Situation: Chinese Staff on a 4-Month Assignment — Who Pays PIT?
1. The situation (hypothetical)
Group S (China) owns a factory in Vietnam, S Vietnam Co. In October 2026, the group seconds Mr. Chen — a Chinese engineer — to the Vietnamese plant to support production-line installation for 4 months (about 120 days of presence in Vietnam). His salary is paid entirely by the Chinese parent.
S Vietnam's accountant wonders: does Mr. Chen owe personal income tax in Vietnam? If so, who withholds and pays? Can the double taxation agreement help?
2. Legal questions
- Is Mr. Chen a tax resident or non-resident in Vietnam?
- Does the Vietnam-China DTA exempt him from Vietnamese PIT?
- Who withholds/pays if tax arises?
3. Analysis
3.1 Step 1: Determine tax residence
Under Circular 87/2026/TT-BTC (effective 1 July 2026, replacing Circular 111/2013/TT-BTC), an individual is a Vietnamese tax resident with presence in Vietnam of 183 days or more in 12 consecutive months (or a regular dwelling in Vietnam…). Mr. Chen's expected 120 days — under 183 — makes him a non-resident in principle.
Consequence: non-residents pay 20% PIT on Vietnam-sourced employment income — the portion attributable to working days in Vietnam.
3.2 Step 2: Check the Vietnam-China DTA
Don't rush to 20% — check the treaty "shield". Article 15 (income from employment): a Chinese resident's employment income from work in Vietnam is taxable only in China if three conditions are simultaneously met:
- Presence in Vietnam not exceeding 183 days in 12 months;
- Remuneration paid by an employer not resident in Vietnam;
- Remuneration not borne by a permanent establishment of the employer in Vietnam.
Mr. Chen meets conditions 1 (120 days) and 2 (paid by the Chinese parent). Condition 3 is decisive.
3.3 Step 3: The crux — who really "bears" the salary cost?
Where many groups stumble:
- Scenario A (treaty applies): the Chinese parent pays the full salary with no recharge/allocation to S Vietnam; the Vietnamese subsidiary doesn't book the cost. → All three conditions met → Mr. Chen's income taxable only in China, no Vietnamese PIT.
- Scenario B (treaty fails): the parent recharges the salary cost to S Vietnam (very common intra-group), or the subsidiary pays part directly. → Condition 3 fails → Vietnam may tax 20% on income attributable to the 120 Vietnam working days.
In practice, tax authorities trace internal service contracts, recharge documents and the subsidiary's books — not just who signs the labor contract.
3.4 Who withholds and pays?
- Scenario B: S Vietnam — as the cost-bearing party — withholds 20% before paying the attributable income and remits it.
- Scenario A: no Vietnamese liability, but keep an evidence file proving the three treaty conditions (passport stamps, secondment letter, Chinese payroll records, confirmation of no cost recharge) for tax inspection.
4. Conclusion and recommendations
- 4 months (< 183 days) → non-resident, 20% on Vietnam-sourced income — unless all three Article 15 DTA conditions are met.
- Condition 3 is the crux: check intra-group recharge/cost-allocation mechanics now. For treaty relief, the Chinese parent must bear the salary cost entirely.
- Build the treaty file from day one: don't hunt for documents when the authority asks — entry/exit stamps, secondment letter, payroll records, no-recharge confirmation.
- Don't forget the work permit: foreigners working in Vietnam for 3 months or more generally need one (except exemptions) — 4 months exceeds this; handle alongside tax.
5. Follow-up questions
- If Mr. Chen comes in two 3-month stints within 12 months, how are the 183 days counted?
- For specialists paid partly by the parent and partly by the subsidiary, how is taxable income apportioned?
- Where is the DTA relief notification filed?
Specific cases need analysis on actual dossiers. Contact FLAT Law Firm at hotline 0988424851.
6. The 183-day rule and treaty tie-breakers in practice
The 4-month assignment sits in the trickiest zone of the Vietnam–China tax treaty: short enough to feel temporary, long enough to trigger residence questions. Three mechanics matter.
Counting the 183 days. Treaty residence looks at presence in any 12-month period commencing or ending in the fiscal year, not the calendar year — and "days of presence" includes partial days, arrival and departure days, weekends, and holidays spent in Vietnam. A 4-month assignment (roughly 120 days) stays below 183 days, but add prior business trips in the same 12-month window and the threshold can be breached retroactively. Keep a travel log with passport stamps; tax authorities in both countries now exchange entry-exit data.
The employer test. Even below 183 days, treaty exemption fails if the salary is paid by (or borne by) a Vietnamese resident employer or a Vietnamese permanent establishment. A Chinese employee formally seconded to a Vietnamese subsidiary — with costs recharged — is typically treated as employed by the Vietnamese entity. Structure the secondment and recharge documentation accordingly, or accept Vietnamese taxation from day one.
Certificate of residence. To claim any treaty relief, the employee needs a Chinese tax residence certificate for the relevant year, legalized and filed with the Vietnamese tax authority within the statutory deadline. Without it, the treaty might as well not exist — Vietnamese payroll will withhold at domestic rates.
Bottom line: for assignments of 3–6 months, model the tax cost under both scenarios (treaty-exempt vs. fully taxable) before the employee boards the plane. The difference often exceeds the assignment's travel budget.
FAQ
Q: Does a foreigner working in Vietnam for 4 months pay PIT?
A: Depends on residence and the DTA. Four months (< 183 days) usually means non-resident, 20% on Vietnam-sourced income — unless all three Article 15 Vietnam-China DTA conditions are met, making it taxable only in China.
Q: What are the DTA exemption conditions?
A: (1) Presence in Vietnam ≤183 days/12 months; (2) paid by a non-Vietnamese-resident employer; (3) not borne by a Vietnamese PE. Missing one, Vietnam may tax.
Q: What if the Vietnamese subsidiary bears the salary cost?
A: Breaks condition 3 — Vietnam taxes 20% on income attributable to Vietnam working days. Authorities trace recharge documents and subsidiary books.
Q: Who withholds?
A: The Vietnam paying/cost-bearing organization withholds 20%. Treaty cases need an evidence file for inspection.
Q: Beyond tax, what papers?
A: Work of 3+ months generally needs a work permit (except exemptions) — handle alongside tax.
References
- Law on Personal Income Tax 04/2007/QH12 (amended).
- Circular 87/2026/TT-BTC (effective 1 July 2026, replacing Circular 111/2013/TT-BTC) on PIT.
- Vietnam-China Double Taxation Agreement (Article 15 — income from employment).
- Cross-checked via thuvienphapluat.vn at drafting (28/9/2026).
—