Service contract in Vietnam: hiring an independent contractor without creating an employment relationship

A service contract in Vietnam is an agreement under which the service provider performs work for the service user and the user pays a service fee (Article 513 of the Civil Code). It is the usual way to engage an independent contractor in Vietnam: a translator, a designer, a software developer or a consultant on a defined project. A genuine service contract with an individual carries no compulsory social insurance, and the company withholds 10% personal income tax from each payment of VND 5 million or more to a resident (Article 50(2) of Decree 253/2026/ND-CP). The Decree took effect on 1 July 2026, but its rules on employment income of residents apply to the whole 2026 tax year (Article 69(1)(a)). Guides that still quote a VND 2 million threshold are relying on Circular 111/2013/TT-BTC, replaced by Circular 87/2026/TT-BTC from 1 July 2026.

The label on the document does not decide the relationship. An agreement that provides for paid work, wages and management, direction or supervision by one party is a labour contract, whatever it is called (Article 13(1), second paragraph, of the Labour Code). For a foreign-invested company, contractor misclassification is the main risk: a contractor who in practice works like a staff member brings back-dated social and unemployment insurance, a 0.03% daily surcharge and administrative fines. Vietnamese law has no separate "independent contractor" status; a service contract in Vietnam is either a genuine civil contract or, in substance, employment.

Which law governs a service contract in Vietnam?#

The Civil Code has a dedicated section on service contracts, Articles 513 to 521, and it is the starting point for any service contract in Vietnam with an individual. The object is work that can be performed and is not prohibited by law or contrary to social ethics (Article 514). No particular form is required: oral, written or by conduct, with data messages treated as writing (Article 119(1)). Sign in writing anyway; the contract is your evidence for both the tax deduction and the withholding.

The Commercial Law (consolidated text 113/VBHN-VPQH) has its own rules on the provision of services, Articles 74 to 87, which apply to traders (Article 3(9)). An individual is a trader only if he or she trades independently, regularly and with a business registration (Article 6(1)). In practice:

• An unregistered freelancer: the Civil Code applies.
• A registered individual business, household business or service company: the Commercial Law applies, with the Civil Code filling gaps (Article 4(3)). The practical difference is the penalty clause. Under the Commercial Law a contractual penalty may not exceed 8% of the value of the breached obligation (Article 301). Under the Civil Code the parties set the amount freely unless another law provides otherwise (Article 418(2)). See penalty for breach of contract in Vietnam.

Service contract vs labour contract: the differences that matter#

The core question in any service contract vs labour contract comparison is who organises the work: a service provider sells a result and decides how to achieve it, an employee works under the employer's management.

Point	Service contract	Labour contract
Subject	Work and its result (Civil Code, Article 514)	Paid employment under management (Labour Code, Article 13(1))
Who organises the work	The provider; the user sets quality, quantity, deadline and place (Article 516(1))	The employer manages, directs and supervises
Delegation	Allowed with the user's consent (Article 517(2))	Not allowed; the employee performs personally (Labour Code, Article 28)
Compulsory social and unemployment insurance	No	Yes, for Vietnamese employees on contracts of at least 1 month
PIT on a resident	10% withheld from payments of VND 5 million or more	Progressive rates for contracts of 3 months or more
Termination	Civil Code Articles 520 and 428	Only on Labour Code grounds and notice periods

For contract types, renewals and notice periods on the employment side, see types of employment contracts in Vietnam.

When is a service contract in Vietnam reclassified as employment?#

Three statutes use the same wording. The Labour Code treats as a labour contract any agreement "under another name" whose content shows paid work, wages and management, direction or supervision by one party (Article 13(1)). The Law on Social Insurance 41/2024/QH15 (Article 2(1)(a)) and the Law on Employment 74/2025/QH15 (Article 31(1)(a)) use the same test for compulsory social and unemployment insurance.

The law gives no list of indicators of contractor misclassification. The checklist below is derived from the three elements of Article 13; it is not a statutory list. The more boxes ticked, the higher the risk:

1. The individual clocks in, or works the company's office hours or shifts.
2. He or she is subject to the internal labour rules, discipline and a line manager assigning tasks day to day.
3. Pay is a fixed monthly amount, not tied to deliverables.
4. The work is a permanent role on the organisation chart (in-house accountant, sales staff, receptionist).
5. The individual has a job title, company email or uniform like an employee.
6. He or she may not work for other clients and must ask permission to take time off.
7. Successive contracts cover the same open-ended work.

A defensible engagement of an independent contractor in Vietnam has a defined deliverable, payment against milestones or acceptance, and a provider who chooses his or her own hours, place and tools and may serve other clients. How the parties actually work outweighs the drafting: if task emails and timesheets show daily supervision, a clause on "independent working hours" will not help.

Social insurance: what reclassification costs#

A genuine service contract creates no compulsory social insurance. Article 2(1)(a) of Law 41/2024 covers only employees under labour contracts (indefinite term, or a fixed term of at least 1 month) and agreements under another name that have all three elements of employment; none obliges the client to contribute for an independent provider. If a contract is reclassified, the obligations run from the date the person fell within the scheme:

• Registration deadline: the employer must file the social insurance registration within 30 days of the employee becoming subject to it (Article 28(1)).
• Late payment or evasion: failure to register within 60 days after that deadline is late payment (Article 38(2)); beyond 60 days it is evasion (Article 39(1)(a)). Unemployment insurance follows the same pattern (Articles 38(3) and 39(1)(b)).
• Arrears: the employer pays the full amount plus 0.03% per day on the unpaid amount for each day of delay (Articles 40(1) and 41(1)). Evasion may also lead to criminal liability as provided by law (Article 41(2)).
• Part-time workers are covered only if their monthly wage is at least the minimum contribution base (Article 2(1)(l)).
• Foreign nationals are covered only under a fixed-term labour contract of at least 12 months, with exceptions such as intra-company transferees (Article 2(2)); see social insurance for foreign employees.

Fines under Decree 283/2026/ND-CP are stated for individuals; a company pays double (Article 7(1) and (2)(b)).

Breach	Decree 283	Individual rate, fewer than 10 workers (company x2)
No social insurance registration more than 60 days after the deadline (evasion)	Article 44(1)	VND 6–12 million; 10 to under 50 workers: VND 12–20 million
No registration within those 60 days (late payment)	Article 43(2)	VND 5–10 million
No unemployment insurance registration, more than 60 days	Article 46(1)	VND 1–5 million
No written labour contract for work of 1 month or more	Article 15(1)	VND 2–5 million (1 to 10 workers)

Remedial measures add registration, payment of the arrears and the 0.03% daily amount (Articles 44(3)(a) and 46(4)(a)). The bands rise with headcount, up to VND 70–75 million at 1,000 workers or more (Article 44(1)(h)). The Decree has no specific offence of "using a service contract instead of a labour contract"; applying Article 15(1) to that situation is our reading.

Tax on a service contract in Vietnam: 10% withholding from VND 5 million#

Remuneration is employment income under the Law on Personal Income Tax 109/2025/QH15 (Article 3(2)(b)). For wages, remuneration and other payments to a resident individual who has "no contract or a labour contract of less than 3 months", Article 50(2) of Decree 253/2026 provides:

• Payments of VND 5 million or more: the payer withholds 10% before paying.
• Payments below VND 5 million: no withholding is required; the payer may withhold 10% if the individual asks.
• Commitment letter: if the individual has only income subject to this 10% withholding and expects taxable income after family deductions to fall below the taxable level, he or she may give the payer a commitment (in the form set by tax administration guidance) and the payer does not withhold. At year end the payer still reports these individuals and their income to the tax authority.

The personal deduction is now VND 15.5 million a month (VND 186 million a year) plus VND 6.2 million a month per dependant (Article 10(1) of Law 109). On our calculation, an individual with no dependants and total annual income of no more than VND 186 million owes no tax and can give the commitment. The form in common use, 08/CK-TNCN, belongs to Circular 80/2021/TT-BTC, which Circular 89/2026/TT-BTC repealed from 1 July 2026 (Article 99(3)(h)). We have not identified the commitment form number under Circular 89, so check with the tax office before using the old form.

If the individual has a main job elsewhere and this extra income averages no more than VND 15 million a month over the year and has been withheld at 10%, he or she need not include it in the annual finalisation (Article 51(1)(b) of Decree 253). Amounts declared and withheld under the old rules between 1 January and 30 June 2026 are not re-filed month by month or quarter by quarter; they are adjusted in the 2026 finalisation (Article 70(2)).

The 10% withholding does not apply in three situations:

• Registered individual or household businesses. Business income of residents is not withheld, except for sales through e-commerce and digital platforms with ordering and payment functions, business cooperation with organisations, agents selling insurance, lottery and multi-level marketing products at fixed prices, and brokers contracting with organisations (Article 67(4)(a) of Decree 253). The individual files his or her own return, and annual revenue of VND 1 billion or less is free of personal income tax (Article 7(1) of Law 109 as amended by Law 09/2026/QH16, which lets the Government set the level; VND 1 billion applies from 1 January 2026 under Decree 68/2026/ND-CP as amended by Decree 141/2026/ND-CP). Independent practice is business income only where the individual holds a professional licence or certificate and has a business registration (Article 3(1)(b) of Law 109, Article 7(2) of Decree 253). Fees paid to an individual without a business registration, whether or not he or she holds a professional licence or certificate, are employment income and are withheld at 10% as above (Article 8(2)(c) of Decree 253).
• Your own employees on contracts of 3 months or more. Article 50(2) covers only people without a contract or with one under 3 months. On our reading, extra payments for work outside the employment contract are still employment income withheld at progressive rates together with salary (Article 50(1)).
• Non-residents. Employment income received for work performed in Vietnam is taxed at 20% (Article 21 of Law 109), withheld by the payer before payment (Article 67(1) of Decree 253). Residence rules are in personal income tax for foreigners in Vietnam.

An individual's tax identification number is his or her personal identification number (Article 11(1) of Law 108/2025/QH15 on Tax Administration), so the contract should record it.

Invoices, VAT and supporting documents#

An unregistered individual paid a fee normally issues no invoice. Goods and services of household and individual businesses with annual revenue up to the level set by the Government are not subject to VAT (Article 5(25) of the Law on VAT 48/2024/QH15, as amended by Law 09/2026/QH16); that level is VND 1 billion from 1 January 2026 (Decree 68/2026/ND-CP as amended by Decree 141/2026/ND-CP).

To deduct the cost for corporate income tax, purchases of services from individuals and household businesses below the VAT revenue threshold need proof of payment and a purchase list signed by the legal representative or an authorised person (Article 9(1)(b) of Decree 320/2025/ND-CP). A single payment of VND 5 million or more, or several payments to the same person on one day totalling that amount, must be made by non-cash means (Article 9(1)(b) and (c)). Keep these with the contract, the acceptance record and the withholding certificate or commitment. Other deduction rules are in how to calculate corporate income tax in Vietnam.

Foreign individuals working under a service contract in Vietnam#

"Performing economic or social contracts or agreements", "contractual service supplier" and "service seller" are among the forms of work by foreigners in Vietnam governed by Decree 219/2025/ND-CP (Article 2(1)(c), (d) and (dd)). A foreign consultant who comes to Vietnam to work under a service contract as a manager, executive director, expert or technical worker (Article 3) therefore still needs a work permit unless an exemption applies; see work permit exemptions and work permit application.

On tax, Article 21 of Law 109 taxes a non-resident at 20% on income "for work performed in Vietnam". On our reading, work done entirely outside Vietnam needs separate analysis, including whether foreign contractor tax applies and how a double tax treaty affects the result.

Drafting a service contract in Vietnam: clauses to include#

The Civil Code rules are mostly defaults, so a service contract in Vietnam has to fill the gaps itself.

1. Scope and deliverables. Result, quality, quantity, deadline and place (Articles 516(1) and 517(1)). The more the contract is tied to deliverables, the further it sits from employment.
2. Acceptance and timetable. Delivery milestones, review period and what silence means. Absent agreement, payment is due at the place of performance on completion (Article 519(3)); if the service falls short or is late, the user may reduce the fee and claim damages (Article 519(4)).
3. Fee, tax and payment. State whether the fee is gross or net of personal income tax, who bears the 10%, and payment by bank transfer to an account in the provider's name. Without an agreed price, the market price at the time and place of contracting applies (Article 519(2)).
4. Materials and personal performance. The user provides information, documents and equipment if agreed or needed (Article 515(1)); the provider must report gaps at once and return materials on completion (Article 517(3) and (4)). By default the provider may not delegate without consent (Article 517(2)).
5. Confidentiality. The duty arises only if agreed or required by law (Article 517(5)). Add a clause or an NDA with a post-termination period.
6. Rights in the work product. Articles 513 to 521 do not say who owns code, designs or text created under the contract. State the transfer, its scope and timing, checked against intellectual property law for each type of output.
7. Termination for convenience. The user may terminate if continuing is "no longer beneficial" to it, even without any breach by the provider, but must give reasonable notice, pay for work done and compensate for loss (Article 520(1)). Either party may terminate for the other's serious breach (Articles 516(2) and 520(2)). Turn "reasonable notice" into a number of days and agree how compensation is calculated. Termination takes effect when the other party receives the notice (Article 428(3)).
8. Overrun. If the deadline passes, the work is unfinished and the provider carries on with the user's knowledge and without objection, the contract automatically continues until completion (Article 521). To stop on the deadline, object in writing.
9. Penalties, damages and disputes. Say whether a penalty and damages can be combined; if the contract is silent, only the penalty applies (Article 418(3)). The 8% cap applies where the Commercial Law governs. The limitation period for contract claims is 3 years (Article 429), but the Commercial Law sets 2 years for commercial disputes (Article 319); where the provider is a trader, plan on 2 years to be safe.
10. What to leave out. Fixed working hours, compliance with internal labour rules, employee-style bonuses and discipline, and a fixed monthly salary unrelated to deliverables. These put the content of a labour contract into a service contract.

Frequently asked questions about a service contract in Vietnam#

Does a service contract need notarisation? No. The Civil Code does not require notarisation or certification of a service contract; only a specific law could (Article 119(2)).

Can we renew a service contract with the same contractor repeatedly? Yes. The two-fixed-term-contract limit applies only to labour contracts. The risk lies in the substance: successive contracts for the same permanent work, paid monthly, point to employment.

Can a foreign-invested company engage a local accountant on a service contract? Yes, for a defined scope (monthly bookkeeping, annual statements) where the accountant organises his or her own work. A full-time in-house accountant working under the director's instructions is likely an employee. An accountant who holds a practising certificate but has no business registration still earns employment income, so the company withholds 10% from each payment of VND 5 million or more (Article 8(2)(c) of Decree 253). An accountant with a business registration earns business income (Article 7(1) and (2)), files his or her own tax, and the company does not withhold 10% (Article 67(4)(a)).

Classifying each service contract in Vietnam correctly avoids insurance arrears and disputes over deliverables. LexData can review contractor, consultant and freelancer agreements through its commercial contracts service, and help move contractor roles onto labour contracts through its employment law advice. This article is general information, not advice on a specific case.