If you are a foreign expat in Vietnam with work permit, temporary residence card (TRC), employer sponsorship, you might be interested to learn about the new law on personal income tax (PIT) that impact your payslip. You would also concern when this new law will become effective and whether you would take home less or more money, or you just want to make sure labour compliance is strictly followed by the company.
In here we continue the theme from our earlier post on the proposal on PIT changes, what was coming is now law, and the real question becomes how the Vietnam PIT reform for foreign employees shows up on a payslip, in payroll withholding, and at year end finalization, especially for higher income foreign professionals.
What the Vietnam PIT Reform for Foreign Employees Actually Changed
1. The amended PIT Law was passed on Dec 10th, 2025 and the main effective date is Jul 1st, 2026
Vietnam passed the amended Personal Income Tax law on Dec 10th, 2025, with effect from Jul 1st, 2026.
2. Some salary or wage provisions apply from the 2026 tax period
The tax authority notes that certain provisions related to wages or salaries for tax resident individuals apply from the 2026 tax period.
3. Family deductions increase from Jan 1st, 2026
Resolution 110/2025/UBTVQH15 raises deductions to:
- VND 15.5m/month for the taxpayer
- VND 6.2m/month per dependent
Effective and applied from the 2026 tax period.
4. The progressive schedule becomes simpler, and the 35% threshold shifts higher
From Jul 1st, the progressive PIT schedule moves from 7 brackets to 5, and the top 35% rate applies above VND 100m/month (instead of above VND 80m/month under current rules).
Why the Vietnam PIT Reform Matters More to High Incomers
High income expats feel the Vietnam PIT reform more because:
- When income is high, even small payroll settings i.e. deductions, thresholds, benefit treatment can change withholding by millions per month.
- High income packages usually include bonuses and benefits, which are exactly where classification mistakes happen.
- The reform has split timing which parts apply from 2026 while a broader effective date arrives later, which increases the chance of payroll applying the wrong rule for months.
- At high income, any mismatch becomes a cashflow issue now and a finalization headache later.
What the Vietnam PIT Reform Means in Real Life
Benefit 1: Higher deductions reduce taxable income every month
From the 2026 tax period, the family deduction rises to 15.5m/month for the taxpayer and 6.2m/month per dependent.
For high income expats, deductions matter because they reduce taxable income at the top end of the progressive system, where your marginal rate is highest. This is the most visible part of the Vietnam PIT reform.
Benefit 2: Less of your income is taxed at the top rate (35% starts later)
The top PIT rate remains 35%, but the top band threshold shifts to above VND 100m/month (instead of above 80m/month).
Even if you are well into the top band, the Vietnam PIT reform for foreign employees still helps because a slice of income that previously entered the 35% layer earlier is now taxed at the layer below first.
Benefit 3: Fewer brackets simplify
A 5 bracket structure is easier to implement consistently than a 7 bracket structure, especially for multinational payroll operations handling allowances, bonus cycles, and split month employment changes.
This is an underrated advantage of the Vietnam PIT reform for foreign employees, which is stability.
Benefit 4: Dependents become a meaningful lever for long term expats
If you have settled in Vietnam with spouse, children, the dependent deduction increase can be material, but only if you register properly and on time.
In practice, for many high income expats, the Vietnam PIT reform becomes real only when dependent files are appropriate.
What Can Go Wrong for Expats
Here are the top high income expat risks under the Vietnam PIT reform for foreign employees:
Risk 1: timeline confusion leads to wrong withholding
- Main effective date: Jul 1st, 2026
- Certain wage/salary rules for residents: applied from 2026 tax period
- Deduction increase: Jul 1st, 2026 (2026 tax period)
If payroll updates late, you might overpay for months and only recover or reconcile later. For high earners, that is not just a tax issue, it is a cashflow and trust issue.
Risk 2: resident vs non-resident assumptions are left unverified
High income expats travel a lot. Resident or non-resident status changes the tax approach dramatically. The Vietnam PIT reform for foreign employees does not remove this risk, if anything, it makes it smarter to confirm your status rather than assume.
Risk 3: gross packages contain quiet taxable items
Senior expat packages often include housing support, education support, relocation benefits, flights, per diem structures, and one off awards. When these are not consistently classified and documented, year end finalization becomes painful, leading to lost trust and leading to potential labour disputes in Vietnam.
Risk 4: dependent deductions are missed in practice
The deduction amount is clear but the execution is not always. If dependent documentation is incomplete or delayed, the Vietnam PIT reform for foreign employees may not translate into reduced withholding during the year.
Risk 5: not sufficient information
Payroll can apply rules, but payroll cannot guess:
- your travel days,
- your family status documentation,
- the tax classification of certain payments unless HR structures them correctly.
The information has to be updated accordingly, and document support is required to ensure the correct information is used.
Step by Step on Allowance and Benefits Stress Test
Step 1: Inventory every benefit
Start with a simple list. If it shows up in your offer letter, HR policy, or payslip, even vaguely, capture it.
Common expat benefits to list:
- Housing: rent, service apartment, utilities, agent fees
- Schooling: tuition, enrollment fees, school transport
- Travel: home leave, relocation flights, baggage, temporary accommodation
- Meals and transport: meal allowance, taxi, car allowance, driver
- Insurance: international health, life, accident
- Devices and work tools: laptop, phone, internet
- One-off items: sign-on bonus, settling-in allowance, relocation package
Step 2: What evidence you must keep
For each benefit, verify:
- Is it cash paid as allowance or in-kind which company pays directly?
- Does it need specific conditions to qualify for a favorable treatment?
- What are the minimum documents needed to defend the treatment?
Evidence checklist example:
- Written policy: company benefit policy, assignment letter, HR handbook excerpt
- Labour contract and appendix mentioning benefit terms. If needing to review labour contract, do it now.
- Invoices and receipts with names, dates, service period
- Payment proof: bank transfer, reimbursement record
Step 3: Fix weak documentation
Treat this like a compliance check, to correct or fix the following typical weak spots:
- Receipts without names or service period
- Payments made in cash with no trace
- Allowance paid as a lump sum with no policy basis
- School/housing paid by the employee but claimed informally
- Mixed personal vs business expenses
Fix actions:
- Ask HR for a benefits policy
- Convert informal benefits into formal payroll line items with descriptions
- Standardize invoices with named recipient, period, address for housing if relevant
- Create a simple benefit claim form for reimbursements
Step 4: Decide the payroll reporting method
Benefits should be handled consistently, month to month.
Pick the method that fits your company’s system:
- Payroll included method: benefits appear clearly on payslip. This is best for transparency
- Reimbursement method: strict claim and documentation workflow
- Direct-payment method: company pays vendors and keep contracts, invoices centrally
Step 5: Prepare for audits
Think of this explanation that HR, Finance, and the employee can all repeat without contradicting each other, including:
- Why the benefit exists: assignment support, employment package
- Who is eligible and under what conditions
- How it’s paid and documented
- Where it appears in payroll records
- Where evidence is stored and who owns it
FAQs: the Vietnam PIT Reform for Foreign Employees
1: Does the Vietnam PIT reform apply to foreigners or only Vietnamese citizens?
PIT rules apply based on taxpayer status and income conditions, not nationality. This is why the Vietnam PIT reform for foreign employees matters for expats.
2: When do I feel the change, January 2026 or July 2026?
Both can be true:
- Deduction increases apply from Jul 1st, 2026 for the 2026 tax period.
- The amended PIT Law is effective from Jul 1st,2026, and some wage/salary provisions are applied from the 2026 tax period.
This split timing is the reason the Vietnam PIT reform for foreign employees causes confusion in office chats.
3: What are the new deduction levels?
- Taxpayer: VND 15.5m/month
- Dependent: VND 6.2m/month
From the 2026 tax period.
4. Does the top rate change under the Vietnam PIT reform?
The top rate remains 35%, but the threshold shifts to above VND 100m/month under the new schedule.
5. I’m a high earner. Do deductions still matter?
Yes. High earners often benefit more from deductions because they reduce taxable income at higher marginal rates. Under the Vietnam PIT reform for foreign employees, higher deductions are one of the most practical benefits.
6. What’s the most common mistake for expats?
Assuming payroll can apply benefits and deductions without correct personal facts and documentation. Under the Vietnam PIT reform, documentation is the bridge.
7. Why do dependents matter so much in expat conversations?
Because the deduction is monthly and recurring, but the paperwork can be cross border and time consuming.
8. Can I wait to year end to reconcile?
Year end finalization may correct totals, but high income expats usually care about predictable monthly net pay and avoiding surprises. With deduction changes effective from Jul 1st,2026 for the 2026 tax period, it is reasonable to ask how monthly withholding reflects the Vietnam PIT reform for foreign employees.
9. What about the 5 brackets instead of 7 change?
It is designed to simplify and widen bracket ranges, reducing friction and implementation complexity. It becomes effective from Jul 1st, 2026 in summaries of the amended law.
Conclusion
If you are a long term foreign expat, the Vietnam PIT reform for foreign employees is not just about paying a bit less or a bit more. To prepare for 2026 tax finalization, for high income professionals, the best outcome for applying the PIT reform right is simple, which are predictable tax, documented facts, and no surprises.
About ANT Lawyers, a Law Firm in Vietnam
We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi, and Danang, and will help customers in doing business in Vietnam.
Source: https://antlawyers.vn/update/vietnam-pit-reform-for-foreign-employees.html
