FDI companies in Vietnam have consistently played a crucial role in contributing to Vietnam's economy and its growth. Since the authorization of foreign investment in 1988, Vietnam FDI has been pivotal in transforming the country into a highly appealing destination for international investors. The country’s robust growth in securing FDI has garnered positive feedback from […]
FDI companies in Vietnam have consistently played a crucial role in contributing to Vietnam's economy and its growth. Since the authorization of foreign investment in 1988, Vietnam FDI has been pivotal in transforming the country into a highly appealing destination for international investors. The country’s robust growth in securing FDI has garnered positive feedback from […]
Vietnam, with timely and effective support from the Government in controlling Covid-19, does not face significant disadvantages compared to other countries, but still has some changes related to Business Operations. Thus, in this article, we will provide you with the latest update on Vietnam’s pandemic controlling results, some emerging trends impacting the Vietnam business operation, and legal changes.
Overview of Vietnam’s Covid-19 controlling results (Until Jan 2021)
Vietnam has controlled the epidemic well, created favourable conditions for recovery and development of socio-economic activities. According to the World Health Organization, Vietnam is among the few countries with good disease control and has had a right, timely, effective and low-cost way.
As of December 29, Vietnam’s Ministry of Health confirmed a total of 1,451 cases of COVID-19. However, 1,318 of the affected patients have recovered and been discharged from hospitals, 35 deaths till now.
Three of the confirmed cases are attributed to illegal entering with health authorities contract tracing and quarantining all F1 and F2 contacts.
Vietnam has agreed to allow South Korean business travelers to fly between both countries without completing the 14-day quarantine. The agreement is expected to take effect on January 1, 2021, though details are yet to be finalized.
The macroeconomy remains stable; inflation is controlled, great balances are guaranteed; achieved a positive growth rate in the context of a severe global economic recession. The annual growth rate (GDP rate) is estimated at over 2%, striving to reach about 3%. This makes Vietnam the highest positive growth rate country compared to 5 major economies in Southeast Asia, is in the top 16 most successful emerging economies in the world
Agriculture affirms its role as the pillar of the economy in difficult times. Growth for the whole year is estimated at 2.6% (higher than the 2.01% in 2019). The agricultural sector is restructured more practically and efficiently, especially rice production to increase both productivities, output, and selling price, and firmly ensure national food security.
The industrial sector faces many difficulties but still achieved a growth rate of 2.5%. The structure of the internal industry continued to change positively; the proportion of processing and manufacturing industries increased, including electronics, pharmaceuticals, medical supplies, food processing, chemicals, wood processing ...
Institutional improvement, administrative reform, e-Government development, towards digital Government and digital economy has been focused and implemented drastically, achieving many positive results.
Foreign affairs and international integration have achieved many important achievements. The position and prestige of Vietnam in the international arena has been increasingly enhanced.
Major trends impacting the Vietnam business operation post-Covid
The results from trusted reports show that although the pandemic has had a serious impact on many industries, the impact on the financial services industry is still quite limited. There are seven main trends affecting the Business Operations post-Covid-19, which are:
Low interest rates will continue to have a strong impact on margins and business operation models.
The pandemic recession and the decline in asset value will impair risk tolerance for state-managed sectors to support the economy as it enters the recovery phase in the next year.
Non-traditional funding agencies will play an important role in the global financial system.
The Covid-19 pandemic will not delay, but may even promote the implementation of existing or planned regulatory measures in many countries and regions.
The reversal of globalization will continue to adjust the size of financial institutions relative to the GDP growth of the host country, while maintaining production and exports. Going abroad will increase business operational risks across the industry.
Companies are constantly facing the pressure to increase productivity through the digitization of business operations and workforce.
To meet customer needs, the shift of the financial services industry to operating on platforms and ecosystems will create a new wave, reduce intermediaries and create breakthroughs.
*Source: Viettonkin Research Team
Legal highlights latest updates 2021
Vietnam’s National Assembly passed the revised Law on Enterprises, and the Law on Investment aimed to make doing business in Vietnam less cumbersome.
Both laws will take effect on January 1, 2021, and are timely given the passage of the new free trade agreements such as the EVFTA and the CPTPP.
While the government is likely to issue forthcoming circulars and decrees on implementation, Vietnam Briefing highlights the main points on the revised laws.
Enterprises with more than 50 per cent of the charter capital owned by the State will be considered SOEs as compared to the current ratio of 100 percent. Article 88 of the Law on Enterprises also divides types of SOE according to the different levels of ownership.
Protection for minority shareholders
The revised law removes the requirement that a shareholder or a group of shareholders must hold ordinary shares for at least six consecutive months to exercise the rights of shareholders. Moreover, shareholder(s) that own five per cent or more of common shares have the following rights:Review, search, and extract the minutes’ books and resolution, decisions of the Board of Directors, financial statements, except documents related to trade and business secrets;Request a convening of a general meeting of shareholders in some specific cases; andRequest the Supervisory Board to examine each specific issue related to management and administration when deeming it necessary.
Private companies can be converted into limited liability companies, joint-stock companies, and partnerships
The Law on Enterprise 2020 has many regulations directly affecting M&A, such as allowing private enterprises to transform into joint-stock companies, instead of only allowing them to be converted into limited liability companies as stipulated in the current Enterprise Law. This regulation will help increase opportunities and more favourable for small and medium enterprises to participate in the M&A process.
Changes to the Law on Investment 2021
Criteria
Detail
Conditional business lines
Among the new changes, the law makes amendments to the list of sectors and business lines requiring conditional market access. Conditional market access is business lines in which the investment must satisfy specific statutory conditions in order to gain market access. Especially, the amended law outlaw’s debt collection services, while abolishing or reducing conditions for 22 business lines, such as commercial arbitration, and franchising and logistics services.
The list that is subject to conditional market access
Tobacco detoxification provision services;HIV/AIDS treatment;Elderly care;Water sanitization;Architectural services;Import press distribution services;Electronic identification and authentication services;Fishing vessel registration; andFishing vessel crew training, among others.The law also contemplates a list of business lines restricted to foreign investment. The NA Standing Committee has emphasized the need to balance national security and investment attraction for socio-economic development, especially for coastal and remote areas.
Incentives and investment support
To ensure the quality of foreign investment, the amended law includes specific conditions for sectors that are entitled to investment incentives. These include:Innovation-related sectors such as Information Technology (IT), R&D, digital content, hi-tech, new and clean energy, and production of intermediate goods participating in value chains and industry clusters, among others;To ensure the effectiveness of incentive schemes, maintaining incentives is conditional to the performance of the previous support package. More specifically, the government would set a definite term for incentives and would extend or scrap it in accordance with the outcome of the incentive;The Prime Minister can apply special incentives to create a favourable mechanism and policies to attract FDI inflows. Notably, the law allows a maximum discount rate of more than 50 per cent compared to the highest level prescribed by the current law; andThe law also provides special incentives for projects with an investment capital of over VND 3 trillion (USD 128.4 million), and VND 10 trillion (USD 428 million), with certain conditions.
Investment procedures
The law removes the need for a Merger and Acquisition (M&A) approval if the transaction does not result in an increase of foreign investors’ ownership ratio in the target company. M&A transactions that result in an increase of foreign investors’ ownership ratio in the target company, and exceed the 50 per cent of shares or charter capital would be subject to an M&A approval. In addition, projects with an investment capital of VND 10 trillion (US$428 million) will not be required approval from the Prime Minister.
Changes to the Law on Public-private partnership (PPP)
Vietnam’s new public-private partnership (PPP) law aims to attract more private and foreign investment by clarifying the existing legal framework.
The changes introduced are in response to growing demands for investment, especially in the infrastructure sector.
Though some uncertainties remain, the government has demonstrated its willingness to make Vietnam a favourable business environment.
To sum up, thanks to the Government’s well control of Covid-19, Vietnam is one of the few countries that have been less affected by the pandemic and is believed to continue to grow in 2021 while the rest of the world is projected to fall into a crisis. If you want to start your business in Vietnam and come across any challenges of doing business in Vietnam, do not hesitate to contact us – the top consulting firms in Vietnam, Viettonkin is always ready to assist you !
According to Vietnamese Law on Accounting, Audit and Compliance is the examination and confirmation of the compliance of your company. To make sure your company stays compliant in the market, this aspect must be focused. Therefore, in this article, we will share a condensed guideline about Audit and Compliance for Foreign Investors doing business in Vietnam.
READ MORE: Audit & Assurance to find how we can help your business to stay compliant in Vietnam.
Overview of Audit and Compliance in Vietnam
According to Article 15 of Decree No. 17/2012 / ND-CP dated March 13, 2012, the Law on Independent Audit, the following subjects are required annual financial report auditing:
Foreign-invested enterprises;
Credit institutions established and operated under the Law on Credit Institutions, including foreign bank branches in Vietnam;
Financial institutions, insurance enterprises;
Public companies, issuers and trading organizations;
Other enterprises and organizations are required to be audited according to relevant law provisions.
Fiscal year
The Vietnamese Law on Accounting set the principles for accounting, audits, and enterprise structure, for businesses to comply in Vietnam. The tax in Vietnam is determined according to the solar calendar year, and a Vietnamese - based auditing company must be in charge of the audit.
The financial statements are sent to the Vietnam Ministry of Finance and the Statistics Office 90 days before the end of the Fiscal Year.
For the fiscal period, you can choose either the solar calendar fiscal year starting from Jan 01, or the 12-month fiscal period beginning on the first day of any quarter.
*Note: The audit and compliance requirements are different between foreign-invested companies (FIC) and representative offices (ROs).
According to the Enterprise Law, all foreign-owned companies are required to have annual financial statements audited by an independent audit firm. The legal audits in Vietnam were performed in accordance with the Vietnamese Standards on Auditing.
Audited financial statements and tax finalization records must be made within 90 days of the end of the Fiscal year.
After fulfilling these obligations and notifying the local tax authority at least 07 working days in advance, you are entitled to remit profits abroad. There will be no tax on repatriation profits.
Once performing the audit, you must maintain accounting records based on the Vietnamese Accounting Standards (VAS), in short - the requirements for accounting include:
- Use Vietnamese language (besides a foreign language, if any)
- Use VND as the currency
- Comply with Vietnamese chart of account (COA)
- Include reports according to VAS regulations, monthly printed, and signed by the General Director with the company seal.
In case you want to use a foreign currency other than VND for your financial records, you need to submit to the local tax authority. This currency unit must be the one used for banking transactions, services and quotations. This currency can also be used to account for revenues, pay staff’s salaries and raw materials.
You can choose to manage two accounting records; one based on VAS and the other compiled exclusively for its abroad headquarters. In fact, many foreign investors maintain the accounting system under VAS and only convert to IFRS, for the purpose of corporate consolidation, quarterly or even annually - this could be supported by the audit firm after completing the statutory audit.
Compliance For foreign-invested companies (FOCs)
For FDI enterprises, according to the Law on Independent Audit passed by the Vietnamese Government in 201, you must provide an audit report, the corporate finalization and personal income taxation annually. The audit and compliance requirements cludes:
Income Statements;
Financial position Statements (profit and loss);
Changes in equity Statements, if any;
Balance sheets.
Then, you need to submit the audited reports to three government agencies no later than 90 days after the end of the fiscal year. The three government agencies includes:
Provincial Department of Planning and Investment (DPI) or the Provincial Level Export Processing and Industrial Zone Department in the case of your business based in industrial zones (IZs) or export processing zones (EPZs);
Provincial-level tax departments;
Provincial-level statistical offices.
Audit and Compliance for representative offices (ROs)
Setting up a Representative office (ROs) is one of the simplest and fastest ways to establish a legal entity in Vietnam. Their report requirements are also more simple compared to FOCs.
READ MORE: Legal Service to find out more about how we can help tackling your problems and protecting your rights
Because ROs are forbidden from directly conducting profit-generating activities and are limited to market research, developing trade contacts, and gathering information on regulations and laws, their compliance requirements are also more simple than FOCs.
Procedure requirements check - list (2021 update)
Tax and accounting procedures
Mandatory:
PIT finalization
PIT finalization for individuals with multiple sources of income or have direct income from abroad
Tasks to note:
Complete cash book and petty card with appropriate invoices and vouchers for tax inspection
Re-audit the tax return - payment and tax receipts
Cross-check the balance - tax status with the tax agency
Annual activity Report
Prepare and submit the Report on the operation of the office during the year to the Department of Industry and Trade
Procedures for wage labor
Mandatory:
Signing a labor contract, an employment contract appendix for the new salary and income for the year for each employee in the country.
Provide appointment letter, confirmation letter of annual income for foreign workers.
Registering and adjusting the salary scale system, labor regulations, labor agreements ... to update regulations and welfare policies.
Complete information about the employee management book with content that needs updating such as days off, overtime hours, discipline, salary increases, …
Tasks to note:
Performing income verification procedures, issuing PIT withholding vouchers for seasonal employees, employees earning direct income from abroad.
Determine a list of personnel subject to PIT self-finalization with the tax office.
Non-compliance penalties (2021 update)
According to the Government’s latest Penal Code, enterprises that do not comply with compliance law can be considered as criminal and must take responsibility before the law.
If the tax authorities find false in the financial report, after the audit, 20% tax will be applied to the under-declared amount.
In addition, the enterprise is also fined 0.03% of the daily interest rate for late tax payment. To sum up, Audit and Compliance is no longer complicated and confusing once you understand it. If you want to start laying the groundwork for your business in Vietnam, please always remember that you can always find a loyal and reliable partner. Us Viettonkin are always ready to accompany you at any time ! Please contact us on the website for more information !
In the midst of the Covid-19 pandemic that disrupted global and regional supply chains, the signing of the Agreement for Regional Comprehensive Economic Partnership (RCEP) marks an important milestone in Vietnam's economic integration process. Thus, this brings benefits both in the short and long term.
READ MORE: Global Incorporation to find out about how Viettonkin can help you grab opportunities abroad.
Together with ASEAN countries, Vietnam has absolutely the opportunity to become a hub to attract foreign investment, especially from countries participating in the Regional Comprehensive Economic Partnership (RCEP).
The agreement was signed on November 15, 2020. The FTA is expected to cover all aspects of business including trade, services, e-commerce, telecommunications, and copyright through negotiations over some aspects still need to be finalized. Tariffs are expected to be reduced within 20 years. The RCEP covers a market of 2.3 billion people and US$26.2 trillion in global output. This accounts for about 30 percent of the population worldwide and over a quarter in world exports.
Opportunities for Vietnam
1. The market is expanded
According to expertise, RCEP has created a market of more than 2.2 billion consumers with a scale of nearly 27,000 billion USD, accounting for nearly 30% of global GDP. Mr. Tran Ngoc Liem - Deputy Director of Vietnam Chamber of Commerce and Industry, City branch. Ho Chi Minh City - share: The effective RCEP will create a huge, stable and favorable market for participating countries.
Strongly boosting the regional and global value chains, helping the economy of Vietnam and other ASEAN countries develop faster, creating conditions for enterprises to expand markets, improve import and export turnover ( Import and export) and attract investment.
The global business community has also paid special attention to RCEP recently, because this is a large import-export market of many businesses, many potential export sectors (export). According to Mr. Nguyen Tien Chuong - Chairman of Dong Nai Import-Export Association, major export markets of Dong Nai and the South export enterprises focus on: Japan, Korea, ASEAN and European countries (EU).
Implementing the RCEP, enterprises are entitled to tax reduction and simpler customs procedures, making it easier for them to expand consumption markets in the countries participating in the agreement. In addition, with the member countries in RCEP, Vietnam has had a number of separate signatures such as: Vietnam - Japan Economic Partnership Agreement (VJEPA); FTAV Vietnam - South Korea ... However, RCEP will still help increase and expand trade with major economies in the world.
2. Moving from Open Door to the global value chain
Vietnamese enterprises can more easily access raw materials from member countries to produce exports. For example, it is possible to import electronic chips from Japan and Korea; imported raw materials for textile and leather from China, then produced domestically and exported to other countries, at the same time, to satisfy the rules of origin within the bloc to take advantage of tariff preferences.
Vietnamese businesses will participate in the value chain and regional production, while also benefiting from the reduced transaction costs and a more friendly business environment through existing rules and general application in different ASEAN FTAs.
3. Importing cheaper goods, especially input materials for production.
According to the Ministry of Industry and Trade, in 2019, our country imports from ASEAN 32.1 billion USD, in 2020 is expected to import 32.2 billion USD, trade deficit is 6.85 and 8.6 billion USD respectively. RCEP will help open the door to importing cheaper goods, especially input materials for production.
At the same time, raw materials for business production imported by Vietnam from RCEP countries will also be considered as a source of raw materials for production in Vietnam when exporting products to countries that have a bilateral agreement. , multilateral with Vietnam.
4. Attracting more investment
RCEP will help Vietnam "open up" space for investment and trade in the long term, especially in the context of the Covid-19 pandemic.
Currently, China, Japan, Korea ..., and even Singapore, Thailand, Malaysia are speeding up investment abroad to expand production and supply chains. Vietnam, as Minister of Planning and Investment Nguyen Chi Dung said, is a safe and attractive destination. The opportunity to accelerate investment attraction from RCEP member countries will be greater than for Vietnam, especially when Vietnam is building many outstanding mechanisms and policies to catch the shifting investment capital flows.
More about the agreement, Ms. Nguyen Thi Quynh Nga - Deputy Director of Multilateral Trade Policy Department (Ministry of Industry and Trade) - said that for all ASEAN countries, this was a non-value-added agreement opening the market since ASEAN already has FTAs with partners. Instead, the RCEP is essentially an agreement connecting ASEAN's existing commitments with five partners to ASEAN in an FTA.
Ms. Nguyen Thi Quynh Nga cited, enterprises will only have to use 1 rule of origin instead of 5 separate rules of origin in previous FTAs. Similarly, customs clearance and trade facilitation rules were agreed and strengthened. "Therefore, basically will not create a commitment to open markets or new competitive pressure but mainly aim at creating favorable conditions for businesses, especially small and medium enterprises" - Ms. Nguyen Thi Quynh Nga emphasized.
With the view of harmonizing existing provisions of the existing ASEAN Agreements with partners, the agreement is considered to be of high value in reducing transaction costs, attracting foreign investment and enhancing its position.
For example, small and medium enterprises of ASEAN countries, including Vietnam, are difficult to take advantage of due to the different provisions between ASEAN Agreements and partner countries. With RCEP, these difficulties will be reduced because it will only share a single set of rules and allow the accumulation of content from all countries in the region.
Similarly, in the past, if there was a trade dispute with a major partner, it was more difficult for ASEAN countries to resolve. Now with a multilateral mechanism with all 15 participating countries, the trade rules will be followed more thoroughly.
"With such an angle, the RCEP Agreement will certainly not exacerbate the trade deficit, even possibly improve for Vietnam and ASEAN countries, especially in the long term" - Ms. Nguyen Thi Quynh Nga affirmed. concentration.
In fact, the process of negotiating market access commitments under RCEP involves close research and suggestions from relevant ministries and businesses to ensure the best interests of Vietnam.
Challenges facing the RCEP Negotiations
But with RCEP, the story is not just the investments between RCEP members. The prosperity and large market size of the RCEP bloc will also make this region the focus of global investors.
It is true that RCEP can bring competitive pressures on Vietnamese goods and services. Because the economies in the RCEP region have many partners with similar product structure to Vietnam, with stronger competitiveness than Vietnam, while the quality and value-added content of most of Vietnam's products are still modest. Therefore, when RCEP comes into effect, competition pressure will increase.
Moreover, Vietnam's investment in manufacturing still depends on imported sources, while the ability to improve its position in the regional value chain is limited, and the level of participation in the provision of trade in services.
Vietnam's global economy is still quite modest. However, we also do not worry about the possibility of increasing the trade deficit because the commitments made with the process of tariff liberalization implemented for many years, the RCEP will not create a tariff reduction shock for Vietnam.
Reality with international integration experience shows Vietnam's ability to join newly established value chains in the region. Vietnam also innovates strongly in administrative procedures, facilitating production and business activities and improving the investment environment.
To sum up, with commitments that are different and flexible from the signed Free Trade Agreements (FTAs), RCEP is forecast to provide a framework for simplifying procedures and facilitating trade liberalization. Therefore, it helps the businesses deeply participate in the global supply chain that pushes the Vietnamese economy.
The Representative Office (RO) has no function of profit generating, but functions such as researching, approaching market expansion, promoting brands, products, contacting customers … So, it can be fairly essential to get one. Thus, how is the procedure and compliance how to establish representative office in Vietnam as well as dissolution? The following article of Viettonkin Consulting will share useful information about the RO establishment and termination procedures and related issues. Let us find out with us for useful information for doing business in Vietnam.
Procedures and Compliances how to establish representative office in Vietnam
Setting up a Representative office (ROs) is one of the simplest and fastest ways to establish a legal entity in Vietnam. Their report requirements are also more simple compared to FOCs.
READ MORE: Legal Service to find out more about how we can help tackling your problems and protecting your rights
Because ROs are forbidden from directly conducting profit-generating activities and are limited to market research, developing trade contacts, and gathering information on regulations and laws, their compliance requirements are also more simple than FOCs.
Procedure requirements check - list (2021 update)
Tax and accounting procedures
Mandatory:
PIT finalization
PIT finalization for individuals with multiple sources of income or have direct income from abroad
Tasks to note:
Complete cash book and petty card with appropriate invoices and vouchers for tax inspection
Re-audit the tax return - payment and tax receipts
Cross-check the balance - tax status with the tax agency
Annual activity Report
Prepare and submit the Report on the operation of the office during the year to the Department of Industry and Trade
Procedures for wage labor
Mandatory:
Signing a labor contract, an employment contract appendix for the new salary and income for the year for each employee in the country.
Provide appointment letter, confirmation letter of annual income for foreign workers.
Registering and adjusting the salary scale system, labor regulations, labor agreements ... to update regulations and welfare policies.
Complete information about the employee management book with content that needs updating such as days off, overtime hours, discipline, salary increases, …
Tasks to note:
Performing income verification procedures, issuing PIT withholding vouchers for seasonal employees, employees earning direct income from abroad.
Determine a list of personnel subject to PIT self-finalization with the tax office.
Procedures and Compliances for Dissolution
In order to carry out the procedures for dissolution of a representative office in accordance with the promulgated law, the enterprise needs to fully perform the following steps:
Step 1: Deactivate tax identification numbers with tax authorities.
Step 2: Procedures to return seal, confirm not to use seal (in case there is no seal).
Step 3: Prepare documents on dissolution of representative office.
Step 4: Submit the application
Step 5: Get results
Procedures for Tax Identification Number (TIN) deactivation
In order to be able to validate the Tax Identification Number of the representative office, you need to submit the application to the administrative tax office. Types of papers and documents include:
Official letter on TIN deactivation.
The decision to close the representative office of the board of members (LLC) / the board of directors (shares) / owner / business owner (private).
Meeting minutes of the Board of Directors / Board of Members on the dissolution of the Representative Office.
Power of attorney for the company's filers.
Instructions to return the seal, confirm not to use the seal of the representative office
According to the Enterprise Law 2014, effective on July 1, 2015. In case representative offices have been established before this time, when completing the procedures to close the representative office, it is necessary to submit a dossier to return the seal or confirm the seal is not used with the police. We would like to advise a set of documents for customers as follows:
Official letter confirming no use / return seal.
Decision to dissolve Representative Office.
Meeting minutes of the Board of Directors / Board of Directors on the closure of Representative Office
Power of attorney, a referral for the company submitter.
Original seal registration certificate, seal in case you pay the seal.
Profile dissolution representative office
After completing the procedures for the code and the seal, the next job that the enterprise needs to do is to prepare papers and documents in the dossier set to close the representative office.
RO's profile that will include the following categories:
Notice of dissolution of RO (Download the form in Appendix II - Circular 20/2019 / TT-BKHDT HERE).
Decision of the Owner / Board of Directors / Business Owner / Board of Members on the closure of Representative Office. Or revocation decision of the competent state agency.
Minutes of the meeting of the Board of Directors / Shareholders' Council (if any).
Original certificate of representative office operation registration (can use a notarized copy).
Seal (if any) or Certificate of unused seal of the police agency.
Notice of tax termination.
Request for supplementing and updating operation registration information for representative offices issued with investment certificates (Download the form in Appendix II-19 of Circular No. 20/2019 / TT-BKHDT HERE).
Power of attorney / company referral for the applicant (FORM)
List of number of employees or their benefits in RO (if any).
List of debt amounts (including tax debt and social insurance debt) the business has not paid, a list of creditors (if any).
Submitting for closing representative office
When conducting the dissolution of a representative office, the enterprise needs to send a notice to the Business Registration Office where the representative office is located.
Next, businesses can apply through the following 2 ways:
Go directly to the business registration office where the representative office is located.
From the time the registration office receives a valid application, it will take about 05 working days including: Examining the application => changing the status in the Database from registration of Representative Office to termination => out Notice of termination of Representative Office operation (if the application is valid).
In the event that the Registration Office checks the file and finds that there are errors or omissions, it will issue a Notice of amendment and supplementation of the file to the enterprise.
Notably
- Responsibilities for the employees: when wishing to dissolve representative offices, domestic or foreign traders need to give advance notice, fulfill the obligation to pay wages, terminate rental contracts, labor contracts ...
- With tax authorities: need to fulfill all tax-related obligations and procedures.
- If the RO has been suspended for more than 1 year but the business owner does not notify the Business Registration Office or the tax authority, then the certificate of operation registration will be revoked. To avoid the situation of being revoked, enterprises need to do temporary business suspension procedures for the representative office if they intend to suspend the business.
- In case the RO location is not in the territory of Vietnam, the enterprise should dissolve in accordance with the regulations of that country. Then, within 30 days, to notify dissolution of the representative office to the Business Registration Office where the head office is located.
When we talk about Vietnam, we have to acknowledge it as one of the fastest-growing economies in Asia today. Vietnam also has become the primary source for programmer in Southeast Asia. However, keep in mind, the Vietnamese programmer is not as experienced in selling their skills, and finding the top talents in Vietnam can take a different approach. Thus, this article will provide you with tips for hiring pogrammer in Vietnam. Let’s keep reading!
According to Channel News Asia (CNA), Vietnam has a robust annual growth of 6% since 2010. In 2019, Vietnam has received over US$38.2 billion for total Foreign Direct Investments (FDI), which is a 7.2% year-on-year increase compared to 2018. Moreover, Singapore was Vietnam’s third-largest investor in 2019 with total investments of US$4.5 billion.
Singapore’s Direct Investments Abroad (DIA) into the country has more than tripled in the last decade. In addition, the seven Vietnam-Singapore Industrial Parks (VSIPs) have attracted over US$12.9 billion in investment for more than 800 companies in 2018.
Vietnam has a rapidly-growing technology community that attracted a wave of foreign investors, including venture capital funds and co-working space providers. The country’s heavy investment in technology and engineering, combined with improved internet connectivity and a young, low-cost workforce, has hatched a prospering IT outsourcing industry.
According to Vietnam’s Ministry of Science and Technology, the country is now home to roughly 30.000 IT companies, while churn out 80.000 IT graduates a year from its universities. Another interesting fact to add, there is top tech talent behind Vietnam's economic growth, and it increases the demand for programmer.
Programmer Types Available in Vietnam
Before hiring the top talents in the technology industry, you have to recognize the field of software development, because there are many different roles involved. If you want your software development project to work out successfully, your company should include different types of programmer in your team.
Frontend developers are specialists in user interface development. They include web developers with expertise in CSS, HTML5, Javascript, CMS, and WordPress, and frontend developers with Angular or ReactJS knowledge.
2. Backend Developers
Backend developers specialized in the performance and logic behind an application through the integration of Application Programming Interfaces (APIs). Common backend developers are C developers, Java developers, .NET developers, PHP developers, NodeJS developers, Python developers, and Ruby developers.
3. Mobile Developers
This type of developer specialized in mobile technology such as creating applications for Apple’s iOS, Google’s Android, or Microsoft’s Windows Mobile platforms. Developers with expertise in Ionic or React Native are also part of this category and are more difficult to find.
4. Offshore Full Stack Developers
Another type of software developer is offshore full stack developers. They can manage both backend and frontend software development in terms of Javascript, PHP, NodeJS, C# Net, and so on.
Salary and Benefits Expected by a Programmer in Vietnam
Software developers in Vietnam often expect the proper salaries and benefits for them to consider joining your company. Here is the guide for your reference:
1. Salary
Junior developers with 2 to 3 years of experience: US$500 - US$1.200 monthly
Senior developers with 3 to 7 years of experience: US$1.000 - US$2.000 monthly
UI / UX designers” US$600 to US$2.000 monthly.
2. Tax and Insurance
Employers in Vietnam are required to pay for their taxes, social insurances, health insurance, trade union fees, and unemployment insurance. All these payments are around 15% to 35% of an employee’s base salary.
3. Other Benefits
It is very common to include an employee’s benefit package, but it depends on their necessities and employer’s ability. Here are the common benefit packages for the employees:
A bonus on the Lunar New Year equals at least a one-month salary. This bonus is different from performance bonuses.
Annual company trip, either domestic or overseas.
Annual company dinner or party.
Private health insurance.
Training and career advancement opportunities.
Flexible working hours.
Premium office facilities.
What To Avoid When Hiring Programmer?
After knowing the tips for hiring software developers, you also need to keep in mind what things that you need to avoid these common mistakes when doing one.
1. Interviewing Programmer Candidates without Pre-screening
A recruiter can easily find 20 or 30 profiles matching the requirements, but interviewing all of them would take up a lot of time. Thus, the recruiter needs to pre-screening the candidates.
During pre-screening, the recruiter will have an initial interview and validate basic claims made by the candidates and how interested they are in the job.
2. Hiring Programmer Based on Their Resume Only
Some people may have great resumes and conquer all interview questions, but sometimes you find out that they just packaged themselves well. It can be the opposite, a skilled candidate may be terrible at presenting their skills. However, when hiring a software developer, a test assignment will usually tell you more about the candidate.
3. Making an Offer Without Understanding The Local Salary Standards
A recruiter’s objective should be to pay competitive market rates. Nonetheless, you can only do that by knowing what the local salary standard is for similar positions.
You also need to be cautious when a candidate asks for less than the market standard, it might be they likely do not have the qualifications you asked for or have some other issues you will not want to deal with later.
4. Not Understanding Local Employment Regulations
Being a foreign company does not exempt you from following local laws and regulations. For instance, in Vietnam, companies pay employees a TET (Vietnamese New Year) bonus. This is the 13th salary paid to employees before Lunar New Year. It is not mandatory by law but unless you agree otherwise, your employee will assume they get it.
Furthermore, employees will expect this on top of any other bonuses you give them, so you need to consider this when discussing the job offer. It is also good to know the regular working hours, annual leaves, and paid holidays when preparing an employment contract.
In conclusion, these are all the information related to hiring software developers in Vietnam. If you approach them in the right way, you will get the top tech talents for your upcoming companies. Finding the top talents in Vietnam can be easy as long as you can avoid the common mistakes, and start planning things ahead. If you are still unsure, do not hesitate to contact us. Viettonkin will always be ready to assist you!
Setting up a Representative Office (RO) is one of the first steps in founding your company in this newly emerged Southeast Asian market. How to set - up a Representative Office in Vietnam, especially in this Covid - 19 situation? This article will provide a cutting - edge starter-pack on how you’re going to set - up your company’s Representative Office.
What is a Representative Office permitted to do and NOT to do ?
A Representative Office is enabled to engage in the following activities to help promoting its parent company:
Conducting market researches;
Playing as a contact point for its parent company;
Promoting the activities of its head office through meetings and other activities, that leads to business at later stages
Representative offices may not conduct any other profitable business. A RO does not have the right to sign a separate contract on its own. The parent company bears all financial obligations arising from the operations of the Representative Office, so the accounting of the RO is dependent on the enterprise.
Thus, in case of wanting to establish more dependent units only with the function of assisting the business to access customers and partners not performing business functions, you may consider establishing representative offices to avoid having to fulfill complicated tax obligations. In addition, for the service industries not directly implemented at the address of representative offices such as tourism, construction, consulting, etc., the form of setting up one in other provinces is a wise option.
In general, a Representative Office is allowed to perform almost all activities the parent company does except direct trading and profits generating, all types of contracts must be signed by the parent company or the Representative Office. It doesn’t have the authority to sign sale and purchase contracts, all invoices and trading documents must be returned to the head office.
What you need to set up a Representative Office ? (Latest update 2020)
Pre - license checklist for setting up a Representative Office
Application for establishment of representative offices of foreign companies in Vietnam;
The legalization of the consular and the public certificate of business registration or the equivalent valuable papers of foreign traders where the foreign trader' s establishment is established;
Written appointment of the parent company;
The notarized translation of the financial statement or the written certification of the fulfillment of the tax liability or financial liability in the latest fiscal year or the equivalent valuable paper issued by the competent agency or organization in the locality where the foreign trader is established or certified or proved;
A notarized copy of the ID card (for Vietnamese) or a copy of the passport (for foreigners) of the Chief representative;
Documents on the expected location, including:
Certified copying office contract;
The certificate of the land use right certificate of the lessor (if the enterprise is hired by the enterprise to provide additional business registration certificates);
In addition, the location of the representative office of the foreign company must conform to the provisions of Vietnamese law on security conditions, order and hygiene and other conditions as prescribed by law.
Note: the entire application dossier for shall be signed and stamped by the parent company. If the parent company in foreign countries has no marks, the whole dossier must be consular legalized.
Post – licenses check-list for establish representative office in Vietnam
Once submitting your application for license, you can start arranging staffs, taxes, annual reports. Apart from those, other basic operations of a representative office, including:
Foreign currency account and VND accounts with foreign currency origin at banks licensed to operate in Vietnam. Only use this account for RO activities;
Annually written report on its activities during the year to the Department of Industry and Trade;
Set up a cash fund to record all revenues and expenditures during the operation of the RO;
Apply for a work permit for the foreign worker at the RO (if any);
Signing labor contracts with the representative and the employees of the RO;
Annually certifying the salary and income for the chief representative and the operations of the representative office;
Pay personal income tax, representative's insurance and representative office employees (if any).
Note, when submitting all tax returns and tax receipts from state agencies. Plus, annual income tax finalization for the representative and the employees of the representative office;
Other duties in accordance with the current law;
What’s next ?
The Business Registration Office shall issue the RO operation registration certificate to your company. It usually takes 03 working days since receipt of a valid application.
Within 30 days after being granted the RO operation registration certificate, you should publish your RO operation registration information on the National Business Registration Portal.
How long does it take to establish representative office in Vietnam?
It can take from six to eight weeks in total, including getting a main license, operating license and stamp. We recommend hiring a professional service to deal with the laws and procedures.
Thanks to the absence of in-country revenue and associated licensing requirements, the setup process does not entail as many bureaucratic procedures as others.
A Representative Office license is valid for five years but can be extended for another five years.
To sum up, above are the very first guidelines to establish representative office in Vietnam. Once you get the basic principles of the Vietnamese RO establishing process, it can be much more simple. Our Viettonkin legal specialists are always ready to support you with any procedure, license and certification. If you come across any obstacle, feel free to contact us below. Viettonkin will always be ready to give you a helping hand !
Franchise is indeed a mainstream business worldwide, including Vietnam. It also has a long-term perspective in the country. Many popular foreign brands are attracted by the business expansion there, while the local Vietnamese investors are looking for the opportunity to operate the business under the well-known brands that Vietnamese are familiar with. Another fact to add, there are a lot of famous franchise brands in Vietnam, such as KFC, Lotteria, Pizza Hut, Burger King, McDonald’s, The Coffee Bean & Tea Leaf, 7-Eleven, and Baskin-Robbins.
Therefore, the government has been working to create a friendly environment to do franchise business by easing the franchise regulations and processes, expecting the business will grow even more significantly. This article will provide you in-depth information all related to franchise business and agreement in Vietnam.
Who Can Open a Franchise Business in Vietnam?
In August 2019, the total number of both local and foreign franchise businesses in Vietnam were recorded at 213.
Based on the franchising law in Vietnam, there are the eligibility criteria on who can open a franchise in the country:
Franchise business from a Vietnamese franchisor to a foreign franchisee.
Franchise business from a foreign franchisor to a Vietnamese franchisee.
A franchise agreement must be signed and registered. If the agreement does not exist and is not registered, both parties will be fined.
There are conditions that both franchisors and franchisees have to meet these criterias. For franchisors, the franchisor’s business must be in operation for a significant period, minimum of 1-year. In addition, the franchisor must obtain written approval from the Ministry of Industry and Trade.
On the other hand, the franchisee must register their business in relevant sectors with regard to their franchise business in Vietnam. For a master franchisee in Vietnam to sub-franchisee to another party when permitted by the franchisor, the master franchisee must also have been operating for at least 1-year before the sub-franchising is conducted.
How To Start a Franchise Business in Vietnam?
In accordance with Decree No. 8/2018/ND-CP, before individuals or organizations can start a franchise business, they must follow these requirements:
The franchise system must have been in operation for a minimum of one year.
A master franchisee in Vietnam must also have been operating for at least a year before there is any sub-franchise.
Products and services offered by the franchise business must not be on the list of prohibited products and services issued by the Vietnamese government. Here are the prohibited items list:
Weapons
Toxic minerals
Addictive drugs
Harmful and dangerous toys to children
Wild animals
Plants
Environment-polluting imported scarps
Marriage broker services
Organised gambling
Adoption broker services
Certain franchise products and services must have special business licenses.
The franchisor must register its franchise with the Vietnamese Ministry of Industry and Trade, then submit required documents such as its disclosure document and franchise agreement, except for the cases in which registration of commercial franchising is not required.
The franchisor must also submit an annual report and update of any franchisees’ changes to the Ministry of Industry and Trade.
You must prepare the following required documents to register your franchise business in Vietnam:
Franchise agreement
Power of attorney
Franchise registration application form
Audited reports from the previous year
Introduction of the franchisor
Business certificate of the franchisor
Trademark or copyright certificate
Approval or permission document from the primary franchisor.
There is one thing that you need to remember, when you are expanding to Vietnam as a franchisor, you need to register your trademark with the National Office of Intellectual Property of Vietnam in order to keep your brand safe.
If you want to know more about how to set up a franchise business in Vietnam, you can read here.
Franchise Agreement in Vietnam
A Franchise agreement is an important part when you want to start a franchise in Vietnam. Moreover, a franchise agreement in the country is a compulsory commercial agreement that is signed between a franchisor and a franchisee. However, this franchise agreement must be in Vietnamese language.
The agreement indicates that the franchisee can buy or sell goods and services on its own, as long as the purchase and sale of products and services are performed based on manners that is specified by the franchisor, such as trade names, trademarks, business logos, business slogans, and advertising.
It can be said that the franchisor has the right to assist the franchise or take charge of running the business.
Generally, a franchise agreement shall cover the commercial rights for franchise, also the rights and obligations of both the franchisee and the franchisor. In addition, the agreement will include how much the franchise is free along with the valid period and payment method, period of effectiveness of the agreement. Lastly, terms and conditions for contract extension or termination, and what to do when conflicts arise must be mentioned in the franchise agreement.
The franchise agreement can be renewed, but the law does not designate any conditions in terms of the contract or renewal of the contract. Nonetheless, this should be negotiated by the parties. For this reason, you should examine all agreements very carefully to avoid costly inconveniences in the future.
Taxes on Franchising in Vietnam
One thing that you should not forget is paying taxes on franchising in Vietnam. Even if you are a foreign contractor and do not register a company in Vietnam, but still collecting fees from the franchisees, therefore, you are subject up withholding tax on any fees collected, including:
Franchise fees
Royalties
Administrative fees
Advertising fees
Management fees
Foreign franchisors in Vietnam are also subject to the withholding taxes for services in the country, such as, Value-Added Tax (VAT) 5% and Corporate Income Tax (CIT) 5%. Conversely, domestic franchisors are subject to, Value-Added Tax (VAT) 10% and Corporate Income Tax (CIT) 20%.
The franchise business is still becoming a number one model to expand the market in Vietnam for foreign investors. However, understanding local knowledge is needed when entering the market, if you underestimate the power of local understanding, your business will not rise up like you expect.
In conclusion, a successful business incorporation in Vietnam cannot be separated from the understanding of local knowledge and regulations, as well as equipping with skills in drafting clear provisions, also discerning terms and conditions. If you need any help, do not hesitate to contact us, because Viettonkin will always be ready to assist you!
Mergers and Acquisitions function as a double-blade that can create or destroy a company. At worst, a disastrous deal can cost the company millions of dollars. On the other hand, smart transactions can accelerate a company’s gain in the market over its competitors, propelling it to the front of the race. Over the last ten years, Vietnam has witnessed billion-dollar M&A deals driven by strong foreign interest in the M&A market and divestment of various state-owned enterprises. If anything, Vietnam’s appetite for M&As is increasing. However, the M&A lands of Vietnam are also littered with examples of failures. This article will outline the main risks associated with M&A in Vietnam and general advice on how to avoid them.
Difference in domestic and international Mergers and acquisitions regulations
One of the main risks of Mergers and acquisitions “collapses” is the legal risk that leads to disputes and litigation that cost both time and money. Most of the conflicts occurred because Vietnamese and international laws have different regulations. Therefore, from the beginning, it is necessary to have a clear agreement in order to identify legal risks and avoid any mistakes from the two parties. In the context of Vietnam's increasing integration, trade disputes are inevitable. Therefore, in this challenge, the more thoughtful the equipment of legal knowledge, the more beneficial it will be.
Financial reports transparency
Investors often complain about the transparency of financial reports and online data room when assessing potential mergers in Vietnam. Kevin Snowball, chief investment officer at PXP Asset Management, pointed out that investors are worried about under-the-table transactions that might take place at SOEs, “where people might just sell the shares to their friends”. Other issues include the willingness, or lack of, group leaders to meet international investors and provide transparent details on their finance, operations, and strategies.
Regarding financial reports, Vietnamese accounting standards contain vast differences to the International Financial Reporting Standards (IFRS), making it harder for overseas investors to make sense of a Vietnamese company’s earnings and losses. There are also no official requirements to release corporate information in English, which can also discourage investors abroad.
Failed Cultural integration
Deloitte has estimated that failed cultural integration is a primary cause in about 30 percent of failed M&As. Bain & Company also identified cultural integration as the number one cause of Mergers and acquisitions failure. This is especially true in Vietnam, when sometimes companies are so blinded by the potential for market growth from a merger that they do not take into account other human and cultural factors.
The first common mistake within the Vietnamese market is short-cutting the M&A process. Anyone who has lived through an M&A knows that it can be a long, unpredictable, and sometimes uncomfortable journey where potential risks abound. Most of the time, local vendors are not sufficiently prepared for the extensive time and effort an M&A deal requires while foreign investors breach overly optimistic timelines.
Also, during the formulation of the deal structure, parties often overlook the closing and post-closing steps of the deal, where cultural integration plays a crucial role. It usually takes months, maybe even years, for two cultures to mesh and find common ground. Claiming victory prematurely can frustrate workforces and create conflicts among the leaders
Vietnamese people still have a strong Asian culture in thinking and acting, considering the company as their "child" so they rarely want to sell it. Therefore, many domestic enterprises are still wary of M&A activities or tend to get tangled up in overly complex and inflexible deal structures. The choice of structure can depend on a number of factors such as the regulatory framework in Vietnam, the type of acquisition, type of business activities, the relationship between the target and buyer… In case of foreign investors, the existing foreign ownership restrictions and conditions can significantly impact M&A deal structures. Thus, it is important that foreign investors ensure the proposed structure works from a Vietnam perspective and be open to considering alternatives at an early stage. (Related article: What you need to know about mergers & acquisitions in Vietnam)
Practices to avoid Mergers and acquisitions mistakes
Focus on cultural integration post-merger
Instead of getting caught up in the technical aspects of the integration, how well the organizations handle the “human” aspect can make or break the deal. Post-merger cultural integration can be achieved by creating a workstream that identifies what is shared between the two organizations and how to create common ground. A cultural workstream ensures both entities respect each other’s values. Also clarify expectations around new leadership to facilitate integration. This is important for Vietnamese companies where leadership styles are culturally different from foreign organizations. Clearly communication expectations lets leaders know when and how to adjust their behavior to drive integration.
Measure the truth
Regularly survey the field to get an honest assessment of how the integration is progressing. Mediate your expectations and anticipate potential risks along the way. When events are unfolding rapidly in an Mergers and acquisitions, we tend to demonstrate greater biases and make more assumptions. To figure out how well the organization is handling the integration, it is important to keep all levels of organization on board and encourage open dialogue so the middle leadership does not feel left out.
Prepare documents in advance
Encourage the vendor to start collating documents for due diligence purposes at least four weeks in advance of when they will be required given the lack of online date among Vietnamese companies. Otherwise, expect the deal timeline to drag.
Select domestic arbitrators
The ability to communicate with and gain support of the court in the country is one of the advantages of including domestic arbitrators. Domestic arbitrators can bridge the gap between international regulations and domestic Mergers and acquisitions laws in Vietnam while anticipating potential legal risks along the way. The use of domestic arbitrators thus helps businesses reduce costs and facilitate progress during integration.
A Limited Liability Company (LLC) according Enterprise Law Vietnam can be set up with only one shareholder who can be of any nationality other than Vietnam. Normally, setting up LLC is believed to be simpler compared to large corporations thanks to smaller scale (up to 50 members), so that investors usually consider this as a worthy choice. Therefore, in this following article we will provide you with a checklist to establish a LLC according Enterprise Law Vietnam in this article.
Overview of Limited Liability Company in Vietnam
Is one of the four types of enterprises in which domestic and foreign investors are allowed to do business in Vietnam under Vietnam's Enterprise Law.
Can be totally or partially foreign-invested.
Is simpler to set up as compared to a large corporation in Vietnam.
Is a legal entity formed from the capital contribution of each member to the company. The number of members must not be over 50.
Especially, an LLC member's liability for the company's financial obligations will depend on his/ her share of the equity, not their personal property.
Investors must do their due diligence to work out the acceptable market entry option suitable to their appropriate business lines and specific requirements.
So, a Limited Liability Company in Vietnam is formed based on the capital contributions of its members. Capital contribution refers to the entire assets contributed to constituting the charter capital of the corporate .
Therefore, a Limited Liability Company’s shareholder can take part in the whole growth of the corporation while their liability and financial obligations are restricted to the quantity of investment they contributed to the company’s charter. (Related article: Limited Liability)
Similarly, just in case of a one-member or single-member indebtedness company, this structure has just one member who is additionally the corporate owner. For this reason, this person must be responsible for all relevant debts and obligations of the corporate to the extent of his/her capital contribution to the corporate .
In 2021, Enterprise Law Vietnam has a lot of preferential investment policies in various economic sectors in Vietnam for foreign investors.
Accordingly, Enterprise Law Vietnam, when conducting investment to establish a company in Vietnam, foreign investors need to learn and grasp the provisions of the current law to ensure the most optimal conditions when investing and doing business in Vietnam.
With the desire to best support legal procedures, tax for foreign investors to set up foreign invested companies in Vietnam, Viettonkin Consultant provide the process details to establish a foreign-invested LLC as follows:
Corporate structure
Member’s council: This is often the body with the very best position for creating decisions of the corporate. It is mandatory that the Member’s council must hold a minimum of one meeting per annum .
The chairman of the Member’s council: An LLC has the duty to select a member to become the council’s chairperson who can be the director or general direct of the company. Note that the applicable tenure of the chairperson is within a period of 5 years.
Director/Director General: Main responsibilities of director/director general is to manage daily business operations of the indebtedness company, also as hold the liability for his/her exercise of rights to the Members’ Council.
Supervisory Board: If your multi-member LLC in Vietnam is a state enterprise or a subsidiary of a state enterprise in Vietnam, then you must establish a Supervisory Board as stipulated by Article 54, Law on Enterprise 2020. Other circumstances on whether this Board should be formed or not is at the discretion of the LLC itself.
Registration Process
In general, you are required to go through the following procedures to set up your Limited Liability Company:
Location of the investment project; area of land used.
Investment capital of the project (including investor's contributed capital and raised capital), capital contribution and mobilization schedule.
Duration of the project.
Investment project execution schedule: capital construction progress and work put into operation (if any); The progress of implementing the main objectives and main items of the project, if the project is implemented in phases, must specify the objectives, duration and contents of each stage.
Investment incentives and supports and bases and conditions for application (if any).
Regulations for investors implementing projects.
Conditions for investors to implement the project (if any).
Business sectors that need sub-licenses are travel (international/domestic business license), printing (printing operation license) and security (certificate of social security), among others.
List of company members, for limited liability companies with 2 or more members;
ID card or passport of a limited liability company member;
Certificate of Business Registration / Business Registration Certificate for members who are organizations and accompanied by personal identification papers, the authorization decision of the authorized representative organization's.
Capital contribution decisions.
List of authorized representatives (for members who are organizations);
An investment registration certificate for the investor has been issued.
After a business is legally registered, an ERC is going to be issued by a business registration agency. An ERC may be a document, often softcopy or hardcopy, that contains information on enterprise registration.
Documents and payments submission for post license requirements
Opening a checking account , paying for business taxes, contributing to charter capital, ordering e-invoice, providing e-signature and company stamp, etc.
What’s next?
Arring staff, tax, and annual reporting . You need to register hired employees with the social insurance department.
Foreign employees also will get to have the specified work permits to figure in Vietnam. This may take longer as Vietnam’s borders remain closed, however, this is still possible and we Viettonkin can assist you in acquiring the needed documents and entry permits.
You have to pay the business license tax. They are also subject to corporate tax (CIT), VAT (VAT), and private tax (PIT). Depending on the line the corporate could also be eligible for CIT reductions within the first years of operation.
Limited liability companies are required to undertake tax audits that checks all revenues and expenses during the tax term to determine payable taxes.
How long does it take?
The whole registration process can take 2 - 3 months in total. However, the time may slightly vary depending on the business activities or sectors and completeness of documents. We recommend finding support from a consulting agency to assist you in the whole process.
To sum up, setting up a foreign-owned limited liability company in Vietnam requires some procedure a bit more complicated than a company with local capital and takes some time to prepare. However, everything will become easier if you understand the whole process of establishing a new business in this promising country. Viettonkin hopes that this information will assist you in any cases. Do not hesitate to contact us if there are any difficulties, Viettonkin is here to help!
Whether you are looking to outsource your business’ operations to Vietnam or setting up a business, choosing a location for manufacturing activities in Vietnam can be a daunting task for investors unfamiliar with the market.
Factory locations may be located inside or outside industrial zones or special economic zones, export processing zones, or hi-tech zones. When choosing a location to set up manufacturing business, investors need to take into account the industry specialization, infrastructure, and scale of business operation. The following options are recommended to investors looking to set up factories in Vietnam.
Investors can rent ready-built factories and warehouses for lease by companies registered in Vietnam. According to Vietnam’s Briefing in 2019, ready-built factories were in the highest demand with investors increasingly moving factories to Vietnam, recording more than an 85 percent occupancy rate. Binh Duong and Dong Nai in the southeast are the markets with the highest demand, given their access to transport infrastructure. This plan is suitable for small to medium scale businesses looking to lease land of less than 8 hectares. These facilities are designed in accordance with production and business requirements and international safety standards. This ensures brisk business set-up while gaining access to strategic economic regions.
Industrial zones
This plan is suitable for investors looking to lease land with a lease term of 40-50 years and an area of more than 8 hectares. Industrial zones are specific areas earmarked by the government for the production of goods and services. Industries are usually concentrated in certain industrial zones, which provide incentives for businesses that set up there. Industrial zones are popular locations for manufacturing businesses in Vietnam. As of 2018, according to Vietnam briefing reports, there are 328 industrial zones countrywide, 249 of which are in operation.
Preferential tax rates are offered by the government to investors located in industrial zones in Vietnam. Other indirect taxes, such as Value Added or Special Consumption Tax, may also be reduced on a good-by-good basis. These tax incentives can help offset the higher wages and rental fees in these areas.
See more at Top locations to start businesses in Vietnam to learn more about Industrial zones and how to narrow down your list of potential business locations.
Export Processing Zones
In the case of investors seeking support from specific exporting regulations, it is required that the business be an Export processing enterprise (EPE). EPEs, as defined by Decree No 82/2018/ND-CP, are enterprises that are established and operate in an Export Processing Zones (EPZ) OR that specialize on a manufacturing product for export and operate in an industrial zone. EPEs are also required to be separated by fence systems, have ports, entrance and exit doors and fulfill requirements by customs authorities related to non-tariff areas and rules on import and export duty. Export processing zones are often located within industrial zones and focus on manufacturing goods for export.
Export processing zones have become a popular destination for foreign investors now that Vietnam has emerged as a China-plus-one destination for companies looking to outsource operations to reduce cost. Their tariff-free trade and access to low-cost labour make export processing zones an ideal location for manufacturing business in Vietnam. Due to their location within industrial zones, businesses can also enjoy tax incentives. EPEs set up in export processing zones are allowed to sell goods to the local market with import duties payable by the recipient. However, EPEs set up in industrial zones other than export processing zones are prohibited to sell to domestic enterprises in the Vietnamese market.
High-tech zone
Hoa Lac Hi-tech Park in Hanoi is the first Hi-tech Park in Vietnam to receive special mechanisms and incentive policies, allowing investors and companies investing in Hoa Lac Hi-tech Park to enjoy preferential tax rates and other support. It was built as a center of research, development, and hi-tech application and consists of various functional zones such as research and development zone, software park, high tech industrial zone, education and training zone. However, the downside of this high-tech zone is that it is operating like industrial parks rather than like sci-tech hubs, except that the cost of factory rental is much higher. Thus, the high-tech zone receives no foreign-invested project and only 4 domestically high-tech projects in 2019.
Land lease from the state
Renting land directly from the state is suitable for investors who plan to lease land for 40-50 years or more and need a large area. The drawback of this plan is that it is a time-consuming and costly process to get approval for land use plannings as well as site clearance plans from the government
When a company intends to locate its business outside the industrial zone, export processing zone, hi-tech park, economic zone, etc., the investor must contact the Department of Natural Resources and Environment for consultation as to where to implement the projects. If a specific location has been decided outside an industrial zone, export processing zone, high-tech park ... (for example, leasing facilities, factories of another enterprise ...), the above company needs to work with The Province's Department of Natural Resources and Environment to find out if the proposed site is consistent with the land use planning.
Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.
Download the eBook now to gain expert insights into successfully navigating Vietnam’s dynamic investment landscape!
Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.
Download the eBook now to gain expert insights into successfully navigating Vietnam’s dynamic investment landscape!
Founded in 2009, Viettonkin Consulting is a multi-disciplinary group of consulting firms headquartered in Hanoi, Vietnam with offices in Ho Chi Minh City, Jakarta, Bangkok, Singapore, and Hong Kong and a strong presence through strategic alliances throughout Southeast Asia. Our firm’s guiding mission is aimed towards facilitating intra-ASEAN investments and connecting investors in Southeast Asia with the rest of the world, thus promoting international business relationships and strengthening inter-nation connections.
