Salary After Tax: How to calculate and simplify Payroll in Vietnam

Salary after tax is what employees actually receive each month, but calculating it can be tricky with multiple deductions and regulations. terra helps HR teams and business owners understand how to calculate salary after tax in Vietnam, use the right tools, and simplify payroll management through reliable outsourcing solutions.

What does “salary after tax” mean?

Salary after tax refers to the actual amount employees take home after deducting compulsory Personal Income Tax (PIT) and mandatory contributions to Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI).

Simply put, it’s the money that’s deposited into your bank account each payday – the income you use for daily expenses, savings, and investments.

Gross vs. Net vs. Salary after tax

• Gross salary: The total amount agreed upon before any deductions, including base pay, allowances, and taxable benefits.
• Net salary: The amount received after all mandatory deductions (PIT and insurance), often used interchangeably with salary after tax.
• Salary after tax: In this guide, it has the same meaning as net salary.

Why businesses should understand it

• Clarity and transparency: Ensures clear communication in job offers, contracts, and payroll schedule to prevent misunderstandings.
• Regulatory compliance: Helps calculate PIT and insurance correctly, reducing risks during audits.
• Effective cost management: Enables companies to design competitive compensation packages while staying within legal frameworks.

How to calculate salary after tax in Vietnam

To determine your salary after tax, start with the basic formula below:

The standard employee contribution rates in Vietnam are as follows:

• Social Insurance (SI): 8%
• Health Insurance (HI): 1.5%
• Unemployment Insurance (UI): 1%

Note: UI (Unemployment Insurance) 1% contribution is only for Vietnamese employees. Foreign employees working in Vietnam are generally not required to contribute to UI.

Note for Expatriates (Non-Tax Residents): If an employee is classified as a non-tax resident in Vietnam (staying less than 183 days within a 12-month period), their PIT is calculated differently. They face a flat tax rate of 20% on all taxable income earned in Vietnam, and they cannot claim family deductions.

Step 1: Identify total gross salary

The gross salary represents the total income before any deductions. It typically consists of the base salary along with allowances such as transportation, housing, meals, phone, and performance-based pay like commissions or bonuses.

Some of these allowances are fully taxable, while others are exempt up to a specific limit. To prevent payroll disputes, companies should clearly define in writing which allowances are taxable or contributable in their internal pay policies.

Certain key allowances are tax-exempt up to a statutory limit. For example:

• Meal allowance is exempt from PIT up to VND 730,000/month per employee (if paid in cash/vouchers). If the company organizes the meals itself, the entire amount is exempt.
• Housing allowance (if paid monthly) is exempt up to 15% of the total taxable income (excluding housing, utilities, etc.).
• Uniform allowance is exempt up to VND 5,000,000/year (if paid in cash).
• Mobile phone allowance is exempt based on the amount specified in the company’s internal financial regulations.

Step 2: Deduct mandatory contributions

Employees are required to contribute 8% for SI, 1.5% for HI, and 1% for UI based on the insurance salary (usually the base salary plus certain allowances, within the statutory cap).

Example: If the insurance base is VND 20,000,000/month, the contributions will be:

• SI: 20,000,000 × 8% = 1,600,000
• HI: 20,000,000 × 1.5% = 300,000
• UI: 20,000,000 × 1% = 200,000

Total contribution: 2,100,000 VND

Taxable income before deductions: 20,000,000 – 2,100,000 = 17,900,000 VND

Step 3: Calculate personal income tax (PIT)

For tax residents in Vietnam, PIT is calculated using progressive tax brackets after applying family deductions. The standard deduction amounts are VND 11,000,000 for the taxpayer and VND 4,400,000 per dependent.

Continuing the example with no dependents:

Taxable income = 17,900,000 – 11,000,000 = 6,900,000 VND

Applying PIT rates:

• First 5,000,000 taxed at 5% → 250,000 VND
• Remaining 1,900,000 taxed at 10% → 190,000 VND

Total PIT payable: 440,000 VND

With one dependent, taxable income becomes 2,500,000 VND, resulting in 125,000 VND PIT at the 5% rate.

Step 4: Determine salary after tax (Net salary)

The final step is to subtract both insurance contributions and PIT from your gross salary:

Formula:

Example results:

• Without dependents: 20,000,000 – (2,100,000 + 440,000) = 17,460,000 VND
• With one dependent: 20,000,000 – (2,100,000 + 125,000) = 17,775,000 VND

Salary after tax calculator – why should you use one?

Using a salary after tax calculator brings several key advantages:

• Minimizes errors: The calculator automatically applies the correct progressive PIT rates, insurance contribution caps, and allowance limits, eliminating manual miscalculations that could affect employee take-home pay.
• Saves time: Instead of computing each step manually, you can instantly simulate both gross-to-net and net-to-gross scenarios in seconds. This is especially useful when preparing job offers, payroll adjustments, or financial planning.
• Improves payroll accuracy: HR departments can cross-check salary data before processing payroll, ensuring consistency between salary structures, tax deductions, and insurance contributions. This helps maintain accuracy and fairness across all pay runs.
• Builds transparency and trust: When employees can clearly see how their net pay is calculated, it fosters confidence in the company’s payroll process and strengthens employee satisfaction.
• Supports compliance and audit readiness: Each monthly payroll run can be exported as PDF or Excel for recordkeeping, ensuring a clean audit trail and simplifying reconciliation during internal reviews or inspections.

See more: What is a fixed salary?

Common mistakes when calculating salary after tax

Even a small error in salary calculation can lead to payroll disputes or compliance issues. Below are the most frequent mistakes HR teams and employees should watch out for and how to avoid them:

Incorrect family deductions

This is one of the most financially impactful mistakes for employees. Personal Income Tax (PIT) is significantly reduced by the standard VND 11,000,000/month taxpayer deduction and the VND 4,400,000/month deduction for each registered dependent. An error here directly inflates the PIT payable.

The Consequence: The employee’s monthly take-home pay (salary after tax) is unnecessarily reduced due to higher PIT, leading to dissatisfaction and cash-flow strain throughout the year.

How to avoid:

• Establish a strict onboarding checklist requiring new hires to submit their dependent registration documents immediately upon starting.
• Implement a system to verify dependency status annually, as required by law.
• Ensure all submitted dependency forms (e.g., Form 02/DK-NPT) and supporting documents are securely filed for potential tax audits.

Using outdated insurance caps or contribution rates

Mandatory contributions to Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI) are calculated based on both a fixed rate and a periodically adjusted maximum cap. Vietnam’s government often updates these caps (based on the Regional Minimum Wage or Base Salary) and, occasionally, the contribution rates themselves.

The Consequence: Inaccurate contributions lead to either over-deduction (employee loss) or under-deduction (company liability and risk of penalties from the Social Insurance agency). This is a primary audit risk area.

How to avoid:

• Assign a dedicated HR/Payroll staff member to track and implement annual government updates on contribution rates and statutory caps.
• Mandate a quarterly review of new government decrees detailing the Regional Minimum Wage (which affects the UI cap) and the base for SI/HI calculations.
• Clearly define the “Insurance Base” in the employment contract and use this amount, up to the legal cap, for all mandatory contribution calculations.

Confusing gross vs. net salary

The fundamental source of many salary disputes is the lack of clarity in the employment contract regarding whether the agreed-upon figure is “Gross” (before all deductions) or “Net” (the amount deposited into the bank).

The Consequence: Companies that promise a Net salary take on an unpredictable financial risk, as labor costs increase automatically whenever tax or insurance rates rise.

How to avoid:

• Strongly recommend using the Gross salary as the primary figure in all employment contracts for maximum transparency.
• If a Net salary must be offered, include an extremely detailed contractual clause that clarifies:
  – The Net salary is computed based on current PIT and insurance rates.
  – How potential future changes in tax/insurance rates will be managed and who bears the increased cost.

Overlooking taxable allowances

Assuming allowances like cash meal benefits are entirely exempt, when in fact, the amount exceeding the current threshold (e.g., VND 730,000/month for cash meal allowance) is fully taxable.

The Consequence: The company may under-declare the employee’s taxable income, leading to an underpayment of PIT and potential back-taxes and fines during a tax inspection.

How to avoid:

• Regularly review tax Circulars (especially Circular 111/2013/TT-BTC) to confirm the specific exemption limits for common benefits.
• Classify every allowance in your payroll policy as fully taxable, partially exempt (up to a limit), or fully exempt.
• Ensure clear communication between the HR/Payroll team and the accounting department regarding the tax treatment of non-cash benefits and allowances.

Payroll services in Vietnam – simplifying salary management

Managing payroll in Vietnam requires constant updates on labor laws, accurate tax and insurance calculations, and strict data security. Many companies now turn to payroll outsourcing to reduce manual workload and compliance risks, allowing HR teams to focus on strategic growth instead of administrative tasks.

Why businesses choose payroll outsourcing

Payroll outsourcing offers several advantages: It minimizes HR administrative burden, ensures full compliance with Vietnamese labor and tax regulations, and secures confidential employee data.

By outsourcing, businesses can avoid high costs tied to time and attendance software and specialized staff, while gaining access to standardized processes, automated accuracy, and reduced dependency on key personnel.

terra’s Payroll solutions for FDI and local companies

Salary management and calculation are complex tasks that require precision and compliance with legal standards. To simplify this process, many companies choose payroll outsourcing services.

terra Payroll Service in Vietnam offers:

• Accuracy & compliance: Always updated with the latest laws.
• Time & cost savings: No need to invest in payroll software or dedicated HR staff.
• Data security: Advanced protection of sensitive information.
• Expert support: A team ready to handle complex payroll issues.
• Customized payroll solutions: Flexible packages suitable for different business sizes.

By using outsourced payroll services, companies can focus on core business activities while ensuring employee satisfaction and legal compliance.

To learn more about payroll outsourcing services in Vietnam, visit terra official website or contact the hotline at +84 28 7102 0608 for tailored consultation.

Conclusion

In short, understanding how to calculate salary after tax helps both employees and businesses ensure fairness, transparency, and compliance in payroll. By mastering key formulas, keeping track of tax and insurance updates, and leveraging automated payroll tools, companies can streamline operations and focus on strategic growth instead of manual calculations.