Employment Tax

Vietnam I The impact of employment arrangements for immigration and social security

Summary

With an increasingly global workforce, companies face a greater risk in managing tax, immigration and employment compliance. For Vietnam, a decision made on the type of work permit to apply for an expatriate employee assigned to work in Vietnam, or a decision made on home country payroll arrangement could have a domino effect on other aspects of the companies’ employee income tax obligations (like social security and tax filing approach). Understanding the implications of employment arrangement could help companies better manage the employee’s move and avoid unexpected consequences.

For the interest of our reader, we provide below an example of the interconnectedness of immigration and social security compliance in Vietnam.

The detail

Vietnam has three elements to its social security system – Social insurance (“SI”), Unemployment insurance (“UI”) and Health insurance (“HI”).

• UI contributions are applicable to Vietnamese employees only.

• HI contributions are generally required for Vietnamese and foreign individuals that are employed under Vietnamese employment contracts with a term of at least 3 months (but not those continuing to be employed under their overseas employment contracts and seconded to Vietnam). Therefore, when applying for a work permit in Vietnam, if the foreign individual assigned to work in Vietnam signs a local employment contract with the Vietnam entity for a period of 3 months or more, he/she is subjected to HI contributions in Vietnam.

• SI contributions are required for Vietnamese. For foreign individuals, generally if they are also employed under a Vietnam employment contract with an indefinite term or a definite term of one year or more, they are subject to SI.

Given the above, we would therefore recommend performing an assessment on the types of work permit to be applied, as apart from the work permit category of “Working under local employment contract”, there are other categories of work permit to be applied for including:

1. Assignment within the group of companies (i.e. intra-corporate transferee);
2. Implementing contracts or agreements on business, commerce, finance, banking, insurance, inspection plan, culture, sports, education, vocational training, and health;
3. Participating in the execution of contracts and projects in Vietnam;
4. And other categories, etc.

It should be noted that each category has its own conditions and requirements to be complied with, correspondingly consideration of the rules and conditions of each category is an important part of the assessment.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Brittany Chong
Partner

Further information on Vialto Partners can be found here: www.vialtopartners.com

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