Determining PIT Tax Residency for Foreign Employees Working in Vietnam for the First Time
RegHub explainer by New MarketerLast updated:
Based on:Ministry of Finance
This explanation was generated by AI and checked by an automated AI review, not by a human expert. It is not legal, tax or accounting advice and may contain errors. Check the official document before you rely on it.
A company asked the tax authority how to determine the personal income tax (PIT) residency status of a foreign employee transferred by the parent company to work in Vietnam starting September 15, 2025. The employee already holds a work permit and a temporary residence card. Earlier, the employee made a short entry into Vietnam (March 14 to 18, 2024) to attend a family wedding, with no work performed and no income earned during that visit. The company wanted to know whether the employee qualifies as a tax resident for 2025, whether the employee can authorize the company to finalize PIT on their behalf, and whether the short 2024 visit affects the residency determination. Based on Circular 111/2013/TT-BTC and Decree 126/2020/ND-CP, the tax authority answered that an individual is a Vietnam tax resident if present in the country for 183 days or more within a calendar year, or for 183 days or more within any 12 consecutive months from the first day of presence. The paying company must determine residency by checking the employee's actual passport entry and exit stamps against the labor contract or assignment letter. For the scenario described, the tax authority did not issue a specific residency conclusion for this individual. Instead, it directed the company to determine the employee's residency status itself, based on the employee's actual passport entry and exit stamps compared against the labor contract or assignment letter.
The question
A company asked the Ministry of Finance/Tax Authority how to determine tax residency status and personal income tax (PIT) finalization obligations for a foreign employee working in Vietnam for the first time.
The employee was transferred by the parent company to work in Vietnam starting September 15, 2025, and already holds a work permit, temporary residence card, and complete labor documentation. Previously, this person had entered Vietnam from March 14 to March 18, 2024 to attend a family wedding, with no work performed and no income earned during that visit.
Three questions were raised:
- Is this individual a Vietnam tax resident for the 2025 tax year?
- If classified as a resident, can the individual authorize the company to finalize PIT on their behalf?
- Does the short 2024 personal visit affect the determination of 2025 tax residency status?
The tax authority's answer
Based on Circular 111/2013/TT-BTC (as amended by Circular 119/2014/TT-BTC) and Decree 126/2020/ND-CP, the tax authority (Tay Ninh Provincial Tax Department) provided the following guidance.
Residency test: An individual is a Vietnam tax resident if present in Vietnam for 183 days or more within a calendar year, or for 183 days or more within any 12 consecutive months counted from the first day of presence in Vietnam. Arrival and departure dates are determined from the entry/exit authority's stamps on the passport.
Who determines it: The income-paying company must determine residency status by checking the employee's actual working period stated in the labor contract or assignment letter against the passport's entry and exit stamps, as the basis for determining PIT obligations.
Taxable income: If classified as a resident, the individual's taxable PIT income covers income earned both inside and outside Vietnam, regardless of where it is paid.
Finalization obligation: Under Point d.3, Clause 6, Article 8 of Decree 126/2020/ND-CP, if an individual's presence in Vietnam during the first calendar year is under 183 days, but reaches 183 days or more within the 12 consecutive months from the first day of presence, that individual must directly declare and finalize PIT with the tax authority rather than authorizing the company to finalize on their behalf.
The tax authority advised the company to apply these rules to its actual circumstances.
Why this matters for businesses
This response does not create new rules; it applies the existing tax residency framework (Circular 111/2013/TT-BTC, Decree 126/2020/ND-CP) to a common scenario: a foreign employee who starts work mid-year. Companies employing foreign staff should keep complete records of passport entry and exit stamps and labor contracts to correctly determine residency status, and should note that residency established under the 12 consecutive months test typically requires the individual to self-finalize PIT directly with the tax authority rather than through company authorization.