Vietnam has quietly become one of Asia’s most compelling business stories. A youthful, industrious population, fast-improving infrastructure, and a manufacturing base that plugs directly into global supply chains make it an obvious stop for companies thinking about scale. 

For many firms, doing business in Vietnam means access to competitive labour costs, skilled factory and tech workforces, and preferential trade arrangements that simplify exporting to big markets.

The government has steadily improved the investment climate, offering incentives for high-tech, export-oriented, and green projects. Put simply, Vietnam combines the scale and cost advantages investors want with a policy environment that increasingly rewards value-adding activity. 

If you want to hire in Vietnam, it helps to understand the payroll mechanics up front, and that’s what this guide is for.

What Is Payroll Tax in Vietnam?

In Vietnam, payroll is more than just a payslip at the end of the month. It’s the process of calculating, withholding, and remitting a mix of statutory contributions and personal income tax (PIT) for every employee on your team. Employers are responsible for ensuring all figures are correct and payments are made on time to both employees and state agencies.

The key components of payroll here include:

  • Gross salary: the base amount agreed with the employee.
  • Mandatory social insurance contributions: covers social insurance (SI), health insurance (HI), and unemployment insurance (UI).
  • Personal income tax: calculated using a progressive tax system for residents, with a flat rate for non-residents.
  • Allowances and benefits: some taxable, some exempt, depending on how they’re structured.

Handled well, it’s a predictable routine. Handled poorly, it can lead to delays, penalties, or unhappy staff, neither of which you want.

Social Security Contributions in Vietnam

Vietnam’s social security system is built on three mandatory schemes:

  • Social Insurance (SI)
  • Health Insurance (HI)
  • Unemployment Insurance (UI)

Each of these is funded jointly by employers and employees, with contributions calculated as a percentage of the employee’s gross salary, but only up to certain caps set by the government. Here’s the current breakdown:

Contribution TypeEmployer RateEmployee RateSalary Cap AppliedWhat It Covers
Social Insurance (SI)17.5%8%20 × reference levelPensions, sickness, maternity, occupational disease, survivorship benefits
Health Insurance (HI)3%1.5%20 × reference levelPublic healthcare services and medical expenses
Unemployment Insurance (UI)1%1%20 × regional minimum wage (varies by location)Short-term income support and job placement services

Here are some key points to note:

  • The reference level is a government-defined figure used for SI and HI caps, not the employee’s actual agreed salary. The caps are 20 times the reference level, which currently equals the government base salary. Since 1 July 2026 the base salary has been VND 2,530,000 per month, so the SI and HI cap is VND 50,600,000 per month.
  • The regional minimum wage varies across Vietnam’s four wage regions, from VND 3,700,000 to VND 5,310,000 per month since 1 January 2026 (Decree 293/2025/ND-CP). This affects the UI cap.

All contributions must be declared and paid monthly to the Social Insurance Fund, managed by the Vietnam Social Security agency.

For foreign employees, UI does not apply. SI and HI are both mandatory for those working under a labor contract of 12 months or longer, with exceptions such as intra-company transferees and workers who had already reached retirement age when the contract was signed.

Overview of Income Tax in Vietnam

Personal Income Tax

Vietnam’s personal income tax (PIT) system is straightforward once you know whether you’re dealing with a tax resident or a non-resident.

  • Residents are taxed on their worldwide income using a progressive rate table.
  • Non-residents pay a flat 20% on Vietnam-sourced income.

You’re considered a tax resident if you spend 183 days or more in Vietnam in a calendar year or in 12 consecutive months, or if you have a regular residence here, meaning a registered permanent residence or a rented home on leases totaling 183 days or more in the tax year.

Current progressive tax rates for residents on employment income, applying from the 2026 tax year under the Law on Personal Income Tax 109/2025/QH15, are:


Monthly Taxable Income (VND)Rate
Up to 10,000,0005%
10,000,001 – 30,000,00010%
30,000,001 – 60,000,00020%
60,000,001 – 100,000,00030%
Over 100,000,00035%

Allowable Deductions for Residents

Deduction TypeAmountNotes
Personal deductionVND 15,500,000/monthApplies to all individual taxpayers
Dependent deductionVND 6,200,000/month per eligible dependentFor each qualified dependent
Other deductionsVariesCertain insurance premiums, charity contributions, and pension fund payments can reduce taxable income, including voluntary pension and life insurance premiums up to VND 3 million per month (employer and employee contributions combined), as well as healthcare and education expenses within limits set by the Government

A Worked Example

Let’s take an employee in Ho Chi Minh City earning VND 40,000,000/month, single, no dependents:

StepCalculationAmount (VND)
Social Security Contributions (SSC)SI = 3.2M, HI = 0.6M, UI = 0.4M4.2M
Taxable Income40M – 4.2M – 15.5M20.3M
PIT Calculation5% on first 10M = 0.5M
10% on remainder (10.3M) = 1.03M		1.53M

Calculate Payroll in Vietnam the Easy Way

Vietnam’s payroll math isn’t complicated once you’ve done it a few dozen times. For most companies, however, you don’t have that kind of time to spare. Between tracking social security caps and applying progressive tax rates, manual calculations can eat into hours you could spend running your business. And of course, they’re prone to errors.

RemotePeople’s Payroll Calculator does the heavy lifting for you. Just enter the basic salary details, and you’ll get instant, accurate breakdowns for both employer and employee costs.

Employer & Employee Responsibilities

Both employers and employees have legal obligations that keep the payroll system running smoothly.

For employers, the main duties include:

  • Withholding personal income tax from each salary payment, generally declaring and paying it quarterly from 1 July 2026 under Circular 89/2026/TT-BTC, and remitting social security contributions every month.
  • Registering new hires with the Vietnam Social Security authority within 30 days of the date they become subject to compulsory social insurance.
  • Keeping accurate payroll records for at least 10 years under the accounting rules, in case of inspections.
  • Carrying out annual PIT finalization for employees who authorize it, and issuing PIT withholding certificatesso employees can check and reconcile their tax obligations.

Failure to meet these obligations can lead to financial penalties, late payment interest, and even suspension of certain business activities.

For employees, responsibilities are lighter but still important:

  • Provide complete and accurate personal and dependent information for tax purposes.
  • Inform the employer of any changes (e.g., dependents, residency status) that affect tax calculations.
  • File an annual PIT return if you have multiple income sources or want to claim additional deductions not handled via payroll.

When both sides follow the rules, payroll runs without a hitch.

Double Taxation Agreements in Vietnam

Vietnam has worked to make itself more attractive to foreign investors by signing 82 Double Taxation Agreements (78 in force) with countries across Asia, Europe, and the Americas. These treaties prevent individuals and businesses from paying tax twice on the same income.

Some of Vietnam’s key treaty partners include Singapore, Japan, South Korea, the UK, France, Germany, and Australia. For many global companies, these agreements can make a real difference to the cost of doing business here.

Most DTAs follow the same principles:

  • They define tax residency to determine where income should be taxed.
  • They reduce withholding tax rates on things like dividends, interest, and royalties between treaty countries.
  • They provide tax credit or exemption mechanisms, so income taxed in one country can be offset against tax owed in the other.

For employers bringing in foreign staff, these treaties can help avoid surprises in payroll planning. And for expatriates, they mean more predictable take-home pay.

Industry-Specific Tax Rates & Incentives

Vietnam offers strong tax breaks for investors in key sectors and regions.

Economic Zones & Disadvantaged Areas

Zone TypeCorporate Income Tax (CIT) Incentive
Economic Zones outside Difficult Areas17% CIT for 10 years, with up to 2 years tax-free + 50% reduction for up to 4 years (Law on Corporate Income Tax 2025, Articles 13 and 14)
Difficult Areas17% CIT for 10 years, with up to 2 years tax-free + 50% reduction for up to 4 years
Extremely Difficult Areas, High-Tech Zones, High-Tech Agricultural Zones, Concentrated Digital Technology Zones and Qualifying Economic Zones10% CIT for 15 years, up to 4-year holiday + 50% reduction for up to 9 years

High-Tech, Software & Digital

IndustryCorporate Income Tax (CIT) Incentive
Software10% CIT for 15 years, up to 4 years tax-free + 50% reduction for up to 9 years
From 2026: AI, Semiconductors, High-Performance Computing (HPC)10% CIT for 15 years, up to 4 years tax-free + 50% reduction for up to 9 years, plus up to 15 years of land rent exemption

R&D & Large Manufacturing

IndustryCorporate Income Tax (CIT) Incentive
High-tech R&D / Large-scale ManufacturingSpecial investment incentives on CIT and land rent for projects that meet capital and disbursement thresholds: from VND 3 trillion for R&D centers and digital infrastructure, VND 6 trillion for semiconductor and key digital technology projects, and VND 30 trillion for other priority sectors. The CIT rate and period are set under the CIT law 

Startups & SMEs

CategoryIncentives
Innovative StartupsCIT exemption for 2 years, then 50% reduction for 4 years 
Financial & Operational SupportInterest rate support of 2% a year on qualifying loans, reimbursement of equipment use costs at technical facilities, incubators and co-working spaces (up to VND 20M/year), and rent support at incubators and co-working spaces (up to VND 5M/month for up to 3 years)

These incentives can significantly lower tax burdens and create long-term savings, especially when paired with a smart payroll strategy.

Common Payroll Errors & Compliance Tips

Getting payroll right in Vietnam is about threading the needle between multiple laws, tax rules, and reporting requirements. And when you’re juggling social insurance caps, progressive tax brackets, and tight deadlines, mistakes can creep in.

Some of the most common pitfalls include:

  • Misclassifying employees as contractors to reduce costs
  • Incorrect social insurance calculations
  • Missing updates to tax bands or contribution rates
  • Late remittance of PIT or social security contributions
  • Overlooking foreign employee registration 

Fines for non-compliance range from a few million VND for small errors to as much as VND 150 million for organizations in serious social insurance cases (for example, late payment is fined at 12% to 15% of the late amount, capped at VND 75 million for individuals, with organizations generally paying double), plus repayment of underpaid contributions with interest at 0.03% per day.

To stay on the safe side:

  • Monitor government circulars and decrees for rate and rule changes.
  • Keep clear, auditable payroll records for at least 10 years.
  • Train HR and accounting teams on both tax and labour law basics.
  • Consider using an automated payroll solution or outsourcing to ensure accuracy and timely filings.

When payroll is done right, it fades into the background, freeing you to focus on growing your team and your business.

Simplify Payroll and Tax in Vietnam with RemotePeople

Payroll in Vietnam requires precision. Between progressive PIT rates, capped social contributions, and shifting incentives, it’s easy for errors to creep in.

RemotePeople’s Payroll Calculator delivers fast, accurate results every time. For those who prefer a completely hands-off approach, our Employer of Record service takes care of everything, from hiring and onboarding to payroll, compliance, and reporting.

Focus on growing your business in Vietnam, while we ensure your payroll is seamless.