2024

Foreword 03

I. Country Profile 04
Key Statistics and Facts 05
Politics 06
Economy 07
Society 09
Technology 12
Environment 13
II. Vietnam's Economy 14

Recent Economic Landscape 15

ESG Practices 21

Capital Markets and M&A Market 24

Vietnam Mid-market Dynamics: Grant Thornton’s Survey 27

III. Key Sectors for Investment in Vietnam 29

Manufacturing 30

Industrial Real Estate 33

Renewable Energy 36

Information Technology 39

IV. Establishing in Vietnam 42

V. Accounting and Audit 46

VI. Taxation 53

Corporate Income Tax (“CIT”) 55

Transfer Pricing (“TP”) 61

Valued-Added Tax (“VAT”) 62

Personal Income Tax (“PIT”) 66

Foreign Contractor Tax (“FCT”) 71

Avoidance of Double Taxation Agreement (“DTA”) 74

Other taxations 75

VII. Labour 78

About Grant Thornton (Vietnam) Limited 83

Doing Business
Doing ininVietnam
Business Vietnam| |2024
2022 2
In 2023, the global economy was confronted with significant
challenges, marked by a hike in global inflation, geopolitical
conflicts and an intensified global divide. As an economy
highly integrated with the global market, Vietnam felt the
impacts profoundly. In response, the country put forward a
series of strategic monetary and fiscal policies, to mitigate
the difficulties. By the end of the year, Vietnam achieved a
GDP growth of 5.05%, surpassing the global average by 1.5
times and ranking second among the ASEAN-6 countries.
While Vietnam saw mixed economic developments in early
2024, the outlook for the rest of the year appears promising
for Vietnam, with the country's great efforts to overcome
hurdles and moderate signs of global recovery.

Amidst the turbulent headwinds, Vietnam continues to be

regarded as an attractive destination on the global
investment map. The country's macroeconomic stability,
combined with a burgeoning population of over 100 million
young and skilled individuals, enhances its appeal. Ongoing
expansion of free-trade agreements, alongside supportive
government policies, further fortifies Vietnam's investment
potential. Additionally, continuous improvements in the
business environment underscore Vietnam’s commitment to
fostering a competitive and dynamic economic climate.

As Vietnam is increasingly becoming a favoured destination

for foreign investment, Grant Thornton Vietnam prepared our
publication 'Doing Business in Vietnam 2024’ to provide
investors with a comprehensive overview of the country's
business landscape. We trust that this guide will serve as a
valuable compass for navigating the business environment in
Vietnam.

NOTE: This guide herein is of a general nature and is not

intended to address the specific circumstances of any
particular individual or entity. Although we endeavour to
provide accurate and timely information, there can be no
guarantee that such information is still accurate as of the
date this guide is received or will continue to be accurate in
the future. When specific problems occur in practice, it will
often be necessary to refer to the laws and regulations of
Vietnam and to obtain appropriate professional advice.
Should you require additional professional guidance, we are
more than willing to provide consultancy and ascertain
where we can be of assistance.

Doing Business in Vietnam | 2024 3

Doing Business in Vietnam | 2024 4
 Vietnam has a young population, stable macroeconomic environment, significant Foreign Direct
Investment (“FDI”) inflows, and strong commitment to sustainable growth.

On the Indochina peninsula Tropical in South, GMT+07

in Southeast Asia, bordering Monsoonal in North with
China to the North, Laos hot rainy season (May to
and Cambodia to the West, September), and warm, dry
and the East Sea to the East season (October to March)

Vietnam’s population ranks 16th in

the world and 3rd in Southeast Asia
Hanoi (Capital)
8.6 million
100+
95-99
90-94
85-89
80-84
75-79
70-74

Da Nang 65-69
1.2 million 60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
Ho Chi Minh City 0-4
The primary economic hub
9.4 million 5 4 3 2 1 0 1 2 3 4 5

Male Female

(Source: General Statistics Office (“GSO”), World Population Review, PopulationPyramid.net - 2024)

Doing Business in Vietnam | 2024 5

 Socialist State

Vietnam is a socialist country under the leadership of the Vietnam Communist Party. Vietnam's political
system comprises four key components: the Communist Party of Vietnam (“CPV”), the State System, the
Fatherland Front of Vietnam, and other social and political organisations. The CPV leads the political
system and is a member of the system. The Party leads, respects and promotes the role of the State, the
Viet Nam Fatherland Front and other socio-political organisations.

*The National Assembly is the highest representative organ of the people; the highest organ of state
power of the Socialist Republic of Viet Nam, the sole organ that has the constitutional and legislative
rights. The body has three key functions: (1) Make laws; (2) Make decisions on important issues of the
nation; (3) Monitor at the supreme level of all activities of the State.
(Source: Vietnam Government Portal)

Doing Business in Vietnam | 2024 6

 Lower-middle income

USD 4,284.5

Agriculture, Forestry and Fisheries

+ 3.83% 3.25%
Industry and Construction
+ 3.74% Core inflation: 4.16%

Service
+ 6.82%

11.96% 37.12% 42.54% 8.38%

(accumulated from 1988 to 2023)

Invested in Vietnam Total registered capital currently active

USD 283,026 million

+ USD 23,504 million (2023)
Singapore Republic Hong Kong
of Korea
USD 68,045 million
+ USD 4,665 million (2023)

China Japan Taiwan USD 40,671 million

+ USD 2,373 million (2023)
(Source: GSO, Ministry of Planning and Investment (“MPI”))

Doing Business in Vietnam | 2024 7

 US China EU ASEAN China Republic ASEAN Japan
of Korea

Vietnam has a diverse and dynamic import-export landscape. In 2023, Vietnam's exports to the US
amounted to USD 97 billion, with Other machinery, instruments, accessories accounting the largest
propotion - 18.7%. China remains Vietnam's largest import partner, with imports over USD 110 billion.
Computers, electronic products, and parts hold the largest portion, at 21.1%, of the total imports from
China.

Unit: USD billion

Iron, Steel 8.35

Seafood 8.97

Wood and wooden products 13.47

Means of transport and equipment 14.16

Footwear 20.24

Textile, sewing products 33.33

Other Machinery, instrument, accessory 43.13

Telephones and their parts 52.38

Computers, Electronical products & parts 57.34

0 5 10 15 20 25 30 35 40 45 50 55 60 65

Unit: USD billion

Chemical products 7.61
Other base metals 7.63
Chemicals 7.73
Petroleum oil, refined 8.37
Telephones and their parts 8.75
Plastic materials 9.76
Iron, Steel 10.43
Textile fibrics 13.02
Machinery, instrument, accessory 41.58
Computers, Electronical products & parts 87.97

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
(Source: GSO)

Doing Business in Vietnam | 2024 8

The labour and employment situation in the first quarter of 2024 has returned to the normal development
trend, as before the Covid-19 pandemic.

Working-age Unemployment rate Avg. monthly earnings

population (0.06% from 2022) of wage workers

As Vietnam is currently in the golden population phase (which started in 2007 and is expected to last for
30-35 years), the proportion and number of people of working age, in Vietnam, has been steadily
increasing, maintaining a level above 52 million people in 2023.

According to the Ministry of Labour, Invalids and Social Affairs (“MOLISA”), 69% of Vietnam's labour are
targeted to be trained by the end of 2024. Meanwhile, 28% of the labour are aimed to become trained
workers with degrees and certificates.
The primary focus will be on high-quality human resources training, to meet market demand. Efforts will
be made to enhance workplace productivity, with a special attention to emerging industries such as
chips and semiconductors.
At the start of 2023, the Government approved Decision 73/QD-TTg, outlining a plan for vocational
education institutions from 2021 to 2030, with a vision for 2045. The goal is to reshape the vocational
education landscape, shifting dominance from public to private and foreign-invested institutions to
better meet the demand for skilled human resources.

Private & foreign-invested

Year Public institutions Total institutions
institutions

2023 1,202 684 1,886

2025 980 820 1,800

2030 850 850 1,700

(Source: GSO, MOLISA, Vietnam Government Portal)

Doing Business in Vietnam | 2024 9

Top 5 provinces with highest spatial cost of living in Vietnam in 2023 (Ha Noi=100%)

100% 97.94% 94.65%

98.44% 96.07%

Spatial Cost of Living in Vietnam by Region 2023 (Red River Delta Region=100%) - Unit: %

102% 100.00% 99.86% 99.97%

100% 98.08% 97.67%
98% 95.93%
96%
94%
92%
Red River Delta Northern Midlands North Central Western Southeast Region Mekong Delta
Region and Mountainous Coast and Highlands Region Region
Region Central Coast

Hanoi and the Red River Delta Region continue to have the highest cost of living, compared to other
regions and provinces in Vietnam. In contrast, the province with the lowest cost of living, Ben Tre, is only
equivalent to 85.93% of that in Hanoi. The Mekong Delta Region is also the region with lowest cost of
living.

Cost of living for international employees ranking 2023

Compared to the majority of countries, Vietnam in general has a low cost of living. Out of the 227 cities
examined in the Mercer Cost of Living City Ranking 2023, Hanoi ranked 156th (6 lower than 2022) while
Ho Chi Minh City ranked 164th (1 lower than 2022). These two cities are costlier than Kuala Lumpur
(ranked 180th), but still less expensive than Bangkok and Phnom Penh (ranked 105 th and 132nd).

Hanoi Ho Chi Minh City

According to the United Nations Development Program (“UNDP”), the HDI of Vietnam in 2022 is 0.726,
belonging to the high group. Vietnam's HDI ranking among the world's nations and territories is 107 th out
of 193 (8 ranks higher than the previous year). From 1990 to 2022, Vietnam's HDI value changed from
0.492 to 0.726, an increase of nearly 50%.

(Source: GSO, UNDP, Mercer LLC)

Doing Business in Vietnam | 2024 10

Greetings Business attire
To greet and say goodbye to Vietnamese business In Vietnam, business attire typically strikes a
partners, it is customary to shake using both hands balance between traditional values and modern
with the left hand on top of the right wrist and bow professionalism. For men, this often means shirts
slightly. with trousers or suits for formal occasions. Women
opt for modest yet stylish attire such as blouses
with trousers or skirts and dresses. The key is to
Business meetings dress neatly and respectfully, considering the
In Vietnam, face-to-face meetings are considered occasion and local climate.
highly formal, particularly when engaging with
government agencies and state-owned enterprises.
Typically, these meetings are confirmed around 1-2
weeks in advance. When initiating a business
conversation, it is customary to exchange business
cards with partners using both hands, a gesture
that underscores respect and courtesy. To show Employees who have been employed for 12
proper respect to your conversation partner, it is months are provided with a minimum of 12 days of
essential to give their business card careful paid annual leave (vacation) per year, in addition
attention rather than swiftly tucking it away. to the public holidays.
Another important aspect of Vietnamese business
culture are post-meeting gatherings, often hosted
by business counterparts. Lunches or dinners
provide invaluable opportunities to engage in
informal discussions for deeper understandings and
trust, ultimately paving the way for successful
collaborations and ventures.

Addressing Vietnamese
Vietnamese names are written "backwards"
compared to Western convention, typically
consisting of three or four parts. The surname
(family name) comes first, followed by the middle
name, and then the given name (first name). If
relevant, a professional title can be included. Given
the commonality of surnames, it is customary to use
the given name when addressing individuals to
avoid confusion.

Souvenirs and gift giving

Gift-giving in business is a common practice
throughout Vietnam, often seen during special
occasions and business meetings to express
appreciation or respect towards business partners.
These gifts and souvenirs need not be expensive, as
their significance lies in the gesture and the
sentiment of goodwill they represent.

Doing Business in Vietnam | 2024 11

 Use Internet in daily life covered by 3G/4G mobile network
Rank 13th worldwide

Download (Mbps) Upload (Mbps) Download (Mbps) Upload (Mbps)

place in the Avg. annual growth in

Asia-Pacific region the last 5 years

“.vn”domain names place in ASEAN worldwide

(Source: Ministry of Information and Communications (MIC), Vietnam Internet Network Information Center (VINIC))

Doing Business in Vietnam | 2024 12

Most of Vietnam’s land is used for agriculture,
however, Vietnam also has diverse and rich mineral
resources within its non-agricultural areas. With
over 5,000 mines and ore deposits containing 60
different types of minerals, Vietnam possesses
several minerals of considerable reserve scale,
which holds strategic significance and serves as
valuable resources for the country's development.

Reducing greenhouse gas emissions - key goals in 2030:

According to the National Strategy on Climate Change for 2050, the process to reduce greenhouse gas
emissions will be divided into two phases with sector-specific targets. By the year 2030, the national
target for total greenhouse gas emissions will be reduced by 43.5%, particularly:

Forestry Agriculture Energy Waste disposal Industry

    

2023
1990

was earned from the first Forest cover rate

forest carbon credit sale in 2023

estimated annual revenue that Vietnam

can earn from carbon credit sales
A draft project “Development of a carbon market in
(Source: MONRE, Ministry of Agriculture and Rural Development Vietnam” by The Ministry of Natural Resources and
(“MARD”))
Environment (“MONRE”) stated that a carbon
exchange is set to commence operations by 2028.

Doing Business in Vietnam | 2024 13

Doing Business in Vietnam | 2023
2024 14
In 2023, Vietnam's economy recorded a 5.05%
growth compared to the previous year. The figure, Holding the Showing
Exceeding
while falling slightly short of the initial target of the global second highest consistent
6.5%, still represents a commendable result. The average by figure among increase by
country's GDP growth in 2023 was 1.5 times higher 1.5 times ASEAN-6 quarter
than the global average, which stands at 2.9%. In
the ASEAN-6 region, Vietnam's figure also stands In 2024, the world economy is forecast to maintain
strong, securing the second position, alongside recovery. According to the International Monetary
Indonesia at 5.05% while the Philippines took the Fund (“IMF”), the global economy has been
lead, growing by 5.6%. showing unexpected strength, which is particularly
favourable for the export-driven economy of
Regarding GDP size, Vietnam's economy was Vietnam. The organisation anticipates Vietnam to
reported to have reached over USD 430 billion by achieve a growth rate of 5.8% this year, placing it
the end of 2023, making it the 35th largest globally. among the world's top 20 fastest-growing nations.
The country’s GDP per capita increased to USD Several other international organisations also have
4,284.5, up by USD 160 from 2022. expressed optimism for Vietnam’s 2024 economic
outlook, with most forecasting a 6.0% growth rate.

Largest economy in the world Unit: %

Throughout 2023, the global economy faced 7.0% 5.8% 6.0% 6.0% 6.0%
5.5%
6.0%
significant challenges, impacting macroeconomic
5.0%
conditions and Vietnam's growth prospects. 4.0%
Despite the difficulties, the country demonstrated 3.0%
resilience and put forward proactive measures to 2.0%
stabilise its economy. The Government primarily 1.0%
focused on implementing fiscal policies, such as 0.0%
WB IMF ADB AMRO UN
tax reductions, to stimulate domestic demand and
support businesses. Additionally, monetary The Vietnamese Government aims for 6.0-6.5%
policies, which involve adjustments in interest economic growth this year, showing determination
rates, were carefully managed to ensure price to revitalise the economy. The first quarter of 2024
stability and provide businesses with more access witnessed promising developments, with GDP
to financing. Furthermore, efforts to diversify expanding by 5.66% and trade recording a surplus
export markets and strengthen trade partnerships of USD 8.08 billion. The first quarter is historically the
were intensified to mitigate external risks. These lowest because of the Lunar New Year Holidays,
combined efforts led to noticeable progress where factories are closed for 2 weeks on average.
throughout 2023, with GDP growth in each However, uncertainties persist, including global
quarter consistently surpassing the previous one. geopolitical tensions and inflation risks. Nonetheless,
the country is determined to confront these hurdles,
emphasizing public investment as a key driver of
Unit: %
growth. The extension of the value-added tax (“VAT”)
8.00% 6.72%
5.33%
reduction policy until the end of 2024's second
6.00% 4.14% quarter aims to sustain momentum, while efforts to
3.32% diversify export markets continue. Interest rate
4.00%
reductions also remain under consideration. Overall,
2.00%
with proactive measures in place, a steady
0.00%
economic recovery is highly expected for Vietnam in
Q1 Q2 Q3 Q4 2024.

(Source: GSO, IMF, World Bank (“WB”), Asian Development Bank (“ADB”),
United Nations (“UN”), ASEAN+3 Macroeconomic Research Office (“AMRO”))

Doing Business in Vietnam | 2024 15

Vietnam has sustained its success in controlling inflation, evidenced by the country’s 3.25% growth in
average CPI last year, achieving the target set by the National Assembly of keeping the figure below
4.5%. Meanwhile, core inflation (inflation calculated after excluding the prices of state-regulated items
and short-term volatile commodities such as fresh food and energy) rose by 4.16%.

In 2024, the Government aims to control the CPI

growth rate in the range of 4.0-4.5%. This year,
Unit: % Vietnam is still confronted with inflationary
5.00% pressures stemming from both global and
Target 4.16% domestic forces. Internationally, continuous
4.00%
3.23% 3.25%
geopolitical conflicts, coupled with the lurking risks
3.15%
3.00% 2.79%
2.59%
in food and energy prices, contribute to
2.01%
2.31% uncertainties in global inflation trends.
2.00% 1.84%
Domestically, the situation is further complicated
1.00% 0.81% by various factors, such as potential price
adjustments in energy and service fees, as well as
0.00%
the upcoming wage reforms in July.
2019 2020 2021 2022 2023
Average CPI Increase Average Core Inflation

The close coordination among monetary, fiscal

and other macroeconomic policies played a key
role in Vietnam's success in controlling inflation
in 2023. Notably, policies to lower interest rates
and boost credit growth were implemented to aid Nevertheless, analysts have expressed optimism,
economic recovery, despite exerting upward suggesting that inflation control this year will
pressure on inflation. To address this challenge, encounter manageable pressures, and efforts are
the Government introduced a range of measures underway to alleviate pressure on prices,
to ease financial burdens for businesses. including the reduction of environmental taxes on
Additionally, price management strategies, gasoline and VAT. In the first quarter of 2024,
including the use of the Petroleum Price Vietnam observed a modest rise in the average
Stabilisation Fund, were deployed to maintain CPI growth with a figure of 3.77% compared to the
stable domestic prices and prevent market same period last year, while core inflation rose by
manipulation. The country’s harmonious efforts 2.81%. Both figures are below the set target.
aimed at promoting economic growth while
mitigating inflationary pressures ultimately lead For the upcoming period, it is expected that
to successfully keeping inflation under control. Vietnam will continue to closely monitor both local
and global price trends. This involves ensuring the
Unit: % availability of essential goods and making
decisions about when and how much to adjust
prices for state-regulated items. In addition, the
Government will carefully manage stimulus
measures aimed at boosting growth, ensuring
they do not adversely impact inflation control
efforts.

(Source: GSO)

Doing Business in Vietnam | 2024 16

In recent years, Vietnam has solidified its position
as a rising star in the global supply chain. Despite Singapore leads in
registered capital with
the headwinds in global trade and investment in
2023, Vietnam's ability to draw foreign direct
investment (“FDI”) remained robust. According to
China leads in project
the Ministry of Planning and Investment (“MPI”), counts with
in 2023, Vietnam recorded USD 36.6 billion in total invested in Vietnam in 2023
foreign investment capital, marking a 32.1%
increase from the previous year. Of the total
registered capital, newly registered capital Vietnam's appeal to investors has been on the rise
recorded nearly USD 20.2 billion, a surge of 62.2% thanks to its strategic location, stable economy,
over the previous year. Meanwhile, adjusted participation in many free trade agreements, and
capital went down 22.1% compared to 2022 with a cost-effective labour force. Emerging global
around USD 7.9 billion. Purchased shares and trends further enhance its attractiveness.
contributed capital had a figure of more Following the Covid-19 pandemic, there was a
than USD 8.5 billion, up 65.7% year-over-year. notable shift towards supply chain diversification,
Besides, disbursed capital stood at approximately with Vietnam emerging as a top choice for
USD 23.2 billion, reflecting a 3.5% rise compared expansion. Additionally, the “China Plus One”
to 2022. Notably, this is a record-high FDI strategy, driven by the US-China trade tensions,
disbursement level. These impressive growth positions Vietnam as a leading alternative
figures in 2023 continued to underscore Vietnam's manufacturing hub. With Vietnam's growing
favourable business environment for foreign recognition, 2024 holds promising prospects for
investors. continued growth in FDI inflows.

Unit: USD billion In 2019, Vietnam's Politburo set forth Resolution

50-NQ/TW, aiming to refine foreign investment
Capital contribution &
Purchased shares
Newly-registered capital policies until 2030. Since then, a noticeable shift
towards quality over quantity, in FDI, has emerged
in the country. Moving into 2024, this emphasis on
quality will continue, with a heightened focus on
Total FDI
FDI projects that align with environmental
protection standards and demonstrate
technological advancements. Additionally, as
Adjusted capital Vietnam’s relations with the US, Japan and
Australia were recently upgraded to
comprehensive strategic partnerships, a new wave
Total FDI inflows to Vietnam in 2023 rebounded to of high-quality FDI influx from both countries is
match pre-Covid-19 levels, reflecting a promising anticipated for Vietnam, in the future.
trend. This resurgence clearly signaled investors’ On the other hand, Vietnam is expected to
trust in Vietnam's resilience amidst global accelerate efforts to improve its business
challenges, positioning the country as a beacon environment with plans underway to improve
for secure and lucrative investment opportunities. infrastructure, labour productivity and skills, and
administrative procedures. This is especially
Unit: USD billion propelled by the adoption of the Organisation for
38.0 36.6 Economic Co-operation and Development
40 35.8 35.4
35
(“OECD”)’s global minimum tax rate of 15% since
28.5 27.7
30 January 2024, which motivates Vietnam to reduce
25 21.1 reliance on tax incentives and focus on enhancing
20 internal capabilities.
15
10
5
0
2017 2018 2019 2020 2021 2022 2023

(Source: GSO, MPI, Vietnam Government Portal)

Doing Business in Vietnam | 2024 17

Vietnam's active effort to expand its Free Trade
Agreement (“FTA”) network stands as a critical
pillar of its economic strategy, driving growth and Unit: USD million
fostering deeper integration into the global
economy. After more than 7 years of negotiations, 50.00 44.95

on 25 July 2023, Vietnam officially signed an FTA 40.00

37.86
with Israel. Therefore, up to now, Vietnam has
been a party to a total of 16 FTAs, including 7 FTAs 30.00
signed as an ASEAN member and 5 FTAs signed as
20.00
an independent party. The country also has 3 FTAs 12.67
11.50
13.76
9.09
under negotiation. The FTAs have significantly 10.00 7.66 6.24
3.87
5.27
7.71
1.57 3.36
contributed to Vietnam's competitiveness by 0.23
0.06 1.09
1.33
1.03 0.49
0.33
-
enhancing diversification of export destinations
and FDI attraction.
Currently, Vietnam is actively implementing the 2018 2023
new-generation FTAs, including the CPTPP, EVFTA,
and UKVFTA. While still in the initial stages of In efforts to diversify its trade partnerships, Vietnam
leveraging these agreements, Vietnam has currently has several FTAs under negotiation,
already observed significant positive shifts. including agreements with the European Free Trade
Importantly, the trade deals have facilitated Association (Norway, Switzerland, Iceland, and
Vietnamese exports' penetration, in previously Liechtenstein) and the UAE, as well as the ASEAN -
uncharted markets, such as Canada, Mexico, and Canada trade deal. Moreover, it is pursuing talks to
various EU nations. On the other hand, these commence an FTA with the Southern Common
agreements also present challenges for Vietnam, Market (“MERCOSUR”), aiming to unlock new
particularly in terms of ensuring compliance with opportunities in the vibrant markets of South
quality and standards to access preferential tariff America.
rates, which prompts Vietnam to upgrade its
production environment.

(Source: Center for WTO and International Trade – VCCI, Ministry of Industry and Trade (“MoIT)”)

Doing Business in Vietnam | 2024 18

 No. FTA Status Parties
FTAs in effect
1 AFTA Effective since 1993 ASEAN

2 ACFTA Effective since 2003 ASEAN, China

3 AKFTA Effective since 2007 ASEAN, Republic of Korea

4 AJCEP Effective since 2008 ASEAN, Japan

5 VJEPA Effective since 2009 Vietnam, Japan

6 AIFTA Effective since 2010 ASEAN, India

7 AANZFTA Effective since 2010 ASEAN, Australia, New Zealand

8 VCFTA Effective since 2014 Vietnam, Chile

9 VKFTA Effective since 2015 Vietnam, Republic of Korea

Vietnam, Russia, Belarus, Amenia,

10 VN – EAEU FTA Effective since 2016
Kazakhstan, Kyrgyzstan

Effective since 30/12/2018, Vietnam, Canada, Mexico, Peru,

CPTPP (previously
11 came into effect in Vietnam Chile, New Zealand, Australia,
known as TPP)
since 14/01/2019 Japan, Singapore, Brunei, Malaysia

Effective in Hong Kong

(China), Laos, Myanmar,
Thailand, Singapore and
12 AHKFTA Vietnam since 11/06/2019 ASEAN, Hong Kong (China)

Effective in all member

countries since 12/02/2021

13 EVFTA Effective since 01/08/2020 Vietnam, EU (27 members)

Effective temporarily from

14 UKVFTA 01/01/2021, officially effective Vietnam, The UK
since 01/05/2021
ASEAN, China, Korea, Japan,
15 RCEP Official effective since 1/1/2022
Australia, New Zealand

Negotiations commenced in
12/2015, completed in 04/2023
16 Vietnam - Israel FTA Vietnam, Israel
Officially effective since
25/07/2023

FTAs under negotiation

Negotiations commenced in Vietnam, EFTA (Switzerland, Norway,
17 Vietnam - EFTA
05/2012 Iceland, Liechtenstein)
Negotiations commenced in
18 ASEAN - Canada FTA ASEAN, Canada
11/2021
In the process of initiating
19 Vietnam - UAE FTA Vietnam, United Arab Emirates (UAE)
negotiations

(Source: Center for WTO and International Trade – VCCI)

Doing Business in Vietnam | 2024 19

 Vietnam's macroeconomy has shown Vietnam has been actively engaging in
stability across various indicators, trade liberalisation. The country now
evident through the country’s solid has 16 FTAs in effect and 3 FTAs in
GDP growth, controlled inflation and negotiation, representing huge
unemployment rates, and a sustained opportunities for investors to capitalise
trade surplus. on preferential tariff benefits.

The Vietnamese Government offers

investment incentives based on
sectors, regions, and investment
scales. The top incentivised sectors
include hi-tech manufacturing,
renewable energy, infrastructure, and
information technology. It is also
aiming to improve the legal framework
and streamline administrative
procedures.

Vietnam's population, which stands at

100.3 million in 2024, is currently in its
golden phase and largely composed of
young individuals. This youthful
demographic contributes to the nation's
abundant labour force.

Vietnam's strategic location, adjacent

to major markets like China and the
ASEAN region, amplifies trade
opportunities and enhances supply
chain efficiency, providing investors
access to numerous markets.

(Source: GSO, Center for WTO and International Trade – VCCI)

Doing Business in Vietnam | 2023

2024 20
ESG (Environmental, Social, and Governance) Notably, a recent research conducted by the
practices have gained significant popularity Vietnam Business Forum (“VBF”) on FDI firms*
among Vietnamese enterprises in recent years, reveals that 80% of businesses have already
driven by the pursuit of sustainability and established an ESG strategy, with 34% actively
responsible business. Many companies release implementing these ESG strategies. The remaining
annual ESG reports to showcase their effective companies are either monitoring their progress or
management of ESG issues, while others have in the planning phase.
made commitments or have plans to adopt ESG
practices. This is not merely a transient
phenomenon, but an inevitable evolution in the
Vietnamese business landscape. Sooner or later, have already established an ESG
ESG practices will become one of the main criteria strategy
used to evaluate a business, alongside traditional
indicators.
The research also found that approximately 60%
of businesses have allocated budgets for ESG
Current Status
initiatives. Out of this, only 19% have clear
There is a growing number of Vietnamese public expenditure budgets, while the remaining
businesses issuing separate ESG reports companies do not have specific plans for these
alongside their regular annual reports. Although initiatives. The majority of clear budget allocations
the rate of such businesses is still relatively low, it for ESG initiatives are seen among large
is a positive sign that companies are gradually businesses. Among those companies with
becoming more responsible and aware of their allocated budgets for ESG, 50% allocate more
impact on the environment and society. than 1% of their total budget specifically to such
initiatives.
For a country that is in the process of
development, like Vietnam, maintaining a high
growth rate while still achieving sustainable Unit: %
4%
development is a considerable challenge.
However, in recent years, the business community, Less than 1%
in general, has taken noteworthy actions to 24% Between 1% and 2%
contribute to the goal of green growth, such as: 47%
Between 2% and 5%
• using clean energy and environmentally 14% More than 5%
friendly raw materials;
12% Don't know/ Prefer not to answer
• investing in modern, high-tech production lines
that use fewer resources and energy, and
reduce emissions; *VBF survey respondents are FDI businesses (about 500
businesses surveyed in February 2024), and the insights
• implementing ESG practices.
drawn may not be representative of the entire business
community in Vietnam, especially private enterprises.
(Source: Ministry of Natural Resources and Environment, VBF,
Ministry of Finance (“MoF”), MPI)

Doing Business in Vietnam | 2024 21

 Recent action of the Government towards ESG practices
in business
Efforts towards integrating ESG practices across multiple business
sectors are not solely made by enterprises. The Vietnamese
Government has actively implemented policies and regulations that
significantly impact the adoption of ESG practices by businesses.
Notably, in the Circular No. 96/2020/TT-BTC on guiding the
disclosure of information on the securities market (2020), the
Ministry of Finance (“MoF”) had added ESG report as a
complimentary part of Public companies’ annual report.
As a leading force, the Government plays a crucial role in
promoting sustainable development and fulfilling Vietnam's
commitments to the global community. Many major projects aimed
at fostering a sustainable future and creating a foundation for ESG
practices in businesses have been initiated and implemented, for
example:

National Strategy on Climate Change for 2050 (2022)

National Action Plan on Green Growth for the 2021-2030 period

(2021)

Action Plan for Methane Emissions Reduction by 2030 (2022)

National Power Development Plan 8 for the 2021-2030 period,

with a vision to 2050 (2023)

Program on Sustainable Forestry Development for the 2021-

2025 period (2022)

Scheme for the Implementation of the Political Declaration on

Establishing the Just Energy Transition Partnership (2023)

Action Program for Transition to Green Energy and Mitigation

of Carbon Dioxide and Methane Emissions from Transportation
(2022)

The need for governmental support

Overall, businesses in Vietnam have demonstrated a notable
awareness of ESG practices over the last few years. Besides, there
have been governmental actions in formulating plans on
environmental, economic, and social issues. However, businesses
indicate that they require more assistance and incentives from the
Government to embark on this ESG journey, particularly in terms of
tax incentives and financial support. Additionally, certain sectors
such as agriculture emphasise the need for clear government
schemes to ensure the effective pursuit of green growth.
To address these needs, there needs to be a comprehensive
program that includes enhancing the capacity of businesses to
better understand and implement ESG practices, providing support
for businesses to access ESG investors and understand the impact
of ESG, and developing a clear legal framework for businesses and
financial institutions. At the same time, there is also a need to raise
awareness about the importance of implementing ESG the right
way, with a focus on the scientific basis and actual impact.

(Source: MONRE, MoF, Vietnam Government Portal)

Doing Business in Vietnam | 2024 22

Growing trends
Governance Takes Top Priority ESG initiatives in other aspects
While the Vietnamese Government is making In addition to the current focus on the governance
significant efforts to enhance the environmental aspect, corporations are signalling a shift in their
aspect, businesses are demonstrating different efforts towards the environmental and social
interests. According to the VBF’s study, nearly half aspects of ESG. Employee wellbeing is emerging
of the businesses prioritise governance practices as one of the top initiatives, followed by carbon
in their operations. Focusing on stability, risk reduction. The increased attention from both
reduction, and ethical operation of the businesses and the Government regarding carbon
organisation is vital for FDI businesses in Vietnam. emissions in 2023 demonstrates a bright future for
On the other hand, small-scale businesses place ESG practices in Vietnam. This is particularly
more emphasis on the social aspect, putting in evident with the Net Zero commitment by 2050
additional effort in the area. and the draft plan for the development of a
carbon market in Vietnam, which provide a solid
Unit: %
and promising foundation for businesses to take
action. The research also indicates a growing
60% focus on greener and more sustainable operations
50% 45% and products, with businesses actively developing
38%
40% initiatives in these areas.
30%
17%
20% Unit: %
0% 10% 20% 30% 40% 50% 60% 70%
10%
0%
Employee wellbeing 60%
Environment Social Governance
Green Energy Carbon reduction
47%
ambitions/commitments
In terms of energy sources, the VBF revealed that
35% of surveyed businesses in Vietnam have set Social equity 39%
their energy targets towards green and clean
energy.
Sustainable supply chains 36%

have set green energy target ESG measurement and reporting 36%
for their operation
Commercialization - developing
28%
sustainable product
Moreover, over 40% of manufacturing businesses
in Vietnam have established targets related to
Climate resilience and adaption 26%
green energy for their current operations as well
as for the future maintenance and expansion of
Circular economy
their operations. These targets hold significant 25%

importance, particularly considering that 8% of

businesses responded that their operations in Sustainable finance 20%
Vietnam would be severely affected and unable to
continue without achieving their clean energy None and others 14%
targets.
This trend aligns with and reflects the
Government's aim about energy source mix by
2030, showcasing the driving force behind the
Government's commitment to a sustainable future.

Renewable Energy rate in 2030

According to the “National Power Development Plan for the
2021-2030 period, with a vision to 2050” (2023)

(Source: VBF, MONRE)

Doing Business in Vietnam | 2024 23

Vietnam’s stock market, currently classified as a frontier market by Morgan Stanley Capital International
(“MSCI”)
1,450.00 and other international rating agencies, is aiming for an upgrade to emerging market status
within the next 2-3 years, seeking to attract more investment capital.
1,400.00

1,350.00

1,300.00

1,250.00

1,200.00

1,150.00

1,100.00

1,050.00
Feb-23, 1,021.25 Oct-23, 1,028.19
1,000.00

950.00

900.00

850.00
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24

The VN-Index concluded 2023 at 1129.93 points,

marking a noteworthy 12.2% increase compared to
the end of 2022. This achievement is particularly
notable considering the prevailing negative market
sentiment stemming from rising interest rates,
tighter monetary policies, and investor
apprehension due to the ongoing fraud Unit: %
investigation in real estate sector. 7.96%

By the year’s end, the capitalisation of Vietnam’s 12.48% 26.32%

stock market reached approximately VND 6.0
quadrillion (equivalent to USD 246.7 billion),
marking a 9.5% increase from the previous year.
This value represents about 62% of the country’s
GDP in 2023. Notably, the number of new domestic 14.67%
securities trading accounts surged by over 350
thousand accounts, totaling 7.4 million accounts,
which represents about 7.5% of the nation’s
23.69%
population. Conversely, the number of foreign 14.88%
securities trading accounts experienced a modest
increase, totaling 42,711 accounts by the end of
2023, up by 253 accounts compared to the Real Estate Financial
previous year. Materials Consumer Staples

In the midst of these developments, the derivatives Industrials Other

stock market remained stable, with an average of
nearly 237,000 contracts traded per session. Notes:
• Real Estate is down from 31% in 2022 due to recent
scandals
• Top 5 industries make up about 92% of the VN-Index

(Source: MSCI, VN-Index)

Doing Business in Vietnam | 2024 24

Government Initiative
On 29 December 2023, Deputy Prime Minister Le Minh Khai signed Decision No. 1726/QD-TTg approving
the Securities Market Development Strategy until 2030.
The primary objective of Decision No. 1726/QD-TTg is to elevate Vietnam's stock market from a frontier to
an emerging market status by 2025, with a clear aim of accomplishing this transition by 2030. In addition
to this primary goal, there are other overarching objectives outlined as follows:

Elevating Vietnam's stock market from a

Primary objective
frontier to an emerging market status
Stock market capitalisation 100% of GDP 120% of GDP
Bond market 47% of GDP 58% of GDP
Corporate bonds 20% of GDP 25% of GDP
Government bonds held by non-banking investors 55% 60%
No. of securities trading accounts 9 million 11 million
Derivatives market’s average annual growth rate 20% - 30%

Barriers to Vietnam's Market Classification Upgrade

1. Language Barrier in Information Disclosure: Currently, Vietnam mandates information disclosure only in
Vietnamese, presenting a significant hurdle for foreign investors who need thorough access to information
to accurately evaluate the Vietnamese market’s potential. Nevertheless, the Government is proactively
addressing this obstacle, particularly with the plan adopt the International Financial Reporting Standards
(“IFRS”) for publicly listed companies in Vietnam in the near future, requiring annual reports to be
published in both English and Vietnamese.
2. Foreign Ownership Limit (“FOL”): The relaxation of the government's foreign ownership limit in 2015
enabled about half of Vietnam’s listed companies to determine their own FOL. However, the following
sectors remain subject to government-imposed restrictions on foreign ownership stakes:

Construction
Restricted sectors Banking Airline Real estate Oil & Gas
materials
Foreign ownership limit 30% 34% 50% 50% 50%

3. Pre-transaction Margin: Governed by Circular 120/2020/TT-BTC, mandates that foreign investors

maintain adequate funds and shares in their trading accounts before executing buy or sell orders for
securities. This regulation aims to prevent short selling and ensure order fulfilment. However, compliance
poses challenges for foreign investors with substantial capital as they must possess the required funds or
shares when placing orders, despite settlement and withdrawal feasible only three days later (T+3).
Consequently, if the purchase and sale of securities are not completed and funds need to be withdrawn,
foreign investors will incur significant fees. This is particularly burdensome for investors with large capital
investments, as money transfers entail substantial fees, both into and out of Vietnam. Therefore, ensuring
the completion of securities transactions is crucial to avoid incurring additional costs.

(Source: Vietnam Government Portal)

Doing Business in Vietnam | 2024 25

 The negative impacts of geopolitical tensions and higher FED fund rates have resulted in a less
dynamic M&A market in. Despite Vietnam's well-controlled inflation and a GDP growth rate of 5.05% in
2023, the country was not immune to the global slowdown in M&A activity.
Vietnam’s M&A market reported a decline by 18% in deal value for the year of 2023 compared to 2022.
This decrease coincided with a reduction in number of the successful deals compared to previous
years. Specifically, the M&A market recorded 280 deals during this period, down from 328 deals in the
same period of the previous year. Nevertheless, the average transaction value surged to over USD 40
million, a significant increase from the previous year's average of approximately USD 17 million. This
increase indicates a proactive pursuit of strategic deals by investors, signaling a shift towards strategic
investments that require substantial financial resources.
Key deals completed in 2023 worth more than USD 100 million:
Amount
Investors’ countries Investor Target company Sector
(USD million)
Singapore United Overseas Bank Citigroup Banking 3,710
Japan Sumimoto Mitsui Banking Corporation VP Bank Banking 1,450
HongKong Swire Pacific Coca-Cola Vietnam & Cambodia Food & Retail services 1,020
HongKong ESR BW Industrial Development Industrial real estate 450
Singapore Thomson Medical Group FV Hospital Healthcare 381
USA Bain Capital Masan Group (MSN) Consumer goods 250
Singapore Growtheum Capital Partners International Dairy Product (IDP) Food & Beverage 100

In 2024 and beyond, Vietnam M&A market is anticipated to continue its growth. Despite the turbulent
global investment climate, Vietnam remains an attractive destination for investors due to its resilient
economy. Favourable macroeconomic factors, coupled with the redirection of investment capital from
China and government support policies such as tax incentives have made Vietnam an appealing M&A
market.

In reference to Grant Thornton Vietnam’s Private Equity (“PE”) Survey in Vietnam 2023, titled "Steering
through Challenges," the findings pinpointed Healthcare & Pharmaceuticals, Education, and Fintech as
the top three sectors ripe for private equity investment, based on responses from our PE respondents.
Moving to 2024, these sectors have shown remarkable resilience and sustained activity levels in M&A
investments. Despite not ranking highest in deal value, according to the M&A Forum hosted by the MPI,
education and fintech deals have continued to attract significant interest and momentum. Renowned
funds such as Ruangguru, Sweef Capital, and PBU are actively pursuing opportunities in the thriving
edtech segment within the education sector, driven by the impacts of Covid-19. Sweef Capital’s USD 5
million minority investment in Teky Alpha in 2023 underscores this growing interest. In the fintech sector,
the e-payment market is poised for consolidation through M&A activities, given its booming yet
fragmented landscape.
Healthcare and Pharmaceuticals
Unit: %
The healthcare sector’s growth is driven by factors like an aging population,
Real estate 2% increased healthcare awareness post-Covid-19, rising disposable incomes, and
Hospitality and Leisure 2% government initiatives to improve healthcare accessibility. Challenges like
Agriculture 2%
limited infrastructure and research funding in the sector have created
attractive investment opportunities.
Construction and Construction material 3%
Technology, media and communication 4%
Retails 6%
According to Bain & Company, Vietnamese families allocate around 20% of
Financial services 6%
their disposable income to children's education, ranking among the highest
Green/ Renewable energy 7% globally. In 2023, the revenue of Vietnam’s e-learning market is valued at about
Transportation and Logistics 7% USD 3 billion, a notable CAGR of 20.2% during the period from 2019 to 2023.
Food and Beverage 7%
Fintech 10%
Education 17% Vietnam’s Fintech market size in terms of transaction value is expected to grow to
Healthcare and Pharmaceuticals 27% USD 63.8 billion by 2028, at a CAGR of 13.11%. The growth is partially supported
by the awareness of the importance of digital banking transformation and the
0% 10% 20% 30% government’s supportive regulations, and government policies that are in
progress.

(Source: Grant Thornton Vietnam, M&A Forum Vietnam 2023, Source of Asia, Bain & Company)

Doing Business in Vietnam | 2024 26

 This growing optimism has been reflected in the
expectations for revenue and profitability of mid-
market enterprises in Vietnam. Accordingly, the
percentage of firms expecting growth in revenue
over the next 12 months saw an uptick from 83%
to 87%, while the anticipation for profit growth
rose from 83% to 86%. These upward trends are
directly influenced by recent improvement signals
The challenges of navigating the global economy in both the domestic and global economy,
have been highlighted in Grant Thornton's latest significantly elevating business sentiment among
International Business Report (“IBR”), a leading Vietnamese firms.
global survey for mid-market businesses.
Compared to the results released in October last The survey also sheds light on the perceptions of
year, the percentage of firms that are optimistic business constraints for mid-market businesses in
about the outlook for their economies over the Vietnam. Accordingly, there is a remarkable drop
next 12 months increased modestly from 65% to in the proportion of firms indicating economic
66%. The slight increase indicates a recovery in uncertainty as a primary challenge in the next 12
the global economy, although at a slow pace. months, from 75% in the previous survey to 62%.
In addition, businesses have shown less concern
about the lack of orders, with the percentage of
firms citing reduced demand as a major
constraint decreasing by 16 points. These results
reaffirm the uptick in optimism about the
economic outlook for the coming time in Vietnam's
In Vietnam, on the other hand, optimism saw a mid-market sector.
significant increase among the mid-market sector,
with the number of businesses having feeling Conversely, concerns about the shortage of
hopeful about the economy in the next year finance have increased. This is understandable
increasing from 68% to 76%. given the prolonged economic headwinds, which
have escalated financial pressures on many
businesses, amplifying concerns about their
ability to maintain sufficient cash flow to fund
operations and meet financial obligations.

Optimism

Unit: %
80%
70%
60%
50%
Revenue 40%
30%
20%
10%
0%

Profitability

H2 2023 Q1 2024
(Source: Grant Thornton IBR)
Doing Business in Vietnam | 2024 27
Despite the burgeoning optimism surrounding the The survey results underscore the persistent
economic outlook, mid-market businesses in challenges posed by the global economy for
Vietnam exhibit a degree of reluctance towards cross-border trade. Despite a cooling down of
bolstering their export endeavors. Recent findings inflation and a resurgence in demand, the
from Grant Thornton IBR indicated that the moderate pace of recovery worldwide is
number of firms expecting to increase export anticipated to sustain its impact on Vietnam's
activities next year decreased to 63%, down 2 deeply interconnected economy.
percentage points compared to the previous
survey in the second half of 2023. This is propelled Despite experiencing a downturn, the data
by a thirteen-point decline (down to 53%) in the gathered in Vietnam reveals that all metrics
number of surveyed businesses anticipating an surpassed the 50% mark, affirming the prevailing
expansion in the countries they sell to, alongside a confidence of mid-market businesses in the
decrease by 10 percentage points (now at 58%) in Vietnamese market regarding the resurgence
those projecting an increase in revenue from non- Moreover, these figures still stand above the
domestic markets. global averages, which indicates a degree of
resilience in Vietnam's mid-market sector amidst
prevailing economic uncertainties.

Expecting to Expecting to Expecting to

increase export increase increase the
activities revenue from number of
non-domestic countries to
markets sell to

The Grant Thornton International Business

Report (“IBR”) is the world’s leading mid-market
business survey, interviewing the C-suite
exclusively in listed and privately held < USD 50m
companies all over the world on a quarterly USD 51m to 1bn
basis. > USD 1bn

Launched in 1992 in nine European countries,

the survey now interviews approximately 14,000
senior executives at mid-market companies
across 31 economies every year, providing
insights into health and issues affecting both 50 - 499
listed and private businesses globally. The 500 - 999
majority of the companies participating in the 1000 - 2499
survey record an annual turnover between USD 2500 - 10k+
51 million and USD 1 billion and have a
headcount of approximately 50-499 employees.

(Source: Grant Thornton IBR)

Doing Business in Vietnam | 2024 28

Doing Business in Vietnam | 2023
2024 29
Manufacturing plays a critical role in driving This reflects the signs of recovery in the global
Vietnam's economic growth, standing out among economy. Even in the early months of the year,
the four basic industrial sectors and other businesses have received numerous orders, and
sectors in the country's economic structure. It production has been ramped up to meet domestic
contributed the highest proportion to Vietnam's consumption as well as export demands. This led
GDP, accounting for nearly 30% of the total to the rise in the index of industrial production
GDP in 2023. However, the industry faced (“IIP”) of various sub-sectors in manufacturing,
numerous challenges and difficulties during the nine of which experiencing a double-digit growth.
year due to the decline in global aggregate
demand. According to the GSO, the
manufacturing sector's added value only grew
by 3.62%, marking the lowest increase within the IIP growth rate over the same period last year
2011-2023 period. Nonetheless, this growth still
contributed 0.93% points to the overall growth
rate of the economy's total added value. In terms 
of FDI, the manufacturing sector remained the Manufacturing
most attractive, with registered capital
exceeding USD 23 billion in 2023, equivalent to
nearly 80% of the total new investment capital. 
Overall, the manufacturing sector remained the Electricity, gas
leading force driving Vietnam's economy in 2023.


Water supply, waste and
wastewater management
Unit: %

9% Mining
4%
4%
6%

The Purchasing Managers' Index (“PMI”) also

64%
13% reveals the state of Vietnam’s manufacturing in
recent times. The PMI showed that Vietnam's
manufacturing sector concluded 2023 with a
downward trend with only 48.9 in December,
Manufacturing signalling weak demand in the result of a
Real Estate decrease in new orders and production. Although
Energy production & distribution the PMI recovered to over the 50.0 threshold in
Finance, banking & insurance the first 2 months of 2024, it dropped below the
Professional, scientific & technical activities threshold again in March. This outcome marked
Others the end of a two-month period of improved
business conditions at the start of 2024. However,
Despite the ongoing challenges and difficulties
manufacturers remained increasingly optimistic
in the global economy in 2023, the
about the industry's growth prospects in the
manufacturing sector in Vietnam has shown
coming months, displaying the strongest
brighter and more positive signals in the first
business confidence in the previous 18 months.
quarter of 2024. The sector witnessed a growth
This has led manufacturers to increase hiring
rate of 6.98%, contributing 1.73 percentage
activities at a faster pace, in addition to planning
points to the overall economic growth. With such
to launch new products to stimulate production,
promising trends, it is expected that the
while hoping that improving market demand will
manufacturing industry and industrial
contribute to an increase in new orders. As a
production will experience a rebound in the latter
result, PMI experienced an increase in April,
half of this year.
surpassing the benchmark of 50.0 by a small
margin, and remained the same in May.
(Source: MPI, GSO, MoIT, S&P Global)

Doing Business in Vietnam | 2024 30

54.0

52.0 51.2
50.5 50.3 50.4 50.3 50.3
49.7 49.6 49.9
50.0 48.7 48.9
47.4 47.7
48.0
47.3
46.7
46.2
46.0
45.3

44.0

42.0
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24

Overall, both the manufacturing sector and the The Government has implemented financial
overall economy of Vietnam faced numerous support policies during the 2023-2024 period,
difficulties and challenges in 2023. However, aiming to strengthen domestic industrial
Vietnam is expected to experience more products. On 29 November 2023, the National
favourable conditions in 2024 compared to 2023. Assembly agreed to continue reducing VAT by
In the early months of 2024, Vietnam's key export 2% from 01 January 2024, to 30 June 2024. This
markets such as the US, the EU, and China have reduction is considered a powerful solution to
started to experience significant growth. The stimulate industrial production, consumer
recovery of these major export markets is demand, and manufacturing. However, policies
expected to provide positive momentum for need to have a long-term perspective to yield
Vietnam's manufacturing sector. In the first tangible benefits for businesses. Additionally, the
quarter of 2024, the export turnover of MoIT, according to their plan, will prioritise key
processed industrial goods increased by 14.5% solutions, including addressing the challenges
compared to the same period in 2023 and faced by businesses to promote production
accounted for 85% of the total export turnover. development. These solutions will be based on
As a clear result, the IIP in May 2024 is recorded the actual production situation of industries,
to have increased by 3.9% compared to the sectors, and key industrial areas.
previous month and 8.9% compared to the same
period last year.

 
Chemicals and chemical Rubber and plastics products
products

 
Coke and refined petroleum Electrical equipment
products

 
Beverage manufacturing Other non-metallic mineral
products

(Source: S&P Global, GSO, MoIT)

Doing Business in Vietnam | 2024 31

Rapid Development in Manufacturing sector
Vietnam is an emerging destination in the global semiconductor supply chain, attracting the attention
and presence of leading global giants. Billions of dollars have been invested in constructing factories,
expanding production, and assembling projects in the country. Vietnam is ambitious and actively
working towards becoming a new global semiconductor hub.

Talent Pool in Semiconductor Industry

of semiconductor chips to the United States

Specialised in integrated circuit design

Noticeably, in 2023, Vietnam is the third largest

Asian supplier of chips to the US after Malaysia
and Taiwan.
Impacts from the Vietnam-US
Comprehensive Strategic Partnership
In November 2023, the Vietnam-US relationship
Vietnam currently has 5,000 skilled engineers was upgraded into a comprehensive strategic
specializing in integrated circuit design working in partnership. This milestone not only signifies a
the industry, with a majority employed by FDI significant achievement in Vietnam's foreign
companies. Moreover, there are 11 educational affairs but also opens up numerous opportunities
institutions that provide training closely aligned for collaboration and facilitates the development
with the semiconductor and integrated circuit of the semiconductor industry. Notably, the US
sector, while 35 others offer training programs recognises Vietnam’s potential to play a critical
with majors related to semiconductors and role in building resilient semiconductor supply
integrated circuits. chains, and further develop Vietnam’s current
Revenue by segment of the semiconductor ecosystem, regulatory framework,
Unit: USD billion and workforce and infrastructure needs.
20 18.64 18.24
15.81
17.23 Government’s initiatives and strategic
14.84 14.41
15
12.92 directions
10.63
10 In October 2023, the Vietnamese Government set
5
the goal of training a high-quality workforce for
the semiconductor manufacturing industry, with a
0 target of 50,000 to 100,000 skilled engineers by
2016 2017 2018 2019 2020 2021 2022 2023 2030. Concurrently, the Government is
Discrete Semiconductors Integrated Circuits formulating a strategy for developing the
Optoelectronics Sensors & Actuators country’s semiconductor industry up to 2030, and
The industry earned a revenue of over USD 17 actively establishing advanced infrastructure,
billion in 2023, with the majority coming from such as the National Innovation Centre (“NIC”),
integrated circuits. Currently, the focus of and dedicated IT parks. The Government is making
Vietnam's semiconductor industry is on the final effort to create important premises and
stage of the chip production process, which favourable opportunities for the country to
involves assembling, testing, and packaging by 40 participate in the semiconductor industry. The
international companies operating in this sector. further development of the industry is being
Majorities of these companies come from: the USA, oriented as follows:
Republic of Korea, Japan, Taiwan, and the
Netherlands. Expand current Focus on higher value-
capabilities in added stages,
assembling, testing, especially designing
and packaging and producing

(Source: MPI, Statista)

Doing Business in Vietnam | 2024 32

Despite the challenges encountered by Vietnam's
real estate market since 2022, the industrial park
(“IP”) sector has emerged as a standout Total area: 87,700 hectares
performer. Data from the Vietnam Association of
Realtors (“VARS”) reveals robust demand for In operation: 295 IPs
industrial properties nationwide in 2023, with an
Under construction: 119 IPs
average occupancy rate of around 73% and a
significant increase in rental prices of
approximately 20%.

According to experts, several factors contribute to Occupancy rate

the outstanding performance of Vietnam's
industrial real estate market. Firstly, the stable The outlook for the industrial property market in
flow of FDI into Vietnam's manufacturing sector, 2024 is optimistic as the positive momentum of FDI
mostly propelled by the supply chain relocation is expected to continue, especially since Vietnam
strategies, has kept demand for IPs high successfully upgraded economic relations with
throughout 2023. Moreover, Vietnam's IPs offer various countries in 2023. On the other hand,
competitive rental prices while maintaining high anticipated high demand is expected to push
standards of quality and accessibility, making rental prices up in the coming years. At the same
them an attractive option for business. Besides, time, the sector will see a steady IPs supply, driven
the Government's proactive efforts to support by the attractiveness of investment opportunities.
investors further bolster the success of the sector.

China

Occupancy rate Vietnam

The US

Japan

Taiwan

Average rental HongKong

Others
m2/remaining term

The US

Occupancy rate Vietnam

Germany

Japan

China
Average rental Singapore

South Korea
m2/remaining term
Others

(Source: Ministry of Construction, VARS, CBRE)

Doing Business in Vietnam | 2024 33

Investing in Vietnam's IPs often comes with various • Investment support services: The Government
governmental incentives, commonly including: provides various support services to assist
investors in setting up and operating their
• Tax incentives: The Vietnamese Government businesses within IPs. This includes assistance
offers preferential tax rates, tax holidays, and with licensing, permits, regulatory compliance,
tax exemptions for businesses operating within and administrative procedures.
IPs. These incentives can significantly reduce • Infrastructure support: The Government invests
the tax burden for investors. in infrastructure development surrounding IPs,
• Land lease incentives: Investors in IPs may including road networks, utilities, and
benefit from favourable land lease terms, telecommunications, to provide a conducive
including long-term leases at competitive rates environment for business operations.
or even free land allocation for certain • Access to skilled labour: IPs often benefit from
industries or projects. proximity to educational institutions and
• Customs incentives: Businesses in IPs may vocational training centers, providing a skilled
enjoy simplified customs procedures, duty workforce for businesses. The Government may
exemptions or reductions, and other incentives also offer incentives to attract and train local
to facilitate international trade and export- labour for employment within IPs.
oriented activities.

Industrial parks in Vietnam include general industrial parks and industrial parks specifically designed for
certain activities. Investors can choose to invest in these separate parks to access more advantages in
terms of resources and incentives.

Export processing zones

An export processing zone (“EPZ”) is a concentrated industrial park specializing in the production of
export goods, the provision of services for export goods production, and export activities. Vietnam
currently has 4 EPZs, all of which are located in the south. Businesses established in an EPZ are
categorised as export processing enterprises (“EPEs”). Setting up facilities in EPZs is a beneficial
investment for foreign companies seeking to locate production in Vietnam as this option provides greater
incentives in terms of tax and policy.

Export processing zones Industrial parks

An industrial park specializing in the An area with a defined geographical
production of export goods, providing boundary, specialised in manufacturing
Definition
services for export production and export industrial goods and providing services for
activities. industrial production.
Goal Attract foreign businesses Attract domestic and foreign businesses
• Incentives applied in normal IPs • Exemption and reduction of corporate
• Exemption and reduction of some income tax (the extent of application
additional taxes such as VAT, import depends on scale, sector, and location)
Incentives and export duties • Exemption and reduction of land lease
• Unlimited quantities of raw materials tax (the extent of application depends
imported on the size, sector, and location)
• Support for quick customs procedures
Industries and goods for export such as Most industries with diverse goods and
Industry
food, textiles, footwear, etc. services

(Source: 2020 Investment Law, Vietnam Government Portal)

Doing Business in Vietnam | 2024 34

Hi-tech parks Eco-industrial parks
Vietnam has been actively promoting Eco-industrial parks (“EIPs”) in Vietnam represent a
investments into hi-tech parks, which focus on notable stride towards sustainability, blending
the research, development, and production of industrial activities with environmental protection
hi-tech products. This model aims to attract initiatives. These parks are designed to minimise
both domestic and foreign hi-tech companies, environmental impact, optimise resource efficiency,
thereby helping the country increase its and foster economic growth. The IEP model plays a
technology capacity and accelerate digital crucial role in the nation’s plan to achieve the net
transformation. At present, Vietnam has three zero emission target by 2050. Several cities and
hi-tech parks established by the Government. provinces, including Ho Chi Minh City, Danang, Hai
Some localities are also applying for Phong, Dong Nai, and Can Tho, have been selected
authorisation to develop new hi-tech parks. for piloting EIP construction and conversion of
traditional IPs into the new model.

Hoa Lac Hi-tech Park Investments in EIPs in Vietnam are encouraged

through a range of incentives, including tax breaks,
• Location: Hanoi land rent exemption and reduction, streamlined
• Established Year: 1998 administrative procedures, and access to modern
Saigon Hi-tech Park infrastructure. Additionally, businesses can benefit
from shared resources and services, enhancing
• Location: Ho Chi Minh City
operational efficiency and market access. Most
• Established Year: 2002
importantly, EIPs are prioritised by the Government
Danang Hi-tech Park to attract investment, thus projects in these parks
• Location: Danang are entitled to grants, subsidies, and preferential
• Established Year: 2010 credit loans.

Over the years, hi-tech parks have successfully

Presently, the MPI is undergoing consultations
attracted numerous domestic and international
on a draft Circular that provides guidance for
investors. As of now, Saigon Hi-tech Park has implementing Decree 35/2022/ND-CP. This
recorded a total of 164 projects, amounting to an circular is particularly focused on guiding the
investment capital of USD 12.4 billion, with FDI trial application of 23 indicators specific to
projects constituting 32.3%. Meanwhile, Hoa Lac Vietnam's EIPs, with 12 of these indicators
hi-tech park boasts 109 projects. Among the referencing international EIP frameworks. The
notable investors are Intel, Samsung, Schneider, ongoing adjustment of Vietnam's legal
TTI, Nidec, and Nissan. The hi-tech parks serve as framework to meet international standards
more than just spaces for business, they are an signifies a pivotal step in closing the gap and is
ecosystems hosting numerous institutions and expected to propel the future development of
cutting-edge facilities, including laboratories and EIPs within the country.
research centres affiliate.

Conducting site assessment and selecting the land plot Establishing Utility Connection Agreements (water,
location electricity, and wastewater drainage)

Drafting construction plans, obtaining construction

Negotiating and executing land lease principle
permits, and securing approvals for the Environmental
agreements
Impact Assessment (“EIA”) and fire prevention plans

Obtaining the Investment Registration Certificate (“IRC”) Commencing construction activities and installations of
and Enterprise Registration Certificate (“ERC”) equipment and machinery

Formalizing the land lease contract and completing land Applying for the Land Use Right Certificate (“LURC”) to
transfer procedures formalise land tenure rights.

(Source: 2020 Investment Law, Vietnam Government Portal)

Doing Business in Vietnam | 2024 35

By 2030, the renewable energy sector is expected to grow at an average CAGR of 9%, accounting for
around 30% of total energy output, driven by the upcoming adoption of the Direct Power Purchase
Agreement (“DPPA”) mechanism, expansion of transmission gridlines, approval of Power Development
Plan 8 (“PDP8”) and the Government's commitment to COP28.

Vision 2030
Vietnamese Renewable Energy Energy Acc. installed
(Approved
Q1 2024 Highlights Source capacity Q1 2024
PDP8)

86,372.10 MW of total installed 16,920 MW 12,836 MW

(incl. 7,755 MW of rooftop (excl. rooftop solar)
capacity solar)
Solar

5,817 MW increase from EOY 2023 6,115 MW 27,880 MW

Wind

27.3% of total energy mix

attributable to renewable energy 523 MW 2,270 MW
sources (23,557 MW utilised)
Biomass

Transmission Gridlines DPPA Current Status

Electricity Vietnam’s (“EVN”) investment plan, Vietnam is committed to adopting two types of
aligned with PDP8, outlines an average annual DPPA:
allocation of approximately USD 2 billion between
1. Private-wire DPPA: Consumers purchase
2021 and 2030 for transmission lines and power
electricity at the retail price regulated by the
grid enhancements.
State from the retail electricity supplier for
However, in recent years, notably 2023 and 2024, their entire electricity demand.
actual investment has been seen to surpass this
2. Synthetic DPPA model: Consumers buy
average due to electricity outages caused by
electricity from power corporations at retail
power congestion.
prices and engage in forward contracts
The majority of these investment funds will be (“CfD”) with generators to determine future
directed towards significant development and electricity prices and output.
construction projects, including the Quang Trach
The Government Office issued Official Letters No.
– Phoi Noi 500kV, Nam Dinh I - Thanh Hoa 500kV,
112/TB-VPCP and No. 1942/VPCP-CN on 25 March
and Quang Trach - Quynh Luu 500kV lines. These
2024, tasking the MoIT with drafting a Decree on
endeavors are designed to enable the efficient
these DPPA mechanisms. The draft Decree is
transmission of power from the growing energy
expected to undergo review by the Government
hub in the central region to the electrically
and Prime Minister in May 2024, followed by pilot
underserved northern region. By doing so, the
scheme approval in July 2024, and full
burden on existing 500kV transmission lines will be
implementation starting from late 2025.
eased, thus enhancing the overall stability of the
power supply between these regions.
Power Grid Actual Reported Data Planned for
Projects in 2023 Completion in 2024

Completed 163 projects 190 projects

Total annual VND 90 trillion VND 102 trillion

investment (approx. USD 3.6 (approx. USD 4.0
billion) billion)

(Source: Vietnam Government Portal)

Doing Business in Vietnam | 2024 36

Key Issues
Investors venturing into renewable energy projects in Vietnam are confronted with a number of
challenges. These hurdles range from grappling with the accessibility of long-term financing options to
navigating the intricate and time-consuming licensing procedures linked to fire and explosion prevention
measures. Moreover, ensuring the establishment of secure rights over mortgage collateral is also another
obstacle for prospective investors seeking to penetrate the renewable energy sector in Vietnam.

Accessibility Licensing
The State Bank of Vietnam (“SBV”) directive to Obtaining the relevant permits required to develop
restrict lending to overheating sectors (e.g. rooftop a renewable energy project involves a substantial
solar), aimed at curbing the growth of bad debts amount of work, especially fire and explosion
in credit institutions, has prompted many banks to prevention and land clearance documents. A
scale back their long-term credit offerings to project cannot be built or operated until all
renewable energy projects. Consequently, permits, approvals and consents relevant to the
renewable energy developers are increasingly construction or operation (as applicable) have
resorting to issuing corporate bonds as an been obtained. The process of obtaining these
alternative source of funding for their projects. licenses, including any necessary amendments, is
These corporate bonds typically carry high- burdensome and time-consuming, leading to
interest rates ranging from 9.5% to 12% per delays and increased costs for businesses.
annum, as reported by Hanoi Stock Exchange
Mortgage Land Use
(“HNX”).
Under current regulations, project companies can
Given the combination of high funding costs and
only mortgage land use rights to lenders if they
the tendency for many renewable energy projects
pay the rent to the authority on a one-off lump-
to become over-leveraged due to their substantial
sum basis. However, projects exempt from rent
capital requirements and prolonged payback
payments or paying rent annually, which is likely
periods, it is predictable that nearly 11% of current
the case for renewable energy projects, cannot
outstanding energy bonds have defaulted.
mortgage their land use rights. Moreover, the
Regarding the challenges in securing long-term mortgage of land use rights and property
financing domestically, established developers attached to land is restricted to onshore licensed
with a proven track record in the sector will explore credit institutions, prohibiting foreign lenders from
alternative funding sources overseas or taking security over land as a collateral asset in
participate in the government's green bond Vietnam.
initiative program to maintain competitiveness and
Given the importance of security over assets, this
profitability in the long term. However, given the
limitation poses a challenge for foreign
current absence of mechanisms and legal
commercial lenders in financing projects. Although
frameworks surrounding green bonds, borrowing
a common alternative is a mortgage in favour of
from foreign banks is expected to be the primary
foreign lenders via an onshore security agency
option. With Vietnam's credit rating score from
arrangement, there is uncertainty about the
credit rating agencies ranging at Ba2 or BB+,
enforceability of this structure in Vietnamese
borrowing rates from foreign banks are estimated
court.
to range between 6-8%.

Doing Business in Vietnam | 2024 37

 PDP8 Implementation
Decision No.500/QD-TTg has been approved by the Prime Minister with some minor adjustments
under Decision No. 262/QĐ-TTg dated 01 April 2024. PDP8 is in direct alignment with Vietnam’s net
zero pledges made at COP28 in 2023.
• Official Circular No.19/2023/TT-BCT for establishing annual electricity
generation prices for standard ground-mounted solar, floating solar,
onshore, and offshore wind power plants (excluding transitional renewable
energy projects and those already in operation under a Power Purchase
Agreement (“PPA”) with EVN* with effective feed-in tariff (“FiT”) rates.
*EVN: Vietnam Electricity – largest state-own power company in Vietnam

• The solar energy section outlined in the approved PDP8, as of 2030, will
focus solely on solar farms (10,236 MW) and self-consumed solar (2,600
MW), omitting rooftop solar installations.
All its wind turbines are required to:
1. Be positioned outside a marine territory spanning six nautical miles, with
details on the marine territory baseline clarification to be determined at a
later date.
2. Be situated within areas of significant sea depth based on actual survey
data, with the current defining depth for offshore wind power plants set at
20 meters, subject to potential adjustment.
• The MoIT is crafting a proposal to authorise organisations generating self-
consumed solar power to engage in electricity trading, on the condition that
both the generators and consumers remain disconnected from the national
grid.
• By 2030, pumped storage hydropower (“PSH”) plants with capacity of about
2,400 MW will be developed to regulate the load, reserve capacity, and
support the integration of large-scale renewable energy sources.
• By 2050, the capacity of PSH and storage batteries is oriented to reach
30,650 - 45,550 MW in alignment with the high proportion of renewable
energy.

Market Expectations
Transitional project developers, with weaker financing and facing lower FiT rates, may opt to accept the
temporarily low purchase prices to mitigate potential losses. Looking ahead, these transitional projects
with lower IRRs (internal rate of return) are expected to emerge as prime targets for M&A activity as
sellers could gain by enhancing their financing structures, while buyers with robust financial backing
and comparatively higher IRRs can effectively sustain these projects until they achieve profitability. M&A
in renewable energy will continue to be extremely active in the coming years.

Amount
M&A Year Investors’ countries Investor Target company
(USD million)
2023 Philippines AC Energy (Acen) Solar NT Holdings Pte. Ltd 165
2023 Singapore BRE Singapore Pte Hoanh Son Group 24
2023 Taiwan Shinfox Energy Co., Ltd GIO Thanh Energy JSC 5
2023 Taiwan Shinfox Energy Co., Ltd Vietnam Renewable Energy JSC 6
2022 Spain EDPR Xuan Thien Group 284
2022 Singapore Leader Energy Pte. Ltd Clean Energy Vision Development JSC 44
2022 Singapore BRE Singapore Pte Solar Esco JSC 15
2022 United Kingdom Asian Energy Impact Trust Plc Viet Solar System Company Limited 5
2021 Vietnam Lizen JSC Licogi 16 Gia Lai Investment Renewable Energy JSC 202
2021 Thailand Super Energy Corporation Asia Energy Limited 5
(Source: Vietnam Government Portal)
Doing Business in Vietnam | 2024 38
The Information & Communication Technology Unit: %
(“ICT”) Industry has been on a recovery trend after
30%
a slow start at the beginning of 2023. The Ministry
of Information and Communications (“MIC”) 25%
reported the ỷear 2023 saw a 1.4% small increase
in the revenue of the sector amidst the rising 20%
tension of the Russia-Ukraine conflict and the post-
15%
Covid economic landscape. While the sector has
been able to pull through the difficulties and 10%
achieve a revenue increase of around USD 2
billion, the vulnerability and overdependence of 5%
the sector on the export of electrical hardware
0%
highlight the need to shift the focus of the industry
2022 2023 2024e 2025e
from manufacturing to innovations and growth in
software and IT services. Software IT Services ITC

Software and IT services

According to Statista Market Insights, in 2024, The Software sector, especially Software export,
Business Process Outsourcing and IT Outsourcing was the pinnacle of the ICT industry in 2023 and is
will be two of the most important markets in terms expected to maintain its exponential growth in
of value for the segment due to how enterprises can the following years. The rising need for digital
allocate company-owned resources and utilise transformation for business process streamlining
external firms with expertise to assist with IT-related or efficiency improvement from enterprises of all
services. Vietnam's IT outsourcing services have sizes creates the foundation for the Enterprise
significantly advanced due to the high Software segment to attain the peak growth rate
competitiveness of Vietnamese developers. The of 19.08% in 2023 and is forecast to continue its
workforce consists of young, talented developers double-digit growth rate until 2027. Overall,
and engineers who are highly accessible because promising growth awaits the sector in 2024 with a
numerous enterprises offer IT outsourcing services rising demand and a favourable policy landscape,
at relatively low costs compared to the region. despite uncertainties in the global politics and the
economy.

Unit: % Unit: USD Million

Business Process
31% 29% Outsourcing
IT Consulting &
Implementation
2024e 152.1 247.3 68.05 127
IT Outsourcing
5%
Other IT Services
35%
2023 133.2 217.4 61.34 115.3

Further commitments have been made by the

Government to support the sector. Vietnam has
strengthened its relationship with strategic partners 2022 112.1 182.6 53.12 101.6

such as Japan to introduce domestic firms to more

opportunities. On 23 June 2023, the passing of the
new Law on E-Transactions and the amended 0 200 400 600 800
Telecommunications Law provides a safe and Application Development Software
comprehensive business landscape for the future Enterprise Software
development of the sub-industry. Productivity Software
System Infrastructure Software
(Source: MIC, Statista Market Insights)

Doing Business in Vietnam | 2024 39

 Foreign Direct Investment in IT sector
The main appeal of Vietnam to foreign investors is Efforts have been made to invigorate FDI inflows to
still centered on the manufacturing sector with the Software and IT services sector. The
over USD 23 billion of inward investment in 2023, establishment of the Vietnam Software & IT
while the IT and telecommunications sector only Services Association (“VINASA”) has been the
received over USD 400 million, ranking it 8th among facilitator between the authorities and enterprises
all sectors, according to the MPI. and supported members with legal advisory
services, networking events, and participation in
the policy construction.

Total FDI Value Challenges

Concerns over labour shortages are rising with an
estimate of 150,000 to 200,000 headcounts
needed between 2022 and 2025. There is also a
mismatch between employers’ expectations and
Registered FDI Capital
employees’ skills regarding communication.
Despite the shift in demand for a higher level of
English, the “Vietnam IT Market Report 2023 -
 Vietnam Tech Talents Report” from TopDev
stressed that only 5% of the workforce is
New projects registered in 2023
proficient in English.

Unit: people
Opportunities
The importance of the ICT industry requires the
Government to adopt appropriate strategies to
incentivise the development of domestic firms and
further boost foreign investments. The National
Digital Transformation Program to 2025, with an
orientation towards 2030, is one of such socio-
economic initiatives aiming to fortify the
foundation for future digitalisation of businesses,
administration, and production activities. The
industry is poised to see further support from the 2022 2023 2024e 2025e
Government as it is highlighted as one of the four Labor Supply Labor Shortage
pillars of digital economy development in 2024 by
the MIC.
Vietnam’s strict regulations for cybersecurity are
also seen as a challenge for foreign investors,
such as mandates for domestic and foreign
Unit: USD Billion service providers to store specific types of data in
Vietnam for a minimum period of 24 months in
Decree No. 53/2022/ND-CP, or requirements for
50 45 foreign cloud services providers to establish
domestic representative offices. In addition,
40 Decree No. 13/2023/ND-CP about Personal Data
30 Protection, effective from July 2023, is the first
30 25 regulation providing a comprehensive legal
18 framework in Vietnam. This Decree applies to
20 Vietnamese authorities, organisations, and
individuals in Vietnam as well as those operating in
10
foreign countries.
2021 2022 2023 2025e

(Source: MPI, e-Conomy SEA 2023 report, TopDev)

Doing Business in Vietnam | 2024 40

Artificial Intelligence (“AI”) Twin Transition
AI applications are set to be implemented by Acceleration in digitalisation requires further
government agencies this year, and model attention for environmental protection as the ICT
applications will be released in the second industry has sizable contributions to global
quarter. Many domestic ICT companies such as greenhouse gas emissions and electricity
FPT, Viettel, and VNPT are setting up branches consumption. Twin Transition thus has been rising
solely focusing on AI development, and in importance to join the two separate processes
international players like Meta are set to launch AI of digital transformation and green
products for their applications in Vietnam, helping transformation. The trend has been mainly
to transform the country to become the “Dragon adopted in Europe, but Vietnam has begun to
of the AI Industry”. integrate green transformation into the
digitalisation and industrialisation of the economy,
shown through the two “National Green Growth
Strategy for 2021- 2030, vision towards 2050” and
“National Action Plan on Green Growth for the
2021-2030 period”.

Estimated Estimated Estimated

growth rate in market size in market size in Reducing the greenhouse gas
2024 2025 2030 emissions intensity per unit of
GDP
Cloud Computing
Transform the growth model with
Cloud computing is the on-demand availability of
computing resources, including storage, an orientation towards greening
infrastructure, analysis, etc., over the Internet, economic sectors
which helps to reduce the cost of investing and
operating in-house physical infrastructure. Cloud Greening people’s lifestyles and
computing, as the backbone of many promoting sustainable
technologies like AI, Data Analytics, Metaverse,
and Internet-of-things, is set to surpass USD 1 consumption
billion in revenue in 2027. While the sector is
dominated by foreign enterprises, domestic firms Greening the transformation
such as Viettel aim to differentiate their services process based on the principles
based on factors of environmental, social, and of equality, inclusivity, and
governance (ESG) framework.
raising resilience

Unit: %

4%

5% 5%
80% 20%

6%

Foreign Providers Viettel

Other providers VNPT
FPT

(Source: FPT Digital, Statista Market Insights)

Doing Business in Vietnam | 2024 41

Doing Business in Vietnam | 2023
2024 42
The current Law on Enterprises was passed by An Investment Registration Certificate (“IRC”)
Vietnam’s National Assembly on 17 June 2020 and will be issued within working 15 days from the
took effect on 01 January 2021. The laws provide receipt of a complete dossier of documents for a
for four types of legal forms of incorporation for common investment project. Upon the issuance
business entities, comprising: of the IRC, the investor must apply for the
• Limited liability company (“LLC”) Enterprise Registration Certificate (“ERC”)
• Joint-stock company (“JSC”) which will be issued within 3 working days from
• Sole proprietorship the receipt of a complete dossier, to complete
• Partnership the incorporation process and put the
• Branch investment project into implementation. These
• Representative Office (“RO”) processes may take longer if the authorities
• Business Co-operation Contract (“BCC”) require extra documentation. In some cases, an
IRC may not be granted, as it is at the discretion
of the authorities.
The law on Public Private Partnership came into
effect on 01 January 2021. Forms of investment Capital requirement
under PPP contracts will be made on the basis of
a contract between a regulatory agency and an Typically, there are no maximum or minimum
investor. capital requirements for a company. However, in
some sectors, a company must be able to meet
The National Assembly adopted the Law on certain capital threshold requirements before it is
Investment 2020 on 17 June 2020, which appears permitted to start business, e.g. a minimum capital
to be structurally more permissive of foreign requirement of VND 3,000 billion (equivalent to
investment. However, it also introduces a USD 129 million) is required for a commercial bank.
“negative list”, meaning that foreign entities are
Company Charter
allowed to invest in any business in Vietnam,
except in those sectors explicitly set out in the List The Company Charter is one of the documents
of Restricted Sectors. Investment in certain sectors that governs the incorporation and operation of a
may be subject to certain conditions. Conditional company. The Company Charter determines the
investment rules apply to foreign investors, with competence, duties and obligations conferred on
additional potential restrictions including: the board of directors and its shareholders or
(i) Percentage ownership limits; owners.

(ii) Restrictions on the form of investment; Filing requirements

(iii) Restrictions on the scope of business and All companies established in Vietnam must adhere
investment activities; to the Vietnamese Accounting Standards (“VAS”)
(iv) Financial capacity of the investors and and System of Accounts as regulated by the
partners and; Ministry of Finance (“MoF”). Financial statements
must be submitted within 30 days for sole
(v) Other conditions under international proprietorships and partnerships, and within 90
treaties and Vietnamese law days for other types of enterprises, from the fiscal
year end. Additionally, third-party audited
Foreign investors who wish to establish an entity in financial statements are mandatory for foreign-
Vietnam, for the purpose of conducting their invested companies, public companies, securities
business in the country, must have an investment firms, credit institutions, financial institutions,
project. An investment project is a collection of insurance enterprises and brokers, state-owned
proposals declaring how the firm plans to spend companies (except those operating in fields
its medium and long-term capital for investment involving state secrets), companies undertaking
activities, in a specific area and for a specified nationally important projects, companies and
duration of time. Documents must also be supplied organisations with state-contributed capital, and
and attested to the legal status of the investor. In projects funded by other state capital as
addition, a report on the financial capacity, and a prescribed by the Government.
proposal for preferential treatment (if any) must
also be provided.

Doing Business in Vietnam | 2024 43

 There are two types of limited liability company:
(i) One Member Limited Liability companies, and (ii)
Limited Liability companies with two or more members.
Neither form can be listed.
Limited liability companies are not entitled to issue
shares and the total members in a limited liability
company cannot exceed 50. A limited liability company
can have more than 01 legal representative.
In addition to cash, capital contributions can be made
in the form of gold, the value of land use rights,
intellectual property rights, technology, technical know-
how and other assets.
Limited liability companies can reduce their charter
capital in certain circumstances in accordance with the
law.

Following establishment, a number of other A joint stock company (“JSC”) is a company whose
formalities must be carried out, including: charter capital is divided into shares, held by three or
more organisations or individuals. A JSC can have more
• Announcing the establishment of than 1 legal representative. JSC is a recognised legal
information on the National Business entity and the only company type under Vietnamese
Registration Portal law that can issue shares. Its shareholders are
responsible for its debts and liabilities up to the amount
• Carving the Company’s seal(s)
of their contributed capital. A JSC can issue securities
• Opening bank accounts (i.e. Direct and be listed on the Securities Exchange. A JSC may
Investment Capital Account and either be 100 per cent foreign owned or domestically
operating account) owned or may take the form of a joint venture between
foreign and domestic investors.
• Registering to join the social insurance
A JSC is established by its founding shareholders based
scheme with social insurance
upon their subscription to shares in the company. It is
department required to have at least 3 shareholders, with no
• Registering and paying Business License maximum stipulated by law.
Fee to the competent tax authorities The founding shareholders of a JSC must subscribe for
• E-invoice registration at least 20% of the total shares that the JSC is
authorised to offer for sale. Shareholders can be
• Others Vietnamese or foreign nationals. A JSC must issue
ordinary shares and may issue preference shares
and/or issue bonds. Types of preference shares include:
A foreign entity may establish its presence
in Vietnam as a: Voting preference shares: only allowed to be held by
government authorised organisations and founding
• Limited liability company (“LLC”); shareholders
• Joint stock company (“JSC”); • Dividend preference shares
• Partnership;
• Redeemable preference shares
• Branch;
• Other types of preference share are subject to the
• Representative office (“RO”); or company’s charter.
• Business cooperation contract (“BCC”)
Shareholders are permitted to convert preference
shares into ordinary shares, but not permitted to
Foreign investors can also buy capital/ convert ordinary shares into preference shares. The
shares in existing domestic enterprises, company’s shares are allowed to be freely transferred
subject to certain ownership restrictions, among shareholders, except for voting preference
which vary depending on the sector. shares.

Doing Business
Doing BusinessininVietnam
Vietnam|| 2024
2023 44
 In accordance with Commercial Law, foreign investors
can set up a resident Representative Office (“RO”) in
Vietnam. The following regulations are in place
A business cooperation contract is a contractual regarding the RO:
relationship signed between multiple parties, • Foreign businesses shall not be allowed to establish
generally a foreign investor and a local more than 1 RO that has the same name within a
company. This does not form a legal entity but province or a centrally-affiliated city.
permits the partners to engage in business
activities on the basis of mutual allocation of • The foreign parent company must have been in
responsibilities and the sharing of profits and operation for at least 1 year to be allowed to
losses. This form of business has traditionally establish an RO in Vietnam, and its incorporation
been used in industries where LLCs and JSCs certificate (or equivalent documents) must be valid
are restricted. This form of business is a means for at least 1 year from the date of submission of the
of private financing without transferring application;
management control to a foreign partner. • Licenses for an RO will be valid for 5 years but may
be extended or re-issued upon expiration;
• RO is not allowed to conduct revenue-generating
activities (e.g. concluding contracts, selling goods or
services). The RO is only permitted to act as a liaison
office, conduct market research and promote the
parent company’s business and investment
opportunities;
Public and Private Partnership (“PPP”) contract is • RO is required to submit an annual report on
a contractual arrangement entered into by the activities to the local Department of Industry and
Government with the private sector for Trade.
infrastructure projects and public services. They
include Build-Operate-Transfer (“BOT”), Build-
Transfer (“BT”) and Build-Transfer-Operate (“BTO”)
Contracts. The difference between these contracts
is the point in time that the project is transferred to
the Government. According to the law on PPP, it is
A branch is not a common form of foreign direct
focused on five essential areas: (1) Transportation
investment and is only applicable in certain
(2) Power grid, power plant (except hydroelectric
sectors (e.g. banks or law firms). A branch is not
plants and some other cases) (3) Irrigation, clean
an independent legal entity.
water supply, drainage, wastewater treatment,
waste treatment (4) Health care, education and • Foreign businesses shall not be allowed to
training (5) IT infrastructure establish more than 01 branch that has the
same name within a province or a centrally-
affiliated city.
• Foreign businesses shall only be entitled to set
up a branch in Vietnam with the condition that
the business has been in operation for at least
Partnerships can be established in Vietnam 05 years.
provided there are at least two individuals who • A branch of a foreign company is permitted to
are members of the partnership and co-owners conduct commercial activities, in Vietnam
of the business. These individuals will be general whereas an RO is not permitted to conduct
partners and have unlimited liability for all such activities.
obligations of the partnership. The partnership
may also have limited liability partners, who • Branches are required to report annually to
can be individuals or organisations, who only the MoIT, on the operational and financial
contribute a part of the capital and have limited position of the business.
liability and rights up to the value of their
contribution.
Typically, partnerships are not widely used for
foreign investment in Vietnam.

Doing Business in Vietnam | 2024 45

45
Doing Business in Vietnam | 2023
2024 46
Foreign-invested business entities are generally required to adopt the Vietnamese Accounting System
(“VAS”). VAS is mainly governed by the following Circulars:

Circular No Circular No Circular No All securities companies

200/2014/TT-BTC dated 133/2016/TT-BTC 132/2018/TT-BTC in Vietnam are required
22 December 2014 (“Circular 133”) for (“Circular 132”) which to adopt the Circular
(“Circular 200”) for all Small and Medium-sized provides guidance on No 210/2014/TT-BTC
types of enterprises in Enterprises VAS for microenterprises (“Circular 210”)
Vietnam

Circular 200 replaces Decision 15/2006/QD-BTC, provides guidance for

VAS - the application of adoption of accounting standards to all types of
enterprises in Vietnam.

Circular 133 provides guidance on VAS for Small and Medium-sized

Enterprises (“SMEs”) and replaces the contents applied to SMEs in both
the Decision No 48/2006/QD-BTC dated 14 September 2006 and the
Circular No 138/2011/TT-BTC dated 04 October 2011. SMEs are authorised
to proactively design and construct their accounting systems in line with
SMEs’ respective industries, management and decision-making purposes.
SMEs can decide to apply the accounting system under the Circular 200
and relevant amendments, supplements or replacements of regulations,
but are required to notify the Tax Authorities as well as to consistently
apply this accounting system during the fiscal year.

Circular No 132 provides guidance on VAS for microenterprises. The

Circular 132 took effect for fiscal years commencing on or after 01 April
2019. Accordingly, a microenterprise shall not be required to appoint a
chief accountant, if available, it is entitled to engage in chief accountant
services. In addition, a microenterprise that pays corporate income tax
(“CIT”) based on the CIT-to-sales ratio (%) is not bound to prepare and
submit a financial statement to the tax authority. A microenterprise, at
their discretion, may choose to apply either the Circular 132 or the
Circular 133 on accounting regulations for SME’s.

Circular 210 provides guidance on accounting systems applicable to

securities companies. Circular 210 provides a number of amendments
related to the chart of accounts, accounting methods, forms of
accounting books, methods of preparation, and presentation of financial
statements applicable to securities companies, which have been
established and are operating under the provisions of the Vietnamese
Securities Law. Circular 210 is applied to securities companies from
financial year starting from 01 January 2016 onwards.

Doing Business in Vietnam | 2024 47

 (*) Foreign-invested
entities are allowed to
Language Vietnamese
select and use another
currency in recording
transactions and
Vietnamese Dong
Currency (*) maintaining their
(“VND”)
Accounting records

accounting records,
provided that they can
clearly demonstrate
Hard-copy
that the receipts and
Type Security disbursements are
mainly denominated in
Electronic such other currency.
Completeness However, for statutory
reporting, entities
5 years using another
currency, as a
functional currency,
Retention 10 years must convert their
financial statements
prepared under such
Framework: other currencies into
• Law on Accounting and guidance
Permanent
VND, as prescribed
• Vietnamese Accounting System
regulations.

(i) If an enterprise
selects a foreign
currency to be used as
functional currency in
recognising
Language Vietnamese transactions,
maintaining
accounting records
Financial statements

Vietnamese Dong and preparing

Currency (i)
(“VND”) financial statements,
its financial
First year and statements are
 15 months
liquidation year required to be
translated into VND for
Fiscal year statutory reporting
Normal 12 months purposes.

(ii) VAS specifies some

Legal representative requirements for
Approval financial statements of
change in the fiscal
Chief Accountant year.

Framework:
• Law on Accounting and guidance
• Vietnamese Accounting Standards and System

Doing Business in Vietnam | 2024 48

 Vietnamese
Accounting Standards
and Guidance

Law on Vietnamese
Accounting and Accounting
Guidance System

Public Sector

Banking Sector

Financial
26 Standards System specific Institutions Separated SMEs
VAS

and guidances to Industries Reporting

Process Normal Scale
Normal
Enterprises
Consolidated Circular
Specific Reporting 202/TT/2014/TT-
Industries Principles BTC

Main characteristics of VAS:

• The Vietnamese Accounting Standards for normal enterprises were issued from 2000 to 2005. They
have been adopted from and primarily based on the International Accounting Standards (“IAS”)
and International Financial Reporting Standards, as promulgated by the International Accounting
Standards Board (“IASB”) prevailing at the time of issuance.
• Key differences between IFRS and VAS include terminology, applied valuation methods and
disclosure requirements, due to the continuing changes and amendments to IFRS.
• Accountants usually refer to the detailed guidance of Vietnamese Accounting System, instead of
Vietnamese Accounting Standards, which clearly guides standardised financial statements,
accounting treatments, accounts mapping, accounting ledgers/vouchers, etc.

Doing Business in Vietnam | 2024 49

On 16 March 2020, the Ministry of Finance issued Decision No. 345/QD-BTC which approved the proposal
to apply Financial Reporting Standards in Vietnam with the following phases:

38 Standards on State
Audit

Legal framework (Decree

No. 05/2019.ND-CP)
Auditing

Code of Ethics and

Independence

37 Standards on Auditing
and Quality Control

10 Standards on Assurance
Services

Doing Business in Vietnam | 2024 50

Vietnam is actively implementing the plan to After the pilot implementation phase, the
transition from the VAS to the Vietnamese adoption of VFRS will be required for all entities,
Financial Reporting Standards (“VFRS”), which except for those already adopting IFRS or VAS
have been developed based on the requirements for microenterprises (as per Circular
of the International Financial Reporting 132/2018/TT-BTC). There will be specific
Standards (“IFRS”). However, the official date of guidance(s) from the MoF on the accounting
this compulsory adoption is subject to the practice for micro-enterprises, that have neither
Decision to be issued by the MoF in the future. the need nor sufficient resources to adopt IFRS
The transitioning process is divided in 2 phases: and VFRS.
• Phase I - Voluntary application period from The (voluntary) implementation of IFRS has
2022 to 2025 (tentatively): Entities with several benefits for entities, as IFRS is one of the
demand and sufficient resources would apply most popular accounting systems in the world
IFRS in preparation of consolidated financial (applied in over 140 countries and jurisdictions)
statements such as: parent company of which is encouraged to be applied by financial
large-scale state-owned groups, listed or non- management authorities in developed countries.
listed parent company, and large public The application of IFRS is expected to strengthen
parent company. FDI entities would also the transparency and comparativeness of
apply IFRS in preparation of their statutory financial information among countries.
(separate) financial statements if they have Furthermore, IFRS also aims to support
demands and sufficient resources. enterprises, customers, suppliers to approach
• Phase II - Compulsory application: Based on the capital markets more effectively, efficiently
the implementation results of Phase I, the and economically.
MoF will evaluate and decide the time for
mandatory adoption.

By applying IFRS for reporting, enterprises in Vietnam might have the following benefits:

IFRS/VFRS application in Vietnam Conversion for consolidation Compliance reporting

• Listed, large public and state-owned IFRS conversion reports of FDI Enterprises that are required to
Compliance
companies entities for consolidation prepare IFRS reports for
• Voluntary application purposes of the parent interested parties, such as:
• Compulsory application company investors, banks, customers and
• VFRS to replace VAS suppliers, etc.

Private fund raising Public fund raising

• IFRS reports for potential investors • Approach international investors
• Fund structuring advisory • Approach international financial institutions with
Opportunities • Enterprise valuation at fair value high transparency requirements
• Improve the enterprise value following the
international standards

Doing Business in Vietnam | 2024 51

Compulsory annual audit Audit contract deadline
Public interest entities: are required to submit Audit contracts should be signed with the
“reviewed” semi-annual financial statements and independent auditors no later than 30 days before
“audited” annual financial statements. There are the end of the entity’s financial year, in
28 audit firms in the list of firms who are approved accordance with the Decree 105/2004/ND- CP
and authorised by the MoF in 2024. dated 30 March 2004 and the Law on Independent
Auditing with effect from 01 January 2012.
Listed State-owned
companies enterprises Audit report and rotation
Certain entities such as banks, non-banking credit
Financial Securities institutions, and branches of foreign banks have to
institutions companies
rotate or replace their audit firm with another audit
firm after five consecutive years. There is no similar
requirements for rotation of audit firms and
Banks Insurance firms auditors for other business entities.
For public interest entities (“PIE”), the involvement
Foreign direct investment enterprises are subject to of all senior personnel (engagement partner,
statutory audit. There are 220 audit firms in the list engagement quality control reviewer or other audit
of firms that were approved and authorised by the partner) shall not be more than 4 consecutive
MoF in 2024 (updated on 08 April 2024). years.

Any other entities involved in special circumstances An Audit opinion is required to sign off by two CPA
such as mergers and acquisitions, changes in holders including 1 legal representative of the audit
ownership, dissolution, and bankruptcy must be firm and 1 auditor.
audited. Sign-off CPA holders are required to rotate after 3
consecutive years with 1 cooling off year.

Compulsory internal audit is required for some

specific cases such as listed companies, State-
owned companies, securities companies, etc.

Audit report deadline

Audited annual financial statements must be
completed and submitted or filed with the
Department of Finance in the province or under the
jurisdiction of the central government where such
enterprise’s head office is located, the local tax
authority, and department of statistics by the last
day of the third month after the end of the fiscal
year. For enterprises located in an EPZ or IP,
financial statements will be filed with the EPZ or IP
Management Board, as required.
Public interest entities are required to submit and
publish their semi - annual reviewed financial
statements and year-end audited financial
statements within 45 days and 90 days,
respectively, from the balance sheet date

Doing Business in Vietnam | 2024 52

Doing Business in Vietnam | 2023
2024 53
Most business activities and investments in There are various other taxes that may affect
Vietnam are likely to be subject to all or some of certain specific activities, including:
the following taxes: • Special sales tax;
• Corporate Income Tax (Annual filing); • Natural resources tax;
• Value-Added Tax (Monthly or quarterly filing); • Property taxes;
• Personal income Tax (Monthly or quarterly • Export duties;
filing and year end finalisation);
• Environment protection tax.
• Foreign Contractor Withholding Tax (Monthly
filing or when incurred)

Corporate Income Tax

Value Added Tax

Personal income Tax

Foreign Contractor Withholding Tax

Others
(Special sales tax; Natural resources tax; Property
taxes; Export duties; Environment protection tax)

Doing Business in Vietnam | 2024 54

 (subject to
application and
approval at the • Companies operating in the oil and gas industry
time of licensing) are subject to rates ranging from 32% to 50%,
depending on the location and specific project.
• Any companies engaging in prospecting,
exploration and exploitation of mineral
resources are subject to CIT rates of 40% or
50% depending on location.

Preferential CIT rates:

• 10% and 17% (effective from 01 Jan 2016) for 15
years and 10 years, respectively Qualifying economic and
• Certain socialised sectors (e.g. education, high-tech zones, certain
health) enjoy a 10% rate for the entire life of the industrial zones and areas
project. with difficult socio-economic
conditions

Tax holidays
• Complete exemption from CIT for a certain Education, healthcare,
period generally beginning after the sport/culture, high
technology, environmental
enterprise first makes profits
protection, scientific
• Followed by a period where tax is charged research, infrastructural
at 50% of the applicable rate: development, renewable
energy and software
manufacturing
➢ 4 years of tax exemption and 9
subsequent years of 50% reduction,
➢ 4 years of tax exemption and 5 Large manufacturing
subsequent years of 50% reduction, projects meeting
requirements of investment
➢ 2 years of tax exemption and 4
capital, minimum revenue,
subsequent years of 50% reduction. minimum headcount

Doing Business in Vietnam | 2024 55

Expenses are deductible, if they meet the following
requirements:
• Relevant to business activities;
• Supported by sufficient legitimate documents (invoices,
non-cash payment evidence for transactions from VND 20
million and above, etc.); and
• Not specifically identified as being non-deductible.

• Depreciation of fixed assets, which is not in accordance

with the prevailing regulations;
• Employee remuneration expenses, which are not actually
paid, or are not stated in a labour contract/ collective
labour agreement/ policies or similar documents
• Staff welfare (including certain benefits provided to family
members of staff) exceeding an annual cap of one
month’s average salary;
• Reserves for research and development not in accordance
with the prevailing regulations;
• Provisions for severance allowance and payments of
severance allowance, in excess of the prescribed amount
per the Labour Code;
• Overhead expenses allocated to a PE, in Vietnam, by the
foreign company’s head office exceeding the amount
under a prescribed revenue-based allocation formula;
• Interest on loans corresponding to the portion of charter
capital not yet contributed;
• Interest on loans from non-economic and non-credit
organisations exceeding 1.5 times the interest rate set by
the State Bank of Vietnam (“SBV”);
• Certain net interest expenses exceeding the cap of 30% of
EBITDA;
• Provisions for stock devaluation, bad debts, financial
investment losses, product warranties or construction
work, which are not in accordance with the prevailing
regulations;
• Unrealised foreign exchange losses due to the year-end
revaluation of foreign currency items other than accounts
payable;
• Donations except certain donations for education, health
care, natural disaster or building charitable homes;
• Administrative penalties, fines, late payment interest;
• Contributions to voluntary pension funds, life insurance
premiums, the purchase of voluntary pension, and life
insurance premiums for employees exceeding VND 3
million per month per person (effective from 01 February
2018);
• Certain expenses directly related to the issuance,
purchase or sale of shares;
• Creditable input value added tax, corporate income tax
and personal income tax (in the case of gross income).

Doing Business in Vietnam | 2024 56

Taxable Income Administration
Taxable income is defined as the difference CIT filing is on an annual basis.
between total revenue and deductible The provisional tax payment is on a quarterly
expenditures, plus other assessable income. basis, based on estimates, and on an annual
Business Units are required to prepare an annual basis based on the finalisation.
CIT return, which includes a schedule for making The quarterly CIT shall be paid no later than the
adjustments to accounting profit to arrive at last day of the first month of the following
taxable profit. quarter. The timeline for both filing the annual
CIT finalisation returns and paying taxes is no
Losses later than the last day of the third month from
Businesses that incur losses after tax finalisation the end of the fiscal year.
are permitted to carry forward those losses to Pursuant to Decree 91/2020/ND-CP taking
offset against the assessable income of future effect from 30 October 2022, the total amount of
years, for a maximum of 5 consecutive years. provisional CIT payment for 4 quarters must not
Losses on incentivised activities can be offset be less than 80% of total annual CIT payable
against profits from non-incentivised activities, upon year-end CIT finalisation (i.e. 80% rule).
and vice versa. Otherwise, interest for late tax payment at the
rate of 0.03% per day would be applied on the
Losses from the transfer of real estate and the outstanding amount counting from the following
transfer of investment projects can be offset day after the deadline of the fourth quarter tax
against profits from other business activities. payment (i.e. by 30 January of the following
Taxpayers are not allowed to carry back losses. fiscal year).
For fiscal year 2021, if the taxpayers have the
Dividend Income provisional CIT payment for the first 3 quarters
Dividends paid to corporate shareholders are generally as of 30 October 2022 which is less than 75% of
exempted from CIT, if the paying firm has fulfilled its the annual tax payable, the above 80% rule will
CIT obligations before payment. be applied. Otherwise, if the provisional CIT
payment for the first 3 quarters as of 30
Thin capitalisation rules October 2022 is equal or more than 75% of the
At present, there are no thin capitalisation rules. annual tax payable, the above 80% rule would
However, certain restrictions to this effect can be found not be applied. In this case, the shortfall is
in the regulations on foreign loans and corporate subject to interest for late tax payment (i.e.
income tax (permitted borrowing capacity and 0.03% per day on the shortage amount)
excessive interest rates). counting from the following day after the
deadline of the third quarter tax payment (i.e. 30
Profit Repatriation October).
In Vietnam, Foreign investors are allowed to repatriate The standard tax year is the calendar year. For
their profits either on an annual basis or on termination enterprises that apply a fiscal year different
of the investment, provided that they have profits from the calendar year, the tax period shall be
based on the audited financial statements, and have
determined according to the applied fiscal year.
fulfilled their tax obligations in Vietnam.
An enterprise may change the tax year period
Foreign investors or their investee companies upon the but the period chosen cannot exceed 12 months
foreign investors’ authorisation are required to notify and it is required to notify the tax authorities
the local tax authorities of the plan to repatriate profits
prior to implementation.
at least 7 working days prior to the scheduled
repatriation. Firms must pay tax in the province where their
head office is located. If an enterprise has a
“dependent accounting production
establishment” in another province or city, then
the amount of CIT assessable and payable will
be determined in accordance with a ratio of
expenses incurred by each manufacturing
establishment over the total expenditure of the
company.

Doing Business in Vietnam | 2024 57

Summary of Incentives Tax Tariff

CIT CIT
Description Applicable period CIT Reduction
rate Exemption

(1) Income from new investment projects in the areas of Up to 15 years

with specially difficult socio-economic conditions,
economic zones, and high tech zones

(2) Income from new investment projects in: For the newly invested
• Scientific research and technology development; projects in items (2),
investment in the development of specially crucial the applicable period
infrastructure works as prescribed and software might be extended for
production an additional 15 years
maximum, subject to 4 years 9 years
• Manufacturing composite materials, light construction
materials, precious and rare materials; manufacturing the Government’s
reproduction energy, clean energy, energy from decision
destroying waste; developing bio-technology
• Environmental protection

10%
(3) Income of high tech enterprises, agricultural
enterprises applying high technology

(4) Income from newly-established investment

projects in the sector of production (except for
project producing goods subject to special sales tax,
mineral exploitation projects) have investment capital
scale at the minimum of VND 6 trillion and being
disbursed in under 3 years from the date of 15 years 4 years 9 years
investment certificate, and
• Having total minimum revenue of VND 10 trillion/year
no later than 3 years from the first year of generating
revenue; or
• Employing more than 3,000 fulltime employees no
later than 3 years from the first year of generating
revenue

Income of enterprises from social activities in the sectors Entire project life 4 years 5 years or 9
of education and training, vocational training, culture, years
medical health, sports, the environment, and judicial applying for
assessment the areas with
specially
10% difficult/
difficult socio-
economic
conditions

Incomes of enterprises from farming, husbandry, Entire project life

15% processing of agriculture and aquaculture products in
areas with normal socio-economic conditions

Income from newly-invested projects based in areas 10 years 2 years 4 years

with difficult socio-economic conditions (CIT rate of 17% from
Income from newly-invested projects in manufacture of 01/01/2016)
high-quality steel; production of energy saving
products; manufacture of machinery and equipment
20% serving for agriculture, forestry, fish breeding, salt
production; manufacture of irrigation equipment;
production and refining of feed for cattle, poultry and
aquatic resources; development of traditional trades
and occupations

Doing Business in Vietnam | 2024 58

Tax Incentives applicable for R&D and mega projects

On 06 October 2021, the Government issued Decision 29/2021/QD-TTg on special investment incentives
for R&D and mega projects in special preferential sectors. The detailed incentives schemes could be
summarised as below:

Applicable
Conditions on eligibility of special investment incentives
projects

Newly-established innovation centre, research and development centre that meet the following
conditions:
Group A i. A total investment capital of at least VND 3 trillion
ii. At least VND 1 trillion of capital disbursed within three years from the issuance date of the
Investment Registration Certificate or the approval of investment

Mega investment projects specializing in special preferential sectors that meet the following
conditions:
Group B i. A total investment capital of at least VND 30 trillion
ii. At least VND 10 trillion of capital disbursed within three years from the issuance date of the
Investment Registration Certificate or the approval date of investment

Under the guidance of the Decision, the special incentives would be applicable to both new and expansion
investment project. Below is the summary of CIT incentives scheme which is applied to eligible projects.

CIT Applicable CIT CIT

Conditions on eligibility of special investment incentives
rate period Exemption Reduction

9% Applied to profits generating from Group B projects 30 years 5 years 10 years

Applied to profits generating from the projects that fall into

the following categories
• Group A projects
• Group B projects that meet one of the following
criteria:
i. Being assessed as a level 1 high tech project
ii. Having Vietnamese enterprises engaging in the value
7% chain at level 1 33 years 6 years 12 years
iii. Having added value (i.e. the total cost of products
minus the expenses paid to overseas such as
imported materials, machinery, royalty fees, etc.)
accounting for over 30% to 40% of the total cost of
products
iv. Satisfying the condition of technology transfer of
level 1

Applied to profits generating from the projects that fall into

the following categories
• Innovation centres established under a Decision of the
Prime Minister
• Group B projects that meet one of the following
criteria:
5% i. Being assessed as a level 2 high tech project 37 years 6 years 13 years
ii. Having Vietnamese enterprises engaging in the value
chain at level 2
iii. Having added value accounting for over 40% of the
total costs of products; or
iv. Satisfying the condition of technology transfer of
level 2

Doing Business in Vietnam | 2024 59

Corporate Income Tax Incentives applicable for R&D and mega projects (Cont.)
The level 1 or level 2 high tech projects are stipulated as follows:

Condition 1 (C1): Revenue from high tech projects is at least 70% of total
annual net revenue

Condition 2 (C2): R&D expense/ (Net revenue - input expenses) is at least

Level 1 0.5%
Conditions for CIT Incentives

Condition 3 (C3): Ratio of employees who have college degree and

directly participate in R&D to the total number of employees in investment
projects >=1%

Condition 1 (C1): Revenue from high tech projects is at least 80% of total
annual net revenue

Condition 2 (C2): R&D expense/ (Net revenue - input expenses) is at least

Level 2
1%

Condition 3 (C3): Ratio of employees who have college degree and

directly participate in R&D to the total number of employees in investment
projects >=2%

CIT Incentives applicable for Supporting

Industry products
In addition, on 04 June 2021, the Government
already issued Decree No. 57/2021/ND-CP (“Decree
57”) to supplement Decree No. 218/2013/ND-CP on
CIT incentives for projects manufacturing
Supporting Industry products. Decree 57 came into
force from 04 June 2021 and is applied retroactively.
The preferential policies in this sector means that in
addition to CIT incentives at the highest level (tax
exemption for 4 years, reduction of 50% of tax
payable for the following 9 years and a preferential
tax rate of 10% within 15 years), the enterprises are
entitled to CIT incentives for the fiscal year when
they are granted the incentive certificate of projects
for manufacturing of supporting products from the
statutory authorities (i.e. Department/ Ministry of
Industry and Trade).
For enterprises that have been or are enjoying CIT
incentives under other conditions (besides the
conditions on Supporting Industries), the “remaining
incentive period” is determined by the CIT incentive
period under the conditions of the projects
manufacturing Supporting Industry products, minus
the number of years where they have already
enjoyed tax exemption, tax reduction or preferential
tax rate under other incentive conditions.

Doing Business in Vietnam | 2024 60

The Vietnamese Government has been TP regulations would apply to any transactions
enforcing Transfer Pricing (“TP”) since 2005 as between related parties (or controlled entities), which is
a integral part of the Corporate Income Tax identified via the following conditions:
regime. In this respect, Vietnamese taxpayers
• One party participates directly or indirectly in the
are required to identify related party and
management, control or equity of the other, or puts
associated related party transaction(s) as well
investment in the other;
as disclose and document compliant evidences
for related party transaction inline with the • Two or more parties participate directly or
prevailing TP regulations, i.e. Decree indirectly in the common management, control, or
132/2020/ND-CP taking effects from tax year via the capital investment to or from other parties.
2020 onward. The Vietnamese TP regime is established in accordance
In general, taxpayer engaging in related party with the Transfer Pricing guidelines and the Base
transaction(s) is required to prepare the Erosion and Profit Shifting (“BEPS”) action plan issued
following compliant documents: by the Organisation for Economic Co-operation and
Development (“OECD”). Additional interpretations from
▪ TP Disclosure Forms: these forms require
Vietnamese lawmakers were applied under Decree
disclosure of related party transaction,
132/2020/ND-CP, resulting in a divergence between
testing method for pricing policies as well as
Vietnamese TP regulations and OECD guideline. As a
brief checklists for TP Documentation
result, such interpretations would make the preparation
reports. TP Disclosure Forms are considered
of Vietnamese TP compliant documents unique, as it
appendices to Corporate Income Tax
seems to be impossible to apply either OECD
finalisation returns with similar annual due
guidelines or Group’s home jurisdiction toward
date.
Vietnamese TP practice without local review and
▪ TP Documentation reports: such reports advice.
consist of Local Files to analyse related
party transaction(s) of Vietnamese taxpayer
and Master Files to provide information of
the Group. TP Documentation reports shall
be available in Vietnamese and submitted to
the tax authority upon request.
For simplification of declaration, Vietnamese TP
regulations also provide a threshold for TP
filing, in which qualified small and medium
taxpayer could be exempted from the
preparation of TP Documentation reports.
Advance Pricing Agreement (“APA”) is also
applicable in Vietnam in both single-lateral and
multi-lateral mechanisms. The prevailing legal
guidance for APA matter is Circular 45/2021/TT-
BTC, taking effect from 03 August 2021 onward.
Qualified APA shall be allowed for a 3-year
duration upon approval from the General
Department of Taxation.

Doing Business in Vietnam | 2024 61

 Certain farming Exported goods/ Essential goods and Standard VAT
products, breeding, and services, including services, such as clean rate
aquaculture not yet goods/ services sold to water, animal feeds,
processed, breeds of overseas/ non-tariff teaching aids, books,
livestock, transfer of areas and consumed medicine and medical
land use rights, medical outside Vietnam/ in the equipment, various
services, public non-tariff areas, goods agricultural products
telecommunications processed for export or and services, art
services, education, in-country export performance, showing
public transport, (subject to conditions), films, exhibition,
technology transfer, international transport technological/ scientific
credit and securities etc. services, social housing,
services, etc. etc.

VAT rate: 0% VAT rate: 10%

This rate applies to exported goods/services The 10% 'standard' rate applies to activities not
including goods/services sold to overseas/non- specified as not subject to VAT, exempt, or subject
tariff areas and consumed outside Vietnam/in the to the 0% or 5% rate.
non-tariff areas, goods processed for export or in- On 28 December 2023, the Government issued
country export (subject to conditions), goods sold Decree 94/2023/ND-CP regarding 2% VAT
to duty free shops, certain exported services,
reduction for goods and services that are
construction and installation carried out for export currently subject to 10% VAT (with certain
processing enterprises, aviation, marine and exceptions) for the period from 01 January 2024 to
international transportation services. 30 June 2024 to support business and stimulate
VAT rate: 5% market demand.
This rate applies generally to areas of the In addition, business establishments, including
economy concerned with the provision of essential business households and business individuals,
goods and services. These include clean water; using the turnover-based VAT calculation method,
teaching aids; books; unprocessed foodstuffs; are entitled to a 20% reduction in the percentage
medicine and medical equipment; various rate for calculating VAT, when issuing invoices for
agricultural products and services; technical/ eligible goods and services subject to VAT
scientific services; rubber latex; sugar and its by- reduction.
products; certain cultural, artistic, sport The policy applies to goods and services subject to
services/products and social housing. the 10% rate, except certain sectors
(i.e. telecommunications, information
technology, finance, banking, securities,
insurance, real estate, and a few types of
industrial products.) Despite the impact on the
state budget, the Government believes this trade-
off is necessary for the economy and citizens' well-
being, as it is expected to lower prices and boost
domestic demand.

Doing Business in Vietnam | 2024 62

VAT exemption
Under this treatment, no output VAT shall be charged and
any input VAT shall be uncreditable, but considered as
deductible expenses for CIT purposes, comprising the following:
• Unprocessed or preprocessed products from farming,
breeding, and aquaculture;
• Breeds of livestock, plant varieties, including eggs, breeds,
seeds;
• Goods/services provided by individuals having an annual
revenue of VND 100 million or below;
• Imported or leased drilling rigs, airplanes and ships of a type
which cannot be produced in Vietnam;
• Transfer of land use rights;
• Financial derivatives and credit services (including credit card
issuance, finance leasing and factoring); sales of VAT payable
mortgaged assets by a borrower under the lender’s
authorisation, in order to settle a guaranteed loan and
provision of credit information.
• Various securities activities including fund management;
• Capital assignment;
• Foreign currency trading;
• Debt factoring;
• Certain insurance services (including life insurance, health
insurance, agricultural insurance and reinsurance);
• Medical services;
• Teaching and training;
• Printing and publishing of newspapers, magazines and
certain types of books;
• Public passenger transport;
• Transfer of technology, software and software services except
exported software which is entitled to 0% rate;
• Gold imported in pieces, which have not been processed into
jewelry;
• Export unprocessed mineral products such as crude oil, rock,
sand, rare soil, rare stones, etc., or processed into other
products, in which the total value of such natural resources
and minerals plus the energy cost is equal to at least 51% of
production costs
• Imports of machinery, equipment and materials, which cannot
be produced in Vietnam for direct use in science research and
technology development activities;
• Equipment, machinery, spare parts, specialised means of
transport and necessary materials which cannot be
produced in Vietnam for prospecting, exploration and
development of oil and gas fields;
• Goods imported in the following cases: international
nonrefundable aid, including from official development aid,
foreign donations to government bodies and to individuals
(subject to limitations).

Doing Business in Vietnam | 2024 63

No VAT declaration and payment
• Compensation, bonuses and subsidies, except • Capital contributions in kind;
those provided in exchange for • Certain asset transfers between a parent
marketing/promotional services; company and its subsidiaries or between
• Transfers of emission rights and other financial subsidiaries of the same parent company;
revenues;
• Collections of compensation/indemnities by
• Certain services rendered by a foreign
insurance companies from third parties;
organisation, which does not have a Permanent
Establishment in Vietnam, where the services are • Collections on behalf of other parties which are
rendered outside of Vietnam, including repairs to not involved in the provision of goods/services
means of transport, machinery or equipment, (e.g. if company A purchases goods/services
advertising, marketing, promotion of investment from company B, but pays to company C and
and trade overseas; brokerage activities for the subsequently company C pays to company B,
sales of goods and services overseas, training, then the payment from company C to company
certain international telecommunication B is not subject to VAT);
services; • Commissions earned by (i) agents selling
• Sales of assets by non-business organisations or services, including postal, telecommunications,
individuals who are not registered for VAT; lottery, airlines/bus/ ship/train tickets, at prices
• Transfer of investment projects; determined by principals; and (ii) agents for
• Sales of agricultural products that have not been international transportation, airlines and
processed into other products or which have just shipping services entitled to 0% VAT; and (iii)
been through preliminary processing; insurance agents

VAT calculation methods

This method applies to business establishments

This method applies to:
maintaining full books of account, invoices and
documents in accordance with the relevant • Business establishments with annual revenue
regulations, including: (i) Business subject to VAT of less than VND 1 billion;
establishments with annual revenue subject to • Individuals and business households;
VAT of VND 1 billion or more, and (ii) Certain • Business establishments which do not maintain
cases voluntarily registering for VAT declaration proper books of account and foreign organisations
under the deduction method. or individuals carrying out business activities in
forms not regulated in the Law on Investment; and
• Business establishments engaging in trading in
VAT payable = Output VAT – Input VAT gold, silver and precious stones.

VAT payable = Revenue x Deemed VAT rate

Input VAT is creditable if it meets the
requirements of:
• Relevant to business activities; The deemed VAT rate for direct VAT calculation varies
depending on the business activities, as below:
• Having sufficient legitimate invoices and
vouchers; • 1% this ratio is for the business of “distribution,
• Settlement via forms of non-cash payment for supply of goods”
transaction more than VND 20 million; and • 3% this ratio is for “the production, transportation,
• Paying through a bank account service associated with goods, construction
exclusive of the materials
• 5% this ratio is for “service, construction exclusive of
material”
• 2% this ratio is for other business activities.

Doing Business in Vietnam | 2024 64

VAT administration VAT refund
All organisations and individuals producing VAT From 01 July 2016, VAT refund is only allowed for
liable goods and supplies must register for VAT. the following cases:
The Business Units shall file and pay their VAT • For exporters, where excess input creditable VAT
returns on a monthly basis, by the 20th day of the exceeds VND 300 million, a refund may be
subsequent month, or on a quarterly basis by the granted on a monthly/ quarterly basis; however,
last day of the first month of the subsequent the amount of input VAT relating to export sales
quarter (for companies with prior year annual to be refunded must not exceed 10% of export
revenue of VND 50 billion or less). revenue.

Invoices and payment vouchers • Pursuant to Decree No. 49/2022/ND-CP,

business establishments satisfy the following
From 01 July 2022 onwards, according to Decree conditions are entitled for VAT refund:
123/2020/ND-CP dated 19 October 2020 prescribing
o being registered for business and VAT
electronic invoices for the sale of goods and
payment according to the tax credit method;
provision of services, e-invoices will now be
mandatory for all businesses, economic o have new investment projects (including
organisations, business households, and individuals investment projects divided into several
paying tax under the declaration method. investment phases or investment categories)
except some certain circumstances OR
There are two types of e-invoices as follows: projects on prospecting and projects to
• E-invoices without a verification code from the tax search, prospect, and develop oil and gas
authorities are acceptable for enterprises in fields, that are in the investment phase;
certain industries, such as electricity, petroleum, o have input VAT for goods and services,
telecommunication, transportation, financial incurred during the cumulative investment
services, insurance, medical, e- commerce, phase that have not been fully deducted of
supermarkets, trading, etc., and other companies at least VND 300 million.
that meet certain conditions regarding technology
infrastructure. • Especially, the enterprises having conditional
business lines shall be eligible for VAT refund for
• E-invoices with a verification code from the tax
investment projects that fall into the following
authorities are applicable for enterprises other
cases:
than the above and the individuals/enterprises in
o Investment projects in the investment phase
the high tax risk category.
and have been granted licenses for
conditional business lines by competent state
agencies, such as licenses, certificates, or
documents on verification and approval;
o Investment projects in the investment phase
that have yet to be required to apply for
licenses for the conditional business lines;
o Investment projects that are not subject to
licenses to engage in conditional business
lines as stipulated by laws.

However, for investment projects, VAT refunds

shall not be granted in the following cases:
• the chartered capital has not been fully
contributed as registered;
• conditional investment projects do not meet the
conditions under the Investment Law;
• investment projects exploiting natural resources
licensed after 01 July 2016, or manufacturing
projects in which the cost of natural resources
and energy expenses account for 51% or more
of the total cost of the product.

Doing Business in Vietnam | 2024 65

 • Physical presence in Vietnam ≥ 183 Tax residents are taxed on world-wide
days in calendar year or consecutive income, whereas non-tax residents are
12 months; or taxed on Vietnam-sourced income.
• Having “regular residence” in
Vietnam.

Depends on the nature of income and

tax residency status
Do not meet the conditions for
being tax resident.

20
Annual after- Annual PIT
%
tax income

5% 10% 15% 20% 25% 30% 35%

0 60 120 216 384 624 960

Unit: million VND

Goods distribution / Supply Asset lease, insurance brokerage, lottery brokerage,

multi-level marketing brokerage, compensation

Service, construction exclusive of Manufacturing, transportation, service associated

building material with goods, construction inclusive of building
material

Other business activities

Doing Business in Vietnam | 2024 66

 • Personal relief: VND 11 million/ Social Insurance (“SI”), Health
month Insurance (“HI”) and
• Family relief: VND 4.4 million/ Unemployment Insurance (“UI”)(*)
month/ qualified tax dependent
(*) From 01 December 2018, in addition to
HI, the expatriate under employment
contract is entitled to SI contribution

Employment Income
Taxable income generally comprises 10 main • One-off relocation allowances for: (i) foreigners
types of income: employment income, business moving to work in Vietnam, and (iii) Vietnamese
income, income from capital investments, working overseas;
income from capital transfers, income from real • Once per year home leave round trip airfare
property transfers, winnings or prizes, royalties, for expatriates and Vietnamese working
income from franchises, income from overseas (but not including family members);
inheritances and receipts of gifts.
• Employee training fees paid to training centers;
• School tuition fees from kindergarten up to
high school in Vietnam/overseas for children of
Non-employment Income expatriates/Vietnamese working overseas;
• Interest earned on deposits with credit • Mid-shift meals (subject to a cap if the meals
institutions/banks and on life insurance are paid in cash);
policies; • Taxable housing benefit including utilities:
• Retirement pensions paid under the Social being the lower of the actual rental paid and
Insurance law (or the foreign equivalent); 15% of the employee’s gross taxable income
(excluding taxable housing benefit);
• Income from the transfer of properties between
various direct family members; • Part of night shift or overtime salary payable
that is higher than the day shift or normal
• Inheritances/gifts between various direct working hours salary stipulated by the Labour
family members; Code;
• Monthly retirement pensions paid under • Compensation for labour accidents;
voluntary insurance schemes;
• Severance allowance paid according to the
• Income from life insurance policies; regulations; and
• Foreign currency remitted by overseas • Income of Vietnamese vessel crew members
Vietnamese; working for foreign shipping companies or
Vietnamese international transportation
• Scholarships;
companies.
• Compensation payments from life and non-life To apply the PIT exemption to the above, there
insurance contracts. are a range of conditions and restrictions.

Doing Business in Vietnam | 2024 67

Any individual present in Vietnam who has taxable
income must obtain an individual tax code. The
taxpayers who have taxable employment income
must submit the tax registration file to their
employer; the employer will subsequently submit this
to the local tax office. Every individual with taxable
non-employment income, must submit their tax
registration files directly to the district tax office.

For employment income

Employers must deduct and withhold employees’ PIT
and submit/ pay it to the tax authority, alongside the
relevant social insurance contributions on a monthly
basis, with a timeline no later than the 20th of the
following month or on a quarterly basis by the last
day of the first month following the reporting
quarter. The total PIT withheld must be finalised no
later than the last day of the third month after the
end of the western calendar year.
Individuals who are subject to PIT direct filling are
required to carry out PIT finalisation no later than
the last day of the fourth month after the end of the
calendar year.
Expatriate employees are also required to carry out
a PIT finalisation on the termination of their
Vietnamese assignments within 45 days from the
termination date. Tax refunds for overpaid tax
payments are only available to those who have a tax
code and a Vietnamese bank account.
For non-employment income
The individual is required to declare and pay PIT in
relation to each type of taxable non- employment
income. The PIT regulations require income to be
declared and tax paid on a regular basis, often each
time income is received.

For tax residents who have overseas income, any PIT

paid in a foreign country is creditable against tax
paid in Vietnam subject to a certain percentage and
tax administration procedures.

The Vietnamese tax year is the calendar year.

However, in the calendar year of first arrival, if the
taxpayer resides for less than 183 days in one
calendar year, his/her first tax year is the 12-month
period from the date of arrival. The subsequent tax
year is the calendar year.

Doing Business in Vietnam | 2024 68

 PIT rate
No. Type of taxable incomes
Resident Non-resident

Progressive rate as above

1 Employment income (*) 20%

Business income

Goods distribution/ supply 0,5%

Service, construction exclusive of building 2%
material
2 Particularly: Asset lease, insurance brokerage,
lottery brokerage, multi-level marketing 5%
brokerage
Manufacturing, transportation, service
associated with goods, construction inclusive of 1,5%
building material
Other business activities 1%
3 Capital investment 5%
4 Capital assignment 20% on net gains 0.1% on sales proceeds
5 Transfer of securities 0.1% on sales proceeds
6 Real property transfer 2% on sales proceeds

7 Royalties/ Technology transfer/ Franchising 5% on amount over VND 10 million

8 Winnings/ Prizes/ Inheritance/ Gifts 10% on amount over VND 10 million

Employment Income
Non-tax residents are subject to PIT at a flat
tax rate of 20% on Vietnam-sourced
employment income whereas tax residents are
subject to PIT under the below progressive tax
rates on worldwide employment income
irrespective of where the income is paid.

Annual employment income for resident

From (VND million) To (VND million) PIT rate (%)

0 60 5
60 120 10
120 216 15
216 384 20
384 624 25
624 960 30
960+ - 35

Doing Business in Vietnam | 2024 69

Vietnam does not operate a separate Capital
Gains Tax (“CGT”) regime.
For local corporate sellers, any gains derived
from the transfer of capital/securities to
another Vietnamese entity are regarded as
other income and accordingly subject to CIT at
the current standard rate of 20%.
For foreign corporate sellers, the tax treatment
on capital gains earned by a foreign seller
depends on the corporate form of the target. In
particular, the transfer of contributed capital
in a Vietnamese limited liability company
(“LLC”) is subject to CGT at 20% on gains
whereas the transfer of securities (bonds,
shares of public joint stock company (“JSC”))
is subject to CIT at 0.1% on the transfer price.
However, for individual investors, the
Vietnamese tax resident’s income earned is
subject to PIT at 20% on gains for capital
transfer in LLC or 0.1% on sales proceed for
securities transfer (bonds, shares of public and
non-public JSC) whereas the non-tax
resident’s income derived from the transfer of
capital/ securities is subject to PIT at 0.1% on
the sales proceed.
The taxable gains are determined as the
excess of the transfer price less the purchase
price of transferred capital/ securities less the
deductible transfer expenses.

Doing Business in Vietnam | 2023

2024 70
FCT imposed on foreign business individuals and
foreign organisations earning Vietnam-sourced
income (hereinafter referred to as “foreign
contractor” or “FC”), except: (i) “pure supply of
goods” under INCORTERMS., i.e. where title Foreign organisations Foreign individuals
passed at or before the border gate of Vietnam
and there are no associated services performed
VAT VAT
in Vietnam, (ii) services performed and
consumed outside Vietnam.
The FCT is not a separate tax. FCT comprises VAT CIT PIT
and CIT or PIT.

Deduction method
This method allows the FC declaring: (i) VAT
under the approach of crediting the input VAT
against the output VAT, and (ii) CIT based on the
declaration of revenue and expense similar to
the local enterprises’ application. Of note, FC is
required to meet some criteria, including FC’s
adoption of the Vietnamese Accounting System.
Direct method
Under this method, FCT is the mechanism to
withhold taxes. The FC’s VAT and CIT will be
withheld by the Vietnamese customers at
prescribed rates from the payments made to the
FC. Various FCT rates are regulated under the
nature of activities performed (please see the
below table briefing the FCT rates for each
activities).
Hybrid method
This method is a mix between the deduction
method and direct method, i.e. allows the FC to
declare VAT based on the creditable approach
and CIT at direct method.

Doing Business in Vietnam | 2024 71

Deemed CIT and VAT rates under the direct method in common cases as below:

Ratio for FCT (%)

Deemed Deemed
Type of business activities VAT-FCT CIT-FCT
rate (%) rate (%)

i. Distribution, supply of goods;

ii.Distribution, supply of goods associated with services
rendered in Vietnam (including the form of spot export
Trades 1/Exempt 1
and import);
iii.Supplying goods under INCOTERMS where the seller
bears risk relating to goods in Vietnam.

Services 5 5

Restaurant/ hotel/ casino management services 5 10

Services
Service associated with goods supply
(if the contract does not separate the value of goods 3 2
and service)

Insurance 5/Exempt 5
Insurance Re-insurance abroad, commission of the re-
Exempt 0.1
insurance transfer

Leasing machinery and equipment 5 5

Leasing Leasing aircraft, airplane engines/ spare parts, vessels
Exempt 2
(for aircraft and vessel cannot be produced in Vietnam)

Derivative financial services Exempt 2

Banking
Loan interest Exempt 5

Capital
Transferring securities/ deposit certificates Exempt 0.1
Investment

Construction, installation including supply of materials,

3 2
machinery, equipment
Construction
Construction, installation excluding supply of materials,
5 2
machinery, equipment

Transport (including the transport by seaway, by

Transportation 3/0 2
airway)

Royalty/ License fee

Exempt
Royalty (*): Software licenses, transfer of technology, transfer 10
(*)
of intellectual property rights are VAT exempt

Other production 3 2
Others
Other Business activities 2 2

Doing Business in Vietnam | 2024 72

Tax mechanism on foreign e-commerce
business
Circular 80/2021/TT-BTC dated 29 September
2021, effective as of 01 January 2022, provides a
mechanism for a tax declaration for foreign e-
commerce companies doing business in Vietnam.
Foreign companies having such business
activities will be granted a tax code and are
required to make an online tax declaration, using
a portal of the General Department of Taxation
(“GDT”) on a quarterly basis. In case of deriving
no income in a tax period, a quarterly blank tax
return is mandatory to be submitted.

Of note, the foreign contractor is able to pay tax

via bank transfer in convertible foreign
currencies.

In case such foreign companies do not apply for

tax code registration as well as declare and pay
tax in Vietnam, relevant Vietnamese entities
would be under the following obligation:

(i) Vietnamese companies are required to

withhold and declare tax on behalf of
foreign companies (this mechanism is
similar to that of foreign contractor tax);
Applicable tax rates
(ii) If the Vietnamese customers are individuals,
the Vietnamese commercial intermediary Foreign companies are subject to Vietnamese
banks or payment service providers VAT and CIT on a deemed percentage of the
involved in the transaction are required to revenue earned in Vietnam. The rate of VAT and
withhold, declare, and pay taxes on a CIT would variously depend on the nature of
monthly basis. GDT will provide the names goods or services provided by the foreign
and websites of such offshore suppliers to companies.
the banks and/or payment intermediaries The VAT and CIT rates are provided under Decree
for tax withholding. 209/2013/ND-CP and Decree 218/2013/ND-CP,
(iii) If the Vietnamese customers use payment respectively.
methods where the banks and intermediary Revenue derived in Vietnam for tax assessment
payment service providers cannot withhold purposes will based on payment information
tax, the banks or the payment service (credit card or bank account information),
providers are required to report payments residency status (i.e., billing, delivery or home
made to the offshore suppliers to address) and access information (e.g., mobile
Vietnamese tax authorities on a monthly phone country code, IP address, and landline
basis. address or similar information).

Doing Business in Vietnam | 2024 73

Vietnam has entered into DTAs with

approximately .
The CIT/PIT portion of the withholding tax
may be exempted/reduced under a DTA, if
foreign contractors/individuals do not
create a PE/ tax residency status in
Vietnam.
The qualified foreign contractors/
individuals will need to submit the DTA
application to the tax authority in order to
enjoy the tax exemption/ reduction in
Vietnam. Following the submission of the
DTA application by the foreign contractor,
the tax authority is required to issue a
decision whether the foreign contractor is
qualified for tax reduction/exemption under
the applicable DTA.
Although the DTAs follow the OECD and the
UN models with similar provisions, there are
some treaties with more beneficial
conditions as compared to others.

Doing Business in Vietnam | 2023

2024 74
Import Duty Export Duty
Generally, all goods crossing Vietnamese borders Export duties are charged on a limited number of
are subject to import duties. In particular: items, generally natural resources such as sand,
• Goods imported through Vietnamese border chalk, marble, granite, ore, crude oil, forest
gates or border by road, river, seaport, airport, products, and scrap metal. Export duty rates
international railway, international post and range from 1% to 40%.
other locations for customs procedures Special Sales Tax (“SST”)
clearance
• Goods transferred from the local market to non- An SST is a form of excise tax levied on the
tax areas or vice versa production or import of certain goods and the
provision of certain services:
• Other goods traded or exchanged that are
considered as imports. • Goods generally subject to SST includes
cigarettes, cigars and other products processed
The following goods are not subject to import from tobacco; spirits and beer; certain
duties: passenger vehicles; two-wheel motor vehicles
• Goods transited and transported by mode of with a cylinder capacity above 125cm3; aircraft
border gate trans-shipment through Vietnam’s and yachts for specific civil purposes; various
border gates or borders under the customs law types of petrol; air-conditioners with a capacity
of 90,000 BTU or less and cards.
• Humanitarian aid goods
• Goods imported from abroad into non-tariff • Businesses subject to SST include dancehalls,
zones and only used therein massage lounges, karaoke parlours, casinos, slot
machines and other similar types of machines,
• Goods brought from one non-tariff zone to betting businesses, golf and lotteries.
another
Manufacturers of SST liable goods which are
Import duty rates are classified into 3 categories: purchased or imported. SST liable raw materials
ordinary rates, preferential rates, and special are permitted to credit the SST amount paid on
preferential rates. raw materials imported or purchased from local
Preferential tax rates are applicable to imports suppliers against the SST amount payable upon
originating from countries, groups of countries or selling goods.
territories that grant most-favoured-nation The SST taxable price of domestically
treatment in trade relations to Vietnam. Taxpayers manufactured goods is the selling price excluding
declare the origin of goods themselves and are the environment protection fee. The SST taxable
held responsible for declarations regarding the price at the import stage is the import dutiable
origin of goods. price plus import duty. The SST payable is
Particularly-preferential tax rates are individually computed by the taxable price multiplied by the
specified for each item covered by decisions SST rate.
released by the MoF.
Environmental protection tax
Ordinary tax rates are applicable to imports
originating from countries, groups of countries or An environmental tax is an indirect tax, collected
territories that do not grant most-favoured-nation on products and goods that, when used, are
treatment or special import tax preferences to deemed to cause negative environmental impacts.
Vietnam. The ordinary tax rate is equal to 150% of The tax is levied on the production or importation
the preferential tax rate. of certain goods, based on the absolute tax rate.
Export products are exempt from environmental
Apart from being subject to import tax, in certain
protection taxes.
situations Vietnam also imposes an anti-dumping
tax, anti-subsidy tax and an anti-discrimination tax
or safeguard tax, in accordance with existing
rules.
Import and export duty rates are subject to
frequent changes and it is always prudent to
check the latest position.

Doing Business in Vietnam | 2024 75

Property tax
Property tax in Vietnam is levied in the form of
three taxes: land-use fee, land rental and non-
agricultural land-use tax.
• The land-use fee applies to organisations, which
are allocated land by the state to develop
infrastructure for sale or for lease and who are
subject to the payment of a land-use fee. The
duration of land usage under this category
should be “long term stable use”.
• Land rental is the amount an investor pays to
lease (or rent) land in Vietnam. The amount
varies depending on a number of factors
including the location, infrastructure and the
industrial sector in which the business is
operating. Payment of the lease can be for a
long-fixed period of time or annually.
• The non-agricultural land-use tax applies to
residential land in rural/urban areas and non-
agricultural land used for business purposes. The
calculation of tax liability is based on the land
area, price of land and tax rate.
In addition, owners of houses and apartments
have to pay land tax under the law on non-
agricultural land use tax. The tax is charged on the Natural Resources Tax (“NRT”)
specific land area used based on the prescribed NRT is also known as production royalty tax. All
price per square meter and progressive tax rates organisations and individuals engaged in the
ranging from 0.03% to 0.15%. exploitation or the mining of natural resources in
compliance with the laws of Vietnam, irrespective
of their industry, scope and operational form, are
liable to register, declare and pay royalties.
Taxable resources means all natural resources
existing on land, islands, internal waters, sea
territory, exclusive economic zones (including
maritime areas common to both Vietnam and a
neighboring country) and the continental shelf
under the sovereignty of the Socialist Republic of
Vietnam, including: metallic mineral resources;
non-metallic mineral resources including soil,
stone, sand, gravel, coal, gemstones, mineral
water and natural thermal water; oil; gas or
natural gas; natural forest products; natural
marine products; natural water including surface
water, ground water and other natural resources
under the law on natural resources.
The taxable value of a resource is the selling price
of each item or unit of resource at the place of
mining in accordance with the principle of market
price. The royalty rates vary from 1% to 40%,
whilst petroleum, natural gas and coal gas are
taxed at progressive tax rates depending on the
daily average production output.

Doing Business in Vietnam | 2024 76

Anti-avoidance measures
While Vietnam does not have any specific anti-
avoidance rules, the tax authorities have the
power to carry out tax inspections of any
taxpayer. Tax inspections can be conducted on
a regular basis but no more than once a year.
Tax inspection duration must not exceed thirty
days from the date of notification of the tax
inspection decision. However, these may be
extended for an additional period not
exceeding thirty days.
A taxpayer who pays tax later than the
statutory deadline has to pay the full tax
amount plus interest calculated at 0.03% per
day on the additional tax amount. Taxpayers
who make incorrect declarations, thereby
reducing tax payable or increasing refundable
tax amounts, will have to pay the full amount of
the undeclared tax or return the excess refund.
Additionally, these taxpayers will also have to
pay a fine equal to 20% of the under-declared
or excess refunded tax amounts, together with
interest for late payment of the tax.
A taxpayer that commits an act of tax evasion
or tax fraud is liable to pay the full amount of
tax according to the regulations and a fine will
be imposed of between one and three times
the evaded tax amount. The general statute of
limitations for imposing taxes is 10 years and
for penalties is 5 years.

Global Minimum Tax (GMT) ▪ Income Inclusion Rules (“IIR”): IIR is applied
toward ultimate parents operating in
GMT is enforced in Vietnam from tax year 2024 Vietnam. IIR requires the calculation of
onward as a part of the Global Anti-Base national-based effective tax rate in each
Erosion model (“GloBE”). GMT will be applied operating country/region, as any addition
to multinational enterprises with consolidated top-up tax to meet the 15% minimum rates
revenue of over EUR 750 million. Under GMT (if not contributed to the respective
application, a minimum top-up tax rate is jurisdiction) shall be calculated and
regulated at 15% and impacted taxpayers are contributed to the Vietnamese State Budget.
required to comply with the following
applications: Impacted taxpayers are required to submit
additional paperwork for GMT declaration
• Qualified Domestic Minimum Top-up Tax within 12 months from financial year end. In
(“QDMTT”): QDMTT is applied toward addition, certain de minimis rules and
constituent entity/entities (“CEs”) operating thresholds are also introduced to support
in Vietnam. National-based effective tax rate qualified taxpayers.
from all Vietnamese CEs shall be calculated
and top-up tax to meet the 15% minimum
rate shall be contributed to the Vietnamese
State Budget.

Doing Business in Vietnam | 2024 77

Doing Business in Vietnam | 2023
2024 78
The terms and conditions of employment In Vietnam, the payroll cycle is monthly and is
contracts can be freely negotiated between most commonly paid at the end of the month, or
employers and employees, as long as they are as agreed within the employment contract.
not less favourable than the basic provisions
A 13th-month is not mandatory in Vietnam, but
prescribed under the Vietnam Labour Code and
most employers provide a 13th month bonus as
other laws.
an annual bonus. It is common to pay this bonus
An employment contract shall be concluded in at the end of the year or during the Tet (Lunar
one of the following types: New Year) holiday.
• Indefinite-term employment contract Salaries paid to Vietnamese employees must be
paid in Vietnamese Dong (VND). Foreign
• Definite-term employment contract - the
employees are permitted to receive salaries,
duration of which is defined by the two
bonuses and allowances in a foreign currency.
parties but does not exceed 36 months from
the date of its conclusion.
• Contracts with a definite term can only be
extended twice and on the third time default
to indefinite term contracts.
Enterprises are allowed to accept students who
Locally hired foreigners will, in practice, always are recruited and to practice doing their work by
have a maximum of 24 months for contracts, the employer in order to work for the employer.
which cannot exceed the duration of work permit, The maximum duration of an apprenticeship is 3
due to work permit regulations. months.
Upon the expiry of the apprenticeship or
traineeship period, both parties must enter into an
employment contract if the conditions stipulated
The length of a probationary period is dependent in the Labour Code are satisfied.
on the required skills and qualifications for the
position and it can vary from 6 to 180 days. The
wage for an employee during the probation
period must be agreed upon in writing and
cannot be less than 85% of the full-time salary
for the position.

Forms of employment contract Types of employment contract

Written labour Verbal labour Indefinite-term Definite-term labour

contracts including contracts are labour contract contract
electronic form applicable for some
cases with less than
1 month term

Doing Business in Vietnam | 2024 79

Normal working hours Paid Time Off
Under the Vietnam Labour Code, normal working Paid leave in Vietnam is set in the employment
hours should not exceed 8 hours per day or 48 contract at a minimum of 12 days paid leave a year,
hours per week. The employer has the right to exclusive of public holidays. This increases by one
determine the daily or weekly working hours as long additional day for every five years of employment.
as the working hours shall not exceed 10 hours per
day and not exceed 48 hours per week where a
weekly basis is applied. Sick Leave
All employees are entitled to up to 30 days of paid
sick leave per year, increasing to 60 days in
Overtime and work at night exceptional circumstances. Sick leave is paid by the
Employers can request employees to work overtime Social Insurance Authority, not by the employer,
with the condition that the employer obtains the and applies to both Vietnamese and foreign
employee’s consent. Employees who work overtime employees. Employees entitled to sick pay are
are entitled to an additional wage. Overtime hours entitled to 75% of their salary or remuneration on
cannot exceed 50% of the total hours worked per which social insurance premiums were based, in
day. In case of weekly basis working hours, the total the month preceding their leave.
normal working hours plus overtime working hours
shall not exceed 12 hours in 1 day, and 40 hours in 1 Maternity Leave
month. Employers must ensure that the number of
Overtime hours of an employee does not exceed Female employees are entitled to 6 months of
200 hours in 1 year, except for those cases maternity leave, potentially up to 7 months for
specified. complicated/multiple births.
The compensation rates over and above the normal The maternity payment is paid by the Social
hourly pay are: Insurance Authority at a rate of 100% of the salary
of the average salary during six-months prior to
• Weekdays, daytime: 150% of the regular salary
maternity leave. The female employee can return to
rate
work after at least four months of maternity leave.
• Weekends, daytime: 200% of the regular salary
rate
Other Leave
• Public holidays and paid leave days: 300% of
the regular salary rate Paternity leave is also stipulated to be 5 - 14
working days, depending on the number of children
Employees working at night shall be paid at least born and the circumstances of the birth. This leave
130% of the normal hourly pay. is paid by the Social Insurance Authority.
Employees who work overtime at night, beside Parental leave in Vietnam is available for childcare
above additional overtime wages, will be paid an and entitles employees to up to 20 days of parental
additional 20% of salary calculated according to leave per year until the child reaches the age of 3
the job performed during the hours of a normal and thereafter up to 15 days per year until the child
working day or of a weekly holiday or of a public reaches the age of 7. The childcare leave is paid by
holiday. the Social Insurance Authority.
Bereavement leave: employees are entitled to 1 - 3
days of paid leave for the death of a family
member.
Marriage leave: Employees are entitled to up to 3
days in the case of marriage and 1 day for a child’s
marriage.

Doing Business in Vietnam | 2024 80

On 20 December 2023, The National Wage Council Up to now, the base salary in 2024 will still be
has sent a recommendation report to the applied according to the provisions of Decree
Government on considering the regional minimum 24/2023/ND-CP, accordingly the base salary in
wage increase in 2024 proposed by the Council by 2024 will be VND 1,800,000 a month.
6%, corresponding to an increase of VND 200,000 -
280,000 depending on the region, effective from 01
July 2024. The minimum wage are as listed by the From 01 July 2024, implement the overall
following zones: salary policy reform according to Resolution
27-NQ/TW, remove statutory pay rate; adjust
Current
As recommended plan pensions, social insurance benefits, monthly
from 01 July 2024
Zone allowances, preferential benefits for
VND/month VND/hour VND/month VND/hour meritorious people and some social security
Zone 1 4,680,000 22,500 4,960,000 23,800
policies that are tied to the statutory pay
rate.
Zone 2 4,160,000 20,000 4,410,000 21,000

Zone 3 3,364,000 17,500 3,860,000 18,600

Zone 4 3,250,000 15,600 3,450,000 16,600

There are three types of statutory social security Health insurance entitles employees to a medical
in Vietnam that must be covered by the company examination and inpatient/outpatient treatments
for employees working under employment at authorised medical establishments.
contracts with some other applicable conditions: Unemployment insurance is paid out to employees
depending on the period of time during which they
• Social insurance (“SI”);
contributed.
• Health insurance (“HI”); and
Both employer and employee are required to pay
• Unemployment insurance (“UI”). the statutory insurances. The mandatory
Social insurance covers employee benefits contribution rates are as follows:
including sick leave, maternity leave, allowances
for work-related accidents and occupational
diseases, retirement allowance, and mortality
allowance.

Employee 8% 8% 1.5% 1% 10.5%

Employer 3% 0.5% 14% 17.5% 3.0% 1% 21.5%

Employee 8% 8% 1.5% 9.5%

Employer 3% 0.5% 14% 17.5% 3.0% 20.5%

Contributions are determined based on The contribution rate to trade union funds is set at
employees’ monthly salary as stipulated in the 2% of the salary fund for Social Insurance
employment contract (capped at 20 times the contributions for employees. This fee must be paid
common minimum wage for social insurance/ into trade union funds once per month.
health insurance and 20 times the minimum Additionally, if the company establishes the
regional wage for unemployment insurance). internal organisation trade union, there will be a
trade union fee of 1% of the salary fund for social
insurance contributions to be contributed by
members.

Doing Business in Vietnam | 2024 81

The termination of a labour contract in Vietnam Foreigners who work in Vietnam are required to
can be quite complex and is based on the Labour obtain a work permit or to obtain confirmation
Code requirements. It can differ depending on the from the local labour department that he/she is
reason of termination and the type of employment exempted for work permit.
contract. This affects the legal requirements,
On 18 September 2023, the Government of issued
notice period, and possible severance payments.
Decree No.70/2023/ND-CP, which introduced
The employer is also responsible for paying the significant changes to regulations governing work
rest of the salary within 14 working days from the permits and work permit exemption certificates.
date of termination of the employment contract. Some major changes are detailed below:
This period may be extended but it shall not • Employers will now only need to report and
exceed 30 days. explain to the Ministry of Labour, Invalids, and
Social Affairs (“MOLISA”) that the position
cannot be filled by a local worker 15 days in
Severance payments advance of the commencement of work of a
In Vietnam, the employer is responsible for foreign worker. Previously the ministry had to
offering a severance allowance (if applicable) to be notified 30 days in advance.
the employee who has worked on a regular basis • Employer is not required to determine the
for a period of at least 12 months. Each year of demand for employing foreign workers in some
work will be compensated at half a month’s salary. exemption cases.
The qualified period of work as the basis for the • Moreover, from 01 January 2024, positions for
calculation of severance allowance is by year (full which an organisation wishes to employ a
12 months); in the case of months less than or foreign worker will need to be advertised on the
equal to 6 months, it is equal to a half year, over 6 Electronic Information Portal of the Department
months is counted as 1 working year. The qualified of Employment under the MOLISA or the
period of work, as the basis for calculation of Electronic Information Portal of the
severance allowance, shall be the total period Employment Service Center. This must include
during which the employee actually worked for the the job position and job title, job description,
employer minus the period over which the quantity of positions to be filled, qualification
employee participated in the unemployment requirements, experience needed, salary,
insurance, in accordance with unemployment working time, and location.
insurance laws and the period for which
severance allowance or redundancy allowance • If a foreign worker is required to work in
has been paid by the employer. multiple locations, these must all be listed on
the application.
• If they work in different provinces, the
Notice period application should be submitted to the MOLISA.
Employers are obligated to give prior notice before • Work permits or work permit exemption
unilateral termination based on the type of certificates issued in the past can serve as
contract: evidence of foreign labour's working
experience.
• 3 working days for the labour contracts of
under 12 months • Economic and industrial park authorities no
longer issue work permits or work permit
• 30 days for a definite employment contract
exemptions; these responsibilities are now
with period from 12 to 36 months
handled by the MOLISA and provincial
• 45 days for an indefinite employment contract. departments.

Doing Business in Vietnam | 2024 82

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Doing Business in Vietnam | 2024 84

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