Vietnam personal income tax guide for expats and employers
Vietnam has overhauled its personal income tax framework for the first time in nearly two decades.
Personal Income Tax Law No. 109/2025/QH15, enacted on December 10, 2025, introduces the most significant restructuring of Vietnam’s PIT system since 2007. Salary and wage provisions apply from January 1, 2026. The full law takes effect from July 1, 2026.
For foreign professionals working in Vietnam and for employers managing payroll across the country, the changes are material. ATA Services Vietnam supports businesses and individuals in navigating the updated framework, from payroll recalculation to full tax compliance.
Understanding the new structure now gives your organization a clear advantage when it comes to compensation planning, employee communication, and regulatory readiness.
Why Vietnam updated its personal income tax law
The previous PIT framework dated back to 2007. Over nearly two decades, living costs rose substantially, salary levels increased across all sectors, and Vietnam’s workforce became significantly more international.
The old seven-bracket system had not kept pace with these changes. The top marginal rate of 35% applied from a threshold that no longer reflected real income levels in major cities. Personal and dependent deductions had not been meaningfully adjusted in years.
Law No. 109/2025/QH15 addresses this directly. The reform simplifies the bracket structure, raises deduction thresholds, expands tax-exempt income categories, and introduces targeted incentives for high-value foreign talent.
Certain implementation details remain subject to guiding decrees and circulars to be issued by the Ministry of Finance and the General Department of Taxation.
How Vietnam's new PIT brackets work in 2026
The number of tax brackets drops from seven to five. The structure is now:
| Monthly taxable income | Tax rate |
|---|---|
| Up to VND 10 million | 5% |
| Over VND 10 million to VND 30 million | 10% |
| Over VND 30 million to VND 60 million | 20% |
| Over VND 60 million to VND 100 million | 30% |
| Over VND 100 million | 35% |
The top rate of 35% remains unchanged. What changes is the threshold at which it applies. Under the previous framework, the 35% rate applied above VND 80 million per month. Under the new law, it applies to amounts above VND 100 million per month.
This adjustment directly reduces the effective tax burden for mid-to-high income earners, including a significant share of the expatriate workforce in Vietnam.
Key consideration:
The bracket simplification benefits both employees and payroll teams. Fewer brackets mean cleaner calculations, reduced administrative friction, and more predictable monthly net salary figures for expatriate compensation planning.
Note: Implementation details for certain income categories will be confirmed through guiding circulars expected to follow the July 2026 effective date.
Personal and dependent deductions under the new law
The revised law raises both core deduction thresholds significantly.
The personal deduction increases to VND 15.5 million per month. The dependent deduction increases to VND 6.2 million per month per registered dependent.
For a foreign professional with two dependents, the combined monthly deduction now reaches VND 27.9 million before any income is subject to tax. This represents a meaningful increase in take-home pay at standard expatriate salary levels.
These deductions apply to tax residents only. A tax resident is defined as an individual who spends 183 days or more in Vietnam in a calendar year, or who maintains a permanent residence or habitual abode in the country.
Tax residency rules for foreign professionals in Vietnam
Tax residency status determines both the applicable rate structure and the scope of taxable income.
Tax residents pay progressive PIT on worldwide income using the five-bracket schedule above. This applies regardless of where the income is earned or paid.
Non-residents pay a flat rate of 20% on Vietnam-sourced income only. Overseas income is not subject to Vietnamese PIT for non-residents. (Article 18.1 of Circular 111/2013)
For foreign professionals on short-term assignments or those who do not meet the 183-day threshold, non-resident status generally applies. For long-term expats with a permanent role in Vietnam, tax residency is the standard framework.
Employers must determine residency status at the point of payroll setup. The classification directly affects withholding obligations and year-end finalization.
Expanded tax-exempt income categories
The updated framework clarifies and expands several exempt income categories relevant to both local and foreign employees.
The following benefit from clarified exemption treatment under specified conditions:
- Overtime pay and night-shift compensation
- Salary payments for unused annual leave, under specified conditions
- Remuneration for scientific, technological, and innovation activities
- Business travel allowances within prescribed limits
- Uniform allowances within prescribed limits
- Housing allowances under specific conditions
For employers structuring compensation packages for foreign hires, these exemptions create meaningful flexibility. Properly structured allowance components can reduce the overall PIT burden without affecting gross cost to the company.
ATA Services Vietnam advises on compensation structuring that maximizes compliant exemptions as part of standard payroll setup.
The 5-year PIT exemption for high-tech personnel in Vietnam
Law No. 109/2025/QH15, Article 5, introduces a fully codified 5-year PIT exemption for high-quality digital technology personnel.
The exemption applies to income earned from the following activities:
- Projects located in designated digital technology zones
- Research, development, and production of key digital technology products, semiconductor chips, and artificial intelligence systems
- Training activities for the digital technology industry
The exemption applies regardless of the individual’s tax residency status. It does not extend to general IT roles in commercial enterprises outside these designated project categories. A standard programmer or software engineer in a commercial company remains subject to normal PIT rates.
For companies operating in qualifying sectors, this measure has direct implications for how compensation packages are structured and communicated to prospective foreign hires. ATA monitors implementing regulations and advises clients in qualifying sectors on eligibility and application processes.
What employers need to know about PIT withholding obligations
Under Vietnamese law, the employer acts as the withholding agent for employee PIT. This creates a direct compliance obligation that goes beyond payroll calculation.
Key employer obligations under the new framework include:
- Withholding and remitting employee PIT on a monthly basis using the updated five-bracket schedule
- Year-end tax finalization on behalf of employees who authorize the employer to do so
- 10% flat withholding on non-employment income paid to individuals exceeding VND 2 million per transaction, including payments to freelancers, consultants, and seasonal workers (Article 25.1 of Circular 111/2013/TT-BTC)
- Documentation and reporting aligned with requirements introduced under the updated law
Failure to withhold correctly or to file on time exposes the company to penalties and back taxes. For FDI companies managing a mixed workforce of local and foreign staff, the complexity increases with each additional compensation arrangement, housing allowance, or equity component.
Under Vietnamese law, the employer acts as the withholding agent for employee PIT. This creates a direct compliance obligation that goes beyond payroll calculation.
Key employer obligations under the new framework include:
- Withholding and remitting employee PIT on a monthly basis using the updated five-bracket schedule
- Year-end tax finalization on behalf of employees who authorize the employer to do so
- 10% flat withholding on non-employment income paid to individuals exceeding VND 2 million per transaction, including payments to freelancers, consultants, and seasonal workers (Article 25.1 of Circular 111/2013/TT-BTC)
- Documentation and reporting aligned with requirements introduced under the updated law
Failure to withhold correctly or to file on time exposes the company to penalties and back taxes. For FDI companies managing a mixed workforce of local and foreign staff, the complexity increases with each additional compensation arrangement, housing allowance, or equity component.
How ATA Services Vietnam supports payroll compliance under the new PIT law
The 2026 PIT reform requires action at the payroll system level, not just awareness of the new rules.
ATA Services Vietnam works with FDI companies and their HR teams to implement the changes correctly. Our payroll team recalculates monthly withholding against the updated brackets, applies the revised deduction thresholds, and ensures year-end finalization is completed accurately and on time.
For companies entering Vietnam, ATA structures payroll from day one in compliance with the new framework. For existing operations, we conduct a payroll review to identify any gaps introduced by the January 2026 transition and correct them before year-end.
Our team also advises on compensation structuring for expatriate hires, helping companies leverage compliant exemptions and the 5-year PIT exemption where applicable.
ATA Services Vietnam operates as your on-the-ground payroll and compliance partner. We remove the complexity so your team can focus on building the business.
Vietnam PIT in 2026: three employer scenarios
FDI manufacturer onboarding expatriate management
A European manufacturer setting up a factory in Binh Duong onboards three foreign senior managers. ATA determines residency status, structures housing and travel allowances within exempt thresholds, sets up monthly withholding under the new five-bracket schedule, and manages year-end finalization for all three employees.
Technology company hiring certified specialists
A regional tech company recruits two foreign AI specialists for its Ho Chi Minh City hub. Their roles involve R&D and production of artificial intelligence systems within a designated digital technology zone. ATA confirms eligibility for the 5-year PIT exemption under Article 5 of Law No. 109/2025/QH15, and structures the compensation package to reflect the exemption correctly in payroll.
Regional holding company with mixed workforce
A Singapore-based group with 40 employees in Vietnam, both local and foreign, requires a full payroll review following the January 2026 PIT transition. ATA audits existing withholding calculations, corrects residency classifications, and realigns year-end finalization obligations across the full headcount.
Need support with payroll and PIT compliance in Vietnam? Contact ATA Services Vietnam today and get a clear picture of your obligations under the new framework before your next payroll run.
How ATA Services Vietnam supports payroll compliance under the new PIT law
Working with the right partner on payroll and tax compliance delivers measurable operational advantages.
- Faster payroll setup. ATA configures payroll under the new five-bracket structure from the start, with correct deductions, withholding rates, and residency classifications applied immediately.
- Reduced compliance risk. Employer withholding obligations under Vietnamese law are significant. ATA manages monthly filing, year-end finalization, and regulatory correspondence to keep your company fully compliant.
- Optimized compensation structures. ATA identifies compliant exemptions and allowance arrangements that reduce PIT burden for foreign hires without increasing cost to the company.
- Cost predictability. ATA’s fixed-scope payroll service means you know your full compliance cost before operations begin.
- Flexible engagement models. Whether you need full payroll outsourcing, PEO support, or standalone tax advisory for your expatriate team, ATA structures the engagement around your specific headcount and operational model.
Prepare Your Payroll for Vietnam’s 2026 PIT Changes
Speak with an ATA advisor to review your payroll setup, tax residency status, deductions, and employer withholding obligations under Vietnam’s new PIT framework.
Frequently Asked Questions
Salary and wage provisions under Law No. 109/2025/QH15 apply from January 1, 2026. The full law, including provisions on other income categories, takes effect from July 1, 2026.
Vietnam now has five progressive PIT brackets, reduced from seven. Rates range from 5% on monthly income up to VND 10 million, to 35% on income above VND 100 million per month.
A foreign individual is considered a tax resident if they spend 183 days or more in Vietnam in a calendar year, or if they maintain a permanent residence or habitual abode in the country. Residents pay progressive PIT on worldwide income. Non-residents pay a flat 20% on Vietnam-sourced income only.
The employer acts as the withholding agent. This includes monthly PIT deduction and remittance, year-end tax finalization, and 10% flat withholding on non-employment payments exceeding VND 2 million per transaction. Non-compliance carries financial penalties.
Yes. ATA manages the full payroll cycle, including monthly PIT withholding under the new brackets, dependent deduction registration, residency classification, year-end finalization, and advisory on compensation structuring for expatriate hires.
