Residents and non-resident

The concept of Personal Income Tax is no longer strange. When it comes to personal income tax, we often think of:

What is the tax rate?

How much tax must be paid?

But sometimes, we forget that, at the very first step, it is necessary to determine whether the individual is a "resident or non-resident".

According to Circular No.111 issued in 2013 on personal income tax, in article one, we can see the definition of "Resident" as a person who meets one of the following two conditions:

At first, the person has been present in Vietnam for 183 days or longer in a calendar year, or for 12 consecutive months from the day on which that person arrives at Vietnam.

Second, the person has a regular residence in Vietnam.

The concept of having a regular residence includes two cases: having a permanent place of residence, or having a rented house to live in.  

+ What is the regular residence?

For Vietnamese citizen: the regular residence is the place where that person regularly, stably, and indefinitely lives and has been registered as permanent residence as prescribed by legislation on residence.

For foreigners: the regular residence is the permanent written in the permanent residence card, or the place of temporary residence registration.

+ What is a rental house to live in?

The rented houses in Vietnam include hotels, guesthouses, motels, offices, etc. whether they are rented by the person or their employer. You can stay in more than one place, as long as during the tax year, the total number of rental days under the lease agreements must be 183 days or more.

We have just reviewed the content of "residents", who must have one of the two conditions mentioned above. Hence, "Non-residents" are the persons that fail to meet the two conditions mentioned above.

There is one case, which makes us wonder, if you have a regular residence in Vietnam, but actually are present in Vietnam for fewer than 183 days in the tax year, are you automatically a resident of Vietnam or not? We would like to answer as follows:

This is also subject to one more condition that, if you fail to prove your residence in any country, you shall be considered a resident of Vietnam. The residency in another country shall be proved by the Certificate of residence. If you belong to a country or territory that signs tax agreements with Vietnam and does not issue the Certificate of residence, you shall present a photocopy of the passport to prove the period of residence.

It can be seen that the element of 183 days is mentioned as a milestone to determine, whether in terms of presence or in terms of having a rented house to live in. So why is it 183 days?

In the simplest terms according to international tax jurisdiction, the number 183 is equivalent to 365 days in a year divided by two. From over 183 days is the maximum number of days an individual can be present in a particular jurisdiction with income tax obligations. And less than 183 days of presence in a particular jurisdiction with no income tax liability, or with but not a regular income tax liability in that location.

In short, in order to determine an individual's residence status, it must first be calculated in the calendar year, or in 12 consecutive months from the first day of presence in Vietnam.

• If a foreigner is present in Vietnam for 183 days or more, that person is a resident, without further consideration of any conditions.
• If the foreigner is present in Vietnam for less than 183 days, it will continue to consider the condition of having a regular residence in Vietnam or not. If that foreigner has a regular residence in Vietnam, he/she is considered a resident, even if he/she stays in Vietnam for less than 183 days. However, if that foreigner can prove that he/she is a resident of another country, then this individual is not a resident of Vietnam.