Personal Income Tax applicable to employees receiving shares is a matter of significant concern for both enterprises and employees, particularly as Employee Stock Ownership Plans (ESOPs), share-based incentives, and stock option programs become increasingly common in Vietnam.

I. Common difficulties employees encounter when declaring taxes on shares

In practice, many employees who receive bonus shares or participate in Employee Stock Ownership Plans (ESOPs) do not fully understand the timing of tax liabilities, the method for determining taxable income, or the applicable tax declaration procedures under Vietnamese law. It often results in incorrect tax declarations, late tax payments, or subsequent tax reassessments and collections by tax authorities.

One of the most common difficulties is the confusion between the time of “receiving shares” and the time of “transferring shares” when determining Personal Income Tax obligations. Furthermore, determining the value of shares as the basis for tax calculation may be particularly complex if the shares are unlisted or subject to transfer restrictions.

For employees working for foreign-invested enterprises or multinational corporations, receiving shares from an overseas parent company may also involve international tax regulations, double taxation avoidance agreements, and additional tax declaration obligations in Vietnam.

II. Concept of Personal Income Tax applicable to employees receiving shares

1. What is Personal Income Tax applicable to employees receiving shares?

Personal Income Tax (PIT) may be understood as a direct tax imposed on individuals, requiring taxpayers to contribute a portion of their salary, wages, or other sources of income to the State budget after applicable deductions and exemptions have been applied.

Pursuant to Clause 1, Article 121 of the Law on Enterprise 2020, a share is a certificate issued by a joint-stock company, a book-entry record, or electronic data evidencing ownership of one or more shares in such a company.

Personal Income Tax applicable to employees receiving shares refers to the tax liability incurred when employees receive shares from an enterprise through mechanisms such as share bonuses, stock option plans, or employee share ownership programs (ESOPs).

2. Do PIT obligations for shares differ between resident and non-resident individuals?

Resident individuals and non-resident individuals may be subject to different tax calculation methods and tax rates with respect to share-related income.

For resident individuals, income derived from shares may be subject either to the progressive tax rate schedule or to specific tax rates, depending on the nature of the income, such as employment income or income from securities transfers. In contrast, non-resident individuals are generally subject to fixed tax rates applicable to each category of taxable income arising in Vietnam.

Accordingly, determining an individual’s tax residency status is a critical factor in accurately calculating PIT obligations relating to shares.

3. Which forms of receiving shares are subject to PIT?

Common forms of receiving shares that may lead to PIT obligations include:

  • Share bonuses awarded to employees;
  • Employee Stock Ownership Plans (ESOPs);
  • Preferential stock option programs;
  • Shares granted in lieu of cash bonuses;
  • Shares received from an overseas parent company;
  • Income derived from the transfer of awarded or preferentially issued shares.

However, in many circumstances, the tax obligation arises only when the employee transfers the shares or realizes actual income from the sale of such shares in accordance with prevailing tax regulations.

III. Legal regulations relating to Personal Income Tax applicable to employees receiving shares

1. In which cases are employees entitled to PIT exemptions or reductions when receiving shares?

Pursuant to Article 4 of the Personal Income Tax Law 2025 and its implementing regulations, certain types of income derived from capital investments or securities transfers may qualify for tax exemptions if the statutory conditions are satisfied.

However, with respect to bonus shares or ESOP shares granted to employees, current legislation does not provide a tax exemption in all circumstances. Tax liabilities are generally determined when actual income is realized from the transfer of the shares.

In addition, if an individual is entitled to the benefits of a Double Taxation Avoidance Agreement (DTAA) between Vietnam and another jurisdiction, the individual may be eligible for reduced tax obligations under the relevant treaty, provided all applicable conditions are met.

Accordingly, employees should carefully assess each share program and their tax residency status to determine whether any tax exemptions or reductions may apply.

2. What are the tax declaration requirements for employees receiving shares?

Pursuant to Article 8 of Decree No. 126/2020/ND-CP, taxes may be declared on a monthly, quarterly, annual, per-occurrence, or tax-finalization basis, depending on the nature of the tax obligation.

Accordingly, PIT relating to employees receiving shares may be declared as follows:

  • Monthly PIT declarations;
  • Quarterly PIT declarations, if the taxpayer satisfies the conditions for quarterly tax declaration under Article 9 of Decree No. 126/2020/ND-CP or falls within the following categories:
    + Organizations or individuals paying income that are required to withhold PIT and are eligible to declare Value-Added Tax (VAT) on a quarterly basis and elect quarterly PIT declarations;
    + Individuals earning salary or wage income who directly declare taxes with the tax authority and elect quarterly PIT declarations;
  • Per-occurrence PIT declarations in respect of income derived from capital transfers.

In many cases, the employer will withhold and declare PIT on behalf of employees. Nevertheless, individuals may still be required to conduct annual tax finalization procedures if additional tax liabilities arise.

3. Is an enterprise required to withhold PIT when issuing shares to employees?

Pursuant to Clause 3, Article 12 of the Law on Tax Administration 2025, income-paying organizations are responsible for withholding tax before making payments to individuals in circumstances prescribed by law.

For share bonus programs or ESOPs, the employer’s withholding obligations depend on several factors, including:

  • The type of shares issued;
  • The timing at which taxable income arises;
  • The method of share transfer;
  • The company’s share management mechanism.

In practice, many enterprises maintain separate records for employee share incentive programs in order to facilitate future tax declarations and withholding obligations when employees subsequently transfer their shares.

If an enterprise fails to properly fulfill its withholding and tax declaration obligations, tax authorities may impose tax reassessments, administrative sanctions, and late payment interest in accordance with tax administration regulations.

IV. Questions regarding Personal Income Tax (PIT) when employees receive shares

1. Is it necessary to declare tax in Vietnam when receiving shares from a foreign company?

If an individual qualifies as a tax resident of Vietnam under the provisions of the Personal Income Tax Law, income arising both within and outside the territory of Vietnam may be subject to tax declaration obligations in Vietnam.

Accordingly, if an employee receives shares from a parent company or an overseas group entity through an ESOP, share bonus scheme, or stock option program, such receipt may lead to tax declaration obligations in Vietnam, depending on the specific circumstances.

In addition, the individual should consider whether a Double Taxation Avoidance Agreement (DTAA) between Vietnam and the relevant foreign jurisdiction may apply in order to avoid double taxation.

2. If shares are received but subject to transfer restrictions, will Personal Income Tax still apply?

Under many share bonus plans and ESOP programs, shares may be subject to transfer restrictions for a specified period. In such circumstances, the determination of when a tax liability arises will depend on the nature of the transaction and the applicable tax regulations.

Generally, for certain employee share award programs, PIT obligations are only triggered when the individual transfers the shares or otherwise realizes an actual economic benefit from those shares.

However, each share program may operate under a different mechanism. Thus, employees should carefully review the issuance documents and the employer’s guidance to accurately determine their tax obligations.

3. Can an employee authorize the company to conduct pit finalization for shares received?

In many cases, employers assist employees with PIT declaration, withholding, and tax finalization procedures relating to income derived from salaries, wages, or employee share incentive programs.

However, if an individual has multiple sources of income or engages in complex securities transactions, the individual may still be required to directly conduct tax finalization procedures with the tax authorities.

4. Is it necessary to retain supporting documents relating to shares received for PIT finalization purposes?

Employees should retain all records and supporting documents relating to the receipt of shares in order to facilitate tax declaration and provide explanations to tax authorities when required. Important documents typically include:

  • Share bonus award decisions;
  • ESOP agreements;
  • Share allocation notices;
  • Securities account statements;
  • Tax withholding certificates;
  • Share transfer documents;
  • Documents evidencing the valuation of shares;
  • Related payment records and supporting documents.

Maintaining complete records can help individuals minimize the risk of tax reassessments and facilitate explanations during tax inspections or audits.

5. Can tax be reassessed if shares received are not properly declared?

If the tax authorities determine that an individual has derived taxable income from shares but has failed to declare such income in accordance with applicable regulations, the taxpayer may be subject to:

  • Collection of unpaid taxes;
  • Late payment interest;
  • Administrative sanctions for tax violations;
  • Or more serious legal consequences where there are indications of tax evasion.

Currently, information relating to securities transactions, bank accounts, and corporate records is increasingly integrated with tax administration systems. As a result, concealing or failing to declare share-related income may expose taxpayers to significant legal and tax risks.

V. Why should you seek legal advice from NPLaw regarding pit issues when employees receive shares?

Issues relating to Personal Income Tax when employees receive shares are often highly specialized, particularly in connection with ESOP programs, shares granted by foreign companies, or transactions involving international elements. Even a minor error during the tax declaration process may result in tax reassessments, sanctions, or disputes with tax authorities.

With a team of experienced lawyers and tax professionals specializing in taxation and corporate matters, NPLaw assists clients with:

  • Advising on tax obligations relating to share bonus schemes and ESOP programs;
  • Assisting with PIT declarations and tax finalization procedures;
  • Advising on the application of Double Taxation Avoidance Agreements;
  • Reviewing legal risks associated with shares and securities transactions;
  • Representing clients in dealings with tax authorities during tax inspections, audits, or tax disputes.

Engaging legal counsel at an early stage enables both enterprises and employees to effectively manage their tax obligations, minimize risks, and safeguard their legitimate rights and interests when participating in corporate share programs.

The information provided above is for reference purposes only. Should you require detailed advice regarding a specific matter, please contact NPLaw for immediate legal consultation.