1. The issue: how is interest income of foreigners taxed?
Foreign experts in Vietnam may earn interest beyond salary: lending to individuals/businesses, or bank deposits. These two interest types are taxed very differently — confusion leads to misfiling.
2. Legal basis
- Law 109/2025/QH15 (effective 01/7/2026) — Article 12 on PIT for capital-investment income (clause 3a, Article 3, including loan interest): 5% rate, taxable income being the gross capital-investment income per occurrence — no VND 20 million threshold.
- Law 109/2025/QH15, Article 4 — exempt income, including interest on deposits at credit institutions.
- Prior practice (Circular 111/2013/TT-BTC): loan interest taxed at 5% on gross income — the new Article 12 of Law 109/2025 carries exactly this logic: 5% on gross income per occurrence, no threshold.
3. Loan interest: 5% tax
Interest from lending (to individuals or organizations in Vietnam) is subject to 5% PIT on the gross interest per receipt under Article 12 of Law 109/2025 — no VND 20 million threshold. The interest payer withholds before payment. Example: lending to a company and receiving VND 50 million interest at once — taxable income = VND 50 million; PIT = 50 million × 5% = VND 2.5 million.
4. Bank deposit interest: exempt
Interest on deposits at credit institutions (commercial banks) is PIT-exempt. This is the key distinction: both are “interest”, but savings interest is tax-free while private loan interest is taxable. Note: government bond and local-government bond interest is also exempt; corporate bond interest is not.
5. Notes for non-resident individuals
For non-residents, Vietnam-source interest remains taxable as above (regardless of where it is received). If the individual’s residence country has a DTA with Vietnam, the treaty’s interest article may cap Vietnam’s tax rate — check each specific treaty.
6. Key takeaways
Remember the two-line formula: loan interest → 5% on gross interest per receipt (Article 12, no VND 20 million threshold); bank deposit interest → exempt. When receiving interest from an organization, verify it withheld correctly.
7. Frequently asked questions
1. VND 2 billion in savings, VND 100 million annual interest — any PIT?
No. Deposit interest at credit institutions is PIT-exempt regardless of amount.
2. Lent a friend VND 500 million, VND 30 million annual interest — how is tax computed?
Taxable income = VND 30 million (gross interest per occurrence, Article 12); PIT = 30 million × 5% = VND 1.5 million for that interest receipt. If the payer is an individual, the recipient self-declares.
3. Is corporate bond interest exempt like deposit interest?
No. Only government bonds, local-government bonds, and credit-institution deposit interest are exempt; corporate bond interest is taxable.
4. Can a non-resident apply treaty relief on Vietnamese loan interest?
Possibly. The interest article of each country’s treaty may cap Vietnam’s applicable rate; a COR and treaty notification dossier are required.
This article has been quality-reviewed by the FLAW AI Legal Council
