1. The issue: foreign authors receiving royalties in Vietnam
A foreign author selling book, software, or patent rights to a Vietnamese partner; a foreign musician receiving royalties from Vietnamese distribution — such royalty income is subject to Vietnamese PIT. Many authors are surprised: “I’m not resident in Vietnam” — yet tax is still withheld.
2. Legal basis
- Law 109/2025/QH15 (effective 01/7/2026) — Article 16 on PIT for royalty income (clause 7, Article 3): 5% rate, taxable income being the portion exceeding VND 20 million per contract.
- Prior practice (Circular 111/2013/TT-BTC): royalties taxed at 5% on the portion above VND 10 million/contract — the new framework raises the threshold to VND 20 million/contract.
- The Vietnamese paying organization is the withholding agent.
3. Computation
Taxable income = total royalties received per contract − VND 20 million (the below-threshold portion is untaxed). PIT = taxable income × 5%. Example: a foreign author sells software rights to a Vietnamese company for VND 60 million under a single contract — taxable income = 60 − 20 = VND 40 million; PIT = 40 million × 5% = VND 2 million, withheld by the Vietnamese company before payment.
4. Distinguishing royalties from neighboring income
Royalties vs salary: commissioned writing/composing may be classified as salary (progressive table) or royalties (5%) depending on the contract’s nature — read the contract carefully. Royalties vs asset transfer: outright IP assignment differs from licensing — tax treatment may differ. Franchising: franchise fees are taxed in the royalty/franchise income group.
5. Treaty application
The royalties article in Vietnam’s treaties typically caps Vietnam’s tax on royalties paid to treaty-partner residents (commonly 10%, treaty-dependent). Authors need a COR and treaty notification dossier to access the preferential rate instead of the domestic rate.
6. Key takeaways
Vietnam-paid royalties are taxed at 5% on the portion above VND 20 million/contract, withheld by the Vietnamese payer. Foreign authors should check their country’s treaty — the treaty rate is usually lower.
7. Frequently asked questions
1. I received VND 15 million in royalties at once — any tax?
No, as it does not exceed the VND 20 million/contract threshold. Only the excess is taxed.
2. Must a Vietnamese company withhold on royalties paid to foreign authors?
Yes. The payer withholds 5% on the portion above VND 20 million per contract before payment, unless the author has a valid treaty dossier for a different rate.
3. Writing a book commissioned by a Vietnamese company — salary or royalties?
It depends on the contract: an employment/service writing arrangement may be treated as salary (progressive table); a grant of work usage rights is royalties (5%). Each contract needs individual analysis.
4. Can a treaty reduce royalty tax?
Usually yes. The royalties article in Vietnam’s treaties with many countries caps the rate (commonly 10%); a COR and treaty notification dossier filed with the Vietnamese tax authority are required.
This article has been quality-reviewed by the FLAW AI Legal Council
