Personal income tax for expats receiving foreign dividend income

As more and more foreign experts (expats) work and live in Vietnam, one of the issues of concern is the obligation to pay personal income tax (PIT) when they receive dividend income from abroad. This type of income is considered financial investment income and often arises for individuals with international investment portfolios.

1. Legal basis

According to the Personal Income Tax Law of Vietnam, foreigners identified as resident individuals in Vietnam (i.e., present in Vietnam for 183 days or more in a year, or having a permanent residence/leased house for 183 days or more) are required to declare and pay tax on their worldwide income, including foreign dividend income.

If the individual is a non-resident, they are only required to pay PIT on income generated in Vietnam.

2. How is foreign dividend income taxed?

• Source of income: Dividends paid by a foreign company in which the expat holds shares.
• Tax basis: Dividend income is categorized as income from capital investment.
• Tax rate: Under current law, the applicable tax rate for income from capital investment (including dividends) is 5% of the total amount received.

3. Foreign Tax withholding and double taxation agreements

In many cases, the country where the company pays dividends may withhold a portion of tax before transferring the money to shareholders. As a result, expats may face double taxation (both in the country of origin and in Vietnam).

However, Vietnam has signed numerous Double Taxation Agreements (DTAs) with other countries. If the country where the dividend income arises has a DTA with Vietnam, expats can apply for tax credits or exemptions accordingly to avoid double taxation.

4. Declaration and payment obligations

• Expats residing in Vietnam must declare foreign dividend income in their annual PIT finalization return.
• Required documents typically include: PIT Code, TRC, proof of income, tax withholding certificates from the foreign country (if any), and documents related to the applicable tax treaty.
• The deadline for PIT finalization is usually no later than April 30 of the following year.

For expats living in Vietnam, foreign dividend income remains subject to personal income tax. Understanding the legal framework, applicable tax rates, and leveraging double taxation agreements will help expats comply with their obligations while optimizing financial benefits.