Managing employee records and setting up labor contracts
Employee profile is a mandatory content for businesses, for foreign workers, employee records also relate to the ability to be issued a work permit, residence card, personal income tax filing and payment obligations, procedures for opening a bank account ... Foreigners should have a clear understanding of the requirements of each type of record and keep fully updated to meet the requirements of local state agencies during his time working in Vietnam.
The employment contract is important procedure that establishes the rights and obligations between the employee and the enterprise. The employment contract is also related to mandatory personal income tax obligations, insurance, salary receipt procedures, and remittance of wages. Failure to manage the form, content and terms of the labor contract will lead to serious disputes or increase tax costs, impeding other foreigners' jobs.
- Identity records.
- Profile proving competency and professional experience.
- Decision of appointment.
- Job invitation.
- Labor contract.
Work permit and temporary residence card
- The foreign worker is required to present a work permit upon immigration and upon receipt of a request from the competent state authority. Foreign workers working in Vietnam without work permits will be expelled from Vietnam according to the Government's regulations. Using of foreign employee without a work permit will be dealt with in accordance with the law.
- After obtaining a valid work permit, a foreigner can be issued a temporary residence card. The temporary residence card can be considered as a type of long-term visa. However, unlike Visa, temporary residence cards have a longer duration, usually issued for a period of 1 year to 5 years. Foreigners with temporary residence cards will be exempted from visas and can enter and exit multiple times according to work needs within the duration of the card, thus saving time and money. In addition, the holder of the temporary residence card can also sponsor for the card with an equivalent period for family members.
- After obtaining a work permit and temporary residence card, foreigners will be allowed to open all types of bank accounts, credit cards, savings books and fully use banking services as residents.
Salary calculation and taxable income management
- The salary of foreigners is not only based on the agreement between the parties but also must ensure the suitability of nationality, professional qualifications, experience, and positions. In case the salary is not reasonable, the tax authority will have domestic and foreign inspection and verification procedures affecting other jobs of the employee.
- In addition to salary, foreign workers can also receive other benefits such as travel expenses, housing, accommodation, insurance, tuition fees for children, concessional cards ... and these amounts are may be subject to personal income tax or may not be required to pay personal income tax, depending on the case. Many foreigners have incurred additional PIT taxes and fines for not properly managing these incomes.
- Foreigner's salary can be paid in USD or another foreign currency, the foreign currency payment procedure will be different for each bank.
Compulsory Social and Health Insurance
- The employee who is a foreign citizen working in Vietnam is subject to compulsory social insurance when having a work permit or a practice certificate or a practice license issued by a competent Vietnamese agency and having indefinite-term labor contracts, fixed-term labor contracts from full 01 year or more with employers in Vietnam.
- Regarding the employee's premium, from January 1, 2022, the employee who is a foreign citizen working in Vietnam is subject to compulsory social insurance, the monthly payment is equal to 8% of the amount of monthly salary to the pension and death fund. At the same time, the employer, on a monthly basis, pays the employee's social insurance premium as follows: 3% to the sickness and maternity fund; 0.5% to the labor accident and occupational disease insurance fund; 14% to the retirement and survivorship fund from January 1, 2022.
- Foreigners who are receiving a monthly pension or social insurance allowance when they no longer reside in Vietnam can authorize another person to receive a pension or social insurance allowance. In case they wish, they may enjoy the one-time allowance.
Personal income tax management
- To determine the valid PIT filing method for foreigners, tax authorities will base their passports, employment contracts, appointment letter / tax deduction documents, and rental contracts.
- Depending on whether the individual is a resident or non-resident, PIT declaration and finalization is also required for income generated in Vietnam or global income. The taxable income / tax rates between resident and non-resident individuals are completely different. Failure to make a clear and valid PIT declaration will result in fines from the tax agency in the coming years. A skilled advisor assists the client in managing employee records / statutory reports as well as reports / declarations to ensure that records are accurate from the start and for 3 or the next 5 years.
- Resident individuals having income generated abroad that have calculated and paid personal income tax abroad may deduct the tax paid abroad. The deductible tax amount must not exceed the payable tax amount calculated according to Vietnam's tax schedule calculated and distributed to the income generated abroad. The allocation rate is determined by the ratio between the income generated abroad and the total taxable income.
- Resident individuals earning income from salaries or wages in case the number of days present in Vietnam in the first calendar year is less than 183 days but counted for 12 consecutive months from the first day of presence at Vietnam is 183 days or more, the first tax period is 12 consecutive months from the date of entering Vietnam, the second tax period is according to the calendar year. The first tax year: make and submit the finalization dossier within 90 days from the 12 consecutive month's date. From the second tax year: make and submit the tax finalization dossier no later than the 90th day from the end of the calendar year.
- The resident who is a foreigner terminates the contract to work in Vietnam to make the tax finalization with the tax office before leaving the country.
- The personal income tax rate from salaries and wages of non-residents is determined by taxable income from salaries and wages (x) at the rate of 20%. Taxable income from salaries or wages of non-resident individuals is determined as income subject to personal income tax from salaries and wages of resident individuals.
- Tax rates and tax bases for resident individuals whose salaries and wages are determined by taxable income from business, wages, salaries are assessable incomes. Assessable incomes are equivalent to taxable incomes minus (-) the following deductions: Family deductions; Insurance premiums, voluntary retirement funds; Charity, humanitarian and study promotion contributions.
Termination of labor relations and related procedures
When terminating the labor relationship, the foreigner needs to manage the following documents to avoid arising risks:
- Agreement to terminate the labor contract.
- Decision to resign.
- Hand over minute.
- Minutes of labor contract liquidation.
- PIT withholding receipt.
- Cancellation or return of work permits and temporary residence cards.
- Complete tax finalization procedures and obtain a certificate of tax obligation completion before leaving Vietnam.