In this article
An expat who works in Vietnam but receives part or all of their salary paid from abroad is a very common situation in FDI companies. Money that does not pass through the Vietnamese company's bank account still has to be declared. This article helps accountants and expats determine who files, what to file and which costs are deductible, following the accounting services approach of ACCA Consulting Vietnam.
1. Offshore payroll vs. split payroll
Offshore payroll means the expat's entire salary is paid by the parent company or another group company abroad. Split payroll means the salary is divided in two: one part is paid in Vietnam through the FDI entity and the rest is paid abroad, usually into an account in the expat's home country.
In principle, if the expat is a tax resident of Vietnam, personal income tax (PIT/TNCN) on salaries and wages is calculated on total income, wherever it is paid. If the expat is non-resident, the taxable scope is income arising in Vietnam. To determine residence, see PIT residence for foreign experts.
2. Who declares the salary paid from abroad
| Model | Portion paid in Vietnam | Portion paid from abroad | Annual finalization |
|---|---|---|---|
| Fully onshore | The company withholds and files with its periodic PIT return | None | The company finalizes on the employee's behalf if eligible, or the individual finalizes |
| Split payroll | The company withholds on the portion it pays | The individual files directly with the tax authority for the prescribed periods | The individual finalizes, combining both sources |
| Fully offshore | None | The individual files for the prescribed periods | The individual finalizes |
For individuals finalizing their own PIT, the deadline is the last day of the 4th month after the end of the year (30 April for a calendar year). In practice, many companies help expats declare their foreign salary through a service provider, but responsibility for the figures should still be clearly agreed in writing.
Illustrative example: resident expat with a total gross salary of VND 100 million/month. Splitting the payment source does not reduce taxable income.
View as table
| Fully onshore | Split payroll 60/40 | |
|---|---|---|
| Salary paid in Vietnam | 100 tr | 60 tr |
| Salary paid from abroad | 0 tr | 40 tr |
| Total income subject to PIT | 100 tr | 100 tr |
3. Recharge costs: when are they deductible?
When the parent company pays the salary and then recharges it to the Vietnamese entity, the key question is whether this payment is a deductible expense for corporate income tax (CIT/TNDN). Experience shows that the tax authority looks at the substance: who the expat works for, who directs the work, and whether the documents reflect that substance.
- Employment contract or assignment letter showing that the expat works for the Vietnamese entity.
- A recharge agreement between the parent company and the Vietnamese company, stating the calculation method and payment periods.
- A detailed monthly salary schedule that matches the amounts declared for the expat's PIT.
- Bank payment records, not cash.
- Evidence that PIT on the recharged salary has been declared and paid in full.
- An analysis of foreign contractor tax obligations if the recharge includes a service fee or a mark-up.
4. Cash flow map and control points
- 1Parent company pays salary
Transfers the foreign portion of the salary to the expat's account in the home country.
- 2Vietnamese company pays salary
Pays the Vietnam portion, withholding PIT and insurance (if applicable).
- 3Expat files
Declares income received from abroad to the tax authority for the prescribed periods.
- 4Parent company issues the recharge
Sends a request for payment of the salary paid on the Vietnamese company's behalf.
- 5Vietnamese company pays
Transfers payment to the parent company, reconciled against the salary schedule and tax declared.
- 6Annual finalization
The expat finalizes both sources; the company reconciles salary costs in the financial statements.
The most important control is that salary figures in three places must match: the parent company's payroll, the expat's tax returns and the salary costs in the Vietnamese company's books. Discrepancies between these three sources are a red flag that the tax authority often raises during finalization audits.
5. Common risks
- The expat does not know they must self-declare the foreign salary, discovers it only at finalization and has to pay additional tax plus late payment interest of 0.03% per day.
- Recharges without an agreement, supported only by a debit note, leading to the cost being disallowed for CIT.
- Omitting benefits paid by the parent company (housing, school fees, foreign insurance) from taxable income. See taxable expat benefits.
- Not considering the tax treaty when the expat has already paid tax in another country on the same salary.
FAQ
Is tax withheld in Vietnam on salary paid from abroad?
The Vietnamese company does not pay this portion directly, so it usually does not withhold on it. A resident expat must file directly with the tax authority for the prescribed periods, unless there is a valid arrangement for filing on their behalf.
Can the Vietnamese company declare the foreign salary on the expat's behalf?
In some cases, an organization in Vietnam may file on the expat's behalf under current guidance. The company should have a written agreement and check the specific conditions before doing so.
Are salary recharge costs subject to foreign contractor tax?
A reimbursement equal to the salary cost is usually treated differently from a service fee. If a mark-up or management fee is added, foreign contractor tax obligations need to be analysed separately.
How is the foreign salary handled if the expat leaves mid-year?
The expat must finalize tax before leaving Vietnam as required, combining income from inside and outside Vietnam. See also the article on expat PIT in the first and final years.
Review your expat payment model
ACCA Consulting Vietnam reconciles payroll, PIT returns and recharge files so that your company does not have costs disallowed at finalization.
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