitment procedure, not under monthly progressive withholding. Keep them in a separate, reconciled population so they are not mixed into the main payroll by default.
- Monthly reconciliation of payroll to the return. Total taxable income, deductions and tax on the payroll register should tie to the withholding return each period. Differences found monthly are small; differences found at finalisation are not.
Most workers in a large plant have taxable income below the level at which tax becomes payable once family deductions are applied. That does not remove the reporting obligation: their income still appears in the employer's finalisation, and their dependants still need to be registered for the deduction to count.
Where to check your own position
The company's e-tax account shows withholding returns filed and payments recorded. Employees can see the tax withheld for them in their individual e-tax account or on the mobile tax app, which is also where many discover a missing dependant registration. If an employee's view and payroll disagree, resolve it before the annual finalisation.
Frequently asked questions
What are the family deduction amounts for 2026?
From the 2026 tax year, VND 15.5 million per month for the taxpayer and VND 6.2 million per month for each registered dependant, under Resolution 110/2025/UBTVQH15.
Can both parents claim the same child as a dependant?
No. Each dependant can be claimed by only one taxpayer. Decide who claims and record it, especially when both parents work for the same company.
Do we withhold 10% from a trainer paid VND 5 million for a one-day course?
If there is no labour contract, or it is shorter than three months, and the payment is VND 2 million or more, the company generally withholds 10%. A trainer who qualifies can instead provide a commitment in the form set by the current circular.
Are compulsory insurance contributions deducted before calculating tax?
Yes. Employee contributions to compulsory social, health and unemployment insurance are deducted from taxable income before the family deductions and the progressive rates are applied.
Our new hire registered two children three months late. Is the deduction lost?
Not necessarily. Depending on the rules, the deduction can often be recovered at the annual finalisation. Monthly withholding is overstated until registration is complete.
Do foreign employees need a separate tax code?
Yes. The personal identification number replaces the tax code only for Vietnamese citizens. Foreign employees and their dependants use tax codes assigned by the tax authority.
