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Social security and personal income tax in Vietnam
In Vietnam, one of the main obligations of employers is social security payments. In order to operate smoothly in Vietnam, it is important for foreign companies to fully understand the legal framework, such as the rights and obligations of employers and employees regarding social security.
The total employer minimum social security contribution was 21% of an employee's monthly salary in 2012-2013, rising to 22% in 2014. There are three types of compulsory social security: social insurance, medical insurance, and unemployment insurance.
Social security: social insurance, medical insurance, unemployment insurance
- Social insurance includes sick leave, maternity leave, benefits for work accidents, pension benefits, death benefits, etc.
- Health insurance gives employees the right to receive medical examinations, inpatient treatment, and outpatient treatment at public medical institutions.
- Unemployment insurance is a benefit if an employee becomes unemployed and is equal to 60% of the average salary for the six months prior to leaving the job. It is funded by the amount contributed by former employers and employees.
Both employers and employees are required to pay contributions.
All companies operating in Vietnam are obliged to pay social insurance premiums to all employees based on labor contracts with a term of 3 months or more and an indefinite term.
The mandatory employer contribution to the Vietnam Social Insurance Fund is generally 18% of the total employee income. Mandatory contributions by employees are generally 8% of gross income (applicable from January 2014). For employment contracts of three months or less, social insurance contributions are included in the salary and employees are responsible for their own social insurance contributions.
Health insurance applies to both Vietnamese and foreign employees in accordance with Vietnam's Labor Law. However, social insurance and unemployment insurance are compulsory only for Vietnamese employees. The amount of contribution is determined based on the monthly salary or wage stated in the labor contract.
Vietnam Personal Income Tax (PIT)
In Vietnam, personal income tax (PIT) filing and payment is treated as withholding. Employers are obliged to collect tax from their employees' income and submit a tax return for each employee, both for Vietnamese and foreign employees. As in Japan, employers withhold taxes, pay taxes every month, and make year-end adjustments.
Personal Income Tax (PIT) is taxable on the balance after deducting obligatory social insurance contributions. For the taxable income from the previous year, the company will process personal income tax on behalf of the employee at the beginning of the year.
A monthly salary of VND9 million or less (approximately JPY 50,000 per month) is tax exempt, and most Vietnamese are not subject to personal income tax. Currently, high-income earners, including foreigners, are subject to taxation. In fact, it is said that 60% to 80% of personal income tax revenue is paid by foreigners.
Payroll and Wage Management in Vietnam
This time, I explained Vietnam's social security and personal income tax PIT. Separately, I will explain about salary management and wage management in Vietnam in a column article. Please refer to this as well.
A real estate agent (with Level 1 bookkeeping qualification) who has been based in Ho Chi Minh City for six years.
Representative of Suzuki Property Vietnam.
To date, we have brokered over 1,000 rental transactions and over 200 sales transactions, primarily with Japanese clients.
We specialize in serviced apartments, condominiums, office brokerage, and real estate contract support for foreigners, and provide support in Japanese, English, and Chinese.
