Case Study No. 6 | Personal Income Tax Filing Obligations for Business Travelers to Vietnam and the Practical Limits of Tax Treaty Relief

What are the personal income tax filing obligations for Japanese employees on business trips to Vietnam? This article examines Vietnamese personal income tax (PIT) liability for short-term business travelers, the requirements and application procedure for exemption under the Japan-Vietnam Tax Treaty, the risk of being classified as a tax resident, and practical measures companies should take (gross-up arrangements, points to watch in housing lease contracts) — illustrated through a case study. Essential reading for legal and tax risk checks before any secondment or business trip to Vietnam!

01 - Overview of the Case

Company XXX had occasion to send employees of its Japan head office on short-term business trips to Vietnam. These employees ("business travelers") have no employment relationship with any local entity, and their salaries continue to be paid by the Japan head office.

Company XXX sought our legal opinion on whether business travelers temporarily present in Vietnam under this arrangement are subject to Vietnamese personal income tax (PIT) filing obligations, and whether an exemption is available under the Japan-Vietnam Tax Treaty.

02 - Legal Advice from Vietnamese Counsel

▶ Legal Issue 1: Are business travelers liable for tax even as non-residents?

Under Vietnam's Decree No. 65/2013/ND-CP and Circular No. 111/TT-BTC, even non-residents are required to file PIT on salary income arising within Vietnam.
In particular, where salary is paid as a result of work performed in Vietnam, that salary is treated as "Vietnam-sourced income" subject to tax, even where it is paid by a foreign entity (e.g., the Japanese parent company).

✅ Accordingly, where a business traveler of Company XXX performs work in Vietnam, the portion of salary corresponding to that work period will, in principle, be subject to Vietnamese PIT filing obligations.

▶ Legal Issue 2: Availability of treaty exemption and practical difficulties in its application

Under Article 15 of the Japan-Vietnam Tax Treaty, a business traveler's income is exempt from Vietnamese tax where all of the following conditions are satisfied.

① Presence in Vietnam of fewer than 183 days within any consecutive 12-month period
② Salary is not paid by a local entity
③ Salary is paid from Japan and booked as an expense on the Japanese side

However, actually claiming this exemption in Vietnam requires submitting an application and undergoing review by the authorities.

✅Required documents

Application for tax exemption
Japanese certificate of residence (original or certified copy)
Employment contract (evidencing the tax treatment)
Copy of passport
※ Some of the above documents require consular legalization and notarized translation.

▶ In addition, although the regulations specify a standard 30-day processing period, in practice we have confirmed that processing delays and a general lack of awareness of this procedure are common.

▶ Legal Issue 3: Risk of being classified as a resident, and related exposure

Even where the number of days present is under 183, entering into a lease of 183 days or more for a serviced apartment or similar accommodation can create a risk of being classified as a "resident."
In particular, care is required because a business traveler residing in housing leased under the company's name may still attract scrutiny from the authorities.

✅If classified as a resident, the traveler's worldwide income — both within and outside Vietnam — becomes taxable, creating a risk of added complexity in coordinating the tax treatment on the Japan side as well.

◆Conclusion and Recommended Course of Action◆

Under current Vietnamese tax practice, some tax liability is unavoidable even for business travelers, and claiming exemption under the tax treaty carries a substantial practical burden and considerable uncertainty.

✅Specific recommendations for Company XXX

Item

Recommended Response

Where a business traveler makes multiple trips to Vietnam per year

Assume the traveler is taxable and plan on withholding tax or self-filing

Only a single short trip (a few days to one week)

Consider applying for exemption (weighing the time and cost involved)

Form of accommodation lease

Recommend a lease under 183 days in the individual's own name (avoid contracts in the company's name)

No employment relationship with a local entity

Clearly document the allocation of Japanese salary and expenses in the contract

Gross-up arrangements

Consider reflecting the anticipated Vietnamese tax burden in the compensation structure