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Hiring in Vietnam

Vietnam, officially known as the Socialist Republic of Vietnam, is a country in Southeast Asia. Hanoi is the capital and Ho Chi Minh City is the largest city of Vietnam. Vietnamese is the national language and dong is the official currency. Vietnam’s economy is largely based on agriculture. Tourism is another major industry of Vietnam. Vietnam’s main trading partners are United States, China, Japan and South Korea. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Vietnam’s legal and tax regulations. Employment regulations are covered by the Labor Code. Labor Code stipulates that employees are entitled to 12 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on their Vietnamese-source income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Vietnam’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • It’s common practice to arrange a “probation period” in Vietnam when engaging new employees. 
  • A probationary period must not exceed 60 days for work that requires specialized or highly technical skills or 30 days for other types of work.

Annual Leave

  • Employees who have worked for twelve months for an employer are entitled to twelve paid annual leave days, with pro rata entitlement for employees with less than twelve month’s service.
  • Employees receive one additional paid vacation day for each additional five years they work for an employer.
  • Employees are entitled to pay in lieu of annual leave for leave not taken by the end of the year.
  • In practice normally the Employer agrees to permit the Employee to carry over untaken annual leave to the following year, but no later than March 31st of the following year, instead of payment in lieu of untaken leave.
  • Employees working under hazardous conditions may earn more leave, and additional leave is often a negotiated supplementary benefit.

Public Holidays

  1. New Year's Day (1st January)
  2. Lunar New Year (23rd to 29th January)
  3. Vietnamese New Year's Eve (24th January)
  4. Hùng Kings' Festival (2nd April)
  5. Reunification Day (30th April)
  6. Labor Day (1st May)
  7. Independence Day of Vietnam (2nd September)

Maternity Leave

  • Female employees are eligible for 6 months of paid maternity leave at 100% of salary (the base salary of the social insurance contribution), and an additional 30 days for each additional child.
  • Salary during this period is paid by the compulsory social insurance.
  • The maximum entitlement is: VND29.800.000, the employer normally will pay for the difference in case of the employee’s actual gross salary base is higher than the amount above.

Paternity Leave

  • Fathers are eligible to receive 5 to 14 days of paid paternity leave, depending on whether the child is born naturally or by C-section and whether it is a single or multiple birth.

Sick Leave

  • Employees who suffer from illness and/or disability or take leave in accordance with a doctor’s order receive an allowance paid by Vietnam’s social insurance fund, provided that they submit the required documentation supporting their leave (normally only doctors at the public hospitals can issue this certificate). 
  • The sick leave allowance is based on the employee’s salary used to calculate the social insurance premium. The maximum entitlement is:
    • 30 days per year (if the employee has contributed to the social insurance fund for less than 15 years) or
    • 40 days per year (if the employee has contributed to the social insurance fund for between 15 and 30 years) or
    • 60 days per year (if the employee has contributed to the social insurance fund for more than 30 years).

Work Hours

  • The maximum working hours per week are eight hours per day, six days per week, for normal working conditions.  
  • It’s legally required that employers provide employees with 1 full day off per week, which is usually Sunday. 
  • In practice, normally working hours: 8 hours per day, 40 hours per week (from Monday – Friday).

Overtime

  • Overtime hours cannot exceed 30 hours per month and 200 per year. 
  • In special cases regulated by the government, the yearly maximum can be increased to 300 hours per year
  • The overtime pay is at least 150 % of actual hourly wage on a normal working day, at least 200 % on a weekly day off and at least 300 % on a public holiday or paid days off (exclusive of wages of public holidays and paid days off prescribed by the Labor Code).

Notice Period

  • Vietnam labor code states that an employer may terminate a labor contract by serving advance notice of 30 working days for termination of a fixed term labor contract or 45 working days for an indefinite labor contract. 
  • However, employers must have proper legal grounds for termination.

Severance

  • Upon termination of employment, a worker who has been employed for more than one year is entitled to severance pay, which shall amount to half a month's wages plus other benefits, if any, for each year of service. Severance pay shall be paid within 7 days from the termination date.

13th / 14th Month Pay

  • Yes
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • However, it is common for employers to pay a 13th month salary as a Christmas bonus.
  • Employees also can receive smaller bonuses for public holidays.

income tax

  • Tax residents are subject to Vietnamese personal income tax (PIT) on their worldwide taxable income, wherever it is paid or received. 
  • Employment income is taxed on a progressive tax rates basis. 
  • Non-employment income is taxed at a variety of different rates.
  • Non-residents are subject to PIT at a flat tax rate on the income received as a result of working in Vietnam/on Vietnam-related income in the tax year, and at various other rates on their non-employment income. 
  • However, this will need to be considered in light of the provisions of any double taxation agreement (DTA) that might apply.

Tax residents: Employment income

Annual taxable income (million VND)

Monthly taxable income (million VND)

PIT rate (%)

0 to 60

0 to 5

5

60 to 120

5 to 10

10

120 to 216

10 to 18

15

216 to 384

18 to 32

20

384 to 624

32 to 52

25

624 to 960

52 to 80

30

More than 960

More than 80

35

 

Tax residents: Non-employment income

Type of taxable income

Tax rate (%)

Business income

0.5 to 5 (based on the type of business income)

Interest (but not bank interest)/dividends

5

Sale of shares

0.1 (of sales proceeds)

Capital assignment

20 (on net gain)

Sale of real estate

2 (of sales proceeds)

Income from franchising/royalties

5

Income from inheritances/gifts/winning prizes (excluding income from casino winning prizes)

10

 

Tax residents: Business income

Type of taxable income

Tax rate (%)

Distribution and supply of goods

0.5

Services, construction without provision of raw materials

2

Lease of assets

5

Production, transport, services attached to goods, construction including provision of raw materials

1.5

Other business operations

1

Tax residents: Non-employment income

Type of taxable income

Tax rate (%)

Employment Income

20

Business income

1 to 5 (based on the type of business income)

Interest (but not bank interest)/dividends

5

Sale of shares/capital assignment

0.1 (of sales proceeds)

Sale of real estate

2 (of sales proceeds)

Income from franchising/royalties

5

Income from inheritances/gifts/winning prizes (excluding income from casino winning prizes)

10

deductible expenses

  • Mandatory employee SI, HI, and UI contributions are deductible for PIT purposes. Contributions to local voluntary pension schemes are deductible (subject to a cap). Contributions to mandatory overseas social and health insurance schemes can also be deducted.
  • Contributions to certain approved charities can be deducted.
  • Personal allowances are allowed as follows:
    • Personal allowance: VND 9 million per month. All tax resident individuals are automatically entitled to this allowance.
    • Dependent allowance: VND 3.6 million per dependent per month. 
      • The dependent allowance is not automatically granted, and the taxpayer needs to register qualifying dependents and provide supporting documents to the tax authority.

Deductible Expenses

Social, health, and unemployment insurance contributions

  • Mandatory employee SI, HI, and UI contributions are deductible for PIT purposes. Contributions to local voluntary pension schemes are deductible (subject to a cap). Contributions to mandatory overseas social and health insurance schemes can also be deducted.

Charitable contributions

  • Contributions to certain approved charities can be deducted.

Personal allowances

  • Personal allowance: VND 9 million per month. All tax resident individuals are automatically entitled to this allowance.
  • Dependent allowance: VND 3.6 million per dependent per month. 
  • The dependent allowance is not automatically granted, and the taxpayer needs to register qualifying dependents and provide supporting documents to the tax authority.

immigration

  • A work permit is required for a foreign national to legally work in Vietnam, except for cases of work permit exemptions. 
  • This document is granted only to a foreign national who is sponsored by an entity in Vietnam.
  • The sponsoring entity in Vietnam must submit the demand for using foreign nationals working in Vietnam to the relevant government’s body at least 30 days before recruiting or transferring the foreign nationals to work in Vietnam. 
  • Within 15 days after receiving the demand, the local DOLISA responds to the sponsoring entity in writing regarding the acceptance or refusal of the demand.
  • This letter is considered to be a pre-approval for using foreign employees in Vietnam. 
  • This pre-approval letter is one of the compulsory documents for application dossiers for work permit issuances, work permit reissuances and work permit exemptions. 
  • A work permit application must be filed with the local DOLISA at least 15 business days before the expected commencement date for the employee. 
  • The current processing time at the local authority is seven business days.
  • Required documents in work permit application dossiers that are issued in foreign countries must be legalized in the country of issuance to be recognized in Vietnam. 
  • A work permit can be granted with a maximum validity period of two years. 
  • A work permit can be renewed through the reissuance process.
  • A foreign national who wants to work in Vietnam must meet the required qualifications for a preapproval position. 
  • The following are the three main categories of positions that foreign nationals may apply for a work permit in Vietnam and the related qualification requirements: 
  • Management experience is required for managers, executives or higher positions according to the definition in the Law on Enterprise. 
  • At least three years of relevant professional experience and a bachelor, engineering or equivalent or higher degree are required for specialists. Alternatively, the specialist must have a document from the relevant foreign authority, organization or enterprise that recognizes him or her an expert. 
  • A minimum one year-training certificate and three years of relevant experience is required for technicians. 
    • In addition to the above qualifications, foreign nationals will generally fall into one of two major categories: intra-company transfer and local hires. 
    • An intra-company transfer must have worked for his or her home employer for at least 12 months prior to the work permit application. 
    • The local hire must sign a local employment contract with the sponsoring entity in Vietnam. 
  • Both intra-company transfers and local hires must submit documentation proving that they meet the necessary criteria.

Work Permit Exemptions

  • Under the Labor Code and the decree on work permits, 19 cases of work permit exemptions exist. 
  • The following are typical examples of individuals who are exempt from the requirement to obtain a work permit in Vietnam: 
    • A foreigner who is a contributing member or owner of a limited liability company. 
    • A foreigner who is a member of the board of directors of a joint stock company. 
    • A foreigner who comes to Vietnam for a period of less than three months to offer services.
    • A foreigner who is an intracompany transferee of corporations operating within 11 service industries listed under Vietnam’s World Trade Organization commitments. A foreigner who enters Vietnam for less than 30 days to work as a manager, executive director, specialist or technician. However, the cumulative period of working in Vietnam in a year cannot exceed 90 days.

Type of Visa

Documentation

Validity

Eligibility

Work permit

  • Health Certificate
  • Criminal Background Certificate
  • Proof of your professional background
  • Copies of your qualifications and degrees
  • Passport-size picture(s)

The employer must submit the following documents: -

  • The Vietnam Work Permit application form
  • Work Contract
  • Approval from the Committee which allows them to employ foreign workers
  • Their Business Registration Certificate

Maximum 2 years

To be eligible for a work permit, the applicant must comply with the following conditions:

  • At least 18 years of age;
  • In good enough health to satisfy job requirements;
  • A manager, executive director or expert with technical skills and knowledge necessary for the job; and
  • Not currently subject to criminal prosecution or any criminal sentence in Vietnam or overseas or have a criminal record.

value added tax

  • The standard VAT rate in Vietnam is 10%.  
  • There is a 5% reduced VAT rate on certain foodstuffs and a range of exempt goods and services as well as imports.

VAT

Higher Rate

15%

Standard Rate

10%

Reduced Rate

5%

Zero Rate

0%

withholding tax

Dividends

  • No tax is imposed on dividends remitted overseas unless paid to an individual, where a 5% withholding tax is imposed

Interest

  • Interest paid to a nonresident is subject to a 5% withholding tax, unless the rate is reduced under a tax treaty

Royalties

  • Royalties paid to a nonresident are subject to a 10% withholding tax, unless the rate is reduced under a tax treaty

Technical Service Fees

  • A withholding tax of 5% and 5% VAT generally applies to technical services fees

 

WHT

Dividends

5%

Interest

5%

Royalties

10%

Technical Service Fees

5%

termination

  • The rights employees have when their employment contract is terminated depend upon the reason of dismissal and the employment contract. 
  • This has effects on the notice period and possible severance payments.
  • Vietnam labor code states that an employer may terminate a labor contract by serving advance notice of 30 working days for termination of a fixed term labor contract or 45 working days for an indefinite labor contract.
  • Proper legal grounds must exist in order for an employer to terminate a labor contract with an employee, such as performance issues, prolonged illness, a force majeure event, or dissolution of the company. 
  • Employers are required to perform various procedures prior to terminating an employee.
  • If an employer fails to prove that there are legal grounds for the termination or fails to follow the proper statutory procedure, a termination may be declared wrongful. 
  • In the event of a wrongful termination, employers may be required to reinstate the employee, pay their salary for the period that they were not allowed to work, and pay two months of the employee’s salary as a penalty for the wrongful termination.
  • In practice, a settlement or resignation can normally be negotiated with some amount of severance pay provided to the employee.

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period,  and severance pay.
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Paternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

payments and invoicing

  • The Vietnamese tax year is the calendar year. 
  • However, where in the calendar year of first arrival, an individual is present in Vietnam for less than 183 days, one's first tax year is the 12-month period from the date of arrival. 
  • Subsequently, the tax year is the calendar year.
  • Individuals who have taxable income are required to obtain a tax code. 
  • Those who have taxable employment income must submit the tax registration file to their employer who will subsequently submit this to the local tax office. 
  • Those who have other items of taxable income are required to submit their tax registration file to the district tax office of the locality where they reside.
  • For employment income, tax has to be declared and paid provisionally on a monthly/quarterly basis by the 20th day of the following month/the 30th day of the month following the reporting quarter, respectively. 
  • The amounts paid are reconciled to the total tax liability at the year-end. 
  • Expatriate employees are also required to carry out a PIT finalization on termination of their Vietnam assignment. 
  • Tax refunds are only available to those who have a tax code.
  • For non-employment income, the individual is required to declare and pay PIT in relation to each type of taxable non-employment income. 
  • The PIT regulations require income to be declared and tax to be paid on a receipt basis.

ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Vietnam ranked 70th in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus%

Based on one month bonus
8.33%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Employees are entitled to severance pay that equals one and a half month of pay for each completed year of service (12.50% of annual salary)

Vacations % Employees who have worked for twelve months for an employer are entitled to twelve paid annual leave days (3.29% of annual salary)
Notice %

Employees are entitled to 45 days of notice after one year of service (12.36% of annual salary)

Christmas Bonus Over Notifications% 0%
Vacations Plus%
0%
Total percentage of Salary (yearly)
The total employment accruals as a percentage of salary per anum are equal to 36.48%

employer accruals

Additional information (Country Accruals)

   
Social insurance 17.500%
Health insurance 3.00%
Unemployment insurance 1.00%
Christmas Bonus 8.33%
Vacations 6.03%
Retirement and death 14%

Employer Accruals Additional information

    Employment Accruals
Annual Leave Employees who have worked for twelve months for an employer are entitled to twelve paid annual leave days, with pro rata entitlement for employees with less than twelve month’s service This equals 3.2% (12/365 days) of annual income
Maternity Leave Female employees are eligible for 6 months of paid maternity leave at 100% of salary (the base salary of the social insurance contribution), and an additional 30 days for each additional child.
Salary during this period is paid by the compulsory social insurance.
Paid by social insurance
Paternity Leave Fathers are eligible to receive 5 to 14 days of paid paternity leave, depending on whether the child is born naturally or by C-section and whether it is a single or multiple birth. This equals 3.8% (14/365 days) of annual income
Sick Leave The sick leave allowance is based on the employee’s salary used to calculate the social insurance premium. The maximum entitlement is:
• 30 days per year (if the employee has contributed to the social insurance fund for less than 15 years) or
• 40 days per year (if the employee has contributed to the social insurance fund for between 15 and 30 years) or
• 60 days per year (if the employee has contributed to the social insurance fund for more than 30 years).
This equals 8.22% (30/365 days) of annual income
Overtime Overtime hours cannot exceed 30 hours per month and 200 per year.
In special cases regulated by the government, the yearly maximum can be increased to 300 hours per year
The overtime pay is at least 150 % of actual hourly wage on a normal working day, at least 200 % on a weekly day off and at least 300 % on a public holiday or paid days off (exclusive of wages of public holidays and paid days off prescribed by the Labor Code).
Overtime is paid at an additional 107,500 VND
Severance Upon termination of employment, a worker who has been employed for more than one year is entitled to severance pay, which shall amount to half a month's wages plus other benefits, if any, for each year of service. Severance pay shall be paid within 7 days from the termination date. This equals 50% of monthly wage
Social Security Employers must make the following contributions: - Social Insurance 17.5%; Health Insurance 3%; Unemployment Insurance 1%. This equals 21.5% of annual income

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