The employment of an expatriate by an enterprise is allowed but generally limited to a managerial position or to a position requiring a high level of expertise. Foreign employees, with a few exceptions, are required to obtain work permits when they work in Vietnam for 3 months or more (Labour Code 2013 could be interpreted as requiring work permits also for foreign employees who work for less than 3 months). Work permits are issued by the local DOLISA where the foreign employee is working. They are issued for a maximum period of 36 months (Labour Code 2013: 24 months) and may be renewed if no qualified Vietnamese national has been found in the meantime to replace the foreigner. Decree 46/2011/ND-CP requires that a vocational training contract with a Vietnamese national is submitted together with the application for renewal of a work permit if the foreigner has a local employment contract.
Before employing a foreigner on the basis of a local employment contract, the employer must run a job advertisement in national and local newspapers at least 30 days prior to hiring the foreigner; proof to this effect has to be submitted together with the application for issuance of a work permit. There is no such requirement if the foreigner (i) is seconded to Vietnam from the parent company or (ii) hired through a recruitment agency. In case the first case (“internal transfer”), the parent company has to confirm that the employee has worked for the parent company for at least one year.
Foreigners working in Vietnam for less than 3 months do not need a work permit (according to Labour Code 2013, this may change). However, the employer has to inform the authorities 7 days prior to the commencement of the employment and submit most of the documents that are also required if a work permit is applied for. This notification requirement is often ignored in practice.
It has been reported that employees seconded to Vietnam who work in a sector covered by Vietnam’s WTO commitments do not have to obtain a work permit. While it is true that Decree 46/2011/ND-CP contains such an exemption, a work permit is still needed in practice as implementing guidelines are missing.
The Labour Code 2013 introduces the requirement that before an enterprise hires a foreigner, it must explain its need to employ the worker to, and receive written consent from, the competent authorities. It remains to be seen how this provision will be implemented in practice.
Foreigners can either (i) have a local employment contract or (ii) be seconded from the parent company (“internal transfer”). In case of an internal transfer, the parent company has to be able to confirm, in the application for the work permit, that the employee worked for the parent company for at least one year. An employee seconded from the parent company is not subject to Vietnamese labour legislation and not required to pay health insurance contributions. It is a bit easier to obtain a work permit for a secondee as prior job advertisements in a Vietnamese newspaper – which are necessary in order to obtain a work permit in case a foreigner is hired locally – are not required. Furthermore, at least according to the opinion of the Ho Chi Minh City DOLISA, a local labour contract with a foreigner has to state the salary amount in VND (payment of the salary can still be made in a foreign currency after the VND amount has been converted into the foreign currency). A secondee, in contrast, has a labour contract with the parent company with his or her salary being expressed in a foreign currency. Unlike a locally hired foreigner, a secondee therefore does not run the risk of the value of his salary decreasing in line with inflation in Vietnam.
According to the wording of Art. 2 Circular 84/2008/TT-BTC as amended by Circular 62/2009/TT-BTC, not all personal income tax incentives may be available to secondees, although they seem to be granted in practice. A secondee is (of course) subject to Vietnamese personal income tax, but there is a gray area whether the local company to which the person is seconded has to withhold personal income tax from his or her salary or whether the secondee alone is responsible for payment. At least if the salary is directly paid by the parent company to the secondee, there should be no obligation on the side of the Vietnamese subsidiary to make withholdings.
If the secondee’s salary is paid by the parent company and later reimbursed by the Vietnamese subsidiary, care has to be taken to avoid Vietnamese withholding tax (“foreign contractor tax”) on the payment by the Vietnamese subsidiary to the foreign parent company.
The Ho Chi Minh City tax authorities take the view that a foreign employee who becomes tax resident in Vietnam in a particular year is liable to Vietnamese personal income tax with regard to the income he or she achieved since 1 January of that particular year even if he or she started to work in Vietnam only on, let’s say, 1 March. This means that the foreign employee is obliged to report his or her income earned abroad prior to his or her arrival and pay Vietnamese personal income tax on it. Credit for foreign personal income tax paid on this “pre-arrival” income is available in Vietnam, but requires a complicated procedure.