Quick answer: Yes — salary paid by an overseas parent for work performed in Vietnam remains subject to Vietnamese personal income tax. Article 21 of the Law on Personal Income Tax 109/2025/QH15 taxes employment income of non-resident individuals on total salary earned from work performed in Vietnam, regardless of where the income is paid. Resident individuals are taxed under the 5-bracket progressive schedule from tax year 2026. The place of payment does not determine the tax obligation — the place of work does.
Applicable legal bases
The framework below is in force as of 20 October 2026 and directly governs this article:
- Law on Personal Income Tax 109/2025/QH15 (effective 01/07/2026; provisions on employment income of resident individuals apply from tax year 2026; replaces Law 04/2007/QH12) — Article 3 (taxable income includes salary, wages, and monetary or non-monetary benefits in any form); Article 21 (non-residents: tax equals total salary from work performed in Vietnam multiplied by the 20% rate, regardless of where the income is paid).
- Law on Tax Administration 108/2025/QH15 (effective 01/07/2026, replacing Law 38/2019/QH14) — withholding, substitute filing and payment obligations of income payers.
- Decree 253/2026/ND-CP (effective 01/07/2026) — guidance on PIT withholding, filing and finalization.
- Double Taxation Agreement (DTA) between Vietnam and the expert’s home country — applies only where a treaty exists and is in force (Vietnam currently has 81 DTAs; there is no DTA with Mexico — verify each case, never assume).
- Decree 125/2020/ND-CP — administrative penalties for tax and invoice violations.
In-depth analysis
The core principle many FDI companies get wrong: PIT liability attaches to the place where the work is performed, not to where the contract is signed or where the salary is transferred. The typical case is a Japanese expert employed and paid in yen by the Tokyo parent, but working full-time in Vietnam for the subsidiary. The entire salary — even though not a single dong passes through Vietnam — is income from employment in Vietnam and taxable in Vietnam.
The first and most important step is determining the expert’s tax residency status, because it dictates the whole calculation method. Resident individuals (present in Vietnam for 183 days or more in a calendar year, or having a regular residence in Vietnam) are taxed under the 5-bracket progressive schedule (5%, 10%, 20%, 30%, 35%) on annual taxable income, after mandatory insurance and family deductions (VND 15.5 million/month for the taxpayer, VND 6.2 million/month per dependent — applicable from tax year 2026). Non-resident individuals face a flat 20% on total employment income arising in Vietnam, with no deductions and no progressive schedule.
Who withholds and files when salary is paid from abroad?
There are three payment models in practice. Model one: the Vietnamese subsidiary recharges or pays on behalf of the parent and is reimbursed — the subsidiary is the income payer in Vietnam and must withhold at source, file and pay on the individual’s behalf under the Law on Tax Administration 108/2025. Model two: the parent pays 100% directly to the expert’s overseas account with no Vietnamese entity in the cash flow — the individual must self-declare, pay and finalize PIT in Vietnam; the subsidiary should keep complete records (secondment agreement, payroll provided by the parent) to evidence the position during tax audits and avoid deemed assessments. Model three: split payment, part in Vietnam and part abroad — the Vietnam-paid portion is withheld by the payer, and the individual self-declares the remainder at year-end finalization.
The point companies most often miss is that the substitute filing obligation does not disappear merely because the money never enters Vietnam. The tax authority determines liability based on actual work performed in Vietnam, cross-checked against immigration data, work permits and the subsidiary’s reports.
Can a double taxation agreement eliminate the tax?
A DTA does not automatically exempt — it only allocates taxing rights between the two states. For employment income, the relevant provision (usually Article 15 under the OECD model) allows the state where the work is performed (Vietnam) to tax, unless three conditions are simultaneously met: the employee is present in Vietnam for no more than 183 days in any 12-month period; the salary is paid by an employer that is not a Vietnamese resident; and the salary cost is not borne by a permanent establishment of the employer in Vietnam. In practice, for experts seconded long-term to a Vietnamese subsidiary, the third condition is almost never met — the salary cost is always booked to the subsidiary. DTAs therefore rarely eliminate Vietnamese tax for long-term secondees; their real value lies in the foreign tax credit mechanism at finalization.
Common risks and how to prevent them
- Assuming “salary paid abroad means no Vietnamese tax”: flatly wrong under Article 21 of Law 109/2025 — the consequence is reassessment of all unwithheld tax, late-payment interest and administrative penalties under Decree 125/2020.
- Misdetermining residency status: applying the progressive schedule to a non-resident (or vice versa) creates a tax shortfall — verify actual days of presence against immigration records, not the contract term.
- No withholding mechanism when the parent pays directly: set up periodic self-filing by the individual from day one instead of bunching everything at year-end.
- Invoking a non-existent DTA: check the list of treaties in force before applying one — not every country has a DTA with Vietnam.
Frequently asked questions
1. If the parent pays 100% of the salary abroad, must the Vietnamese subsidiary withhold tax?
If the subsidiary is not involved in paying or disbursing, no withholding obligation arises for it — but the expert must still self-declare, pay and finalize PIT in Vietnam because the income arises from work performed in Vietnam.
2. An expert stays in Vietnam 150 days a year — which rate applies?
Below 183 days and with no regular residence in Vietnam, the individual is a non-resident: a flat 20% on total employment income from work performed in Vietnam, with no family deductions and no progressive schedule.
3. Does a double taxation agreement exempt tax in Vietnam?
Not automatically. A DTA only allocates taxing rights; for long-term secondees, the salary cost is typically borne by the Vietnamese subsidiary, so Vietnam retains its taxing right. The DTA’s value is in crediting tax already paid abroad at finalization.
4. What records does an individual need for self-filing when salary is paid from abroad?
The employment or secondment contract, payroll or income confirmation issued by the parent (foreign currency converted at the rate at the time the income arose), the passport with immigration stamps evidencing days of presence, and the annual PIT finalization return.
Key takeaway for investors
Salary paid abroad does not mean tax-free in Vietnam — Article 21 of Law 109/2025 taxes by place of work, regardless of place of payment. FDI companies should determine each expert’s residency status correctly, establish clearly who withholds and files on behalf of whom from the moment the secondment agreement is signed, and verify the actual DTA position instead of assuming exemption.
This article has been quality-reviewed by the FLAW AI Legal Council This content is legal reference only and does not replace counsel for a specific case.