Is it possible to pay salaries for foreigners in foreign currency? The use of foreign workers and experts is increasingly popular, especially in new fields. Accordingly, can the company pay wages to foreign workers in foreign currency? Let us learn about this topic with LSX law firm as follow:
Is it possible to pay salaries for foreigners in foreign currency?
In principle, in the Vietnamese territory, all transactions and payments in contracts; agreements and other similar forms must not be made in foreign exchange; except for cases permitted by regulations of the State Bank; (according to Article 22 of the Ordinance on Foreign Exchange 28/2005/PL-UBTVQH11).
At the same time, Clause 14, Article 4 of Circular No. 32/2013/TT-NHNN states that residents and non-residents being organizations may negotiate and pay salaries; bonuses and allowances in labor contracts in foreign currencies transfer/cash to non-residents; residents who are foreigners working for that organization. Minimum wage for foreign workers?
On the other hand, Clause 2, Article 95 of the Labor Code 2019 also stipulates:
2. The salary stated in the labor contract and the salary paid to the employee is in Vietnam Dong. In case the employee is a foreigner in Vietnam, it may be in a foreign currency.
Thus, based on the above provisions; the company may negotiate the salary stated in the labor contract; and pay the foreign worker’s salary in foreign currency through wire transfer or cash; (the form of payment is agreed upon by the two parties and stated in the labor contract).
Salary in foreign currency, how to calculate social insurance contributions for foreigners?
In details of social insurance premiums for foreigners, according to Article 26 of Decree 115/2015/ND-CP; an employee whose salary stated in the labor contract is in foreign currency shall:
The monthly salary on which social insurance premiums are based; calculated in Vietnam Dong on the basis of foreign currency wages converted in Vietnam Dong at the average exchange rate on the inter-bank foreign currency market set by the Bank. The State of Vietnam announced at the time of January 2 for the first 6 months of the year; and July 1 for the last 6 months of the year.
If the date falls on a holiday that the State Bank of Vietnam has not yet announced; the exchange rate of the next day following the announcement by the State Bank of Vietnam shall be used.
In addition, the monthly salary on which social insurance premiums are based; recorded in the social insurance book, also the salary in Vietnam Dong converted at the above exchange rate.
How to convert salaries for foreigners in foreign currency when calculating PIT?
According to Clause 1, Article 5 of Circular 111/2013 of the Ministry of Finance as amended in Circular 92/2015; personal income taxable income in Vietnam Dong.
If taxable income received in a foreign currency; it must be converted into Vietnam dong at the actual buying exchange rate of the individual bank opening a trading account at the time of income generation.
If the taxpayer does not open a transaction account in Vietnam; he/she must convert the foreign currency into Vietnam Dong at the buying exchange rate of the Joint Stock Commercial Bank for Foreign Trade of Vietnam at the time of income generation.
In case a foreign currency does not have an exchange rate with Vietnam Dong; it must be converted into a foreign currency with an exchange rate with Vietnam Dong.
At the same time, Article 5 of Circular No. 200/2014/TT-BTC also stipulates the same.
Therefore, the income subject to PIT of foreign workers must be converted into Vietnam Dong for deduction; tax declaration, tax finalization at the buying exchange rate of the individual bank opening a trading account at the time of income generation.
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Related questions
Foreign currency is the currency of another country or territory or the common currency of the European Union and other common currency used in international and regional payments (Clause 1, Article 2 of Circular 07/2012/TT-NHNN).
Foreign currency transaction (also known as foreign exchange transaction) includes: transaction of buying and selling foreign currency for spot; transaction of buying and selling foreign currency forwards; foreign currency swaps and options to buy and sell foreign currencies. In which, the spot purchase and sale of foreign currency is a transaction by two parties to buy and sell together an amount of foreign currency with Vietnam Dong or with another foreign currency at the spot exchange rate determined at the transaction date. (Clause 5, 6, Article 2 of Circular 15/2015/TT-NHNN)
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