In this article
Contracts for foreign experts often state a net salary: the company commits to paying an after-tax amount and bears all personal income tax (PIT/TNCN). In that case the accountant must gross up the net salary, i.e. convert it back to pre-tax income, because the tax the company pays on the employee's behalf is itself taxable income. This article explains the method step by step, with an example that includes a housing allowance. It draws on the payroll accounting experience of ACCA Consulting Vietnam.
1. Why gross up a net salary?
If the company pays PIT on the employee's behalf, that tax is a benefit to the employee. Taxable income must therefore include the tax paid on their behalf. Calculating tax directly on the net salary will always understate it, because it ignores the "tax on the tax".
The consequence of underpayment: the company withholds and pays too little PIT, and is assessed for the shortfall plus late payment interest of 0.03% per day. In addition, the salary expense recorded does not match the PIT returns, which causes difficulties at the corporate income tax (CIT/TNDN) finalization.
2. Step-by-step method for converting net to gross
- 1List the net items
Net cash salary plus items the company pays on the employee's behalf (housing, school fees...) that count as taxable income.
- 2Determine deductions
Personal deduction of VND 15.5 million/month and VND 6.2 million/month per dependant (resident individuals, from the 2026 period), plus compulsory insurance if any.
- 3Calculate converted assessable income
Subtract deductions from net income to identify the tax bracket using the conversion table for the current tax schedule.
- 4Convert to gross assessable income
Apply the conversion formula for the relevant bracket, or solve the equation gross − tax = net.
- 5Back-check
Calculate tax on the gross amount; gross minus tax must equal exactly the committed net amount.
Steps 3 and 4 require the progressive tax schedule currently in force. Because the schedule may change under amended legislation, the example below uses a hypothetical single-rate schedule of 30% purely to illustrate the conversion logic. Do not use these figures to calculate actual tax.
3. Gross-up example with a housing allowance
Expert M (illustrative example) is a resident individual whose contract states: net salary of VND 80 million/month (≈ USD 3,140, approximate at VND 25,500/USD), plus rent of VND 20 million/month paid by the company directly to the landlord, with the company bearing all tax. No dependants. All rent is assumed to be taxable income (in practice there is a cap under current regulations), and insurance is not considered.
| Step | Explanation | Amount |
|---|---|---|
| Let G be the gross cash salary | Taxable income = G + 20 (housing) | — |
| Assessable income | G + 20 − 15.5 = G + 4.5 | — |
| PIT | 30% × (G + 4.5) | — |
| Net condition | G − 30% × (G + 4.5) = 80 | — |
| Solve the equation | 0.7G = 81.35 → G | 116.21 |
| PIT paid by the company | 30% × (116.21 + 4.5) | 36.21 |
| Check | 116.21 − 36.21 | 80.00 |
Illustrative example with a hypothetical single 30% rate; tax is understated by about VND 10.86 million each month.
View as table
| Calculated on net (wrong) | Grossed up (correct) | |
|---|---|---|
| Assessable income | 84.5 million VND | 120.7 million VND |
| PIT | 25.4 million VND | 36.2 million VND |
The difference is about VND 10.86 million per month, or more than VND 130 million per year, for just one expert in this example. Under the actual progressive schedule the difference depends on the bracket, but the direction is always an underpayment.
4. Excel template for net-to-gross conversion
There are two ways to build the template. The first uses a bracket conversion table: each tax bracket has a formula converting net income to gross assessable income, with IFS or LOOKUP used to select the bracket. The second uses Goal Seek: enter a trial gross, calculate tax using the progressive schedule, then let Excel find the gross at which gross − tax = net.
- Keep a separate parameters sheet: tax schedule, deduction levels, insurance rates. When the law changes, you update only one place.
- One row per expat, with columns for net cash, items paid on their behalf, deductions, gross, tax and back-check.
- Add a warning flag column when the back-check row is not 0.
- State the exchange rate if the net contract is in USD, and the date the rate applies.
- Lock formulas and leave only input cells editable to prevent accidental changes.
5. Common errors when the company bears the tax
- Calculating tax directly on the net salary without converting.
- Forgetting to include housing, school fees and air tickets paid on the employee's behalf in income before grossing up. See which expat benefits are subject to PIT.
- Grossing up a year-end bonus on its own without adding it to that month's salary.
- The contract states a net salary, but the tax withholding certificate is issued on the net figure.
- Not grossing up the additional tax arising at year-end finalization.
- Salary paid abroad by the group is left out of the same calculation.
At finalization, you must also gross up again on full-year income. If the finalized tax exceeds the total withheld, the additional amount paid by the company is again income and needs to be converted further. For the general finalization process, see PIT finalization.
FAQ
Is PIT paid by the company on the employee's behalf a deductible expense?
Tax paid on the employee's behalf is usually treated as part of salary if it is clearly stated in the employment contract and salary policy and has been grossed up correctly. Check the conditions for deductible expenses under current regulations.
Which exchange rate is used to gross up a USD net salary?
Convert to VND at the exchange rate used for tax filing at the time of payment, then gross up. Set out the exchange rate policy in the salary policy so that it is applied consistently.
Is gross-up needed for a non-resident expat?
Yes, if the company commits to a net salary. The calculation is simpler because the flat statutory rate applies and there are no family deductions.
Should AI tools be used to calculate gross-up?
An AI assistant can be used to check formulas, but expat salary and passport data should not be uploaded to public AI tools. The final result still needs to be checked against the current tax schedule.
Review your foreign experts' net payroll
ACCA Consulting Vietnam offers a free preliminary review of your company's current gross-up method. Accounting services based in Ho Chi Minh City, with remote support nationwide.
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