Answer from the General Department of Taxation, under the Ministry of Finance:

Under Point 3, Article 21 of Circular No.92/2015/TT-BTC issued by the Ministry of Finance to guide the declaration and finalisation of personal income tax, the company should look at the labour contract to define the forms of withholding personal income tax for foreign employees, with specific cases as follow:

• If the company signs a labour contract with the foreign employee for a duration of three months or more, or more than 183 days, the company must withhold tax in accordance with the progressive tax rates and, at the end of the year, the company should calculate the total withheld tax and fill in form No.05-1/BK-QTT-TNCN, including the case that the employee terminates his/her contract prior to the due date (working for only two months).
• If the company does not sign a labour contract for the duration of three months or more, the company must withhold tax at the flat rate of 10 percent and, at the end of the year, the company must calculate the total withheld tax and fill in form No.05-2/BK-QTT-TNCN.

• In cases the company signs a labour contract in Vietnam with the duration of fewer than 183 days as the company is not sure if the foreigner will stay in Vietnam for more than 183 days, the company should withhold the personal income tax based on the rate applied to non-residential individuals (20 percent of salary, wage), and make total tax withheld declaration at the end of the year and fill the form No.05-2/BK-QTT-TNCN.

• For foreigners, he/she must define the duration of their stay in Vietnam for the year to calculate whether they have to pay additional tax or receive back the amount they overpaid based on the tax rates applied to resident or non-resident status.