MINISTRY OF PLANNING AND INVESTMENT FOREIGN INVESTMENT … · According to the Foreign Investment...

DOING BUSINESS IN VIETNAM 2020Investing in Vietnam, Engaging the world

MINISTRY OF PLANNING AND INVESTMENTFOREIGN INVESTMENT AGENCY

II. Customs Duty and Procedures

E. Human Resources and Employment F. Foreign Exchange ControlUseful websites

Abbreviation

A. Country ProfileIntroduction

B. Trade and Investment I. Trade Agreement II. Foreign Direct InvestmentC. Setting up an investment in Vietnam

356

12131317

52

586568

Deloitte Vietnam 71Foreign Investment Agency 72

III. Land Rental Incentives 56

D. Taxation and Customs I. Taxation

2526

Doing business in Vietnam 2020. 2 Investing in Vietnam, Engaging the world

3

APA

BOT

EZ

FDI

DTA

CIT

EPZ

ASEAN

BLT

BTL

CPTPP

ERC

APEC

BCC

BOO

BTO

EPE

BT

FCWT

Advance Pricing Agreement

Build-Operate-Transfer

Economic Zone

Foreign Direct Investment

Double Taxation Avoidance Agreement

Corporate Income Tax

Export Processing Zone

Association of Southeast Asian Nations

Build-Lease-Transfer

Build-Transfer-Lease

Comprehensive and Progressive

Partnership

Enterprise Registration Certificate

Asia-Pacific Economic Cooperation

Business Cooperation Contract

Build-Own-Operate

Build-Transfer-Operate

Export Processing Enterprise

Build-Transfer

Foreign Contractor Withholding Tax

GSO

IRC

OECD

RCEP

VAS

IMF

IP

PIT

O&M

VND

FTA

M&A

VAT

WTO

SST

PPP

USD

GDP

Investment Registration Certificate

Organization for Economic Cooperation and Development

Regional Comprehensive Economic Partnership

Vietnamese Accounting Standards

International Monetary Fund

Industrial Park

Personal Income Tax

Operate & Manage

Vietnamese Dong

Free Trade Agreement

Mergers & Acquisitions

Value Added Tax

World Trade Organization

Special Sales Tax

Public-Private Partnership

US Dollar

Gross Domestic Product General Statistics Office

ABBREVIATION

Agreement for Trans-Pacific

5

INTRODUCTION

In more than 30 years of social-

Vietnam has moved from being one of the poorest nations in the world to a lower middle-income country with a number of convincing social-economic achievements. Joining the Association of Southeast Asian Nations (ASEAN) in 1995Economic Cooperation (APEC) in 1998 and the World Trade Organisation (WTO) in 2007; expanding gross domestic product (GDP); improving infrastructure; and a steady increase in foreign direct investment (FDI) suggest that Vietnam has transformed into an attractive investment destination.

Vietnam has been enjoying strong economic growth. Since 1990, Vietnam’s GDP per capita growth has been among the fastest in the world, averaging 6.4 per cent a year in the 2000s. Despite crisis and uncertainties in the global environment, Vietnam’s economy continues to grow, with GDP expanding by 7.02 per cent in 2019,and is expected to continue on this path.

Overseas businesses are increasinglyattracted by the country’s move from

a centralized to a market orientedeconomy and its 96.92 million-strong population, which features a large and young workforce as well as an increase in disposable income in recent years. The Vietnamese Government has done an excellent job

2.79 percent (2019).

This guidebook was prepared by the Foreign Investment Agency of Vietnam in cooperation with Deloitte Vietnam to provide readers with an overview of the investment climate, forms of business organization, taxation, and business and accounting practices in Vietnam. Although we do our best to ensure that information contained in this book is current at the time of writing, the rapid changes in Vietnam mean that laws and regulations may change to reflect the new conditions. We hope that you find this book useful in your endeavour to expand your business in Vietnam.

Ministry of Planning andInvestment of VietnamForeign Investment Agency

A COUNTRY PROFILE

VIETNAM Strategically located at the centre of Southeast Asia with convenientaccess to commodity and cultural exchange.

COUNTRY PROFILEVietnam’s economy continues its fast growth driven by free trade agreements (FTAs) with major developed countries and increasingly deregulated business environment.

Competitive productioncost compared toneighboring countries.

16 FTAs with major developed markets.

A youthful and vibrant country with digitally-savvy

and well-educated workforce,a developing culture of entrepreneurship, and openness to new ideas.

A stable political environment, and an attractive business environment with high incentives for foreign investors.


Fast growing economy with GDP growth projected to be

between 6% to 7% during 2016-2019 period.

7

COUNTRY SNAPSHOT

LOCATION POPULATION AND WORKFORCEPopulation: was estimated at 96.92 million peopleRanked 15th in the list of most populated countriesPeople of working age in employment: 48.7 million people (51.2% of total population)Unemployment rate: 2%

ECONOMYNominal GDP ( 2019): USD 261.9 billionGDP in 2019 increase by 7.02%,the highest growth since 2011GDP per capita (2019): USD 2739.82

LANGUAGE

BUSINESS HOURSUnder the Vietnamese Labor Code, normal working hours should be 8 hours/day, or 40 - 48 hours/week.

CURRENCY Vietnamese Dong (VND)

LAND AREA 330,967 sq. km

COASTLINE3,260 km

5 MUNICIPALITIES & 58 PROVINCES North: Hanoi – the capital Centre: Da Nang City South: Ho Chi Minh City – the largest city

CLIMATE AND WEATHERThe climate varies from North to South with three distinctive climate zones: tropical in the South (rainy season from April to September; dry season from October to March); monsoonal with hot and rainy season in the Centre and North (May to September); cold and damp in the highlands and the North (October to March). It is also blessed with plenty of sun throughout the year.

Southeast AsiaThe country borders with China, Laos, Cambodia,Pacific Ocean and Gulf of Thailand

Vietnamese (official language)English (taught widely at school as a second language)

Source: General Statistics Office (GSO), Economist Intelligence Unit

POLITICAL STRUCTUREVietnam is a socialist country under the leadership of the Communist Party of Vietnam. The 14th National Assembly of Vietnam (term 2016-2021) has 489Assembly, which is the highest-level representative body of Vietnamese people, has the power to exercise constitutional and legislative rights and to decide on critical issues of the country.


9

MAIN EXPORT PARTNERS, 2018(share of total)

RETAIL SALES

GDP BY SECTOR, 2018

2018

(billion USD)

8.0%7.5%7.0%6.5%6.0%5.5%5.0%4.5%4.0%

Source: GSO

Industry &Construction

Agriculture,Forestry and

Fishery

Product tax (net)

Services

2018 2019

2018 2019

2018

2018

Japan 18%

South Korea 16%

Germany 11%US 46%

China 40%

7.08%7.02%

6.60%

132131

150148 162166

180173

214 211

243 237

111125

140 154168 173

195

4.09%

2.66%

0.63%

6.21%5.98%

6.68% 6.81%

3.53% 3.54%2.79%

15%10%

34%

41%

050

100150200250

5.42%

A COUNTRY PROFILE

REGULATORY REFORM TO IMPROVE INVESTMENT CLIMATE

VIETNAMESE GOVERNMENT’S EFFORTS TO IMPROVE INVESTMENT CLIMATE

2014

2015

2016

2017

2018

The regulatory framework has been constantly revised to incorporate more favorable regulations for businesses to invest and operate in Vietnam. Since the new Law on Investment and the new Law on Enterprises were passed in 2014, many other laws, decrees and circulars have been put in place to provide guidelines for better market access.

- Law No. 67/2014/QH13 on Investment- Law No. 68/2014/QH13 on Enterprises- Decree No. 46/2014/ND-CP provides regulations on collection of land rent and water surface rent- Circular No. 78/2014/TT-BTC guides the implementation of the Law on CIT- Circular No. 103/2014/TT-BTC provides guidelines for fulfillment of tax liability of foreign entities doing business in Vietnam or earning income in Vietnam

- Decree No. 118/2015/ND-CP provides guidelines for some articles of the Law on Investment- Decree No. 96/2015/ND-CP provides guidelines for some articles of the Law on Enterprises- Decree No. 15/2015/ND-CP on investment in the form of public-private partnership- Circular No. 38/2015/TT-BTC on customs procedures, customs supervision and inspection, export tax, import tax, and tax administration

- Law No. 107/2016/QH13 on Export and Import Duties- Decree No. 134/2016/ND-CP provides guidelines for the Law on Export and Import Duties- Circular No. 83/2016/TT-BTC guides the implementation of investment incentive programs- Circular No. 130/2016/TT-BTC on guidelines on some articles of the Law on Value Added Tax, and the Law on Special Sales Tax

- Law No. 04/2017/QH14 about provision of assistance for small and medium-sized enterprises (coming into force from January 1st, 2018)- Decree No.32/2017/ND-CP on state investment credit- Decision No. 3610A/QD-BCT slashes 675 conditions on business and investment under state management

- Decree No. 119/2018/ND-CP on electronic invoices for sale of goods and provision of services- Decree No. 09/2018/ND-CP on trading activities of foreign investors- Decree No. 08/2018/ND-CP on business conditions under State management of the Ministry of Industry and Trade- Circular No. 25/2018/TT-BTC on amendments of some articles of Circular 78/2014/TT-BTC and Circular 111/2013/TT-BTC

2019

- Resolution No. 50/NQ-TW on the direction of completing institutions and policies, improving the quality and efficiency of foreign investment cooperation by 2030- Resolution 23-NQ/TW on the national industry development strategy during 2018-2030 - Amended Law on Tax Administration No. 38/2019/QH14 (effective from 1 July 2020)- Decree No. 14/2019/ND-CP providing guidelines for the law on special sales tax- Decree No. 05/2019/ND-CP provides a legal framework for the establishment and implementation of Internal Audit- Circular No. 48/2019/TT-BTC on the making and settlement of provisions for devaluation of inventory, losses of financial investments, bad debts and warranty at enterprises- Draft amended Laws on Investment/Enterprises/Securities


11

RESTRUCTURING AND EQUITISING STATE-OWNED ENTERPRISESThe Vietnamese Government upholds its commitments to economic reform. The equitisation of state-owned enterprises (SOEs) in recent years is an example

economy forward. The 2016-2020 roadmap for the equitisation of SOEs has been outlined in Decision No. 58/2016/QD-TTg.

2011 2012 2013 2014 2015 2016 2017 2018

1426

73

175

220

5545

23

NUMBER OF EQUITISEDSOES DURING 2011-2018

Source: Vietnam Government Report on the equitisation of SOEs (2011-2018)

TRADE ANDINVESTMENT

12

13

According to the Foreign InvestmentAgency under the Ministry of Planningand Investment, the total newlyregistered, adjusted capital, capitalcontributed and shares purchased byforeign investors reached 38.2 billion USD,increase 7.2% as compare to the sameperiod in 2018. The realized capital offoreign direct investment projects wasestimated at 20.38 billion USD, up 6.7%as compared to the same period in 2018.Higher FDI disbursement throughout theyears implies the improvement ininvestors’ confidence in the economicoutlook and their commitment toestablish long-term investments inVietnam.

Vietnam is one of the only few countries in the region that allows 100% foreign ownership for most sectors. 375 SOEs will be partially or wholly divested during 2017 -2020 period.

Vietnam has been actively engaging in a number of free trade agreements to help accelerate the country’s integration into global economy in recent years. Key trade pacts include:

ASEAN Economic Community(launched in December 2015)

Comprehensive and Progressive Agreement for Trans-

(signed on March 8th, 2018)

Regional Comprehensive Economic Partnership (RCEP)(on-going negotiation)

Free trade agreements signed as an ASEAN member country- ASEAN - Japan- ASEAN - South Korea- ASEAN - India- ASEAN - China- ASEAN - Hong Kong- ASEAN - Australia - New Zealand

Bilateral agreements

Vietnam has established diplomatic relations with 185 countries, expanded commercial and investment relations with more than 220 markets and signed more than 80 Double Tax Avoidance Agreements.

I. TRADE AGREEMENT

II. FOREIGN DIRECT INVESTMENT

- Vietnam – Chile- Vietnam – South Korea- Vietnam – Japan - Vietnam - Eurasian EconomicUnion FTA - Vietnam – EU FTA (not yet effective)- Vietnam – Israel (in negotiation)- Vietnam – EFTA (in negotiation)

B TRADE AND INVESTMENT

Vietnam has become an attractive investment destination for various sectors, from manufacturing, real estate, energy, retail, and construction, to arts, tourism, entertainment, and other services.

Manufacturing: With advantages in a number of areas such as competitive labor cost, raw materials resources, lower barriers to trade, and many designated investment incentives, the manufacturing sector remains

2019, accounting for around 65

Real Estate: The investment in real estate sector accounted for 10 per

2018. Ho Chi Minh City stands out as the hub to attract most of the large-scale real estate projects.

Other sectors: Green energy, science & technology, wholesales, and infrastructure development are entering a booming period, as the Government has given these sectors priorities for development through incentives and encouragement to attract investors. Investment in these sectors is expected to increase in the years to come.

INVESTMENT INDUSTRIES

20162015 2017 2018 2019

40,000

30,000

20,000

10,000

0

Millio

n USD

Registered FDI Disbursed FDI

REGISTERED AND DISBURSED FDI (2015-2019)

Manufacturing Real Estate Professional activities,science and technology

Wholesale, Retail & RepairOthers

FDI BY SECTOR (2019)


24,11526,891

35,602

14,50015,800

17,700

35,466

19,100

38,019

20,380

65%

14%

4%

7%

10%

15

MAIN EXPORT PARTNERS,

Foreign investors usually select densely populated cities with modern infrastructure and agglomeratedconvenience (e.g. Hanoi, Ho Chi Minh City, Da Nang) to implement service-related projects. Whereas, manufacturing and processing investment projects are often located at

TOP 10 FOREIGN INVESTORS BY REGISTERED CAPITAL (AS OF DECEMBER, 2019)

60,00050,000

80,00070,000

40,00030,00020,00010,000

0

Inves

ment

Capit

al(m

illion

USD

)

China

South Korea

Singapore

British Virg

in Island

s

HongKongJapan

TaiwanThailand

HollandSamoa

326 INDUSTRIAL PARKS 3 HI-TECH PARKS– Hoa Lac Hi-tech Park – Saigon Hi-tech Park– Da Nang Hi-tech Park

industrial parks (IPs)/economic zones (EZs) where the infrastructure and transportation are specialized, and special investment incentives are given. FDI capital invested at IPs and EZs accounted for roughly 80% of total registered capital in manufacturing sector.

17 COASTAL ECONOMIC ZONES

Source: Foreign Investment Agency

B TRADE AND INVESTMENT

M&A TRANSACTIONS HEAD TO BREAKTHROUGHS IN 2019


The Government is establishing mechanism and policies to facilitate the private sector to join the State-owned enterprises (SOEs) restructuring process through capital contribution and share purchase as well as enhancing linkages in value chain between the SOEs and the private sector.

The value of M&A transactions increased from US$1.1 billion in 2009 to US$7.64 billion in 2018. The total value of transactions in the decade hit US$55 billion. However, the value of M&A transactions in the first half of 2019 leveled off at US$1.9 billion, equal to 53% of the same period last year.

According to the statistics of the Foreign Investment Agency, under the Ministry of Planning and Investment, foreign investors spent US$2.64 billion to purchase shares.

Positive factors are opening a new era for M&A activities in Viet Nam with a number of opportunities for breakthrough and making M&A become a crucial investment attraction channel in the time ahead.

M&A market in Viet Nam expects strong developments in the issuance andrealization of policies as well as connectivity, trade transactions and innovation of buyers and sellers.

17

SETTING UP AN INVESTMENT IN

VIETNAM

C SETTING UP AN INVESTMENT IN VIETNAM

A limited liability company is a legal entity established by capital contribution which is treated as equity (or charter capital) from its members. A limited liability company is not allowed to issue shares. The total number of members in a limited liability company is restricted to 50 (applied to form of a limited liability company with more than two members). Members of a limited liability company

the limited liability company within the capital contributed – or undertaken to be contributed - to the company.

A limited liability company may be established by foreign investors either in one of the two following forms:i. A 100% foreign-owned enterprise

(where all members are foreign investors); or

ii. A joint-venture enterprise with at least one Vietnamese investor.

OTHER FORMS OF INVESTMENT(i.e. participating in contractual business forms or purchasing stakes of an existing enterprise)

ESTABLISHING A NEW BUSINESS ENTITY

INVESTMENT VIA M&A

Some main corporate forms of doing business in Vietnam include: (1) Limited-liability company with one or more members; (2) Joint-stock company; (3) Partnership; (4) Business Cooperation Contract; and (5) Public-Private Partnership Contract.

LIMITED LIABILITY COMPANY

Limited Liability Company Established

by capital contribution

Members areliable for the nancial

obligations withinthe capital contributed

Maximum of50 members

Not allowedto issueshares


19

A partnership may be established between two individual managing partners. The managing partners have unlimited liability for allobligations of the partnership. Besides managing partners, a partnership may have contributing

obligations of the partnership up to the value of their contributed capital.

JOINT STOCK COMPANY

PARTNERSHIP

BUSINESS COOPERATION CONTRACT

Joint

Stock C

ompany

Established by its founding

shareholders on the basis of their subscription of

shares

At least three shareholders

(with no maximum number of

shareholders)

Managingpartners have

unlimited liability forall obligations of the

partnership

Contributingpartners only liable

obligations of the partnership up to their

contributedcapital

Partnership

Busine

ss Co

opera

tion Contract

Signed between foreign investors and Vietnamese investors

without the creation of a new legal entity

BCC’s parties hold unlimited liability for the

of the BCC

A joint stock company is a legal entity established by its founding shareholders on the basis of their subscription of shares of the joint stock company. The charter capital of a joint stock company is divided into shares and each founding shareholder holds a number of shares corresponding to their subscribed and paid-up shares in the joint stock company.

A joint stock company is required to have at least three shareholders (with no maximum number of shareholders). A joint stock company may take the form of either (i) 100% foreign-owned; or (ii) a joint venture between foreign and domestic investors.

A Business Cooperation Contract (BCC) is normally signed between foreign investors and Vietnamese investors in order to carry out certain business activities.

BCC is executed without the creation of a new legal entity. Instead, parties to a BCC shall establish a co-ordination board to implement and oversee the BCC. The investors to a BCC mutually agree on allocation of responsibilities and sharing of profits/losses arising from a BCC. BCC’s parties hold unlimited liability for the financial obligations of the BCC.


PUBLIC-PRIVATE PARTNERSHIP

Publi

c-Priva

te PartnershipComprise BOT, BT, BTO, BOO, BTL, BLT, O&M

Contracts

Set upon the basis of a contract

between relevant government authorities and project

companies to perform certain regulated infrastructure

works and publicservices

A Public-Private Partnership (PPP) contract is an investment form set up on the basis of a contract between relevant government authorities and project companies to perform certain regulated infrastructure works and public services, e.g. transportation system, water supply system, power plants, educational and healthcare-related infrastructure, etc.

PPP Contracts comprise Build-Operate-Transfer (BOT), Build-Transfer (BT), Build-Transfer-Operate (BTO), Build-Own-Operate (BOO), Build-Transfer-Lease (BTL), Build–Lease-Transfer (BLT) and Operate-Manage (O&M) Contracts.

After signing PPP contracts with an authorized state agency, foreign investors must establish a project company in the form of a limited liability company or a joint stock company. PPP contracts clearly set out the rights and obligations of foreign investors to such contracts.

20

21

MERGERS AND ACQUISITIONS

Capital contribution, sale/purchaseof shares or contributed

capital in Vietnamese enterprises without directly participating in the enterprise management and

administration

Sale/purchase of other valuable papers in Vietnamese dong

permitted to issue within Vietnam’sterritory by organizational residents

Capital contribution, transfer of contributed capital in securities

investment funds and fundmanagement enterprises in accordance

with the laws on securities

Sale/purchase of bonds and other types of stocks in the Vietnamese

securities market

The legal framework for M&A is set out under the Law on Enterprise and Law on Investment and their guiding documents, which cover conditions, procedures and tax consequences of such activities.

The Competition Law also has an effect on M&A activities. Where a merger or acquisition may result in a legal entity with a market share accounting for 30% to 50% of the relevant market, the legal representative of such entity must notify the competition management body before the merger/acquisition is implemented, unless the law provides otherwise. A merger or acquisition that results in a new entity with its market share accounting for more than 50% of the relevant market is prohibited, unless otherwise stipulated in the Competition Law.

Other investment formsAll indirect investment activities of foreign investors in Vietnam must be conducted in Vietnamese Dong via an indirectly-invested capital account opened at a permitted bank. Balances in indirectly-invested capital accounts of foreign investors cannot be converted into time deposits, or saving deposits at credit institutions and foreign bank branches.

Below are examples of frequently-conducted indirect investment activities in Vietnam.


In order to legally carry out business activities in Vietnam, foreign investors must register their investment with the appropriate licensing authorities. Under the new Law on Investment and Law on Enterprises, foreign investors now go through two steps:

(*) The timeline for setting-up projects prioritized by national or provincial Government shall be shortened. (**) Please note that IRC is required only for investments by foreign investors or deemed-to-be foreign investors (i.e. companies with more than 51% of charter capital held by foreign ownership).

SETTING UP A NEW BUSINESSPROCEDURES FOR COMPANY SET-UP

PROCEDURES FOR NEW COMPANY SET-UP

Step 1

Location Selection

PublicNotification

PROCEDURES FOR BRANCH, REPRESENTATIVE OFFICE SET-UP

Step 1 Step 2 Step 3 Step 4

Location Selection

RO/Branch License Application

Seal/Tax ID Registration

5-7 days5-7 days7 days

PublicNotification

ERC Application

IRC Application

15 days 3 days 5-7 days

Step 2 Step 3


23

As part of the set-up procedures, various types of documents will be required depending on the type of company/business activities that is being set up, etc. All legal documents issued by overseas authorities must be translated into Vietnamese and must be validated by the Vietnamese Embassy in the home country of the investor.

RELEVANT LICENSING AUTHORITIES

CERTIFICATE

Projects located INSIDE industrial zones, export processing zones, high-tech zones & economic zones

Projects located OUTSIDE industrial zones, export processing zones, high-tech zones & economic zones

Provincial Management Board of Industrial/ Economic Zones

Provincial Department of Planning and Investment

Provincial Department of Planning and Investment

IRC ERC

LIQUIDATION AND CLOSING BUSINESSThe termination, liquidation, or dissolution, of an enterprise shall occur in the following circumstances:

The operation period in the company’s charter expires without a decision on extension

Failure to maintain minimum required number of members for 6 consecutive months without business conversion

The dissolution is decided by owners/ general partners/ board ofmembers/ shareholders

Business Registration


The company shall be dissolved only when all debts and liabilities are settled and the company is not involved in any dispute at a court or arbitration body. The liquidation procedures generally take about 6 - 12 months, which normally

Step 1

Step 2

Step 3

Business Registration Authority

Tax Authority

Business

AuthorityRegistration

National

Registration PortalBusiness

Tax Authority

Employees

5 days

7 days

2-3 months

from approval date

from debt clearance date

NOTIFICATION OF DISSOLUTION DECISION

SUBMIT DISSOLUTION DOSSIERS & RETURN IRC/ERC

TAX FINALISATION / TAX AUDIT & TAX CODE CANCELLATION


25

D TAXATION AND CUSTOMS

TAXATION AND CUSTOMS

D


I. TAXATION

Corporate Income Tax (CIT);Personal Income Tax (PIT);Value Added Tax (VAT);Foreign Contractor Withholding Tax (FCWT); andOther taxes (i.e. Special Sales Tax, Import & Export Duties, Natural Resources Tax, Property Tax, Environment Protection Tax, Business License Duty & Registration Fee).

All taxes are levied at the national level. There are no local taxes.

Please refer to the following pages for your further reading.

i.ii.iii.iv.v.

The Vietnamese tax system is comprised of the following:

Type of TaxCorporate Income Tax 28

34

39

44

51

51

Personal Income Tax

Value Added Tax

Foreign Contractor Withholding Tax

Other Taxes

Special Sales Tax

Page

Environment Protection Tax 52

27


NO. TAX TYPE/ TIME LIMIT MONTHLY QUARTERLY FINALIZATION20th day of the following month

30th day of the following quarter

90th day from

or calendar year-end date

1 Corporate Income Tax N/A (provisional payment only)

2 Personal Income Tax (*) (calendar year)

3 Value Added Tax (**) N/A

4 Foreign Contractor Withholding Tax

5 Compulsory Social/Health/ Unemployment Insurance

6 Stamp Duty Upon occurrence

7 Export Duty Upon occurrence

8 Import Duty Upon occurrence

50shall be applicable.

12-month operation within a

50 billion or less, otherwise the

monthly basis or quarterly basis.

TAX COMPLIANCE TIMELINE

10th day following the payment day; or 20th of the month following the payment month if registering to file FCWT on a monthly basis

The last day of the month

CORPORATE INCOME TAX (CIT)TAXPAYERS

TAX CALCULATIONCIT PAYABLE = TAX RATE X ASSESSABLE INCOME

Tax Rates

1 2Vietnam-

incorporated enterprises

Branches/Agents Serviceestablishment

Plants/Construction sites Others

Assessable Income

Total Revenue

Deductible Expenses

Other Income

Carried Loss

Foreignenterprises with orwithout Permanent

Establishment (PE)

1. (Total revenue – Deductible expenses) is considered an income from main business activities. Such income is entitled to CIT incentives, if any.

2. Normally, other forms of income are not entitled to CIT incentives, and thus, shall be subject to the standard CIT rate of 20 per cent. Other income includes gains from foreign exchange revaluation, income from disposal of fixed assets, interest income, ect. not related to main business.

From 1 January 2016, the standard CIT rate is 20 per cent. The CIT rate for enterprises operating in exploration and mining of petroleum, gas, and other rare and precious natural resources shall range from 32 per cent to 50 per cent, depending on the project locations and conditions.


29


TAX INCENTIVES COMMENCEMENT RULE

BY LOCATION

ACTIVITIESCIT INCENTIVES

PREFERENTIAL TAX RATE TAX HOLIDAY

With especiallly difficultsocio-economic conditions

• Economic Zones• High-tech Zones, includingconcentrated information technology parks establishedunder the Prime Minister’sdecision

10% for 15 years • 4 years of tax exemption; and• 50% reduction for the next 9 years

• With difficult socio-economicconditions


Not applicable • 2 years of tax exemption; and• 50% reduction for the next 4 years

Preferential tax rateGenerally, preferential tax rate is applicable from the first revenue-generation year; except high-tech enterprises or projects.

Tax holidayGenerally, tax holiday is available from the first profit-making year or the fourth revenue-generation year, where applicable, except high-tech enterprises.

• Industrial Parks (which are notlocated in the favorablesocio-economic locations)

BY SECTORThe current incentive scheme is applicable for sectors that are prioritized for investment under the Government’s development policies.

ACTIVITIES (for example)

CIT INCENTIVES


• High-tech enterprises (including science and technology enterprises); research, application, and incubation of hi- technology projects• Environmental protection• Investment for infrastructure

• Supporting industries

development (water plant,power, road, port, etc.)• Software production


• Socialised projects in regions with 10% for whole project’s duration

• 4 years of tax exemption; and• 50% reduction for the next 9 years

• Socialised project not located in

economic regions

10% for whole project’s duration

• 4 years of tax exemption; and• 50% reduction for the next 5 years

• Farming, husbandry, processing of

production of plant varieties, animal regions; forestry in difficult regions;

breeds; production of salt; preservation of agriculture products, aquaculture products and foods, etc.


• Tax exemption and reduction under incentives for location (if applicable)

difficult/especially difficultsocio-economic conditions


31


BY BUSINESS SCALEInvestment incentives are granted to large projects manufacturing projects (excluding those in product manufacture subject to special sales tax or those in mineral resources exploitation) having either:1. Total capital of VND 6,000 billion or more, disbursed within 3 years since being licensed with:- Minimum annual revenue of VND 10,000 billion by the 4th year of revenue generation at the latest; or- Regularly employing more than 3,000 employees by the 4th year of operation at the latest.2. Total capital of VND 12,000 billion or more, disbursed within 5 years since being licensed and using technologies being evaluated under the Law on Hi-technology, and the Law on Science and Technology.

ACTIVITIES (for example)

CIT INCENTIVES


• Farming, husbandry, processing of agriculture and aquaculture products


17% for 10 years

ACTIVITIES CIT INCENTIVES


• VND 6,000 billion capital project (1) 10% for 15 years • 4 years of tax exemption; and• 50% reduction in tax for the next 9 years• VND 12,000 billion capital project (2)

• Manufacturing of steel, energy savingproducts, machinery and equipmentserving agriculture, forestry, fisheries andsalt production, traditional crafts, etc.

DEDUCTIBLE EXPENSES

An expense might be deductible for CIT purpose if the following conditions are met:

In addition, payments above VND 20 million must be supported by bank payment vouchers (or deemed as made via bank) to be deductible.

NON-DEDUCTIBLE EXPENSES

cap of one-month average monthly salary;• Costs of raw materials, supplies, fuel, power and goods exceeding the reasonable consumption levels as stipulated by the Government;• Interest on loans from non-economic and non-credit organizations exceeding 1.5 times of the interest rate announced by the State Bank of Vietnam; • Interest expenses exceeding 20% EBITDA for enterprises having related-party transactions;• Interests on loans corresponding tothe portion of charter capital not yet contributed in accordance with registered contribution schedule;• Periodical accrued expenses not paid or not fully paid at the end of the period;

losses, inventory devaluation, bad debts, product warranties or

Actually incurred and relevant to the company’sbusiness activities

Payments above VND 20

by bank payment vouchers or deemed as made via banks

Supported by proper documents1

3

2

4million must be supported Not in the list of

non-deductible expenses

Below are notable examples ofnon-deductible expenses:• Depreciation expenses of fixed assets not in accordance with prevailing regulations, i.e. (i) not for business purpose; (ii) not supported by proper documentation; and (iii) exceeding the regulated depreciation rates;• Labor expenses recorded but not actually paid or not stipulated with clear conditions and amounts under labor contracts, collective labor agreements or company’s financial policies;


33


construction works, vocational risks not in accordance with the prevailing regulations;• Unrealized foreign exchange losses due to the year-end revaluation of foreign currency items other than account payables;• Overhead costs allocated to the Permanent Establishment (PE) by foreign companies exceeding the amount determined based on the revenue-based allocation ratio;• Contributions to voluntary pension funds and purchase of voluntary pension insurance, life insurance for employees exceeding VND 3 million/person/month;

payment interests, etc.;• Donations other than certain donation contributions for education, health care, natural disaster or building charitable homes, etc.;• Certain expenses related to the issuance, purchase and sale of shares.

LOSSESTax loss is carried forward within a maximum period of 5 years after the loss-making year. The tax loss generated from January 2009must be carried forward consecutively even during the tax exemption period. Carry-back of tax loss is not allowed.Losses from incentive business

income from non- incentive

activities. Losses from the transfer of real estate, investment projects, rights to participate in investment projects (except for mineral exploitation and exploration

from other business activities.

TAX DECLARATION AND PAYMENTEnterprises are not required to submit the quarterly CIT declaration returns. However, provisional payments are still compulsory and will be calculated and settled basedon best estimation. In case the

the sum of provisional CIT payments is more than 20 per cent of the CIT

excess of 20 per cent shall be subject to late tax payment interest.

prepared and submitted to the tax authorities within 90 days from the

tax liabilities arising from the tax

payments made quarterly shall be settled within 90 days from the end of fiscal year.The standard tax year is the calendar year. However, enterprises are able to adopt a tax year, i.e. fiscal year, which is different from the calendar year upon notification to tax authorities.

TAX RESIDENCYAn individual is a tax resident if he/she meets one of the following conditions:•

•

•

Note: An individual having registered addressor rented house over 183 days but residing less than 183 days in Vietnam may still be a tax resident if being unable to prove residency of another country.

TAXPAYER TAX RESIDENT TAX NON-RESIDENT

Taxable income

Worldwide income Vietnam-sourced income

Tax rate on employment income

Progressive rate (5~35%) Flat rate (20%)

Tax calculation Assessable Income = Taxable Income- Deductions

Assessable Income = Taxable Income

Deduction Personal deduction Dependent deduction Compulsory and (capped) voluntary insurance contribution Charitable or humanitarian donation

No deduction is claimed

Tax relief Foreign tax credit is allowed on the foreign-sourced income

Tax treaty exemption may be applicable if conditions are met

PERSONAL INCOME TAX (PIT) OVERVIEW

House lease contract of 183 days or more

Permanent/Temporary

residence card

Present in Vietnam for 183 days or

more

Residing in Vietnam for 183 days or more in 12 consecutive months from the first arrival date or in a calendar year;Having a registered permanent residence in Vietnam as recorded by a temporary/permanent residence card;Having rented a house in Vietnam with a term of 183 days or more within a tax year.


35


TAX YEAR

EMPLOYMENT INCOMEEmployment income includes salaries and wages, and all forms of

Tax residents are subject to PIT in Vietnam on their world-wide income regardless of where such income is paid, earned or charged. Worldwide employment income is subject to tax at progressive tax rates ranging from 5 per cent to 35 per cent depending on income level.Individuals who do not satisfy any of the above condition are classified as non-residents and subject to tax onlyon Vietnam-sourced income. The rate applicable to tax non-residents’ Vietnam- sourced employment income is currently fixed at 20 per cent. Both residents and non-residents are also subject to PIT in Vietnam on incomes of non-employment nature which are taxed at different flat rates.

remuneration and fringe benefits whether in cash or in kind. However, certain income items are not subject to tax, typically:• Once-off relocation allowances for example, paid to foreigners first time comes to work in Vietnam; or Vietnamese citizens residing overseas return to work in Vietnam;• Transportation allowance: from home to work and vice versa under the Company’s policy;• Wedding and funeral allowances under the Company’s policy and being capped at one-month average monthly salary;• Airfare in kind one round trip per year for employee to travel back to home country;• Tuition fee in kind for children to study from nursery to high school level at host country;• Insurance premium: voluntarynon-accumulative insurance for health & death;• Membership/ healthcare/ entertainment in kind & non-identified beneficiary;• Supports for cure of fatal diseases toemployees (and close family members);• Per-diem: Fully exempted if paid under the Company’s policy;• Housing allowance: In excess of 15 per cent of total taxable income;

The Vietnamese standard PIT reporting period is the calendar year. For foreign individual, the fist tax year will be the 12-consecutive-month-period from the first arrival date in Vietnam in case the individual is present in Vietnam for less than 183 days during the first calendar year. From the second year, the tax year will be the calendar year.

NON-EMPLOYMENT INCOME Non-employment income includesincome from business, capital investment, inheritance, gifts, prize winnings, transfer of capital, transfer of real estate, sale of shares/securities, royalties, franchising, copyrights, etc. which are subject to

TAX DEDUCTIONSTax residents of Vietnam are entitled to the following deductions from taxable income:• A personal deduction of VND 9 million per month;

spouse, children and other eligible persons including parents in the amount of VND 3.6 million per dependent per month (provided that certain conditions are met);• Eligible charitable or humanitarian donations;• Compulsory social insurance, health insurance and unemployment insurance paid by employees; and• Contribution to private pension fund made by the employer and the employee capped at VND 1 million per month pursuant to the Ministry of Finance’s guidance.

TAX RELIEFFOREIGN TAX CREDITA tax resident is entitled to claim for Foreign Tax Credit (i.e. the amount of tax paid overseas according to overseas regulations) against their Vietnamese PIT on the foreign-sourced income; however, the creditable amount shall not exceed the Vietnamese PIT payable according to

income arising overseas.

TAX TREATY RELIEFA tax non-resident may enjoy PIT exemption in Vietnam via tax treaty application if certain conditions under the treaty are met. To enjoy

are required.

MONTHLY ASSESSABLE

INCOME (million VND)

TAX RATE

RESIDENTSNON-

RESIDENTS

Up to 5 5%

20%

Over 5 to 10 10%Over 10 to 18 15%Over 18 to 32 20%Over 32 to 52 25%Over 52 to 80 30%

Over 80 35%

TAX RATESEmployment Income

• Uniform allowance in cash below VND 5 million/year or in kind;• Overtime in excess of the normal rate.


NON-EMPLOYMENT INCOME TAX RATE

Business Income1% - 5% on revenue *Depending on type

of business

5%

Capital transfer

20% on net gains for tax resident; 0.1% on

sales proceeds for non-resident

Securities / JSC share transfer

0.1% on sales proceeds

2% on sales proceedsIncome from winning

prizes (in excess of VND 10 million)

10%

Income from copyright (in excess of VND 10

million)5%

Income from royalty/ franchising (in excess

of VND 10 million)5%

Income from gifts / inheritances

(in excess of VND 10 million)

10%

Non-Employment Income(applicable to both residents & non-residents)

Capital investment,i.e. interest, dividends

(except for bankinterest)

Real estate transfer

37

TAX DECLARATION AND PAYMENT

TYPE OF INCOME DEADLINE

Employment income received from Vietnamese employers

′s return)20th day of the following month

Employment income received from Vietnamese employers

′s return)30th day of the following quarter

Employment income received

via Company′s return)

Non-employment income 10th day from the date of arising income

Monthly

Quarterly

TAX FINALIZATION

Each individual taxpayer must register for a personal tax code prior to the time limit for his first PIT filing. In case the employer makes tax registration for employees earning income from salaries or wages and tax registration for employees’ dependents, the registration deadline shall be within 10 working days before the submission of annual PIT finalization return.

Tax residents are required to file the PIT finalization return and settle outstanding PIT liabilities within 90 days from the end of the tax year.

Residents foreign expatriates terminating their Vietnam assignment must file PIT finalization dossiers prior to their departure dates (or within 45 days from departure dates in case of authorization following a recent specific guidance)


VALUE ADDED TAX (VAT)

SCOPE OF APPLICATIONVAT is imposed on goods and services used for production, trading and consumption in Vietnam (including those purchased from overseas organizations and individuals).


TAX RATESThere are three types of VAT treatment: non-taxable items; items not required to declare VAT and taxable items (at 0 per cent, 5 per cent and 10 per cent VAT rate).Below are some notable cases:

NON-TAXABLE

• Land use rights;

• Insurance related to human;

• Loan, credit services;

• Education and vocational training according to prevailing regulations;

• Medical services;

• Temporarily imported goods;

• Intellectual property rights, software (except exported software);

• Unprocessed or semi-processed products of cultivation, agriculture, aquaculture; animal

• Imported goods/services for humanitarian aid;

• Machinery and equipment not locally produced, imported for some specific purpose;

• Capital transfer transactions between non-tariff zones and overseas;

• Exported products directly processed from main materials being natural resources and/ orminerals whose total value plus energy cost makes up at least 51% of the prime cost.

breeding stock, seedlings, salt products, etc.;

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DECLARATION NOT REQUIRED

• Project transfer;

• Transfer of assets within a company and dependent units;

• Capital contribution by assets;

• Commission for some agent services.

TAXABLE

Export goods and services;International transportation;Aviation and maritime services provided either directly for foreign entities or through agents

Standard VAT rate, applicable to goods and services other than those mentioned above

0%

5%

10%

• Compensation, financial income;

Clean water, pesticide, services for digging, embanking,dredging of canals, agricultural machinery and equipment,sugar and by-products, medical equipment, teaching aids,artistic, sports activities, etc.

40


TAX CALCULATION CREDIT METHODThe credit method is adopted by enterprises maintaining complete books of accounts, invoices and documents in accordance with relevant regulations, including:• Enterprises with annual revenue subject to VAT of more than VND 1 billion;• Enterprises in other cases who voluntarily register for VAT declarationunder credit method.

VAT calculation under credit method:

VAT PAYABLE

OF WHICH Output VAT shall be equal to the total VAT on goods or services sold as stated

Input VAT shall be:

OUTPUT VAT

INPUT VAT

GOODS/SERVICES LOCALLY

PURCHASED

IMPORTED GOODS

PAYMENTS ON BEHALF OF FOREIGN

CONTRACTORSVAT invoice

VAT payment receipt

(*) Non-cash payment voucher

Customs returns

(*) Non-cash payment vouchers are only required for payments of VND 20 million or more (inclusive of VAT).

For general business activities, VAT liabilities must be paid to local tax authorities where general business activities take place while for imported goods, VAT liabilities will be collected by customs authoritiesupon importation.There are two methods for VAT declaration: Credit method and Direct method.• Credit method: VAT liabilities are calculated by offsetting input VAT with output VAT; • Direct method: VAT liabilities for specific goods and services are calculated by using the deemed VAT rates.

in the VAT invoice.

- VAT amount as recorded in all VAT invoices for the purchase of goods or services;- VAT amount stated on receipts for VAT payment on imported goods;- VAT amount stated on receipts for VAT payment on behalf of foreigncontractors.

In order to claim deductible input VAT, taxpayers must obtain the followingdocuments for each type of goods/services purchased:

41

DIRECT METHODThe direct method is adopted in the following cases:• Enterprises with annual revenue subject to VAT of less than VND 1 billion unless they voluntarily register for credit method;• Enterprises not maintaining proper books of accounts and foreign organizations/ individuals carrying out business activities not regulated under the Law on Investment;• Business individuals and households;• Enterprises engaging in trading in gold, silver and precious stones.VAT calculation under direct method:

VAT PAYABLE REVENUE VAT RATE

OF WHICH, THE APPLICABLE VAT RATES

SHALL BE:

VAT OUTPUT CORRESPONDING INPUT

Non-taxable Nil Not eligible for credit

Declaration not required Nil May be credited

Taxable (0%) Nil May be credited

Taxable (5%, 10%) Yes May be credited

In case the credit method is applied, taxpayers should note the following principlesregarding credits:

If goods/services/fixed assets are used for the production/trading of both taxable good/services and non-taxable goods/services, then only the input VAT of goods/services/fixed assets used for the production/trading of taxable goods may be used for credit. Taxpayers must separate the credit-eligible input VAT from non-credit-eligible inputs. Otherwise, the input VAT shall be credited based on the ratio of the revenue of goods/services subject to VAT and not required for VAT declaration to the total revenue from sales of goods/services.

• 1% Distribution; supply of goods• 5% Services; construction excluding supply of materials• 3% Manufacturing; transportation; services attached to the supplyof goods; construction, including supply of materials• 2% Other cases



For those enterprises engaging in the business of gold, silver and precious stones, VAT payable shall be calculated as 10% of the added value. The value added of gold, silver, and precious stones equals their selling price minus their purchase price which are recorded by proper VAT invoices or payment receipts/vouchers.

TAX DECLARATION AND PAYMENT

TAX REFUNDFrom 1 July 2016, taxpayers can only claim VAT refund from tax authorities in the following common cases:• New projects of taxpayers who adopt the VAT-deduction method that are in the pre-operation investment period, and with a total accumulated input VAT exceeding VND 300 million (some exceptions may apply);

local sales) with an amount exceeding VND 300f million (but capped at 10% of export

revenue), except: goods imported then re-exported;

Customs Law.

From 1 February 2018 146/2017/ND-CP in addition to the above, business establishments importing and then exporting goods into

VAT exceeding VND 300 million are re-allowed to enjoy VAT refund.E-InvoiceCurrently, taxpayers can choose between paper invoices or e-invoices.However, e-invoices must be used for all enterprises from 01 November 2020.

Monthly VAT declaration shall be applied in most cases and is to be filed by the 20th day of the following month.

Quarterly VAT declaration is applicable to taxpayers with total turnover from sales of goods/ services of the preceding year not exceeding VND 50 billion. The deadline for quarterly VAT filing is by the 30th of the following quarter.

Where the taxpayer are eligible for quarterly VAT declaration wish to instead file VAT monthly, they shall submit a notification to tax authorities not later than the deadline for VAT declaration in the first month of the tax year.

VAT finalization is not required.

43

IMPORTANT NOTEThere is no dividend withholding tax in Vietnam on corporate shareholders.

TAX DECLARATIONThere are three methods for FCWT declaration including: (i) Deemed method; (ii) Hybrid method; and (iii) Declaration method.

FOREIGN CONTRACTOR WITHHOLDING TAX (FCWT)

TAXPAYERSFCWT is applicable to foreign organizations/individuals who conduct business or earn income in Vietnam on the basis of a contract/agreement with (i) a Vietnamese party (as a main foreign contractor); or (ii) another foreign contractor to implement part of the contractual scope of works (as a foreign sub-contractor). FCWT is a tax collection mechanism that normally comprises both CIT and VAT, but may also include PIT for payments to foreign individuals.

SCOPE OF APPLICATION

SUBJECT TO FCWT NOT SUBJECT TO FCWT

Services Services provided or consumed inside Vietnam

Services provided and consumed outside Vietnam

Goods

Supply of goods accompanied by servicesSupply of goods in which the delivery point is inside Vietnam

Supply of goods not accompanied by services and the delivery pointis overseas or outside border gate of Vietnam

OthersRoyaltiesTrademarksPenalty/compensationIncome from transportation activities Security transfer

Construction & installation Interest

While the Deemed method can be applied by foreign contractors without any specific conditions (and is the most common method, which can be applied), the Hybrid method and Declaration method require foreign contractors to satisfy the



following conditions:• Maintaining a contract duration of 183 days or more;

• Applying the Vietnamese Accounting System.

NO. CRITERIA DEEMED METHOD DECLARATION METHOD HYBRID METHOD

1 Filing responsibility

• Vietnamese Party • Foreign Contractor • Foreign Contractor

2 Compliance timelineVAT declaration • 10 days from

payment date; or• Monthly

• Monthly • Monthly

CIT declaration • 10 days from payment date; or• Monthly

• Quarterly • 10 days from payment date; or• Monthly

Finalization • 45 days from contract termination date

•

•

90 days from the end of

45 days from contract termination date

• 45 days from contract termination date, applied for CIT

3 Tax calculationVAT

CIT

• VAT = Taxable income x deemed rate• CIT = Taxable income x deemed rate

• VAT = Output VAT – Input VAT

• CIT = Taxable income x CIT rate

• VAT = Output VAT – Input VAT

• CIT = Taxable income x deemed rate

4 Auditing • No • Not compulsory • Not compulsory

5 Revenue/ • Tax liability would be withheld before remittance

• No detailed requirement

requirements to

before remittance

45

ACTIVITIES VAT RATE CIT RATE

Exempt 1%

Services 5% 5%

Supply of goods attached to services where the value is separated:

Goods portion Services portion

Exempt (for goods) 5% (for services)

1% (for goods) 5% (for services)

Supply of goods and some services where value is not separated (*)

3% 2%

3% or 5% 2%

Exempt 5%

Income from royalties Risk of being taxed at 5% 10%

Other cases where value is not separated

TAX RATESIn case of the deemed method, the following rates shall be applied for some notable cases:

Supply of goods in Vietnam or associated with services rendered in Vietnam (including in-country export- import, distribution of goods in Vietnam or delivery of goods where the seller bears risk relating to the goods in Vietnam)

Construction

Loan interest

Highest rate applicable Highest rate applicable



DOUBLE TAXATION AVOIDANCE AGREEMENT

Vietnamese tax is withheld, or alternatively, after tax has been withheld, in which case, the applicant would be seeking a tax refund.As of August 2019, Vietnam has signed DTA agreements with 80 countries and territories around the world. The table below contains the withholding tax rates that apply to dividend, interest and royalty payments by Vietnamese companies to non-residents under

a number of countries.

Vietnam has a solid tax treaty network, with most treaties following the OECD - model treaty. Treaties generally provide for relief from double taxation on all types of income, limit the taxation by one country of companies’ residents in the other and protect companies’ residents in one country from discriminatory taxation in the other. Vietnam’s treaties generally contain OECD-compliant exchange ofinformation provisions.Tax relief under Double Taxation Avoidance Agreement (DTA)application is not automatically granted. Instead, foreign taxpayers are required to submit certain notification dossiers to Vietnamese tax authorities within 15 days prior to the tax payment deadline.Notification dossiers normally include tax residence confirmation, which must be translated into the Vietnamese

language and notarized, along with various Vietnamese Government forms. In the case the statutory deadline above is missed, taxpayers can still retain their right to claim tax treaty benefits as long as the notification is submitted within 3 year from the tax payment due date.The documentation can be submitted before the payment is made and

47

WITHHOLDING TAX RATES UNDER VIETNAM’S TAX TREATIESTreaty Partner DividendsAlgeria (*)

Australia

Estonia

Austria

15 15 1510 10 105/10/15 10 7.5/10

Azerbaijan 10 10 10Bangladesh 15 15 15Belarus 15 10 15Belgium (*) 5/10/15 10 5/10/15Brunei Darussalam 10 10 10Bulgaria 15 10 15Cambodia 10 10 10Canada 5/10/15 10 7.5/10

China 10 10 10Cuba 5/10/15 10 10Czech Republic 10 10 10Denmark 5/10/15 10 5/15

5/10 10 7.5/10Egypt (*) 15 15 15Finland 5/10/15 10 10France 7/10/15 0 10Germany 5/10/15 10 7.5/10Hong Kong 10 10 7/10Hungary 10 10 10 Iceland 10/15 10 10India (*) 10 10 10Indonesia 15 15 15Iran 10 10 8/10Ireland 5/10 10 5/7.5/10/15Israel 10 10

Japan 10 10 10

5/7.5/15 Italy 5/10/15 10 7.5/10

Interest Royalties



WITHHOLDING TAX RATES UNDER VIETNAM’S TAX TREATIESTreaty Partner Dividends

5/15 10 10/15Korea (North) 10 10 10Korea (South) 10 10 5/15Kuwait 10/15 15 20Laos 10 10 10Latvia 5/10 10 7.5/10Luxembourg 5/10/15 10 10Macedonia (*) (**) (**) (**)Malaysia 10 10 10Malta 5/15 10 5/7.5/10/15Mongolia 10 10 10Myanmar 10 10 10Morocco 10 10 10Mozambique 10 10 10Netherlands 5/10/15 10 5/10/15New Zealand 5/15 10 10Norway 5/10/15 10 10Oman 5/10/15 10 10Panama

Pakistan

Palestine

5/7/12.5 10 1015 15 1510 10 10

Philippines 10/15 15 15Poland 10/15 10 10/15Portugal (*) 5/10/15 10 7.5/10Qatar 5/12.5 10 5/7.5/10Romania 15 10 15Russia 10/15 10 15San Marino 10/15 10/15 10/15Saudi Arabia 5/12.5 10 7.5/10Serbia 10/15 10 10

Interest RoyaltiesKazakhstan

49

WITHHOLDING TAX RATES UNDER VIETNAM’S TAX TREATIESTreaty Partner DividendsSeychelles 10 10 10Singapore 5/7/12.5 10 5/10Slovakia 5/10 10 5/7.5/10/15Spain 7/10/15 10 10Sri Lanka 10 10 15Sweden 5/10/15 10 5/15Switzerland 7/10/15 10 10Taiwan 15 10 15Thailand 15 10/15 15Tunisia 10 10 10Turkey 5 10 10United Arab Emirates 5/15 10 10Ukraine 10 10 10United Kingdom 7/10/15 10 10United States (*) 5/15 10 5/10

15 10 15Venezuela

Uzbekistan

5/10 10 10

Interest Royalties

Notes: (*) These DTAs and the protocols for DTAs have been not yet in force. (**) The content of some new DTAs were not available at the time this Investment Guide was prepared.



OTHER TAXES

SPECIAL SALES TAXSpecial Sales Tax (SST) taxpayers include producers and importers of goods and providers of services that are subject to SST. SST rates are presented in the table below:

GOODS/SERVICES TAX RATES (%)

Cigarettes, other products derived from tobacco plants • From 1 January 2016 to 31 December 2018• From 1 January 2019

7075

Spirit/Winea) Spirit/Wine with ABV ≥ 20°

• From 1 January 2018b) Spirit/Wine with ABV < 20°

• From 1 January 2018

65

35

Beer• From 1 January 2018 65

Automobiles having fewer than 24 seats 5~150

Motorcycles with cylinder capacity above 125cm3 20

Aircraft/Yacht 30

Gasoline 7~10

Playing cards 40

Votive papers 70

Dancing club business 40

Massage, karaoke business, betting business 30

Casino business, electronic casino game business 35

Golf course business 20

Lottery business 15

51

II. CUSTOMS DUTY AND PROCEDURESEXPORT DUTYExports are the factor that drives the growth of the Vietnamese economy; therefore, most of common goods are not subject to export duty. Export duty is applicable to only

the duty rates ranging up to 40 per cent.

IMPORT DUTYImport duty is generally applied to goods physically crossing or “considered as crossing”

duty rates, which are determined border based on HS codes and the origins of the goods. Goods originating

categorized as follow:

GOODS UNIT TAX RATE (VND/UNIT)

Liter/kg 300-1,000

ton 10,000-20,000

kg 4,000

kg 40,000

kg 500

kg 1,000

kg 1,000

kg 1,000

ENVIRONMENT PROTECTION TAXEnvironment protection taxpayers are organizations, households and individuals producing and/or importing goods that are subject to the environment protection tax. The tax rates are presented in the table below:

REGISTRATION FEEOrganizations and individuals having properties subject to registration fee must pay the registration fee when registering the ownership and usage rights

previously called registration tax.

Petrol, oil and grease

Coal

HCFC solution

Taxable plastic bags

Herbicides restricted from use

Termiticides restricted from use

Forest product preservatives restricted from use

Storehouse disinfectants restricted from use



IMPORT DUTY RATESpecial

preferential rates

MFN rates

Ordinary rates

of Origin (“C/O”) accompanying the imported goods.

es, including not only domestic customs regulations but also guidance issued by the World Customs Organization

DUTIABLE VALUEThe dutiable value is determined by six valuation methods in accordance with the WTO Valuation Agreement, in which transaction value (i.e. the price paid or payable for the imported goods, and where appropriate, adjusted for certain dutiable

priority. Only when the transaction value is

methods for customs valuation be used.Besides import duty, imported goods might also be subject to import VAT, SST and environment protection tax – all are declared and paid at the importation stage.

construction materials (which cannot be produced locally) imported to form

Imports from countries that have an FTA with Vietnam. For example: Korea, Japan, China, Chile, India, the ASEAN members, New Zealand, Russia, and the EU.

Imports from countries that maintain the Most Favored Nation (MFN) status with Vietnam. The MFN rates are in accordance with Vietnam’s WTO commitments and are applicable to goods imported from other member countries of the WTO.

Imports from countries that neither maintain the MFN status with Vietnam nor have an FTA with Vietnam. Ordinary rates are generally 50% higher than MFN rates.

EXEMPTIONImport duty exemption might be applicable for certain cases including but not limited to the followings:• Raw materials, supplies and components imported for the processing of goods for export and finished products for use in the processed goods;• Materials, supplies, components imported for the manufacturing of goods for export;• Machinery & equipment, specialized means of transportation and

53

areas or encouraged sectors);• Certain imports serving petroleum-related activities;• Goods temporarily imported within a

purposes. Import duty exemption is also applicableto import transactions of an Export Processing Enterprise (EPE). An EPE is

considered as an EPE, a company must commit to export all of its products. All of the purchases in relation to the manufacture/processing of exported

assets) are exempted from import duty & import VAT.

REFUNDA refund of import duties might be granted in certain cases, including but not limited to the followings:• Goods for which import duties have beenpaid but which are not actually physicallyimported;• Imported raw materials that are not used and must be re-exported;• Imported materials serving the production of products to be sold in thedomestic market, but actually used for the production of products to beexported (either exported abroad orinto the Export Processing Zone (EPZ)).

PRIORITY ENTERPRISE STATUSBusinesses that are granted priority enterprise status are entitled to various privileges, waivers or exceptions of customs administrative requirements, including:• Waiver of certain documentrequirements during customs clearance, customs inspection, etc.;• Exemption from the requirement ofcustoms audit at customs offices • The customs authority may conduct post-clearance audit at the enterprise′s office only once every three years, on the basis of risk management, except for signs of violations of the legislation on customs.To apply for priority enterprise scheme, taxpayers must meet several conditions, some of which are as follows:• Full compliance: No tax offence in twoconsecutive years before the application. • Annual export/import turnover: Atleast USD 100 million in total; or USD 40 million for goods manufactured in Vietnam; or USD 30 million for exported agriculture and sea foods manufactured or grown in Vietnam.Once accredited with priority enterprise status, the status is valid for three years.



CUSTOMS AUDIT

TYPICAL RISKSMANUFACTURING/PROCESSING FOR

EXPORTEPE TRADING &

DISTRIBUTION

Inventory reconciliation

Customs valuation

Certificate of Origin

N/A

N/A N/A

N/A

N/A

The above risks might be exposed before, during, or after the customs declaration are carried out. Typically, a customs audit shall be conducted if there is any signal that there may be acts of taxpayers that violate legal requirements, or in accordance with a specific inspection plan of the customs authorities. The audit might be performed either at the customs authority offices or at the taxpayer′s premises.

For different business models, different typical customs risks might be triggered.

55

III. LAND RENTAL INCENTIVES

PROJECT CONDITION LAND RENTAL EXEMPTION PERIOD

1. PROJECT ENJOYING EXEMPTION OF LAND RENTAL FEE FOR WHOLE RENTAL PERIOD

The whole rental period

2. PROJECT ENJOYING EXEMPTION OF LAND RENTAL FEE FOR DEFINITE PERIOD

Up to 3 years in the fundamental construction period

3 years

7 years

Specially encouraged sectors; or Specially difficult socio-economic condition locations; orEncouraged sectors in difficult socio-economic locations

11 years

15 years

Land rental incentives are mostly governed by the Land Law 2013, andimplementing regulations (including Decree No. 46/2014/ND-CP, Decree No. 123/2017/ND-CP, List of encouraged field & sectors in Decree No. 118/2015/ND-CP and other specific regulations).

• Project invest in specially encouraged investment sectors and in specially difficult socio-economic condition locations• Mega-projects having total capital of at least VND 6,000 billion(*) in specially encouraged investment sectors

After this 03-year-exemption time, subject to certain conditions, the investment project could enjoy the land rental fee exemption for further period as below:

During the fundamental construction period of projects approvedby the competent authorities.

• Project invest in encouraged investment sectors

• Project invest in:

• Project invest in:

• Project invest in difficult socio-economic condition locations• Labor-intensive projects in rural areas using at least 500 labors(*)

• Labor-intensive projects in rural areas using at least 500 labors(*)in encouraged investment sectors• Mega-projects having total capital of at least VND6,000 billion(**)

• Labor-intensive projects in rural areas using at least 500 labors(*)in specially encouraged investment sectors • Mega-projects having total capital of at least VND6,000 billion(**)in encouraged investment sectors

Specially encouraged sectors in difficult socio-economic locations; or Encouraged sectors in specially difficult socio-economic locations



3. OTHER SPECIFIC PROJECTS

• Projects located in economic zones and hi-tech zonesGovernment or the Prime Minister (***)

The Prime Ministerrequested MinisterMinisters ministerial

Governmental agencies and Presidents of the People’s Committees of provinces

shall consider and decide to grant the land rent exemption

(*) Labor-intensive projects located in the rural areas using at least 500 full-time employees signing labor contract of more than one year since official operation (excluding those doing commercial housing business, or those manufacturing products subject to special sales tax (except automotive) or those exploiting mineral resources).(**) Mega-projects (excluding those doing commercial housing business, or those manufacturing products subject to special sales tax (except automotive) or those exploiting mineral resources), having total capital of VND 6,000 billion or more, disbursed within 3 years since being licensed.(***) Of note, the land rental fee exemption period for the projects located in economic zones and hi-tech zones could be 11 years, 13 years, 15 years, 17 years, 19 years or the whole rental period, which is regulated separately by Decree No. 35/2017/ND-CP dated 03 April 2017 of the Government (effective from 20 June 2017).

57

HUMAN RESOURCES AND EMPLOYMENT

58

E HUMAN RESOURCES AND EMPLOYMENT

Vietnam is well-known for a disciplined, hard-working, and fast-learning population. Traditions emphasizing learning and respect for authority, as well as low wages and a high adult literacy rate, are often cited by investors as among the most attractive aspects of the country’s investment environment.

EMPLOYEES’ RIGHTS AND REMUNERATIONThe legal framework for employment relationships are currently set out under the Labor Code, which was enacted in 2012. The stated aims of the Labor Code and relevant guiding regulations are to create social equality, to improve protection for employees and employers, and to meet the country’s demand for regional and international integration.

Workers generally must be at least 15 years old (except for apprentices working in approved trade training centers, who must be at least 13).

An employee may be employed in any geographical location not prohibited by law. An individual may be hired directly by an enterprise or via an employment service organization.

directly in the local market. All enterprises must report biannually to the provincial department of labor on their employment levels and projected employment needs.

HUMAN RESOURCES AND EMPLOYMENT

The wage and salary minimum pay rates schedules are applied, which vary by region. Regulations apply to overtime, leave and working week.

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WORKING TIME

OF WHICH

WAGES AND BENEFITS

• Region I includes urban Hanoi, Hai Phong, Ho Chi Minh City, Dong Nai, Binh Duong and Ba Ria – Vung Tau

• Region II includes rural Hanoi, Hai Phong, Ho Chi Minh City and

Weekly hours:40 – 48

Daily break:1 hour

Daily hours:8

Overtime:200 hours/year(300 hours in special cases)

Overtime payment must be at least 150% of regular wages on normal work days, at least 200% on weekendsand at least 300% on public holidays and paid leave days.

medium- sized cities and towns

• Region III includes small-sized cities and towns

• Region IV includes the remaining less developed areas of Vietnam

VND 3,430,000

VND 3,920,000

VND 4,420,000

VND 3,070,000

Region IV

Region III

Region II

Region I

According to Decree No. 90/2019/ND-CP, the region-based minimum monthly wages applied from 1 January 2020 are as follows:



SOCIAL INSURANCE (SI), HEALTH INSURANCE (HI) AND UNEMPLOYMENT INSURANCE (UI)The Vietnamese compulsory SIHIUI scheme is applicable to Vietnamese national

3 months or above.Foreign employees, however, shall only be subject to the mandatory Vietnamese HI scheme in the same manner as Vietnamese national employees. Currently, the SIHIUI contributions for eligible employees are based on the following prescribed rates:

1 July 2019, the common minimum salary being the basis for the SIHI contribution is VND 1,490,000. The SIHI contribution then is computed at the lower of the contracted gross income or 20 times the monthly common minimum salary, currently capped at VND 29,800,000. The cap of UI is 20 times of the common regional salary, e.g. VND 83,600,000 for Region I.

TYPE OF INSURANCE

SI

HI

UI

TOTAL

8%

1.5%

1%

10.5%

17.5%

3%

1%

21.5%

25.5%

4.5%

2%

32%

EMPLOYEECONTRIBUTION

EMPLOYERCONTRIBUTION

TOTAL

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TERMINATION OF EMPLOYMENTPursuant to the current Labor Code, a labor contract is terminated in the following cases:

1.2.

3.

4.

5.

6.

The labor contract expires. The work stated in the labor contract has been completed. Both parties agree to terminate the labor contract. The employee fully meets the requirements on the time of the social insurance contributions and the retirement age (60 for males and 55 for females). The employee is sentenced to imprisonment or death, or is prohibited from performing the job stated in the labor contract under a legally effective judgment or ruling a court.The employee dies or is declared

7.

8.

9.

10.

by a court as to have lost civil act capacity, be missing or dead.The individual employer dies or is declared by a court to have lost civil act capacity, be missing or dead; the institutional employer terminates operation. The employee is dismissed on disciplinary grounds. The employee unilaterallyterminates the labor contract. The employer unilaterallyterminates the labor contract; the employer lays off the employee due to structural or technological changes or economic reasons, merger, consolidation or division of the enterprise or cooperative.

The Labor Code also specifies certain cases where employer and employee may unilaterally terminate the labor contract, for example: employee’s failure to perform the contracted work; reduction in employer’s business scale due to force majeure events; employee’s inability to continue working due to illness, accidents or breach of discipline; etc.


In case of unilateral termination, the employer is required to give 3 days’

under 12 months; 30 45 days’ for an

apply to employees dismissed on disciplinary grounds.

EMPLOYMENT TERMINATION ALLOWANCESeverance allowanceExcept for cases of dismissal on disciplinary grounds, the employee with working period of 12 months or above shall be entitled to severance allowance upon termination of a labor contract at the rate of half of one month’s salary for each working year.

Job-loss allowance

allowance” instead of “severance allowance” from the employer if the employee has been employed for at least 12each year of service and not less than two full months’ pay in total.

• Calculation of severance and job-loss allowance

OF WHICH• Salary basis is the average of the

monthly salary under the labor contract within the six consecutive months preceding the time of contract termination.

• Time basis is the total actual

working time of the employee minus the time of UI contribution and the time of being paid with severance allowance from the employer measured by the number of years.

Severance allowance

Time basis Salary basis 1/2

Job-loss

allowanceTime basis Salary basis

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company

company,


For employees being recruited after 1 January 2009 and having fully contributed to the compulsory UI scheme, the State Unemployment Agency shall be responsible for paying severance/job-loss allowance which is also referred to as unemployment allowance to these employees upon termination of labor contract.

EMPLOYMENT OF FOREIGNERSTo be employed in Vietnam, foreigners must meet the following requirements:• Be at least 18 years old;• Be in good health condition necessary to satisfy the job requirements;• Be in possession of high technical skills or considerable professional experience in

production operation/management;• Be a manager, an executive director or an expert; and• Have no criminal convictions, civil record or pending criminal proceedings in

Vietnam or abroad.

Foreigners must obtain a valid work permit from the local Labor Department before working in Vietnam, except for some special cases, including “foreigners entering Vietnam to hold the positions of experts, managers, chief executive

under 30 days and an accumulated working period of under 90 days per year” as per the recently issued regulations. This new provision opens up new opportunities for expatriates working in Vietnam for a short-term duration (i.e. less than 90 days) to be exempted from work permit application. Yet, in order to enjoy such exemption, the foreign experts must hold a Bachelor degree or above, and

WORK PERMIT & VISA APPLICATIONpossess at least 3 years of working experience in relevant positions. The maximum term of a work permit is 2 years. Renewal of a work permit is required prior to its expiry if the foreign employee is still under the assignment term. In addition, a business visa is statutorily required prior to a foreigner’s entry into Vietnam. Upon the expiry of the initial business visa (normally 3 months), applying for either visa extension or a temporary residency card (TRC) is required. Since the duration for visa extension is only less than 12 months, the TRC with a current limited period of up to 3 years should be considered in case of long-termassignment.


FOREIGN EXCHANGE CONTROL

65

F FOREIGN EXCHANGE CONTROL

Foreign currency capital for indirect foreign investment must be exchanged

currency for remittance abroad.

similar forms (e.g. conversion/adjustment of prices of goods/services or value of contracts and agreements) are not allowed to be conducted in foreign currency. However, foreigners working in Vietnam shall still be allowed to receive salaries, bonuses and allowances in foreign currency and may deposit these earnings in interest-bearing foreign currency accounts in Vietnam. Also, the restrictions on foreign currency earnings, payments and exchange transactions do not apply to companies operating in EPZs.

Residents and non-residents may purchase, transfer and take foreign currency out of Vietnam for the purpose of payment and money transfer with respect to current transactions. The cap on foreign currency that may be brought out of Vietnam by individuals is USD 5,000 (or the equivalent in another currency) and VND 15 million in local currency. Individuals must provide supporting documents as requested by the credit organizations. It is not necessary to present documentation to the Vietnamese authorities that

Foreign currency trading on the foreign currency interbank market is permitted.


Foreign investors may purchase foreign currency at prescribed banks in Vietnam without a permit from the State Bank. Ordinary foreign currency accounts may be used to service current account transactions and regulatory approval is not required. However, a special, separate foreign currency bank account is needed to conduct certain

term loan repayments; and foreign currency withdrawals and deposits.

Another special account, known as a foreign currency deposit account, may be opened to receive foreign loan capital, repay foreign loans or at the

bank account can be used for this purpose, but permission is required from the State Bank.

engage in BOT projects with special requirements.

Nonresident indirect (portfolio) investors must open indirect capital accounts in Vietnamese dong at authorized banks for all transactions related to the implementation of their investment in the country. Resident organizations and individuals may

although this is subject to meeting requirements imposed by the State Bank.

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F FOREIGN EXCHANGE CONTROL

USEFUL WEBSITES• Ministry of Planning and Investment: http://www.mpi.gov.vn

• Foreign Investment Agency – Ministry of Planning and Investment

• Ministry of Industry and Trade: http://www.moit.gov.vn • Ministry of Finance: http://www.mof.gov.vn

• State Bank of Vietnam: http://www.sbv.gov.vn • Vietnam Chamber of Commerce and Industry: http://www.vcci.com.vn

• General Department of Taxation: http://www.gdt.gov.vn/wps/portal • General Department of Customs: http://www.customs.gov.vn

• State Securities Commission of Vietnam: http://www.ssc.gov.vnhttp://www.gso.gov.vn



This publication contains general information obtained or derived from a variety of publicly available

sources and was assembled in September 2019 based on the law enforceable at the time. None of the

Foreign Investment Agency of Vietnam, Deloitte Touche Tohmatsu Limited and its member firms, or

their related entities (collectively, the “Deloitte network”) is, by means of this publication, rendering

professional advice or services. Before making any decision or taking any action that may affect your

finance or your business, you should consult a qualified professional adviser. No entity in the Foreign

Investment Agency of Vietnam, or Deloitte network shall be responsible for any loss whatsoever

sustained by any person who relies on this publication. By reading this without any of response to

Foreign Investment Agency of Vietnam or Deloitte, we hereby assume that you agree with all the

information and provisions set forth above.

Deloitte Vietnam delivers high quality services by combining the best localand international experts to help clients succeed.

ContactsHanoi Office

Visit us at www.deloitte.com/vnEmail: [email protected]

Ho Chi Minh City Office

71

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Foreign Investment Agency (FIA)Ministry of Planning and Investment of Vietnam

• Administration Office• Statistics and General information Division• Foreign Investment Division• Outward Investment Division• Investment Promotion Division

Investment Promotion Center- Northern Vietnam

Investment Promotion Center- Central Vietnam

Investment Promotion Center- Southern Vietnam

Foreign Investment Agency (FIA), an organization belonging to the Ministry of Planning and Investment of Vietnam, is commissioned to advise to the Minister of Planning and Investment to implement state management function related to foreign direct investment activities in Vietnam and Vietnam direct investment activities abroad.

Divisions under Foreign Investment Agency include:

Address: 6B Hoang Dieu, Ba Dinh District, Hanoi, VietnamTel: +84 80 48461 Fax: +84 24 3734 3769Email: [email protected] Website: http://fia.mpi.gov.vn

65 Van Mieu, HanoiTel: +84 24 3747 5998Fax: +84 24 3843 7927E-mail: [email protected]: http://ipcn.mpi.gov.vn

103 Le Sat, Da NangTel: +84 236 3797 669/~689/738/699Fax: +84 236 379 7679Email: [email protected]: http://centralinvest.mpi.gov.vn

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