Doing business in Vietnam

Updated in November 2018

 Contents Foreword

Foreword 1 Vietnam Vietnam is a unique country providing extensive

opportunities for those willing to spend time to understand
Country profile 2
the market. Although not without its problems, Vietnam’s
Business etiquette and travel 6 economy continues to expand and modernise, and with the
opening up of previously restricted industries and sectors to
Key trends and statistics 8
meet WTO commitments; opportunities continue to develop.
Finance 13 Further growth is being stimulated through bi-lateral Free
Trade Agreements (e.g. South Korea) and others such as
Regulatory environment 16
the EU Vietnam Free Trade Agreement and the CPTPP.
Opening up to Foreign Investment 21
Business entities 22
Grant Thornton Vietnam has prepared this guide to assist
those interested in doing business in Vietnam. This guide Kenneth Atkinson
does not cover the subject exhaustively. However, it is Executive Chairman
Labour 26
intended to answer some of the more important questions
Financial reporting and audit 31 that may arise. When specific problems occur in practice, it
will often be necessary to refer to the laws and regulations
Tax System 34
of Vietnam and to obtain the appropriate professional
Contacts 48 advice.
We hope this guide helps you in learning about and
understanding business in Vietnam. Should you require
professional assistance we will be only too willing to meet
you, to see if we can help.
NOTE:
This guide contains only brief notes and includes legislation
in force as of January 2017. The information herein is
of a general nature and is not intended to address the Nguyen Chi Trung
circumstances of any particular individual or entity. CEO, Managing Partner
Although we endeavour to provide accurate and timely
information, there can be no guarantee that such
information is accurate as of the date it is received or
that it will continue to be accurate in the future. No one is
entitled to rely on this information and no one should act on
such information without appropriate professional advice
obtained after a thorough examination of the particular
situation.

ii Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 1

Country profile Geography and population The Vietnamese legal system consists of a constitution,
codes, laws, ordinances, decrees, decisions, circulars,
directives and official letters. Although all have the force of
law, only laws passed by the National Assembly are referred
Vietnam has the third largest population in South East Asia
to as such.
(after Indonesia and Philippines) and is ranked 13rd in the
world in terms of total population, reaching 92.7 million Ordinances are issued by the Standing Committee of
according to the population survey in 2016. The rural the National Assembly to regulate an area where a law
population accounts for approximately 67%. is not yet promulgated or regulated. On matters the
Summary Vietnam is an elongated “S” shape with a long borderline
from China in the North, Laos in the West and Cambodia The city of Hanoi covers a large urban and rural area in the
National Assembly has entrusted to the Government, the
Government will issue decrees, decisions, circulars or
Vietnam is a rapidly developing country with a dynamic in the West and South West. Vietnam has a diversified north of the country. The registered population was around
directives to implement the issued laws or ordinances.
and emerging market economy. topography of plains, midlands and mountains. 7.2 million at the end of 2015.
Decrees, decisions and circulars are normally issued by
According to Bloomberg. Vietnam is one of the fastest The capital of Vietnam is Hanoi, which lies in the north of the Ho Chi Minh City, the primary economic hub for Vietnam,
individual ministries and other State agencies, including
growing economies in Southeast Asia. Vietnam’s GDP country. Other major cities include Ho Chi Minh City (often had a population of about 8.3 million. However, the actual
People’s Committees, with respect to subjects within their
growth rate recorded a 10-year high of 6.81% in 2017, abbreviated to “HCMC” and also referred to as Saigon), population of Ho Chi Minh City (and Hanoi, to a lesser
sphere of responsibility and the force of subordinate
mainly fuelled by exports, foreign direct investments and Dong Nai, Ba Ria – Vung Tau, Binh Duong in the South; Hai extent) is likely to be significantly higher due to unrecorded
legislation.
the manufacturing industry. This figure is forecasted by The Phong, Quang Ninh and Hai Duong in the North, Hue, Da migration from rural areas. In addition, Ho Chi Minh City is
Ministry of Planning and Investment to grow at a similar rate Nang, Quang Nam, Quang Ngai on the Central and South also bordered by the established industrial and urban areas It should be noted that while codes, laws and ordinances
in 2018. East Coast. of Binh Duong, Dong Nai and Long An Provinces, which are referred to by name; decrees, decisions, circulars and
arguably extend the City’s limits into these provinces. directives are usually referred to by the number, signing
Vietnam comprises a landmass of 330,972 km2, a vast sea Although growth has moderated somewhat during 2016, date, and the name of issuer.
area including a large continental shelf, and a string of Vietnam’s macroeconomic environment remains favourable.
archipelagos stretching from the Gulf of Tonkin in the North After falling to record low of 0.63% in 2015, inflation has
to the Gulf of Thailand in the South. increased slightly to 2.66% mainly due to administrative Political and legal system
price hikes for health and education services, but this level is Language
still well below the official target of 5%.
The Constitution in general establishes the rights of
the people under the leadership of the Communist Vietnamese is the country’s official language. Foreign
Party. The power of the people is exercised through the languages such as English, French, Russian, Chinese,
National Assembly at a central level and through People’s Japanese and German are also used to varying degrees.
Committees at a local level. English, however, is by far the most widespread foreign
language and is commonly used alongside Vietnamese in
The National Assembly is the supreme representative and
legal documents relevant to foreign trade and foreign direct
legislative body and determines domestic and foreign
investment. English is also featured on the websites of many
Hanoi 330,972 km2 Vietnamese policies, socio -economic tasks, national defence and
security issues.
businesses (both local and foreign-owned) and Government
Capital Area Language agencies.
The Head of State is the President, elected by the National
Assembly and represents the Nation in internal and foreign
affairs. The highest executive body in Vietnam is the
Government, formerly known as the Council of Ministers. Business hours/time zone
It is in charge of the general management of the economy
and the State. The court and prosecution system in Vietnam
VND +84 8am to 5pm has a structure similar to the administrative system. At a Normal working hours in Vietnam are 8 hours per day
Currency International dialling Business and Banking central level, the Supreme People’s Court is the highest and 6 days a week. However, the standard working week
code hour judicial body in Vietnam. At a local level, courts exist at for officials and public employees and employees in
provincial and district levels. administrative organizations is 40 hours (5 days). Other
organizations are encouraged to apply the standard
In January 2016 the 12th National Party Congress was working week of 40 hours. The total number of overtime
held in Hanoi to select new leaders for the country. Nguyen hours should not exceed 4 hours a day, 30 hours a month
Phu Trong, the incumbent General Secretary of the or 200 hours a year. In special circumstances, and subject
68 6.8% 93 M Communist Party was re-elected. The new President (Mr. to the government’s allowance, the total number of overtime
Doing Business rank 2018 GDP growth Population Nguyen Phu Trong), Prime Minister (Mr. Nguyen Xuan Phuc) hours can be extended to a limit of 300 hours per person
(by The World Bank) and Chairman of the National Assembly (Madam Nguyen per year.
Thi Kim Ngan) were also elected in May 2016.

2 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 3

Public holidays Economy Employment levels Living standards
Employees who have been employed for 12 months are provided Vietnam is a developing country that has been transitioning from As at 28 December 2016, Vietnam had 54.4 million people As stated by World Bank, The national poverty rate
with a minimum of 12 days of paid annual leave (vacation) per the rigidities of a centrally-planned economy since 1986. Vietnam over 15 years old, including 47.7 million people of working continued decreasing to 9.8% (2016) compared to 13.5%
year, in addition to the Public Holidays. joined the World Trade Organization in January 2007, which has age with approximately 66.6% of them concentrated in in 2014 and 17.2% in 2012.
promoted more competitive, export-driven industries. Vietnam rural areas.
According to the Human Development Index (HDI) report
successfully finalised negotiations for the Comprehensive and
The number actually employed in 2016 was estimated at announced by UNDP in September 2015, Vietnam’s HDI for
Progressive Agreement for Trans-Pacific Partnership (CPTPP)
1 Jan New Year’s Day 53.29 million, of which, 41.9% were working in agriculture, 2014 positioned it at 116 out of 188, climbing 5 places from
trade agreement, signed a number of bilateral and multilateral
forestry and fishery sectors, 24.69% working in the 2013 thanks to some achievements in poverty reduction,
free trade agreements.
industrial and construction sector and 33.41% working in healthcare and education improvements.
the services sector.
(FTAs) with other countries, including the EU Vietnam FTA, and
joined the ASEAN Economic Community (AEC). It is expected The underemployment rate was 1.64% on average while it
that Vietnam would have much to gain from these agreements was 2.10% in rural areas. Overall the unemployment rate in
Lunar new year and partnerships, especially where booming apparel and shoes 2016 was 2.30%, slightly lower than that of 2015 but higher 47.78 M
Tet Holidays (5 days) industries are poised to benefit from the 0% tariffs in the United than that of 2014 (2.31% and 2.10% respectively); however, people of working age
(varies)
States and other significant importing markets. the unemployment rate in urban areas improved to 3.18%
compared to 3.29% in the previous year.
Agriculture’s contribution to the country’s GDP has continued
to shrink from about 25% in 2000 to 16.3% in 2016, while
contribution from the Service sector increased from 39% to 41%
Cost of living
10th day of 3rd in the same period. The foreign invested sector was identified as
Hung King’s Anniversary an increasingly significant source of growth for the Vietnamese According to the Mercer’s survey over 209 cities across five
lunar month (varies) economy, accounting for 23.4% of the total capital invested in continents in 2016, Vietnam’s two major cities: Ho Chi Minh 33%
2016, an increase of 23.3% from 2015. City and Hanoi were ranked 88th and 106th respectively of the labour force
in terms of the cost of living, compared with 90th and 86th working in service sector
In 2016, a total of 60,667 domestic firms closed down, a decrease
respectively, in 2015. Living in Ho Chi Minh City and Hanoi
of 15.0% from the same period of 2015. The number of newly-
is more expensive than in Phnom Penh and Kuala Lumpur
established businesses was 110,100, an increase of 16.2% in
(ranked 118th and 151st respectively) but not as expensive
number and 48.10% in terms of capital. In addition, 26,689
as in Bangkok.
30 Apr Reunification Day
enterprises resumed their operations, up 24.1% compared to the
same period of 2015.

1 May International Labour Day

2 Sep National Day

4 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 5

Business etiquette and travel

Business ettiquette Gift giving

Travel to Vietnam
The giving of gifts is quite common throughout Vietnam on
numerous occasions and in business meetings to express Visas Visa extensions
Greetings your appreciation, gratitude or respect to your business
relations. The gift is not supposed to be costly but as an A valid visa is required for entry into Vietnam. Legally, Nowadays, Vietnam visa extension is not difficult.
To greet and say goodbye to Vietnamese business partners,
appreciation of friendship. tourist visas are not valid for business visits, although this Depending on your holding visa, the procedures takes you
Vietnamese shake both of their hands with the left hand on
top of the right wrist and bow slightly. Otherwise, you can requirement is not strictly enforced. Vietnam has signed 7 to 10 days to extend a visa for 30 to 60 days at a cost
bow to Vietnamese. bilateral agreements with most ASEAN countries to exempt of 40USD and 60USD respectively. Ideally, visa extensions
entry visas for ASEAN citizens visiting other ASEAN countries work smoothly in four big cities: Ho Chi Minh City, Hanoi,
Business meeting for a pre-determined period of time. Vietnam has also Danang and Hue.
Face-to-face meeting is considered very formal in Vietnam exempted citizens of The United Kingdom, Germany, France,
that will be confirmed at most one week before the Italy, Spain (until 2021), Denmark, Finland, Sweden, Japan,
appointment time, if dealing with Government departments South Korea, Norway, Belarus and Russia for citizens visiting
and State Owned Enterprises. To start and open a business Vietnam from requiring entry visas for visits of less than 15
conversation, business cards should be handed and days.
received to and from business partners by two hands. To
clarify the person you are speaking with and show your
proper respect, you should read your partners cards
carefully. Do not simply glance at it and put it in wallet Currently, the government is considering entry visa six months may be obtained for visitors who have
immediately. exemptions to foreign visitors from Australia, New regular business in Vietnam. It is dependent on each
Zealand, India, and Canada and the majority of case, 6-month visa could be issued to visitors such as
One more important thing should be noted in business European countries. prestige tourism agencies or investors who are making
meetings is being receptive to any invitations to lunch or investments in Vietnam.
dinner after your business meetings. Dinners or luncheons In order to obtain a business visa, a business person
are often arranged by business partners who will be hosting should be sponsored by an organisation in Vietnam. The Visas can be pre-arranged through certain travel agents
you to build personal relationships – one of the keys to sponsorship can be by the visitor’s Vietnamese business or on line and collected upon arrival at Hanoi or Ho
successful business, in Vietnam. partner or the visitor’s representative office or branch, a Chi Minh City airports, avoiding the need to visit a
Addressing Vietnamese trade-support institution, a consulting firm or authorized Vietnamese Embassy abroad.
agent. Visitors must submit visa application forms with
Vietnamese names are written backwards compared photographs and their passports to the Vietnamese Alongside implementing the e visas system, the
to Western names and generally have three or 4 parts: Embassy in their country for visa issuance and pay a Vietnamese Immigration Department has allowed
Surname, middle name and last name, family name starting visa stamping fee. for a Visa upon arrival In order to make the process
first, middle name and last name. If it is applicable, you can of obtaining a visa easier for tourists and business
add the professional title. It is normal to use the last name to Since 1 February 2017, Vietnam has introduced a travellers,. This system allows the traveller to apply for
address a Vietnamese i.e. their Christian name. system for e visas and visitors from 40 countries can an approval letter from the Vietnamese Immigration
Business attire now apply on line for a 30 day single entry visa. Department online. The visa will be issued upon arrival
at Vietnam international airport having paid the relevant
In working places, Vietnamese dress conservatively in To apply for e-visas, foreign citizens can access the fee. However Visa on arrival can be subject to delays
good-looking clothes. Men wear suits and women wear suits websites http://www.xuatnhapcanh.gov.vn or http:// of 30-120 minutes depending on the time of arrival,
or dresses. For the time of warmer months, particularly in www.immigration.gov.vn. particularly in HCMC. So using the fast track option is
Southern Vietnam, jacket and suit jackets are not required recommended for an additional fee.
unless meeting Government officials. A one-month renewable visa will generally be issued.
Multiple entry-exit visas, which are valid for three to

6 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 7

 Contribution to GDP
Key trends and statistics The Service sector continued to contribute the largest portion to the economy (41%), followed by the Industry and
Construction sector.
The Industry and Construction sector, however, is the fastest growing sector with an increase by 8% in 2017.
GDP contribution by sectors
Source: Government Statistics Office (GSO)

Overview 10.00% 15.34%

Vietnam ranked 55 out of 137 countries in World Economic Forum‘s Global Competitiveness Index 2017-2018 edition, a
5-rank improvement from 2016-2017 report. Agriculture, Forestry and Fishing
In terms of credit rating, Vietnam is rated B1 with positive outlook by Moody’s, an improvement compared with last-year
rating of B1 Stable. Fitch also raised Vietnam’s rating from BB- to BB with a stable outlook. Industry and Construction

Economic Environment Services

Vietnam’s GDP growth rate recorded a 10 year high of 6.81% in 2017, mainly fueledfuelled by exports, foreign direct 41.32% 33.34%
investments and the manyfacturing industry. This also ranks Vietnam as one of the fastest growing economies in Southeast
Asia – according to Bloomberg. GDP is forecasted by The Ministry of Planning and Investment to grow slightly at a similar Tax less subsidies on production
rate in 2018.
GDP Growth Rate (2009-2018f)
Source: GSO and the Ministry of Planning and Investment

8.00%
6.68% 6.81% 6.83%
7.00% 6.42% 6.24% 6.21%
5.98%
6.00% 5.40% 5.25% 5.42% Principal Exports
5.00%
In 2017, export turnover increased by 21% y-o-y, reaching USD219 billion.
4.00% Vietnam’s Principal Exports
3.00% Source: Government Statistics Office (GSO)

2.00%
2017 2016
1.00% Top export sectors
0.00%
USD Billion % USD Billion %
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f
Telephones and spare parts 45.3 20.65% 34.3 18.95%
Textiles and garments 26.0 11.88% 23.8 13.16%
GDP per capita
Computers, Electronics & spare parts 25.9 11.84% 19.0 10.47%
GDP per capita has continued to improve steadily y-o-y since 2000. The graph a shows the average GDP per capita of
USD2,385 in 2017, an increase of 7.7% compared to 2016. The actual GDP per capita in key cities such as Ho Chi Minh Footwear 14.7 6.68% 13.0 7.18%
City and Hanoi are significantly higher than other regions.
Machinery and spare parts 12.8 5.83% 10.1 5.60%
GDP per capita (2001-2017)
Government Statistics Office (GSO)
Seafood 8.3 3.79% 7.1 3.89%
3,000
Wood and wooden products 7.7 3.49% 7.0 3.85%
2,385
2,500
2,052 2,109
2,215
Means of transport and equipment 7.0 3.19% 6.1 3.34%
1,907
2,000 1,748
1,517
1,500 1,273 Overall, Vietnam’s top export sectors remained unchanged from 2016 to 2017. Telephones and spare parts continued to
1,024 1,064
835
contribute the largest export turnover, contributing 20.65% of total export value in 2017 and increasing by 32% y-o-y.
1,000 729
640
481 552
403 415 439
500

-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Doing Business in Vietnam 2018 9

8 Doing Business in Vietnam 2018

 Vietnam’s Principal Import Market (%)

Vietnam’s Principal Exports Market (%) Source: Government Statistics Office (GSO)
In 2017, export turnover increased by 21% y-o-y, reaching USD219 billion.
Vietnam’s Principal Exports 2017 2016
Source: Government Statistics Office (GSO)

2017 2016
China, PR China, PR
51 58 Korea
44.62023 Korea
49.92996
USA 662 019 USA
20% EU EU
23% 28
USA USA ASEAN 32.03394 ASEAN
EU 47% EU 12 47 697
Others Others
51% 19% ASEAN ASEAN 23.88313
20% 9.203377
Others Others 504
998 11.06357 8.708084
10% 049 692
10%

The US-23% continued to be the largest export market, followed closely by EU-20%. However, their respective proportions
both dropped in 2017, indicating a shift to other markets.
Principal Imports Foreign Direct Investment (FDI)
Total import turnover reached USD211 billion in 2017, an increase by 21% from 2016. Total registered FDI recorded a 10-year high of USD35.9 billion in 2017, a y-o-y increase of 47%.
The top 7 import sectors remained unchanged, while Computers, Electronics & spare parts replaced Machinery, Japan replaced South Korea as Vietnam’s largest source of investment in 2017. Notably, the amount of Japanese FDI to
Instruments and Accessories to be the largest import sector. Vietnam increased significantly, mostly due to various power plant projects that involved Japanese investors. Singapore
and China are the next 2 largest sources of investment, making up 14.79% and 6.04% of total registered FDI, respectively.
Vietnam’s Principal Imports In terms of sectors, the top 3 sectors for FDI in 2017 are Processing and Production Industries (44%), Power, Water &
Source: Government Statistics Office (GSO) Energy (23%) and Real Estate (8.51%).
2017 2016
USD Billion % USD Billion % Inflation

Computers, Electronics & spare parts 37.7 17.9% 27.9 16.0% The inflation rate in 2017 increased slightly to 3.53%. It was at a record low of 0.63% in 2015. Inflation is expected to
continue at a rate of under4%, which is a stated Government policy target.
Machinery and spare parts 33.7 16.0% 28.4 16.3%
Vietnam Annual Inflation rate (2008-2017)
Telephones and spare parts 16.3 7.7% 10.6 6.1% Source: Government Statistics Office (GSO)
Textile & fabrics 11.4 5.4% 10.5 6.0% 25.00%
22.97%
Iron & Steel 9.0 4.3% 8.0 4.6%
20.00%
Plastics 7.3 3.5% 6.3 3.6% 18.58%

Oil and gas 7.0 3.3% 4.9 2.8% 15.00%

9.19% 9.21%
China continues to be Vietnam largest source of imports, but its proportion is declining. On the other hand, the Korean 10.00%
percentage is increasing fast. Imports from EU and the US continue to decline, together they only make up 10% of Vietnam 6.60%
6.88%
total imports. 5.00%
4.09% 3.53%
2.66%
0.63%
0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

10 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 11

 Registered FDI
Finance
2017 35,880

2016 24,400

2015 22,800

2014 20,200

2013 21,600
Capital markets trillions of dong into the capital markets, contributing to the
sizable growth in the industry.

2012 The P/E ratio of Vietnam’s securities market rose to 19.26x at

13,000
The Vietnam securities markets are monitored and regulated the end of December 2017, higher than the figure of other
2011 14,700 by the State Securities Commission. There are two markets in the region such as Thailand, Malaysia, China.
centralised securities markets, the Ho Chi Minh City Stock
Foreign investors contributed a large portion in the capital
2010 18,600 Exchange (HOSE) and the Hanoi Stock Exchange (HNX).
inflows in the securities market in 2017. By the end of
2009 21,500 The market for unlisted public companies, UPCOM which 2017, the net cash flow to Vietnam’s capital market from
was established in June 2009, aims to narrow transactions foreigners was around USD1.2 billion. This fact illustrates
2008 64,000 on the free market, improve information and transparency that Vietnam is becoming an attractive destination for
of companies and reduce risks for investors. foreign investments, especially since the government
2007 20,300 loosened restrictions on foreign ownership in Vietnamese
From August 2017, investors can trade futures contracts
enterprises.
2006 10,200 of stock indices and government bonds on the derivatives
market. By the end of 2017, it is reported by the State All securities transactions in Vietnam must be conducted in
Securities Commission that there were 946,326 traded Vietnamese Dong. In order to sell and buy securities of listed
contracts with the total nominal value of VND 80,899 billion. enterprises, foreign investors must trade through a special
The growing trend of this market is expected to continue in Vietnam Dong indirect investment account opened at an
Registered FDI by countries and territories, Registered FDI by sectors, 2018 thanks to the introduction of covered warrants. This authorized bank in Vietnam.
new product, listed on HOSE in 2018, is expected to bring
USD billion (2017) USD billion (2017)
more investment and hedge options to investors.
Source: Ministry of Planning and Investment Source: Ministry of Planning and Investment
In 2015, the Vietnamese government gave a major boost Banking system
to foreign direct investment by permitting foreign investors
to take a majority ownership or to wholly own Vietnamese
Processing and Vietnam’s banking system was divided into a two-tier
public companies. From 1 September 2015, the previous
Production structure in 1988 when the State Bank of Vietnam (SBV)
foreign ownership cap of 49% was lifted in a number of
assumed the regulatory and supervisory roles for the
Japan 17.10% Utilities business sectors in accordance with the issuance of Decree
25.39% banking sector, with commercial activities shifting to credit
30.10% No. 60/2015/ND-CP on 26 June 2015. However, some
South Korea institutions.
6.82% sectors will continue to have restrictions such as 30% for
44.24% Real Estate
the banking industry, 49-51% for logistic services, 49% The SBV acts as both the Central Bank and as a
Singapore
8.51% for entertainment services etc. The holding of fixed income Government Agency of the Socialist Republic of Vietnam.
China Retail and
6.04% securities is not subject to any restriction. Operating under the tight direction of the Government, the
23.67% Others Wholesale SBV is subject to the Government’s or the Prime Minister’s
23.34% In 2017, Vietnam became the Asia’s best performing
14.79% Others approval for key areas of operation.
stock market as the Vietnam Stock Index increased by
48% compared to the figure of 2016 . The total market Since dividing into a two-level system, the Vietnam banking
capitalization rose 73% year-on-year, at around VND 3,360 system has expanded rapidly. Vietnam’s credit institutions
billion and it accounted for 74.6% of GDP, exceeding the comprise state-owned commercial banks (SOCBs),
target for the year 2020. joint-stock commercial banks, joint-venture banks, 100%
foreign-owned banks, branches of foreign banks, credit
During 2017 and early 2018, the Vietnam stock market
cooperatives, finance leasing companies and finance
witnessed the strong capital inflows with the IPOs and
companies.
equitisation of numerous state-owned enterprises such as
Petrolimex, PV Power, Binh Son Refinery. Besides, several Four SOCBs dominate the domestic banking sector, the
private companies successfully conducted their IPOs in Bank for Foreign Trade of Vietnam (Vietcombank), the
2017, including Vietjet Air and VP-Bank. Those deals brought Vietnam Joint Stock Commercial Bank for Industry and

12 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 13

Trade (Vietinbank), the Bank for Investment and Development
of Vietnam (BIDV), and the Vietnam Bank for Agriculture and Foreign investor banking Investment Management
Rural Development (Agribank). The SOCBs currently account
for around 45% of total banking system assets; however,
services
in 2017 in that the total net asset value (NAV) of funds
the domination of these banks has been on a significant Generally, all foreign investors are required to open a There are various types of investment management
rose by 91% in comparison with the number for the year
downward trend due to the strong growth of private banks. bank account to conduct business in Vietnam. Foreign organizations in Vietnam: securities companies, fund
before. The average NAV per fund was 26% higher than
investors are permitted to open accounts in Vietnamese management companies, securities investment funds,
2017 was a great year for the Vietnam banking system as all that of 2016. There are 3 types of investment funds in the
Dong and some other foreign currencies. Foreign and branches of foreign investment firms. While securities
large banks reported substantial growth in profits earned. As market: open-end, closed-end, and exchange-traded fund
invested enterprises should note the requirement to companies and securities investment funds focus virtually
reported by State Bank of Vietnam, the total assets of credit (ETF). Currently, the open-end funds are dominating the
open a capital account for all capital and dividend totally on the stock market, fund management firms
institutions in Vietnam grew significantly to approximately sector, thanks to its relative liquidity and open access.
transactions. and foreign invested enterprises diversify their business
VND 10,000 trillion in 2017, up 17.62% year-over-year. The into numerous fields such as : securities, real estate, or In 2018, the investment management industry is expected
non-performing loan ratio of the banking system in 2017 investing in private companies. to continue to grow, with the introduction of real estate
was 9.5%, lower than the number of 2016 (11.9%). Besides, Insurance industry According to The State Securities Commission, there are
investment funds and pension funds. The operation of
in 2017, there were successful IPOs (Initial public offerings) those funds could bring various opportunities for investors,
from various commercial banks such as VP-Bank, VIB, currently 93 securities companies, 47 fund management
Vietnam’s liberalisation policy in the early 1990s hence attracting more capital inflows into the market.
Kienlongbank and LienVietPostBank. This trend will continue companies, 21 branches of foreign invested enterprises,
in 2018 as a number of credit institutions are planning opened the insurance industry up to foreign and 25 securities investment funds that are in operation in As the number of wealthy individuals in Vietnam is on
to go public this year, including Maritime Bank, TPBank, investment. Previously, the market was dominated by Vietnam. the rise thanks to the rapid economic growth, a large
Techcombank and so forth. state-owned enterprises. Foreign invested enterprises number of local banks have started to tap into the wealth
can now operate insurance businesses as 100 percent With the booming of the stock market, the investment
management and priority banking segment, which has
Over the last decade, foreign banks have expanded their foreign-owned enterprises, joint ventures with local management industry also grew quickly. At the end of
been better served by foreign banks and branches of
presence in Vietnam. There are about 49 foreign bank partners, branches or representative offices. If an 2017, the total assets of fund management companies
foreign banks, in Vietnam.
branches; two joint-venture banks, and nine 100 percent investor chooses a 100 percent foreign owned or joint were around VND 223 trillion, up 46% year-over-year. The
foreign-owned banks in the country as of 31 December 2017. venue form, they must set these up as limited liability total net profit for the year 2017 was VND 444 billion, The wealth management industry is regulated by The
companies. increasing 87% compared to the figure of 2016. State Securities Commission, which supervises the
Current legislation states that the total foreign shareholding securities market, provides licenses to market participants
in local Vietnamese banks is not to exceed 30 percent. Within The insurance industry has grown extensively over the Following the trend of the industry, the securities
and regulates the market’s activities. The State Bank
this limit the maximum shareholding permitted to a foreign past decade; with life and non-life premiums growing at investment fund sector experienced significant growth
of Vietnam also has a role in regulating bank wealth
bank as a strategic partner is 20 percent, while a non- a CAGR of 19.13 percent from 2006 to 2016. In 2017, management products.
strategic investor can own 15 percent. Individual investors the insurance premium reached approximately VND
may hold no more than 5% of the shares. 105,611 billion, an increase of 21.20% compared to
With the rapid development of the banking industry, Vietnam the amount of 2016, in which major growth was seen
is in the transformation phase from a cash-based to an in life insurance. Nevertheless, insurance penetration
electronic-based society. As presented by State Bank of is still at a relatively low level in the country, compared
Vietnam, by the end of 2017, there were around 59 percent to other emerging markets. By the end of 2017, there
of Vietnam’s population of 90+ million held bank accounts, were 61 insurance companies (both domestic and
while the account penetration rate for 2014 was only 31 foreign-invested enterprises) operating in Vietnam.
percent of total adult population (baophapluat, vnexpress) Among these, there were: 29 non-life insurers, 1
branch of a foreign non-life insurer, 18 life insurers,
11 insurance brokers and 2 re-insurance companies.
Legal treatment As Vietnam signed the CPTPP in early 2018, foreign
investment activities and capital inflows into Vietnam
are expected to rise, leading to increase in demand for
Under the current regulations, credit institutions are insurance and growth in this market. However, the level
permitted to provide a wide range of products and services of competition is also foreseen to increase.
from traditional banking to fund management or securities The insurance market is highly regulated in Vietnam.
services. In practice, due to licensing restrictions, the non- Insurance companies are supervised by the Insurance
traditional banking services are generally provided by banks Supervisory Authority, a subordinate body within the
through separate legal entities. Ministry of Finance, under a number of laws, including
In accordance with Vietnam’s commitments to the WTO, the the Law on Insurance Business of 2000 and its
government has committed to providing a level playing field amendment in 2010.
for both domestic and foreign credit institutions.

14 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 15

Regulatory environment
• Anyone collecting, processing and using the personal required to open a “capital account”, which is a bank
data of a data subject in a network environment must account for all transactions in regard to capital remittance,
obtain consent from the data subject, unless otherwise foreign loans, profits and other legitimate types of income
stipulated by law from foreign investment. In addition to this account, other
operating VND and/or foreign currency accounts can be
• The data subject must be notified of the form, scope,
opened. Specific cases and conditions for Vietnamese
place and purpose of the collection, processing and use of
companies opening bank accounts in a foreign country also
his or her personal data
apply.
Summary Data Protection • The data must only be stored and used for a certain
All foreign loans (except for short-term loan of less than
period, either as stipulated by law or per the agreement
The political system of the Socialist Republic of Vietnam can Vietnam does not have a comprehensive data protection 1 year) must be approved and registered with the SBV.
between the two parties
be defined by a single-party socialist Republic framework. law. Instead, the provisions for data protection can be found All foreign loan transactions that a foreign invested firm
The system is led by the Communist Party of Vietnam. across a number of different pieces of legislation: • The data collector must take the necessary measures to undertakes must be conducted via the capital account.
ensure that the personal data is not lost, stolen, disclosed, The conversion of currencies into USD or VND for various
Executive power is concentrated in the Government, • The Constitution modified or destroyed financial transactions is implemented in accordance with
formerly known as the Council of Ministers. The Government the reference to the rate set by the SBV, at the time of
• The Civil Code (Law No. 33/2005/QH11) • Necessary measures must be taken to update or amend
is charged with the general management of the economy transfer.
and the state. The head of government is the Prime Minister. • The Law on Protection of Consumers’ Rights (Law No. personal data if it is inaccurate
59/2010/QH12) Residents receiving foreign currency income from
The Head of State, also known as the President, represents • Data can only be transferred to a third party where the
goods and services exported, or other non-resident
the Nation in internal and foreign affairs and helps to • The Law on E-Commerce (Law No. 51/2005/QH11) data subject provides his consent.
sources in foreign countries, must transfer such income
appoint thr Prime Minister and other officials with the help There is no official body in Vietnam regulating the use to foreign currency accounts opened with authorised
• The Law on Information Technology (Law No. 67/2006/
of the National Assembly. of personal data. Accordingly, there is no notification credit establishments in Vietnam. This should be done
QH11)
Below the Central Government are People’s Councils or registration scheme for the collection, processing in accordance with payment time-limits of contracts or
• The Law on Insurance Business (Law No. 24/2000/QH11 or disclosure of personal data. There is also no legal payment vouchers.
and People’s Committees. People’s Councils are directly
as amended by Law No. 61/2010/QH12) requirement to appoint a data protection officer.
elected by the people and People’s Committees are elected Organisations receiving foreign currency from money
by People’s Councils. There are three levels of People’s • The Law on Credit Institutions (Law No. 47/2010/QH12) Any person or business that fails to uphold necessary transfers, must transfer such currency to foreign currency
Committees and People’s Councils: provincial, district and measures to ensure the safety of personal information may accounts opened with authorised banks or sell it to
• Cyber Security Law (Law No. 24/2018/QH14).
commune (or ward). be liable to an authorised banks.
The provisions under the above data protection laws apply
The National Assembly is the supreme representative and administrative fine of between VND 20 million and VND 30 Foreign investors are permitted to transfer dividends abroad
to all individuals, companies and State Bodies. While there
legislative body and determines domestic and foreign million (US$ 900-1400). and income legally earned in Vietnam and any remaining
is no official definition, personal data is generally defined
policies, socio-economic tasks, national defence and invested capital upon the liquidation of an investment
as information which is adequate to accurately identify
security issues. It has 496 members, elected by popular project. This transfer must be conducted via the company’s
vote to serve four-year terms. While the Constitution in
the identity of a data subject, covering at least one of the
following types of information: full name, date of birth,
Exchange Controls capital account.
general establishes the rights of the people under the
profession, title, contact address, e-mail address, telephone The management of foreign exchange for both local and
leadership of the Communist Party, the power of the people
is exercised through the National Assembly at a central level
number, ID number and passport number. foreign invested enterprises and foreign parties to business
contracts is regulated by the State Bank of Vietnam (SBV).
Money Laundering Regulations
and through People’s Councils at a local level. The key data protection provisions for people or entities who
Vietnam issued the Law on Anti Money Laundering No.
hold or process personal data are as follows: Foreign invested enterprises and parties to Business
The Vietnamese judiciary is independent of the executive. 07/2012/QH13 which was effective from 01 January 2013.
Cooperation Contracts (“BCC”) must open bank accounts
The legal system consists of the Constitution, codes, laws, • A data subject’s right to privacy shall be respected and
in Vietnam Dong, and/or foreign currencies, with banks Vietnamese legislation requires businesses to report
ordinances, decrees, decisions, circulars, directives and protected by law
permitted to operate in Vietnam. Where necessary, transactions over a certain threshold and suspicious
official letters. Although all have the force of law, only laws
• The collection and publication of personal information Vietnamese enterprises with foreign-owned capital may transactions to Vietnam’s financial intelligence unit (FIU). In
passed by the National Assembly are referred to as such.
must only occur with the consent of the data subject, unless open accounts with banks abroad with the approval of the addition:
The Constitution is the Supreme Law of the country.
this is being undertaken as part of obligations stipulated by SBV.
• Jewellery sellers must ascertain the identity of, and
The court and prosecution system in Vietnam have a law
Furthermore, foreign invested enterprises and parties to report, transactions of USD14,000 or more
structure similar to the administrative system. At a central
• Any form of electronic information of a data subject BCCs are able to buy foreign currencies from commercial
level, the Supreme People’s Court is the highest judicial • Securities brokers, dealers and real estate vendors have
must be protected and kept confidential; the control of banks to cover permitted transactions. Although they have
body in Vietnam. At a local level, courts exist at provincial to report all transactions to the FIU regardless of the amount
this communication may only take place in circumstances the right to cover, there is no guarantee that their foreign
and district levels. Legal decisions are made by the People’s of the transaction
stipulated by law and subject to a decision issued by an currency demands can be met, except for infrastructure
Courts, the People’s Inspectorate, Military Tribunals and
authorised State body development and other “critically important” projects. • Banks will have to ascertain the identity of businesses
Special Tribunals.
and persons undertaking transactions equal to or greater
Foreign invested enterprises and parties to BCCs are
than VND300 million per day if the person or entity has not

16 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 17

• Casinos will have to ascertain the identity of persons
gambling when the bets or the wins are equal to or exceed
Intellectual Property Rights Copyright
VND60 million per day Vietnam recognises the importance of protecting intellectual Copyright can protect: literary work, dramatic works, musical works,
property rights (IPR), which include patents, trademarks artistic works, layouts and typographical arrangements, recordings and
• Charities will have to report the names and addresses
and service marks, copyright and industrial designs. broadcasts. Copyright works, receive statutory protection automatically
of organisations and people who make donations and will
With the implementation of the Bilateral Trade Agreement once they are placed in the public domain.
have to report how the funds were used
provisions regarding IPR, Vietnam has made a commitment
• All reporting entities must undertake AM risk assessments to protecting intellectual property. The Bilateral Trade
Protection granted Infringements Duration
in respect of their business and implement compliance Agreement’s property rights chapter was modelled on the
plans to mitigate those risks. WTO Agreement on Trade- Related aspects of Intellectual Copyright is granted to eligible In the case of infringements, whereby The length of protection is indefinite
Property. work automatically irrespective of a person reproduces, distributes, for the moral rights of authors to give
Failure to comply with the above provisions may result in registration. However, registration displays or performs the protected titles of their works, attach their names
a number of administrative sanctions. A monetary fine The National Office of Intellectual Property (NOIP) is the of this copyright is recommended. work, the owner can take the following to their works and have their real
of VND30 million to VND50 million, (US$ 1,320 -2,200) authority responsible for the registration of intellectual The author or owner of a copyright actions: names acknowledged when the work is
for a failure to report any suspicious transactions can property. Foreign organisations and individuals who seek can directly, or authorise another published.
be imposed. A monetary fine of VND40 million, to VND80 to register their intellectual ownership should file their • request that a person terminates
person, to submit an application
million, (US$ 3,520-4,400) is applicable if a person fails to applications through an authorised agent, who will transfer the infringement, correcting any false However, the right of publication with
for the registration of a copyright
report parties involved in a concerned transaction named in their applications to the NOIP. information and providing appropriate regard to cinematographic works,
to the Department of Copy Right in
the black list of the authorities. A fine and a prison term of compensation photographic works, applied art
The Office of Copyright Protection under the of Culture, Literature and Arts of the Department
between one and 15 years may be imposed for involvement works and anonymous works is only
Sports and Tourism is responsible for the protection of of Information and Culture. • request the competent state
in money laundering activities, alongside a ban on holding protected for 75 years from the date of
copyrights. authority to apply administrative, civil
certain professional positions for one to five years. The owner is granted moral and first publication.
or criminal sanctions.
economics rights over his work,
For all other works, rights are protected
including the right to apply
for the life of the author plus 50 years.
technological measures to prevent
infringements of his rights.

Patents
Patents protect inventions which can be applied in an industrial
environment. For a patent to be granted, the invention must be new,
have an inventive step which is not obvious to someone with experience
in the subject and capable of being used in some kind of industry.

Protection granted Infringements Duration

A patent gives its owner the ability to Infringing a patent means 20 years from the filing date.
take legal action to stop others from: manufacturing, using, selling or
importing patented products or
• the making of a product or the
processes without the owners’
use of a process which is the subject-
permission.
matter of the patent
In case of infringement, the owner
• selling anything incorporating the
of a patent can request that the
subject-matter of the patent
person terminates any infringement
• inducing third parties into any or request the state authority to
of the above, without the inventor’s apply administrative, civil or criminal
permission. sanctions.
Patents must be registered with
the National Office of Intellectual
Property of Vietnam. The rights are
then protected through registration
and the registrant is granted
moral and economic rights over the
work, including the right to apply
technological measures to prevent
infringements of his rights.

18 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 19

 Trademarks
A trade mark must be a sign capable of distinguishing goods and services
Opening up to Foreign
of one undertaking from those of another undertaking. Those signs can be:
words, personal names, designs, letters, numeral slogans, sounds, smells,
signs and distinctive colours.
Investment
Protection granted Infringements Duration In 2017, Foreign Direct Investment (FDI) in Vietnam hit a trade agreement, after the North American Free Trade
The owner can obtain protection in Some examples of infringement of a 10 years (registration can be renewed 10-year record at USD 35.88 billion, up 44.4% year-on-year. Agreement and European Union. With the absence of
Vietnam by registering the trademark trademarks are: for further periods of 10 years). In Vietnam, FDI inflows are often divided into 3 categories: the United States, CPTPP is expected to still yield robust
at the National Office of Intellectual investment in new projects, additional capital to existing economic gains for Vietnam, although at a lower level than
using an identical or similar trade
Property, unless it is a famous trade projects, and capital contribution and share purchase. As the original TPP. Gains from CPTPP are expected to be
mark for identical or similar goods and
mark which is protected on the basis of reported by the Ministry of Planning and Investment, by the concentrated in a handful of industries: wearing apparel,
services to a registered trade mark
actual use in the marketplace. end of 2017, there were 2,591 licensed new projects with textiles, food, beverages, and tobacco.
creating a likelihood of confusion on
total investment of USD 21.27 billion, an increase of 42%
Registration provides the owner with the part of the public Apart from vast improvements in the legislative environment,
to the figure of 2016. The additional contributed capital
exclusive use over the trade mark. there have also been improvements in bureaucratic
where a mark has a reputation, also rose by 49.2%, at around USD 8.41 billion. In addition,
procedures which have been considered a bottle neck to
infringement may arise from the use the total capital contribution and shares bought by foreign
social development of Vietnam. In September 2017, the
of the same or a similar mark which investors in 2017 grew to USD6.19 billion, rising 45.1%
Ministry of Industry and Trade issued Decision 3610a/QD-
damages or takes unfair advantage of versus the amount of 2016. In addition, FDI disbursement
BCT, simplifying administrative and investment procedures
the registered mark in 2017 was documented at USD 17.5 billion, the highest
by removing 675 investment conditions which accounted
figure in the history.
• In the case of infringement, the for 55.5% of the number of existing conditions. In the
owner of a patent can request that the Since the economic reform “Doi Moi” in 1986, foreign period 2017-2018, the General Department of Vietnam
person terminates any infringement investment has been deemed as an essential resource for Customs put efforts to reduce customs clearance time for
or request the state authority to development of Vietnam economy. So as to attract further exports and imports to 70 hours and 90 hours respectively
apply administrative, civil or criminal capital inflows from outside investors, a good investment and aimed for a further reduction to below 36 hours and
sanctions. climate is of the utmost importance. Therefore, the Vietnam 41 hours by 2020. In addition, tax payers have enefited
government has made efforts to integrate into the global from the annual time reduction for making tax filings and
economy by joining international commercial organizations payments which have reduced from 537 hours (prior to
such as WTO and AEC, and signing various Free Trade 2014) to 247 hours in 2014, to 117 hours in 2015 and to
Designs Agreements (FTAs). 110 hours by the end of 2016 (the average time for tax
An industrial design, the external appearance of a product embodied fillings of ASEAN 6 is 121 hours/year).
in three dimension configurations, lines, colours or a combination of Currently, Vietnam has participated in a large number of
the aforementioned element, can be protected if it is new, of a creative FTAs, which are effective or still under negotiation. By 2018,
nature and can be applied in industry. there were 10 effective FTAs that had been implementing,
including several notable agreements such as VCUFTA
(Vietnam with the Customs Union of Belarus, Kazakhstan
Protection granted Infringements Duration
and Russia – effective in 2016), VKFTA (Vietnam with Korea US$15.182 billion
Registering a design gives the owner a Design rights are infringed by an Once obtained, design rights
– effective in 2015), JVEPA (Vietnam with Japan – effective registered FDI for new projects
property right over the design. Holding unauthorised person making an article are protected for a period of five
in 2009).
design rights provides the one and exactly or substantially similar to years from the date of filing of the
the exclusive right to use it and to the protected design or by making a application. It can then be renewed Meanwhile, 5 FTAs were being negotiated, in which the
prevent any third party using it without design document for the purpose of twice for periods of five years. EU - Vietnam FTA was expected to enter into force in early
consent. making unauthorised copies. 2019. This agreement is expected to be one of the key
drivers for economic growth, in that virtually all tariffs (with
The filing must be made with the
a few exceptions) imposed on imported goods from both
National Office of Intellectual Property.
sides would be eliminated within 10 years from the effective
date. Also, it will open up the Vietnamese market to EU
US$15.8 billion
investments, which can encourage more foreign investment FDI disbursement
inflows into Vietnam.
CPTPP, which is considered as a modified version of the
TPP, was signed in March 2018. It is the third largest signed

20 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 21

Business entities
Capital requirement of the Company to create the mechanism of Chairman or
Typically, there are no maximum or minimum capital members’ council.
requirements for a limited liability company. However, in In the case of a “Chairman mechanism mode”, the
some sectors a company must be able to meet certain management structure will consist of one authorised
capital threshold requirements before they are permitted representatives appointed by the owner and the general
to start business, e.g. for foreign-owned banks, there is a director.
minimum capital requirement of VND3,000 billion. Limited
liability companies can reduce their charter capital in In the case of “members’ council mechanism mode”, the
The Law on Enterprises (LOE) was adopted by Vietnam’s National Assembly on 26 November 2014 and took effect on 1 July accordance with the new Law on Enterprises (Article No 48/ management structure comprises the members’ council, the
2015. The Law provides four types of legal forms of corporation for business entities, comprising: Law on Enterprises 68/2014/QH13). chairman of the members’ council and the general director.
• Limited liability company (LLC) A limited liability company cannot issue shares. In addition A director/general director is appointed or hired by
to cash, capital contributions can be made in the form members to manage the daily business operations of
• Joint-stock company (JSC)
of gold, the value of land use rights, intellectual property the company. The chairman of the Members’ Council,
• Sole proprietorship rights, technology, technical know-how and other assets. who is also elected by members, can be concurrently the
company’s Director/General Director.
• Partnership Company Charter
The Company Charter (similar to an M &A) is one of the For a company whose total members exceed eleven, a
A foreign entity may establish its presence in Vietnam as a limited liability company with one or more members, a joint-
incorporation documents of the Company and constitutes Supervisory Board must be established to supervise the
stock company, a partnership, a branch, a business cooperation contract or a representative office.
the incorporation and operation of the Company. The management and direction of the company handled by the
Foreign investors are also permitted to purchase an interest in existing domestic enterprises, subject to ownership Company Charter determines the competence, duties Management board and the Director/General Director. The
restrictions; this varies depending on the relevant industry sector. and obligations conferred on the company, the board of competence and duties of the Supervisory Board are also
directors and its shareholders/ owners. defined by the company charter.
The main characteristics and management structures of the common business entities are summarised below:
A Company charter should include: Filing requirements
Every company established in Vietnam must comply
• the company name, head-office, branches and with the Vietnamese Accounting Standards and System
representative offices regulated by the Ministry of Finance. Companies are
obliged to submit financial statements within 90 days of the
Limited Liability Companies Investor must apply for the business registration certificate
(BRC) to complete the incorporation process and put
• a list of business activities the firm undertakes
end of each fiscal year.
• the charter capital and any methods of raising or
There are two types of limited liability company: (i) Single the investment project into implementation. These reducing the charter capital Annual financial statements of public joint-stock
Member Limited Liability companies, and (ii) Limited Liability processes may take longer if the authorities require extra companies must be audited before being submitted to the
companies with two or more members. Neither form can be documentation. In some cases, investment certificates are • name, address, nationality and other basic identification Shareholders’ Meeting.
listed. issued automatically providing certain conditions are met. of company owner
In other cases, investment certificates may not be granted; All shareholders who held shares for at least one year
Limited liability companies are not entitled to issue shares • rights and obligations of the owner/ investor are entitled to review the reports and statements at an
as it is at the discretion of the authorities.
and the total members in a limited liability company cannot • management structure appropriate time.
exceed fifty. Following establishment, a number of other formalities must
be carried out. These include: • legal representative of the company
Establishing a limited liability company
Foreign investors wishing to form an LLC in Vietnam, and • Announcing the establishment information on the • process for the adoption of decisions Joint-Stock Companies
conducting their first investment in the country, must have National Business Registration Portal • dispute resolution provisions A joint stock company is a company whose charter capital
an investment project. An investment project is a collection is divided into shares, held by three or more organisations
• Carving and registering the Company seal(s) with the • method for calculating salary, allowance and bonuses of
of proposals declaring how the firm plans to spend its or individuals. It is a recognised legal entity and the only
licensing authority chairman, directors or general director
medium and long-term capital to carry out its investment company type under Vietnamese law that can issue shares.
activity in a specified area and for a specified duration • Opening bank accounts • principles for the distribution of profits and settlement of Its shareholders are responsible for its debts and liabilities
of time. Documents must also be supplied, attesting: to losses up to the amount of their contributed capital. A joint stock
• Registering labour recruitment plans with the labour
the legal status of the investors, proposals for investment company (JSC) can issue securities and be listed on the
office • procedures for dissolution or liquidation.
preferential treatment and a report on the financial Securities Exchange. A joint-stock company may either
capacity of the investor. • Registering to join the social insurance at the social • providing the constitution does not contravene legal be 100 per cent foreign owned or domestically owned, or
insurance department obligations, the document will be binding between the may take the form of a joint venture between foreign and
This investment project will be assessed before applying domestic investors.
for the incorporation license. Following this, an investment • Registering and paying the business license tax company and owners.
registration certificate (IRC) will be issued in 15 days Management structure Establishing a joint-stock company
• Submitting the proposed accounting system to the
from the receipt of sufficient documents for a common competent tax The management structure of a limited liability company A joint stock company is established by its founding
investment project. Upon the issuance of the IRC, the will depend on the number of the authorized representatives shareholders based upon their subscription for shares in the
company. It is required to have at least three shareholders,

22 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 23

 Management structure offices in Vietnam;
The management structure of a JSC comprises the general • foreign businesses shall only be entitled to set up a
meeting of shareholders, the board of management, the branch in Vietnam with the condition that the business has
general director and the board of supervisors (where the been in operation for at least five years;
company has more than 10 individual shareholders).
• licenses for representative offices and branches will be
The Board of Management should consist of at least three valid for five years but may be extended or re-issued upon
members but no more than 11. Its members are elected by expiry;
the General Shareholder Meeting for terms of up to five
years. The Board of Management has authority to make • branches shall be entitled to do business in accordance
decisions, exercise the company’s rights and perform the with the branch license;
company’s obligations on behalf of the company. • representative offices and branch employees shall be
Filing requirements subject to the relevant tax obligations, in accordance with
Every company established in Vietnam must comply the laws of Vietnam;
with the Vietnamese Accounting Standards and System • branches shall have to follow the accounting regime, as
regulated by the Ministry of Finance. Companies are required by the laws of Vietnam.
obliged to submit financial statements within 90 days of the
end of each fiscal year. • branches are required to report annually to the Ministry
of Trade, on the operational and financial position of the
with no maximum stipulated by law. Company Charter Annual financial statements of public joint-stock business;
Following establishment, a number of other formalities must The Company Charter is one of the incorporation companies must be audited before being submitted to the
documents of the Company and constitutes the Shareholders’ Meeting. • representative offices are required to submit annual
be carried out. These include: reports to the provincial Trade Department office.
incorporation and operation of the Company. The
• Announcing the approval and contents of the investment All shareholders who held shares for at least one year
Company Charter determines the competence, duties
license in designated Vietnamese newspapers are entitled to review the reports and statements at an
and obligations conferred on the company, the board of
directors and its shareholders. The Company Charter must
appropriate time. Business Cooperation Contracts
• Opening bank accounts
include: (BCC’S)
• Registering labour recruitment plans with the labour
office • the company name, head-office, branches and Partnerships A business cooperation contract is a contractual
representative offices relationship signed between multiple parties, generally a
• Registering with local tax and other relevant authorities foreign investor and a local company. This does not form a
• the list of business activities the firm undertakes Partnerships can be established in Vietnam providing
• Submitting the proposed accounting system to the legal entity but permits the partners to engage in business
• the charter capital and any methods of raising or there are at least two individuals who are members of
Ministry of Finance. activities on the basis of mutual allocation of responsibilities
reducing the charter capital the partnership and co-owners of the business. These
and the sharing of profits and losses. This form of business
Capital stock and shareholders individuals will be general partners and have unlimited
• name, address, nationality and other basic identification has traditionally been used in industries where LLCs and
The founding shareholders of a JSC must subscribe at least liability for all obligations of the partnership. The
of company owner JSCs are restricted. This form of business is a means of
20 per cent of the total shares that the JSC is authorised to partnership may also have limited liability partners, who
private financing without transferring management control
offer for sale. Shareholders can be Vietnamese or foreign • rights and obligations of the owner can be individuals of organisations, who only contribute a
to a foreign partner.
nationals. A joint-stock company must issue ordinary shares part of the capital and have limited liability and rights up to
• management structure the value of their contribution.
and may issue preference shares and/or issue bonds. Types
of preference shares include: • legal representative of the company Typically partnerships are not widely used for foreign Public and Private Partnership
• Voting preference shares: only held by government- • formality for the adoption of decisions investment in Vietnam. Contracts
authorised organisations and founding shareholder.
• dispute resolution methods
• Dividend preference shares
• method for calculating salary, allowance and bonuses of
Branches and Representative Public and Private Partnership (“PPP”) contracts are
• Redeemable preference shares chairman, director or general director Offices contractual arrangements entered into by the government
• Other types of preference share, subject to the • principles for the distribution of profit and settlement of with the private sector for infrastructure projects and
In accordance with Commercial Law, foreign investors
company’s charter. losses public services. These are typically used for transportation,
can set up a resident Representative Office or a Branch in
electricity production, water supply, drainage and waste
Shareholders are permitted to convert preference shares • procedures for dissolution or liquidation. Vietnam; however, ownership may be restricted in certain
treatment projects. It includes Build-Operate-Transfer
into ordinary shares, but not permitted to convert ordinary sectors. The following regulations are in place regarding
• providing the constitution does not contravene legal (BOT), Build-Transfer (BT) And Build-Transfer-Operate (BTO)
shares into preference shares. Representative Offices and Branches:
obligations, the document will be binding between the Contracts. The difference between BOT, BT, BTO, BOO, BTL,
The company’s shares are allowed to be freely transferred company and owners. • all foreign businesses, which have been in operation for BLT and O&M contracts is the point in time that the project is
among shareholders, except for voting preference shares. more than a year will be allowed to open representative transferred to the government.

24 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 25

 job and work place; term of the labour contract; wage, form b) At least 7% higher than the regional minimum wage rates
of wage payment; deadline for wage payment; regimes for paid to skilled/trained employees.

Labour
promotion and wage raise, working time; social insurance
and health insurance; training. The Labour Code allows an
employer to require an employee whose work is related to
business or technological secrets to enter into a separate
agreement on confidentiality and nondisclosure of those
secrets. A confidentiality agreement may contain a clause
on financial penalties in case of breach of contract.
The Labour Code prohibits employers from keeping
Laws governing employment and industrial relations largely stem employees’ original identification cards, diplomas and
from provisions set out in the 1992 Constitution which was amended certificates and requesting employees to make deposit in
and supplemented under Resolution No. 51/2001/QH10. However, cash or property as security for the performance of the
the new Labour Code, enacted in 2012, provides current framework labour contracts when signing and performing labour
of regulations regarding the employment. Alongside the Code, there contracts.
are specific implementing decrees to help guide organisations to Region 1
comply with the provisions of the new Labour Code, for example, the A contract must be signed by the legal representative of the VND 3.750
decrees on labour contracts, on labour disputes, and salary. Employer or an authorised person before the employment
begins. million
The Labour Code covers a diverse range of labour related issues,
including recruitment, employment contracts, working hours,
labour discipline, and labour dispute resolution. The Labour Code Minimum regional wages
is applicable to employees and employers, across both foreign and
According to Decree No. 141/2017/ND-CP which is effective
resident organisations. Region 4 Region 2
from 1 January 2018, the Prime Minister approved an
gravida in dapibus et, faec cursus laoreet accumsan. Nullam id increase in Vietnam’s minimum monthly salary of between VND 2.580 VND 3.320
tincidunt odio, sit amet cursus odio. Mec cursus laoreet accumsan. VND180,000 - VND 230,000 effective from 1 January
Nullam id tincidunt odio, sit amet cursus odio. Mooapibus pulvinar million million
2018, dependent on the region. The minimum wages are as
felis vitae iaculis. follows:
• Region One (which includes urban Hanoi, Hai Phong, Ho
Employment Contract Chi Minh City) - VND3.980million
Region 3
In Vietnam, employment relationships are governed by contractual • Region Two (which includes rural Ha Noi, HCMC, Hai
Phong plus the capital cities of Hai Duong, Hung Yen, Bac
VND 2.900
agreements entered into between employer and employee.
Contracts may take one of the following forms: Ninh, Thai Nguyen, Nha Trang, Can Tho and Rach Gia) - million
VND3.530 million
• Indefinite-term labour contract
• Region Three ( which includes the remain cities and
• Definite-term labour contract - the duration of which is defined districts in the provinces of Hai Duong, Vinh Phuc, Phu Tho,
by the two parties as a period of one to three years Bac Ninh, Nam Dinh, Phu Yen, Dong Nai and Tien Giang,
• A temporary labour contract for a specific project or seasonal Ben Tre) – VND 3.090million
work - the duration of which is less than one year. • Region Four (the least developed areas in Vietnam) -
A definite-term labour contract can only be renewed twice; following VND 2.760 million.
that, the employer must sign an indefinite-term labour contract. The above are the regional minimum wage rates which
In case the employer does not wish to renew the labour contract are the lowest rates to be used as the basis for any
with the employee, the employer must inform the employee of the arrangement between enterprises and employees on salary
termination at least 15 days before the expiry date of the labour and salary payment, in which the wage rate to be paid
contract. to employees who work under normal working conditions,
Contracts must comply with a prescribed form published by the meet monthly working hour standards, and fully discharge
Ministry of Labour, War Invalids and Social Affairs (MOLISA). The their obligations for predetermined labor productivity norms
labour contract must have minimum principal contents: name and or agreed worked duties, but these rates must be:
address of Employer; full name, date of birth, gender, residential a) Equal or higher than regional minimum wage rates paid
address, ID number of the employee; to unskilled employees who perform simple tasks;

26 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 27

Normal working time, overtime Social security Fund where an individual has contributed social insurance
for more than 20 years and when they reach 60 years of
problems or the advent of technology rendering the
employee’s job obsolete. Termination must be made in
and leave Vietnam’s compulsory social, health & unemployment age for men, or 55 years of age for women. writing.
insurance (“SIHIUI”) regime covers sickness, maternity,
Normal working time A deduction of up to VND1 million per month is permitted for In some cases, the employer is required to discuss the
work-related accidents, unemployment, retirement and
Under the Vietnamese Labour Code, normal working hours contributions to supplementary pension schemes. Though termination and reach an agreement with the executive
survivorship allowance. The employers and Vietnamese
should not exceed 8 hours per day or 48 hours per week. still in its infancy, it is expected that a greater number of committee of the trade union. Where the employer or
employees are required to contribute compulsory social
This may be extended through an agreement between providers will offer supplementary schemes. With these employee is terminating a contract, advance notice must be
insurance, health insurance and unemployment insurance
the employer and employee but the normal working time schemes, the employees will have a better support in and given. This is calculated considering the period for which the
on a monthly basis to the social insurance fund.
cannot exceed 10 hours per day, or 48 hours per week. the means to save for retirement diversify the sources of worker has been employed.
The SIHIUI contribution is computed on the factors of salary their pensions and will provide employers with a means to
Overtime and mandatory rate. retain key employees. Advance Notice Required
Employers can request the employees to work overtime with Type of contract
The mandatory contribution rate by employee and (days)
the condition that the employer obtains the employee’s
consent.. The employer must ensure that the number of employer are as follows. Healthcare and benefits Indefinite term contract 45 days
overtime working hours does not exceed 50% of the normal Health care Definite term contract 30 days
Social Health Unemployment Total
working hours per day; (in case of applying regulations on Basic health care is covered by the Social Insurance Fund.
insurance insurance insurance Seasonal contracts 3 days
weekly work, the total of normal working hours and overtime However, private schemes are becoming more popular
Employee 8% 1.5% 1% 10.5% especially schemes from Insurance companies. However, Protection from termination
working hours must not exceed 12 hours per day);), must
not exceed 30 hours per month and the total of overtime Employer 18% 3% 1% 22% please note that for foreigners entering into labour While Vietnam has not yet developed a set of laws and
working hours must not exceed 200 hours per year, except Total 26% 4.5% 2% 32.5% contracts with companies in Vietnam, they have to join the regulations to deal with employment discrimination issues,
in some special cases as stipulated by the Government in health insurance scheme with the local social insurance labour law prescribes the prohibition of discrimination
which overtime working hours must not exceed 300 hours Since 1 January 2015 onwards, it is compulsorily required department. based on sex, race, social class, beliefs or religion.
per year. to contribute the SIHIUI for the employees with labour Therefore, no employee can be dismissed based upon these
contracts of 03-month term and above without any taking Workers’ compensation
factors. Furthermore, the labour code specifically provides
Employees who work overtime are entitled to additional into account of number of employees in the labour unit as Workers suffering labour accidents or work-related diseases
that no female employee can be dismissed because she is
wages. Wages for overtime work on normal days is at least compared to pre 2014. are entitled to an allowance equal to 100 per cent of their
getting married, pregnant, taking maternity leave or nursing
equal to 150% of his/her current wage unit. Wages for salary during the initial treatment period. Employers will be
According to Decree No. 47/2016/ND-CP, effective from 1 a child.
overtime work on weekends are at least equal to 200% of responsible for the allowance and all the examination and
his/her current wage unit and for public holidays and paid May 2016, which regulates the statutory pay rate for public treatment expenses. After the conclusion of the treatment, Collective redundancies
leave days, the overtime wage is at least equal to 300% of officials, public employees, working employees and workers. the worker will receive further allowances from the Social Employers are restricted in the situations that they are
his/her current wage unit.. Under this Decree, the statutory pay rate was increased to Insurance Fund based on the degree of disability and permitted to make mass redundancies. For example,
VND1,210,000 per month. illness. If a worker dies as a result of work related injury or natural disasters, fire or other major events, as set out
Leave
With the effect of the changes in the said Decree, the disease, his family will be entitled to death benefits covered by the government. If the employer intends to undergo
Employees that are under 18 years of age and women who by the Social Insurance Fund. Employers have an additional
maximum salary base to determine Social Insurance (“SI”), mass redundancy, they must consult with the trade union
are over seven months pregnant, or have a child of less than obligation to pay compensation representing at least 30
Health Insurance (“HI”) and Unemployment Insurance (“UI”) and appropriate state authority. They must also provide
one year in age, are granted an extra hour off a day and months’ salary to workers who suffer a reduction of more
contribution are as follows: severance payments, where applicable.
are not permitted to work overtime. than 81 per cent of their labour capacity, or they must pay
• The salary base to determine SI and HI contribution shall an equivalent amount to the close relatives of a worker who Severance payments
Employees are entitled to at least one rest day per week.
not exceed 20 times of the regional minimum salary, from 1 dies as a result of a labour accident or disease not caused There are two treatments depending upon the date of
Employees who have been employed for 12 months are January 2018 is VND 79.6 million per month for employees by his own negligence. In cases where the injury or death recruitment:
provided with a minimum of 12 days of paid annual leave working in Ho Chi Minh City (i.e. the regional minimum of the worker is due to their own fault, the worker will still
(vacation) per year, alongside the 10 days of public holiday • For the employee who commenced employment before
salary VND 3,980,000 x 20 times). receive an allowance equalling at least 12 months’ salary.
each year. Employees who work in dangerous jobs or those 1 January 2009 Where a labour contract is terminated,
that reside in areas with harsh living conditions may be • The salary base to determine UI contribution shall not Probation employees working for 12 months or more will be entitled to
entitled to up to two to four extra days off. Furthermore, exceed 20 times of the regional minimum salary, from 1 Employers and employees may agree on a probationary severance allowance equal to the aggregate amount of half
workers are generally entitled to an extra day of holiday for January 2017 is VND75 million per month for employees period. This must not exceed 60 days for work that requires of one month’s salary for each year of employment.
each five years of service with a company. working in Ho Chi Minh City (i.e. the regional minimum special or highly technical skills and 30 days for all other In case of restructuring, change of technology, change
salary VND3,750,000 x 20 times). work. A probationary employee must not be paid less than
Employees are entitled to sick leave, although this is not for economic reasons, merger, consolidation, division, or
Retirement benefits are provided under the compulsory 85% (per cent) of the normal wage for that job. separation of an enterprise, the severance allowance will
paid for by the employer. The Social Insurance Fund covers
sick-leave allowances for employees and also for female social insurance regime. Dismissal be one month’s salary for each year of employment, but at
employees taking care of their sick children. The maximum least two months’ salary.
Monthly pensions are provided from the Social Insurance The current Labour Code protects the employee. In general,
time granted per year for sick leave is 30 days (in most age for men, or 55 years of age for women. both employer and employee may unilaterally terminate • For employees recruited after January 1st 2009
industries and professions), with 15 days permitted for a labour contract in certain circumstances specified in
taking care of sick children. The allowance granted in lieu of A deduction of up to VND1 million per month is permitted for Once the labour contract is terminated subject to
the Labour Code; these include failure of employees to
salary is equal to 75 per cent of the salary. contributions to supplementary pension schemes. Though contribution of UI, the State Unemployment Agency shall
carry out their tasks, breach of discipline or serious injury
pay the severance allowance.
of illness. Termination may also occur due to financial
28 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 29
Employment of resident and non-
Financial reporting and audit
• They are a foreign lawyer who has been issued a license
to practice law in Vietnam
resident employees • Foreigners’ internal movement in the enterprises
The Vietnamese Labour Code states that foreign operating in 11 service sectors specified in Vietnam’s
companies, branches and representative offices must commitment schedule to WTO are not subject to work
provide Vietnamese citizens with priority of employment permits. (11 service sectors are listed in Annex I under
opportunity. Decree 35/2016/TT-BCT issued on 28 Dec 2016 which is
effective from 10th February 2017).
Any Vietnamese citizens who wish to be employed by
foreign companies must satisfy the following criteria:
The accounting and auditing profession in Vietnam has improved
• are over 18 years old (with exceptions)
dramatically in recent years. This is a result of the introduction
• have fulfilled their legal obligations of and continuing improvement of the accounting and auditing
• have not been charged with any criminal activity Trade Unions standards. Additionally, professional bodies have been established,
• are not officials, employees of mass organisations or the number of qualified accountants and auditors has increased as
armed forces personnel
well as further development of relevant laws and regulations.
• are retired officials, public servants or discharged armed All companies, with either Vietnamese or foreign
forces personnel, who have obtained consent from their
former employers. owned capital, must permit their employees to join a trade
union. Disputes between employers and employees should
Where employment positions require specialist skills or be resolved through negotiations. If a resolution is not
senior management responsibilities that Vietnamese
residents cannot fill, organisations are authorised to recruit
reached then the Ministry of Labour, War Invalids and Social
Affairs or Labour Tribunal may be asked to intervene to Vietnamese Accounting effect for fiscal years commencing on or after 1 January
2017. Circular 133 replaces the contents applied to SMEs of
foreigners to fill that position. However, the employer must
have a plan or program of training to enable a Vietnamese
settle the dispute. Standards and System both Decision No.48/2006/QD-BTC (“Decision 48”) dated
Companies are required to contribute 2% of total salary 14 September 2006 and Circular No. 138/2011/TT-BTC
national to take over the job and replace the foreigner at a Accounting Standards (“Circular 138”) dated 04 October 2011 as issued by the
point in the future. For most positions, foreign employees expenses into a trade union fund. There are currently 26 Vietnamese Accounting Standards Ministry of Finance. The SMEs are authorised to proactively
must provide original copies of relevant educational (“VAS”) which were issued from 2001 to 2005. All standards design and construct their accounting system in line with
qualifications in order to obtain a work permit. were adopted from and primarily based on the International SMEs’ respective industries, management and decision-
Accounting Standards (“IAS”) and International Financial making purposes. SMEs can decide to apply the accounting
Foreigners who work in Vietnam are required to obtain a
Reporting Standards as promulgated by the International system under Circular 200/2014/TT-BTC dated on 22
work permit or to obtain confirmation from the local labour
Accounting Standards Board (IASB) prevailing at the December 2014 of the Ministry of Finance (“Circular 200”)
department that he/she is exempted from a work permit.
time of issuance. Key differences between IFRS and and relevant amendments, supplements or replacements of
Work permits are issued for the same duration as the term VAS include terminology, applied valuation methods or regulations, but are required to notify the Tax Authorities as
of the labour contract; a work permit can be issued for a disclosure requirements due to the continuing changes and well as to consistently apply this accounting system during
maximum of 24 months and is allowed to be renewed with amendments to IFRS. the fiscal year. In case the SMEs decide to apply Circular
the same duration. 133, they are required to notify the Tax Authorities and
Vietnam is on the way to close the gap between VAS and
All foreigners are required to apply for a work permit, except IFRS and it is expected that full adoption of IFRS will be implement the changes as from the beginning of the fiscal
for the following cases: made by 2020. year.

• They are a member of a limited liability company with Accounting System All securities companies in Vietnam are required to adopt
more than two members; All companies in Vietnam are required to adopt Circular Circular No. 210/2014/TT-BTC (“Circular 210”), issued by
No. 200/2014/TT-BTC dated 22 December 2014 (“Circular the MOF on 30 December 2014, providing guidance on
• They are the owner a limited liability one-member accounting systems applicable to securities companies.
company 200”) issued by the Ministry of Finance (“MOF”), and other
prevailing Vietnamese decisions and circulars. Circular 200 Circular 210 provides a number of amendments related
• They are a member of the management board of a joint- provides guidance on Vietnamese Accounting Systems and to the chart of accounts, accounting methods, forms
stock company the application of and adoption of accounting standards to of accounting books and methods of preparation and
all types of enterprises in Vietnam. presentation of financial statements applicable to securities
• They are in Vietnam to offer and sell services companies established and operating under the provisions
• They are in Vietnam to deal with emergency cases that On 26 August 2016, the Ministry of Finance issued Circular of the Vietnamese Securities Law. Circular 210 is applied
are likely to affect business activities that Vietnamese No.133/2016/TT-BTC (“Circular 133”) which provides for securities companies’ financial year starting from 1
experts cannot deal with guidance on Vietnamese Accounting Systems for Small January 2016 onwards.
and Medium-sized Enterprises (“SMEs”). Circular 133 took

30 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 31

Accounting records and financial months in duration. Enterprises must select the fiscal year-
end which could be either at the end of the calendar year
Audit requirements Filing/publication requirements
statements or at the end of each quarter (i.e. 31 March, 30 June and Under the Law on Independent Audit, annual financial
30 September). A notice to the local tax authority is required statements of foreign invested entities and public interest
The Vietnamese Law on Accounting stipulates that the to be submitted if an enterprise selects a quarter date other entities (i.e. listed entities, banks, insurance companies,
accounting records and financial statements of all than December(**) securities companies and financial institutions), and Foreign invested entities are required to submit statutory
enterprises established in Vietnam should be prepared in any other entities involved in special circumstances such audited financial statements to its applicable licensing
accordance with the following fundamental requirements: • Language: Vietnamese body, Department of Finance in provinces and cities under
as mergers and acquisitions, changes in ownership,
• Reporting currency: VND (***) termination and bankruptcy must be audited by an audit the jurisdiction of the central government where such
Accounting records
firm legally operating in Vietnam. enterprise’s head offices are located, and the local tax
• Framework: Vietnamese Accounting System • Approval: The financial statements must be approved by authority and department of statistics within 90 days from
• Language: Vietnamese the Chief Accountant and the Legal Representative. Under the prevailing regulations certain entities such as their reporting date. For enterprises located in an Export
banks, non-banking credit institutions and branches of Processing Zones or Industrial Zones, financial statements
• Currency: VND (*) (**) For newly incorporated enterprise, the first accounting
foreign banks have to rotate or replace their audit firm by will be filed with Export Processing Zone or Industrial Zone
period must not be more than 15 months after the
• The company can use electronic documents as another audit firm after five (5) consecutive years. There Management Board if required.
enterprise’s date of incorporation.
accounting records, but must print and file those electronic is no similar requirement for rotation of audit firms and
(***) If an enterprise selects a foreign currency to be auditors for other business entities. However, the Law on Public interest entities are required to submit and publish
papers in hardcopy
used as functional currency in recognising transactions, Independent Audit mandates that signing auditors (licensed their half-year reviewed financial statements and year-end
• Records retention: five (5) years for accounting maintaining its accounting records and preparing its auditors signing the auditor’s report along with the legal audited financial statements within 45 days and 90 days
documents; ten (10) years for accounting data, accounting financial statements, its financial statements are required to representative of the audit firm) have to be rotated or respectively from the balance sheet date.
books and permanently for documents that are significant be translated into VND for statutory reporting purposes. replaced after three (3) consecutive years.
in term of economics, national security and defence
The MOF also issued Circular 202/2014/TT-BTC dated 22 Foreign invested entities are required to have their annual
(*) Foreign -invested entities are allowed to select and use December 2014 to guide, amend and supplement on the financial statements audited. Those entities must appoint
another currency in recording transactions and maintaining methods how to prepare and present consolidated financial an audit firm from the list of practicing auditors and audit
their accounting records, provided that they can clearly statements. firms qualified to provide audit services as approved and
demonstrate that the receipts and disbursements are published by the MOF annually. There were 180 audit firms
mainly denominated in such other currency. However for
statutory reporting, entities using another currency as
Auditing standards in the list of firms who are approved and authorised by the
MOF in 2018.
functional currency must convert their financial statements There are forty seven (47) Vietnamese Standards on
prepared under such other currencies into VND under Auditing (“VSA”) which were issued by the MOF. Of these, Public interest entities are required to submit “reviewed”
certain prescribed regulations. 37 standards were issued in 2013 and 10 standards were semi-annual financial statements and “audited” annual
newly issued in 2015. The VSA were essentially adopted financial statements. Such review and audit should be
Financial statements from ISA. All audit activities and practices of audit firms and carried out by auditors and audit firms qualified to provide
• Framework: Vietnamese Accounting Standards and auditors are required to be in accordance which VSA and such services to Public Interest Entities (PIE) as approved by
System (VASs) the Law on Independent Audit, which was released on 29 the State Securities Committee (“SSC”). The list of approved
• Financial year: An accounting period is generally 12 March 2011 and took effect on 1 January 2012. auditors and audit firms is reviewed and published
annually on the websites of the MOF, SSC and Vietnamese
Association of Certified Public Accountants (“VACPA”).
Currently, there are 32 audit firms in that list which includes
Grant Thornton Vietnam.
Audit contracts should be signed with the independent
auditors no later than 30 days before the end of the entity’s
financial year in accordance with Decree 105/2004/ND-
CP dated 30 March 2004 and the Law on Independent
Auditing with effect from 1 January 2012.

32 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 33

Tax System CORPORATE INCOME TAX Non-deductible expenses include:
• Depreciation of fixed assets which is not in accordance
(“CIT”) with the prevailing regulations;
Scope • Employee remuneration expenses which are not actually
Organizations conducting business and earning taxable paid, or are not stated in a labour contract or collective
income in Vietnam, which do not benefit from tax labour agreement;
exemptions, are subject to CIT, comprising:
• Staff welfare (including certain benefits provided to
The tax system of Vietnam has undergone crucial reforms since Doi • Enterprises established pursuant to the law of Vietnam family members of staff) exceeding a annual cap of one
Moi in 1986. • Foreign enterprises earning income in Vietnam with or
without a resident establishment in Vietnam
month’s average salary;
• Reserves for research and development not in
• Enterprises established pursuant to the Law on Co- accordance with the prevailing regulations;
In particular, since Vietnam obtained memberships of international Operatives • Provisions for severance allowance and payments of
organizations e.g. ASEAN (1995) and WTO (2007), tax policy and
• Professional entities established pursuant to the law of severance allowance in excess of the prescribed amount per
tax reform has become more aligned with international rules and
Corporate Income Tax Vietnam the Labour Code;
practices, and at the same time tax collection and administration
processes have been improved. In 2007, the Law on Tax • Any other organization conducting activities of • Overhead expenses allocated to a PE in Vietnam by the
Administration was first implemented. The Law provides rules on production or business that earns income from activities, in foreign company’s head office exceeding the amount under
tax administration, management of information, tax collection and Vietnam. a prescribed revenue-based allocation formula;
enforcement, and has provided guidance in areas previously open
A company is a tax resident if it is incorporated in Vietnam • Interest on loans corresponding to the portion of charter
to wide interpretation. Later in 2007, the National Assembly also
or has a permanent establishment (“PE”) in Vietnam. capital not yet contributed;
passed the first Law on Personal Income Tax, covering taxation
of all income of individuals in Vietnam for the first time. This Law In these cases, the foreign enterprise must pay tax on • Interest on loans from non-economic and non-credit
introduced the concept of personal and family deductions in its worldwide income. If the company is not either a tax organizations exceeding 1.5 times the interest rate set by
Corporate Income Tax determining taxable income of individuals. resident or does not possess a PE, it is only required to pay the State Bank of Vietnam;
tax on income arising in Vietnam.
In 2008, three major tax laws were amended: Corporate Income • Provisions for stock devaluation, bad debts, financial
Tax, Value Added Tax and Special Sales Tax. All of these laws CIT rate investment losses, product warranties or construction work
Value Added Tax were implemented in 2009 and were further amended in 2014, Currently, the CIT standard rate is 20%. For corporations which are not in accordance with the prevailing regulations;
2015 with various changes for implementation in 2014 and 2015 with total revenues of less than VND20 billion, a 17% CIT
rate shall be applied. • Unrealised foreign exchange losses due to the year-end
onwards.
revaluation of foreign currency items other than accounts
Tax administration is controlled by the General Department of Certain industries are liable to a higher tax rate: payable;
Personal Income Taxx Taxation, which operates under the Ministry of Finance. Tax affairs • Companies operating in the oil and gas industry are • Donations except certain donations for education, health
may also be handled by local provincial Tax Departments. subject to rates ranging from 32% to 50%, depending on care, natural disaster or building charitable homes for the
Foreign investors are likely to be subject to the following common the location and specific project. poor;
Foreign Contractor Tax taxes: • Any companies engaging in prospecting, exploration and • Administrative penalties, fines, late payment interest;
• Corporate Income Tax exploitation of mineral resources are subject to CIT rates of
40% or 50% depending upon location. • Contributions to voluntary pension funds and the
• Value Added Tax purchase of voluntary pension for employees exceeding
CIT may be reduced under investment incentive schemes. VND 1 million per month per person;
Others • Personal Income Tax
Deductible vs. non-deductible expenses • Certain expenses directly related to the issuance,
• Foreign Contractor tax
Deductible expenses purchase or sale of shares;
• Others (e.g. Special Sales Tax, Environmental Tax, Import and
Expenses are CIT deductible if they meet the following • Creditable input value added tax, corporate income tax
Export Duties, Natural Resources Tax, Environmental Tax, Property
requirements: and personal income tax.
Tax, etc.).
• Relevant to business activities; The previous cap on the tax deductibility of advertising and
promotion expenses was abolished from 2015
• Having sufficient legitimate invoices and vouchers;
For certain businesses such as insurance companies,
• Settlement via forms of non-cash payment for
securities trading and lotteries the Ministry of Finance
transactions from VND20 million and above; and
provides specific guidance on deductible expenses for CIT
• Not specifically identified as being non-deductible. purposes.

34 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 35

Taxable Income Capital gains Tax Incentives period from 2009 to 2013 which were not entitled to any CIT
Taxable income is defined as the difference between total Vietnam does not operate a separate Capital Gains Tax Tax incentives comprise preferential tax rates, tax exemption incentives previously) which satisfy certain conditions are
revenue and deductible expenditures, plus other assessable (“CGT”) regime. and tax reduction and are applicable to new investment also entitled to CIT incentives from 2015. The projects which
income. projects in encouraged locations, encourage sectors and are formed after certain acquisitions or re-organisations
For local corporate sellers, any gain derived from the are not considered new investment projects and investment
scale of projects. Investment expansion projects (including
Business Units are required to prepare an annual CIT transfer of capital/securities in another Vietnamese entity is expansion projects entitled to the said tax incentives.
expansion projects licensed or implemented during the
return which includes a section for making adjustments to regarded as other income and accordingly subject to CIT at
accounting profit to arrive at taxable profit. the current standard rate of 20%.
CIT CIT CIT
Losses For foreign sellers (e.g. corporations and individuals being Description Applicable period
Businesses that incur losses after tax finalization are tax resident in Vietnam), the tax treatment on capital gains rate Exemption Reduction
entitled to carry forward those losses to be offset against earned by a foreign seller is different depending on the (1) Income from new investment project in the areas of with specially 15 years
the assessable income of future years for maximum of five corporate form of the target. In particular, the transfer difficult socio-economic conditions , economic zones, hi tech zones
consecutive years before they expire. of contributed capital in a Vietnamese limited liability For the newly
(2) Income from new investment projects in: invested projected
company is subject to CGT at 20% on the gain whereas the
Losses on incentivised activities can be offset against profits transfer of securities (bonds, shares of joint stock company) in the Item (2), the
• Scientific research and technology development; investment in the
from non-incentivised activities, and vice versa. is subject to CGT on a deemed basis at 0.1% of the sale applicable period
development of specially crucial infrastructure works as prescribed,
Losses from the transfer of real estate and the transfer of price. software production might be extended for 4 years 9 years
investment projects can be offset against profits from other additional 15 years
However, an individual investor who is a non-tax resident • Manufacturing composite materials, light construction materials, at maximum, subject
business activities. in Vietnam and earns income from the transfer of capital/ precious and rare materials; manufacturing reproduction energy, clean to the Government’s
The taxpayers are not allowed to carry back losses. securities in a Vietnamese LLC/JSC is subject to PIT at a rate energy, energy from destroying waste; developing bio-technology decision
of 0.1% on the sales proceeds.
Administration • Environmental protection.
Taxpayers subject to CIT are obliged to file tax declarations The taxable gains are determined as the excess of the 10%
transfer price less the purchase price of transferred capital/ (3) Income of hi-tech enterprises, agricultural enterprises applying
on an annual basis.
securities less the deductible transfer expenses. hi-technology
The tax payment shall be on a quarterly basis based on (4) Income from newly-established investment project in the sector
estimates, and on an annual basis based on the finalization. Groups
of production (except for project producing goods subject to special
The quarterly CIT shall be paid no later than the 30th day There are no provisions within the corporate tax law sales tax, mineral exploitation project) have investment capital scale at
of the following quarter. Timeline for both filing the annual addressing the concept of group consolidation. the minimum of VND6,000 billion and being disbursed not over 3 years
CIT finalization returns and paying taxes is no later than 90 Nevertheless, current regulation stipulates that profits and 15 years 4 years 9 years
from the date of investment certificate, and
days from the end of the fiscal year. The final tax payment losses cannot be offset between companies within a group.
at year-end finalization stage is required not exceeding • Having total minimum revenue of VND10,000 billion/year no later
Thin capitalisation rules than 3 years from the year generating revenue; or
20% of the accumulated CIT liabilities paid during four
At present, there are no thin capitalization rules. However,
quarters. Otherwise, the shortfall in excess of 20% is subject • Using over 3,000 fulltime employees no later than 3 years from the
certain restrictions to that effect can be found in the
to penalty calculated at 11% per year for late payment year generating revenue.
regulations on foreign loans and corporate income tax
counting from the deadline for payment of CIT in the 4th
(permitted borrowing capacity and excessive interest rates) Income of enterprises from socialization activities in the sectors of Entire project life 4 years 5 years
Quarter.
education and training, vocational training, culture, medical health,
Dividend Income OR
The standard tax year is the calendar year. For enterprises 10% sports and the environment
that apply a fiscal year different from the calendar year, Dividends paid to corporate shareholders are generally 9 years
exempt from CIT, if the paying firm has fulfilled its CIT For CIT Reduction: 5 years OR 9 years applying for the areas with
the tax period shall be determined according to the applied
obligations before payment. specially difficult/ difficult socio-economic conditions
fiscal year. An enterprise may change the tax year period
but the period chosen cannot exceed 12 months and it is Incomes of enterprises from farming, husbandry, processing of Entire project life
Profit Repatriation
required to notify the tax authorities prior to implementation 15% agriculture and aquaculture products in areas with normal socio-
Foreign investors are allowed to repatriate their profits
economic conditions
Firms must pay tax in the province where their main either on annual basis or on termination of the investment,
in Vietnam, provided that they have profit based on the 20% Income from newly-invested projects based in the areas with difficult 10 years 2 years 4 years
head office is located. If an enterprise has a “dependent
audited financial statements. socio-economic conditions
accounting production establishment” in another province (CIT rate of 17%
or city, then the amount of CIT assessable and payable The foreign investors or their investee companies at the Income from newly-invested projects in manufacture of high-quality from 01/01/2016)
will be determined in accordance with a ratio of expenses foreign investors’ authorization are required to notify the steel; production of energy saving products; manufacture of machinery
incurred by each manufacturing establishment over the local tax authorities the plan to repatriate profits at least 7 and equipment serving for agriculture, forestry, fish breeding, salt
total expenditure of the company. working days prior to the scheduled repatriation. production; manufacture of irrigation equipment; production and
refining of feed for cattle, poultry and aquatic resources; development
of traditional trades and occupations

36 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 37

 VALUE ADDED TAX (“VAT”) - Capital assignment;
- Foreign currency trading;
VAT is an indirect tax, the cost of which ultimately falls on
the consumer. The majority of transactions involving the - Debt factoring;
supply of goods, the provision of services and imports will
- Certain insurance services (including life insurance,
be subject to this tax.
health insurance, agricultural insurance and reinsurance);
Broadly, VAT is levied on the value added, at each stage of
- Medical services;
the production and distribution supply chain. Registered
businesses act as collection points for the Value Added Tax - Teaching and training;
Department.
- Printing and publishing of newspapers, magazines and
VAT rates certain types of books;
The standard rate is ten percent (10%). In addition, there - Public passenger transport;
are other rates of 5% and 0% and VAT exemption, as below:
- Transfer of technology, software and software services
• 0% : This rate applies to exported goods/services except exported software which is entitled to 0% rate;
including goods/services sold to overseas/non-tariff areas
and consumed outside Vietnam/in the non-tariff areas, - Gold imported in pieces which have not been processed
goods processed for export or in-country export (subject to into jewellery;
conditions), goods sold to duty free shops, certain exported - Exported unprocessed mineral products such as crude
services, construction and installation carried out for export oil, rock, sand, rare soil, rare stones, etc., or processed into
TRANSFER PRICING annual Corporate Income Tax return. In addition, taxpayers
are also required to prepare the contemporaneous TP
processing enterprises, aviation, marine and international
transportation services.
other products in which the total value of such natural
Enterprises that have transactions with related parties resources and minerals plus the energy cost are at least
Documentation (TPD) report in Vietnamese before the
are required to prepare compliance documents in order • 5%: This rate applies generally to areas of the economy 51% of production costs
disclosure of the TPFs, which provide consistent information
to maintain sufficient evidence toward the arm’s length with the above TPFs, information relative to the operation concerned with the provision of essential goods and - Imports of machinery, equipment and materials which
(appropriateness) nature in such transactions. In this and profitability of the taxpayer and the Group as a whole, services. These include: clean water; teaching aids; books; cannot be produced in Vietnam for direct use in science
respect, according to the newly issued Vietnamese Transfer and most importantly, proper analysis to prove that the unprocessed foodstuffs; medicine and medical equipment; research and technology development activities;
Pricing (TP) regulations, which took effect onMay 2017 and related party transactions are conducted in accordance various agricultural products and services; technical/
applied for tax year 2017 onwards, enterprises shall be scientific services; rubber latex; sugar and its by-products; - Equipment, machinery, spare parts, specialized means
with the arm’s length principle. Taxpayers shall maintain the
considered associated in a tax period under two (2) general certain cultural, artistic, sport services/products and social of transport and necessary materials which cannot be
TPD report in their facility and submit to the Tax authorities
conditions as follows: housing. produced in Vietnam for prospecting, exploration and
upon receiving a request. The new TP regulations has
development of oil and gas fields;
reduced the submission deadline from 30 working days to • VAT exemption: Under this treatment, no output VAT
i. A party participates directly or indirectly in the
15 working days during TP audit and remain at 30-working- shall be charged and the input VAT shall be uncreditable, - Goods imported in the following cases: international non-
management, control or equity of the other, or puts
days for other circumstances. but considered as deductible expenses for CIT purposes, refundable aid, including from Official Development Aid,
investment in the other;
comprising the followings foreign donations to government bodies and to individuals
At the same time, the new TP regulations have also provided
ii. Parties participate directly or indirectly in the common (subject to limitations).
the conditions for simplification in TP declaration, in which - Certain agricultural products;
management, control, or the capital of or put investment
taxpayer, has once satisfied the regulated conditions, they In addition, there are regulated cases that goods and
into other parties. - Supply of fertilizer, feed for livestock, poultry, seafood and
will be exempted from the preparation of TPD report in the services are not required to declare and pay VAT. This
In general, the TP legal regime in Vietnam is generally respective tax year. other animals means that no output VAT has to be charged but input VAT
established from the foundation of the Transfer Pricing Goods/services provided by individuals having annual paid on related purchases can be creditable. These supplies
Of note, the Ministry of Finance has recently introduced
guidelines and the Base Erosion and Profit Shifting revenue of VND 100 million or below; include:
the Advance Pricing Agreement (“APA”) mechanism in
(BEPS) action plan issued by Organization for Economic
accordance with Circular 201/2013/TT-BTC dated 20 - Imported or leased drilling rigs, airplanes and ships of a
Co-operation and Development (OECD). The current
December 2013. The General Department of Taxation is type which cannot be produced in Vietnam;
regulations mandate the three (3) acceptable categories - Compensation, bonuses and subsidies, except those
working through process of guidance which will allow both
of TP methods of examining the arm’s length principle, - Transfer of land use rights (subject to limitations); provided in exchange for marketing/promotional services;
the taxpayers and the tax authorities to seal the advance
i.e. comparable uncontrolled price method, comparable
agreement on the pricing methods and outcomes. - Financial derivatives and credit services (including credit - Transfers of emission rights and other financial revenues;
profit margin methods (including cost plus method, resale
price method and comparable profit method) and profit Controlled foreign companies (CFC) card issuance, finance leasing and factoring); sale of - Certain services rendered by a foreign organization
allocation method. VATable mortgaged assets by a borrower under the lender’s which does not have a PE in Vietnam, where the services are
There is no anti-controlled foreign company legislation.
authorization, in order to settle a guaranteed loan and rendered outside of Vietnam, including repairs to means of
Taxpayers who incur related party transactions are provision of credit information.
required to disclose their transactions under the annual TP transport, machinery or equipment, advertising, marketing,
Disclosure Forms (TPFs), which are filed together with the - Various securities activities including fund management; promotion of investment and trade to overseas; brokerage

38 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 39

activities for the sale of goods and services overseas, training,
certain international telecommunication services;
• Indirect method applies to: VAT administration
All organizations and individuals producing VAT liable
PERSONAL INCOME TAX (“PIT”)
- Business establishments with annual revenue subject
goods and supplies must register for VAT. Also, branches The new Law on PIT took effect on 1 January 2009. This
- Sales of assets by non-business organizations or to VAT of less than VND1 billion;
must register separately and declare VAT on their own replaced the previous ordinance and regulations covering
individuals who are not registered for VAT;
- Individuals and business households; transactions. Income Tax on High Income Earners in Vietnam.
- Transfer of investment projects;
- Business establishments which do not maintain The Business Units shall file and pay their VAT returns on a Individuals liable to PIT and tax resident status
- Sale of agricultural products that have not been processed proper books of account and foreign organizations or monthly basis by the 20th day of the subsequent month, Individuals are subject to Vietnamese PIT based upon their
into other products or which have just been through individuals carrying out business activities in forms not or on a quarterly basis by the 30th day of the subsequent tax resident status, i.e. PIT on their worldwide incomes for
preliminary processing; regulated in the Law on Investment; and quarter (for companies with prior year annual revenue of tax residents or PIT on Vietnam sourced income for non-tax
- Capital contributions in kind; - Business establishments engaging in trading in gold, VND 50 billion or less). residents.
silver and precious stones. Invoices and payment vouchers Any foreign individual shall be considered a PIT resident if
- Certain asset transfers between a parent company and
its subsidiaries or between subsidiaries of the same parent Accordingly, VAT payable = revenue x ratio for direct VAT Entities may use pre-printed invoices, self-printed invoices he/ she meets one of the following conditions:
company; calculation. or electronic invoices to declare their VAT liability. There are • Being present in Vietnam for a period of 183 days or more
stipulated items that must be included and strictly reflected within either a western calendar year or for 12 consecutive
- Collections of compensation/indemnities by insurance Ratios for direct VAT calculation varies depending on the onto the invoice.
companies from third parties; business activities, as below: months counting from the first arrival date;
Since 24 Dec 2014, the General Department of Taxation • Having a permanent residence in Vietnam (including a
- Collections on behalf of other parties which are not regulates invoices, contracts, payment vouchers and the
involved in the provision of goods/services (e.g. if company registered residence which is recorded on the permanent/
A purchases goods/services from company B, but pays to
1% related documents,which must be consistent and the temporary residence card in case of foreigners) and being
payment voucher must state clearly the payment for the unable to prove tax residence in another country;
company C and subsequently company C pays to company distribution, supply of goods
reference contract. Otherwise, it shall not be creditable for
B, then the payment from company C to company B is not VAT purpose. • Having a leased house in Vietnam with a term of 183
subject to VAT); days or more in a tax year and being unable to prove tax
3% VAT refunds residence in another country
- Commissions earned by (i) agents selling services,
the production, transportation, From 01 July 2016, VAT refunds will no longer be allowed,
including postal, telecommunications, lottery, airlines/bus/ A non-resident is any individual who does not satisfy the
service exclusive of materials except the following cases:
ship/train tickets, at prices determined by principals; and (ii) above conditions.
agents for international transportation, airlines and shipping • For exporters, where excess input creditable VAT exceeds
services entitled to 0% VAT; and (iii) insurance agents; 5% VND300 million, a refund may be granted on a monthly/ Taxable income
service, construction exclusive quarterly basis, however, the amount of input VAT relating to Taxable income generally comprises 10 main types of
- Commissions from the sale of exempt goods/services. income: employment income, business income, income from
of material export sales to be refunded must not exceed 10% of export
VAT calculation methods revenue. capital investments, income from capital transfers, income
There are two VAT calculation methods: from real property transfers, winnings or prizes, royalties,
• Newly established entities in the pre-operation investment
• Credit method applies to business establishments
2% phase may claim VAT refunds on a yearly basis or where the
income from franchises, income from inheritances and
receipts of gifts.
maintaining full books of account, invoices and documents other business activities accumulated VAT credits exceed VND300 million.
in accordance with the relevant regulations, including: (i) Income not subject to tax generally includes:
However, for investment projects, VAT refunds shall not be
Business establishments with annual revenue subject to VAT granted in the following cases: Employment
of VND1 billion or more, and (ii) Certain cases voluntarily
registering for VAT declaration under the deduction method. - the chartered capital has not been fully contributed as • One-off regional transfer allowances for: (i) foreigners
registered; moving to reside in Vietnam, (ii) Vietnamese holding other
Accordingly, VAT payable = Output VAT – Input VAT. country nationality working in Vietnam, and (iii) Vietnamese
- Conditional investment projects does not meet the working overseas;
Input VAT is creditable if it meets the requirements of: conditions under Investment Law
- Relevant to business activities; • Once per year home leave round trip airfare for
- Investment project exploiting natural resources licensed expatriates and Vietnamese working overseas;
- Having sufficient legitimate invoice and vouchers; after 01 July 2016, or manufacturing project in which the
cost of natural resources and energy expenses account for • Employee training fees paid to training centres;
- Settlement via forms of non-cash payment for 51% or more of the total cost of the product.
transaction more than VND20 million; and • School fees up to high school in Vietnam/overseas for
children of expatriates/Vietnamese working overseas;
- Paying under the bank account.
• Mid-shift meals (subject to a cap if the meals are paid in
cash);
• Taxable housing benefit including utilities: being the lower
of the actual rental paid and 15 per cent of the employee’s

40 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 41

gross taxable income (excluding taxable housing); office. For individuals with taxable non-employment income, Brief of PIT rates and bands
they must submit their tax registration file directly to the
• Part of night shift or overtime salary payable that is PIT rate
district tax office. No. Type of PITable incomes
higher than the day shift or normal working hours salary
stipulated by the Labour Code; • PIT declaration and payment: resident non-resident

• Compensation for labour accidents; and - For employment income, Employers must deduct Progressive rate as above
1 Employment income 20%
and withhold employees’ PIT and submit/ pay it to the (*)
• Income of Vietnamese vessel crew members working for
tax authority, alongside the relevant social security Business income
foreign shipping companies or Vietnamese international
contributions on monthly basis with the timeline no later
transportation companies Goods distribution/ supply 0,5%
than the 20th of following month or on a quarterly basis
To apply the PIT exemption on the above, there are a range by the 30th day following the reporting quarter. The total Service, construction exclusive of building material 2%
of conditions and restrictions. income withheld must be finalized no later than 90 days 2
after the end of the western calendar year. Particularly: Asset lease, insurance brokerage, lottery
Non-Employment 5%
brokerage, multi-level marketing brokerage
Expatriate employees are also required to carry out a PIT
• Interest earned on deposits with credit institutions/banks
finalization on termination of their Vietnamese assignments Manufacturing, transportation, service associated
and on life insurance policies; 1,5%
before exiting Vietnam. Tax refunds due to excess tax with goods, construction inclusive of building material
• Retirement pensions paid under the Social Insurance law payments are only available to those who have a tax code.
(or the foreign equivalent); Other business activities 1%
- For non-employment income, the individual is required to
• Income from transfer of properties between various direct declare and pay PIT in relation to each type of taxable non 3 Capital investment 5%
family members; employment income. The PIT regulations require income 4 Capital assignment 20% on net gains 0.1% on sale proceeds
to be declared and tax paid on a regular basis, often each
• Inheritances/gifts between various direct family members; 5 Transfer of securities 0.1% on gross sale proceeds
time income is received.
• Monthly retirement pensions paid under voluntary 6 Real property transfer 2% on gross sale proceeds
• PIT credit: For tax residents who have overseas income,
insurance schemes;
any PIT paid in a foreign country is creditable against tax
7 Royalties/ Technology transfer/ Franchising 5% on amount over VND10 million
• Income from life insurance policies; paid in Vietnam subject to certain percentage and tax
administration procedures. 8 Winnings/ Prizes/ Inheritance/ Gifts 10% on amount over VND10 million
• Foreign currency remitted by overseas Vietnamese
• PIT year: The Vietnamese tax year is the calendar year.
• Scholarships
However, in the calendar year of first arrival, his/her first
• Compensation payments from life and non-life insurance
contracts.
tax year is the 12 month period from the date of arrival.
Subsequently, the tax year is the calendar year.
FOREIGN CONTRACTOR’S TAX There are three methods of FCT payment at the FC’s
selection:
PIT deductions Progressive PIT rates on employment income
(“FCT”) • Deduction method:
Tax deductions include: Annual employment Income for resident PIT rate FCT imposed on foreign business individuals and foreign This method allows the FC declaring: (i) VAT under the
(%) organizations earning Vietnam-sourced income (herein approach of crediting the input VAT against the output
• Contributions to mandatory social, health and
referred as “foreign contractor” or “FC”), except: (i) VAT, and (ii) CIT based on the declaration of revenue and
unemployment insurance schemes; From (million VND) To (million VND) “pure supply of goods” under INCORTERMS., i.e. where expense similar to the local enterprises’ application. Of
• Contributions to local voluntary pension schemes; 0 60 5 title passed at or before the border gate of Vietnam and note, FC is required to meet some criteria, including FC’s
60 120 10 there are no associated services performed in Vietnam, adoption of the Vietnamese Accounting System.
• Personal and family relief: Personal relief of VND9
(ii) services performed and consumed outside Vietnam. It
million/month, and family relief of VND3.6 million/month/ 120 216 15 • Direct method:
includes two kinds of taxes: VAT-FCT and CIT-FCT at varied
dependent. The dependent allowance is not automatically 216 384 20 FCT rates. Under this method, FCT is the mechanism to withhold taxes.
granted, and the taxpayer needs to register qualifying
384 624 25 The FC’s VAT and CIT will be withheld by the Vietnamese
dependents and provide supporting documents to the tax
authority; and 624 960 30 customers at prescribed rates from the payments made to
960+ - 35 the FC. Various FCT rates are regulated under the nature
• Contributions to certain approved charities. of activities performed (please kindly see our below table
PIT administration briefing the FCT rates for each activities).
• Individual tax code: Any individual present in Vietnam • Hybrid method:
who has taxable income must obtain an individual tax
code. The taxpayers who have taxable employment income This method is a mixed-up between the deduction method
must submit the tax registration file to their employer; the and direct method, i.e. allows the FC declares VAT based on
employer will subsequently submit this to the local tax the creditable approach and CIT at direct method.

42 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 43

FCT rates Vietnam has entered into more than 70 DTAs with other • Goods transited and transported by mode of border gate
countries for the avoidance of Double Taxation (note trans-shipment through Vietnam’s border gates or borders
Ratio for FCT (%) that the DTA with the United States of America is still not under the customs law
Deemed VAT-FCT Deemed CIT-FCT effective). FCs, and individuals working in Vietnam being
Type of business activities • Humanitarian aid goods
rate (%) rate (%)x nationals of the countries who have entered into Tax Treaties
with the Vietnamese Government can apply for either FCT • Goods imported from abroad into non-tariff zones and
(i) Distributing, supplying goods; exemption for the part of CIT only or the PIT provided that only used therein
these FCs/ individuals satisfy certain conditions of the Tax
(ii) Distributing, supplying goods associated with services • Goods brought from one non-tariff zone to another
1/Exempt Treaty, i.e. (i) the FCs do not create or have a PE, (ii) the
rendered in Vietnam (including the form of on-spot export and individuals do not become tax resident and receive income Import duty rates are classified into 3 categories: ordinary
1. Trades: 1
import); from a PE in Vietnam. rates, preferential rates and special preferential rates.
(iii) Supplying goods under INCOTERMS where the seller bears The Vietnamese Government has given more guidance Preferential tax rates are applicable to imports originating
risk relating to goods in Vietnam. on the application of DTAs effective since 2014. The most from countries or groups of countries or territories that
notable changes relate to beneficial ownership and general grant most-favoured-nation treatment in trade relations with
Services 5 5 anti-avoidance provisions. DTA entitlements will be denied Vietnam. Taxpayers declare the origin of goods themselves
Restaurant/ hotel/ casino management services 5 10 where the main purpose of the arrangements is to obtain and are held responsible for declarations regarding the
2. Services: beneficial treatment under the terms of the DTA (treaty origin of goods.
Service associated with goods supply shopping) or where the recipient of the income is not the
3 2 Particularly-preferential tax rates are individually specified
(if contract doesn’t separate the value of goods and service) beneficial owner. The guidance dictates that a substance
for each item covered by decisions released by the Minister
over form analysis is required for the beneficial ownership
Insurance 5 /Exempt 5 of Finance.
3. Insurance: and outlines the factors to be considered:
reinsurrance abroad, commission of the reinsurrance transfer Exempt 0.1 Ordinary tax rates are applicable to imports originating
• Where the recipient is obligated to distribute more than
from countries, groups of countries or territories that do not
Leasing machinery and equipment 5 5 50% of the income to an entity in a third country within 12
grant most-favoured-nation treatment or special import tax
months;
4. Leasing: Leasing aircraft, airplane engines/ spare parts, vessels preferences to Vietnam. The ordinary tax rate is equal to
Exempt 2 • Where the recipient has little or no substantive business 150 per cent of the preferential tax rate.
(for aircraft and vessel cannot be produced in Vietnam)
activities;
Apart from being subject to import tax, in certain situations
Derivative financial services Exempt 2
5. Banking: • Where the recipient has little or no control over or risk in Vietnam also imposes an anti-dumping tax, anti-subsidy tax
Loan interest Exempt 5 relation to the income received; and anti-discrimination tax or safeguard tax, in accordance
with existing rules.
6. Capital • Back to back arrangements;
Transferring securities/ deposit certificates Exempt 0.1
Investment: Import and export duty rates are subject to frequent
• Where the recipient is resident in a country with a low tax
changes and it is always prudent to check the latest
Supply of goods and/or services for oil & gas exploration and Standard: 10 rate;
5 position.
7. Oil and Gas: development (or 5%/ exempt) • The recipient is an intermediary or agent.
Export Duty
Leasing drilling rigs Exempt 5 Export duties are charged on a limited number of items,
generally natural resources such as sand, chalk, marble,
Construction, installation including supply of materials,
machinery, equipment
3 2 OTHER TAXATION granite, ore, crude oil, forest products, and scrap metal.
Export duty rates range from 0-50 per cent.
8. Construction: Import Duty
Construction, installation excluding supply of materials, Special Sales Tax (SST)
5 2 Generally, all goods crossing Vietnamese borders are
machinery, equipment Special sales tax is a form of excise tax levied on the
subject to import duties. In particular:
9. Transportation: Transport (including the transport by seaway, by airway) 3/0 2 production or import of certain goods and the provision of
• Goods imported through Vietnamese border gates
certain services:
Royalty/ Licence fee or border by road, river, seaport, airport, international
10. Royalty: Exempt (*) 10 railway, international post and other locations for customs • Goods generally subject to SST include: cigarettes,
(*):Software licenses, transfer of technology, transfer of intellectual property rights are VAT exempt
procedures clearance cigars and other products processed from tobacco; spirits
Other production 3 2 and beer; certain passenger vehicles; two-wheel motor
11. Others: • Goods transferred from the local market to non-tax areas
vehicles with a cylinder capacity above 125cm3; aircraft
Other Business activities 2 2 or vice versa
and yachts; various types of petrol; air-conditioners with a
• Other goods traded or exchanged that are considered as capacity of 90,000 BTU or less and playing cards.
imports.
• Businesses subject to SST include: dancehalls, massage
The following goods are not subject to import duties: lounges and karaoke parlours, casinos, slot machines and

44 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 45

 Property tax
other similar types of machines, betting businesses, golf Property tax in Vietnam is levied in the form of three taxes:
and lotteries. land-use fee, land rental and non-agricultural land-use tax.
Taxpayers producing SST liable goods from SST liable raw • The land-use fee applies to organizations which are
materials are entitled to claim a credit for the SST amount allocated land by the State to develop infrastructure for sale
paid on raw materials imported or purchased from domestic or for lease and who are subject to the payment of land-use
manufacturers fee. The duration of land usage under this category should
be “long term stable use”.
The SST payable is computed by the taxable price
multiplied with the SST rate, which ranges from 10 per cent • Land rental is the amount an investor may lease (or
to 70 per cent depending on the kinds of taxable goods or rent) land in Vietnam. The amount varies depending on a
services. number of factors including the location, infrastructure
and the industrial sector in which the business is operating.
Also, there are various anti-avoidance rules which specify
Payment of the lease can be for a long fixed period of time
minimum prices for SST purposes. For example where a
or annually.
manufacturer produces goods subject to SST and sells such
goods through an agent, the minimum price for calculation • Non-agricultural land-use tax applies to
of SST is 90% of the average selling price of the agent.
• Residential land in rural/urban areas and non-
Natural Resources Tax (“NRT”) agricultural land used for business purposes. The
NRT is also known as production royalty tax. All calculation of tax liability is based on the land area, price of
organizations and individuals engaged in exploiting or land and tax rate.
mining natural resources in compliance with the laws
In addition, owners of houses and apartments have to pay
of Vietnam, irrespective of their industry, scope and
land tax under the law on non-agricultural land use tax. The
operational form, are liable to register, declare and pay
tax is charged on the specific land area used based on the
royalties.
prescribed price per square meter and progressive tax rates
Taxable resources means all natural resources existing in ranging from 0.03% to 0.15%.
the land, islands, internal waters, sea territory, exclusive
economic zones (including maritime areas common to both Environmental protection tax A taxpayer who pays tax later than the deadline is to
Vietnam and a neighbouring country) and the continental Environmental tax is an indirect tax, collected on products pay the full tax amount plus a fine equal to 0.03 per cent
shelf under the sovereignty of the Socialist Republic of and goods that, when used, are deemed to cause negative per day for late payment of the tax amount for each
Vietnam, including: metallic mineral resources; non-metallic environmental impacts. The tax is levied on the production day the payment is late. Taxpayers that make incorrect
mineral resources including soil, stone, sand, gravel, coal, or importation of certain goods, based on the Absolute tax declarations, thereby reducing taxes payable or increasing
gemstones, mineral water and natural thermal water; oil; rate. Export products are exempted from environmental refundable tax amounts, are to pay the full amount of the
gas or natural gas; natural forest products; natural marine protection tax. undeclared tax or return the excess refund, and will also
products; natural water including surface water, ground pay a fine equal to 20 per cent (%) of the under-declared
water and other natural resources under the law on natural Anti-avoidance measures or excess refunded tax amounts, together with a fine for late
resources. While Vietnam does not have any specific anti-avoidance payment of the tax.
rules, the tax authorities have the power to carry out tax
The taxable value of a resource is the selling price of audits of any taxpayer. Tax inspections can be conducted A taxpayer that commits an act of tax evasion or tax fraud is
each item or unit of resource at the place of mining in on a regular basis but no more than once a year. Tax liable to pay the full amount of tax according to regulations
accordance with the principle of market price. The royalty inspection durations must not exceed thirty days from the and a fine will be imposed of between one and three times
rates vary from 0 per cent to 40 per cent, whilst petroleum, date of notification of the tax inspection decision; however the evaded tax amount. The general statute of limitations for
natural gas and coal gas are taxed at progressive tax rates these may be extended for an additional period not imposing tax is ten years and for penalties is five years.
depending on the daily average production output. exceeding thirty days.
Exemptions or reductions in NRT include offshore fishing by
high-capacity vessels; natural water used for generation
of hydropower that is not fed into the national power grid;
and soil or combined soil products for ground levelling or
construction works.

46 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 47

Grant Thornton (Vietnam) Limited
Head office in Hanoi Office in Ho Chi Minh City
18th Floor 14th Floor
Hoa Binh International Office Building Pearl Plaza
106 Hoang Quoc Viet Street 561A Dien Bien Phu Street
Cau Giay District, Hanoi Binh Thanh District, Ho Chi Minh City
Vietnam Vietnam
T +84 24 3850 1686 T +84 28 3910 9100
F +84 24 3850 1688 F +84 28 3910 9101

Nguyen Chi Trung Nguyen Thi Vinh Ha Kenneth Atkinson Nguy Quoc Tuan
Managing Partner Partner Executive Chairman Partner
T +84 24 3850 1616 T +84 24 3850 1600 T +84 28 3910 9108 T +84 28 3910 9180
E chitrung.nguyen@vn.gt.com E vinhha.nguyen@vn.gt.com E ken.atkinson@vn.gt.com E tuan.nguy@vn.gt.com

Hoang Khoi Pham Quoc Hung Le Minh Thang Nguyen Hung Du

Partner Partner Partner Partner
T +84 24 3850 1618 T +84 24 3850 1621 T +84 28 3910 9219 T +84 28 3910 9231
E khoi.hoang@vn.gt.com E hung.pham@vn.gt.com E minhthang.le@vn.gt.com E hungdu.nguyen@vn.gt.com

Nguyen Dinh Du Le The Viet Nguyen Manh Tuan

Partner Partner Partner
T +84 24 3850 1620 T +84 24 3850 1622 T +84 28 3910 9184
E du.nguyen@vn.gt.com E viet.le@vn.gt.com E manhtuan.nguyen@vn.gt.com

Nguyen Tuan Nam Nguyen Hong Ha

Partner Partner
T +84 24 3850 1617 T +84 24 3850 1601
E tuannam.nguyen@vn.gt.com E hongha.nguyen@vn.gt.com

48 Doing Business in Vietnam 2018 Doing Business in Vietnam 2018 49

 © 2018 Grant Thornton (Vietnam) Limited. All rights reserved.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and
advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton
International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a
separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL
and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts
or omissions.

grantthornton.com.vn