Employer Sanctions Increased for Illegally Employing Foreigners and Income Tax Payment Required for Departing Foreigners Who Worked in Vietnam
Dang The Duc, Managing Partner, and Nguyen Ngoc Oanh, Legal Assistant, Indochine Counsel, Hanoi, Vietnam
In response to difficulties regarding labor and tax issues for foreign workers in Vietnam, the Vietnamese Government's Labor Code and Law on Tax Administration introduced new penalties, in two separate decrees, for non-compliance with work permit and foreigners' income tax requirements. These changes have been enacted to strengthen the Vietnamese Government's management of foreign workers and encourage both local employers and foreign workers to give their undivided attention to labor agreements.
Increased Administrative Penalties for Employers Illegally Employing Foreigners
The maximum administrative penalty for employers has been increased from the previous amount of 20 million Vietnamese Dong (VND) to 75 million VND by Decree 95.1 Article 22 of Decree 95 discusses the work permit requirement and stipulates the amount of money an employer will be fined based on the number of unauthorized foreigners that the employer employs (except in the case of a legitimate exemption from work permit requirements or with expired work permits).
Employers that employ foreign workers without work permits will be liable for the following fine based on the number of workers involved:
- if 1 through 10 workers are employed, a fine ranging from 30 million VND to 45 million VND;
- if 11 through 20 workers are employed, a fine ranging from 45 million VND to 60 million VND;
- if 21 workers or more are employed, a fine ranging from 60 million VND to 75 million VND.
Furthermore, employers are threatened with the additional penalty of suspending the company's operation for a period ranging from one to three months following the same stair-step categories listed above.
Regarding foreign employees, aside from individuals exempted from the work permit requirement, foreigners cannot enter Vietnam for the purpose of working there without work permits and other related personal documents (i.e. passport, temporary residence card). Additionally, anyone working without a valid work permit in Vietnam will be deported by the Ministry of Public Security at the request of the provincial Department of Labor, Invalids and Social Affairs.
Paying Personal Income Tax (PIT) before Leaving Vietnam
According to Decree 83,2 foreigners departing Vietnam are required to fulfill their PIT obligation prior to departure. Article 40.2 of Decree 83 provides that the tax administration agencies are responsible for issuing a written certification, at the foreigner's request, that all tax liabilities were fulfilled before foreigners' departure from Vietnam.
The decree also indicates that the immigration management agencies at the border gates of Vietnam have the responsibility of preventing foreigners from exiting Vietnam if the tax administration agency notifies them that the foreigner has outstanding PIT debts. In such situation, a foreigner's exit will be suspended until his/her PIT debt is completely paid.
1Decree No. 95/2013/ND-CP, dated August 22, 2013, of the Government on penalties of administrative violations in labor, social insurance and overseas manpower supply by contract ("Decree 95"), taking effect October 10, 2013 and replacing Decree No.47/2010/ND-CP, dated May 6, 2010, of the Government on administrative penalties for breach of law on labor.
2Decree No. 83/2013/ND-CP, dated July 22, 2013, detailing a number of articles of the Law on Tax Administration and the Law Amending and Supplementing a Number of Articles of the Law on Tax Administration ("Decree 83").