MINISTRY OF PLANNING AND INVESTMENT FOREIGN INVESTMENT AGENCY DOING BUSINESS IN VIETNAM 2018 Investing in Vietnam, Engaging the world Abbreviation 3 II. Customs Duty and Procedures 52 Introduction 5 III. Land Rental Incentives 56 A. Country Profile 6 E. Human Resources and Employment 58 B. Trade and Investment 12 F. Foreign Exchange Control 65 I. Trade Agreement 13 Useful websites 68 II. Foreign Direct Investment 13 Deloitte Vietnam 71 C. Setting up an investment in Vietnam 17 Foreign Investment Agency 72 D. Taxation and Customs 25 I. Taxation 26 2 Doing business in Vietnam 2018. Investing in Vietnam, Engaging the world ABBREVIATION APA Advance Pricing Agreement FTA Free Trade Agreement APEC Asia-Pacific Economic Cooperation GDP Gross Domestic Product ASEAN Association of Southeast Asian GSO General Statistics Office Nations BCC Business Cooperation Contract IMF International Monetary Fund BLT Build-Lease-Transfer IRC Investment Registration Certificate BOO Build-Own-Operate IP Industrial Park BOT Build-Operate-Transfer M&A Mergers and Acquisitions BT Build-Transfer O&M Operate & Manage BTL Build-Transfer-Lease OECD Organization for Economic Cooperation and Development BTO Build-Transfer-Operate PIT Personal Income Tax CIT Corporate Income Tax PPP Public-Private Partnership CPTPP Comprehensive and Progressive RCEP Regional Comprehensive Agreement for Trans-Pacific Economic Partnership Partnership DTA Double Taxation Avoidance SST Special Sales Tax Agreement EPE Export Processing Enterprise USD US Dollar EPZ Export Processing Zone VAS Vietnamese Accounting Standards ERC Enterprise Registration Certificate VAT Value Added Tax EZ Economic Zone VND Vietnamese Dong FCWT Foreign Contractor Withholding Tax WTO World Trade Organization FDI Foreign Direct Investment 3 4 Doing business in Vietnam 2018. Investing in Vietnam, Engaging the world INTRODUCTION n more than 30 years of social- a centralized to a market- oriented economy and its 95 million-strong Vietnam has moved from being population, which features a large Ione of the poorest nations in the world and young workforce as well as to a lower middle-income country an increase in disposable income with a number of convincing social- in recent years. The Vietnamese economic achievements. Joining the Government has done an excellent job Association of Southeast Asian Nations (ASEAN) in 1995 Economic Cooperation (APEC) in 1998 2.6 per cent (2017). and the World Trade Organisation (WTO) in 2007; expanding gross This guidebook was prepared by the domestic product (GDP); improving Foreign Investment Agency of infrastructure; and a steady increase Vietnam in cooperation with Deloitte in foreign direct investment (FDI) Vietnam to provide readers with an suggest that Vietnam has transformed overview of the investment climate, into an attractive investment forms of business organization, destination. taxation, and business and accounting practices in Vietnam. Although we do Vietnam has been enjoying strong our best to ensure that economic growth. Since 1990, information contained in this book is current at the time of writing, the Vietnam’s GDP per capita growth has rapid changes in Vietnam mean that been among the fastest in the world, laws and regulations may change to averaging 6.4 per cent a year in the reflect the new conditions. We hope 2000s. Despite crisis and uncertainties that you find this book useful in your in the global environment, Vietnam’s endeavour to expand your business economy continues to grow, with GDP in Vietnam. reaching 6.81 per cent in 2017, and is expected to continue on this path. Ministry of Planning and Overseas businesses are increasingly Investment of Vietnam attracted by the country’s move from Foreign Investment Agency 5 A COUNTRY PROFILE COUNTRY PROFILE Vietnam’s economy continues its fast growth driven by free trade agreements (FTAs) with major developed countries and increasingly deregulated business environment. VIETNAM Strategically located at the centre of Southeast Asia with convenient access to commodity and cultural exchange. A stable political A youthful and vibrant environment, and an country with digitally-savvy attractive business environment with and well-educated workforce, high incentives for a developing culture of foreign investors. entrepreneurship, and openness to new ideas. Low and competitive production cost. Fast growing economy with GDP growth projected to be between 6% to 7% during 2016-2018 period. 16 FTAs with major developed markets. 6 Doing business in Vietnam 2018. Investing in Vietnam, Engaging the world COUNTRY SNAPSHOT LOCATION POPULATION AND WORKFORCE Southeast Asia Population: Over 95 million people The country borders with China, Laos, Cambodia, Ranked 15th in the list of most populated countries Pacific Ocean and Gulf of Thailand People of working age in employment: 48.2 million people (50.7% of total population) Unemployment rate: 2.24% LAND AREA 330,967 sq. km ECONOMY Nominal GDP ( 2017): USD 220.6 billion Annual GDP growth averaging 6.4% since 2014 COASTLINE GDP per capita (2017): USD 2,385 3,260 km LANGUAGE 5 MUNICIPALITIES & 58 PROVINCES Vietnamese (official language) English (taught widely at school as a second language) North: Hanoi – the capital Centre: Da Nang City South: Ho Chi Minh City – the largest city BUSINESS HOURS Under the Vietnamese Labor Code, normal working CLIMATE AND WEATHER hours should be 8 hours/day, or 40 - 48 hours/week. The climate varies from North to South with three distinctive climate zones: tropical in the South (rainy season from April to September; dry season from October to March); monsoonal with hot and rainy season in the Centre and North (May to September); cold and damp in the highlands and the North CURRENCY (October to March). It is also blessed with plenty of Vietnamese Dong (VND) sun throughout the year. Source: General Statistics Office (GSO), Economist Intelligence Unit, Vietnamese Labor Code 7 POLITICAL STRUCTURE Vietnam is a socialist country under the leadership of the Communist Party of Vietnam. The 14th National Assembly of Vietnam (term 2016-2021) has 489 Assembly, which is the highest-level representative body of Vietnamese people, has the power to exercise constitutional and legislative rights and to decide on critical issues of the country. 8 Doing business in Vietnam 2018. Investing in Vietnam, Engaging the world 8.0% 7.5% Product tax (net) Agriculture, 7.08% Forestry and 7.0% Fishery 6.81% 6.5% 6.68% 6.0% 5.98% 6.21% 5.5% 5.42% 5.0% Industry & Services Construction 4.5% 4.0% H1 2018 RETAIL SALES (billion USD) 173 6.60% 168 154 140 4.09% 125 3.53% 111 3.29% 2.66% 0.63% H1 2018 MAIN EXPORT PARTNERS, 2017 (share of total) 214 211 180173 Japan 8% 166 150 162 148 132 131 ASEAN 10% Source: GSO 9 A COUNTRY PROFILE REGULATORY REFORM TO IMPROVE INVESTMENT CLIMATE The regulatory framework has been constantly revised to incorporate more favorable regulations for businesses to invest and operate in Vietnam. Since the new Law on Investment and the new Law on Enterprises were passed in 2014, many other laws, decrees and circulars have been put in place to provide guidelines for better market access. VIETNAMESE GOVERNMENT’S EFFORTS TO IMPROVE INVESTMENT CLIMATE - Law No. 67/2014/QH13 on Investment - Law No. 68/2014/QH13 on Enterprises - Decree No. 46/2014/ND-CP provides regulations on collection of land rent and water surface rent - Circular No. 78/2014/TT-BTC guides the implementation of the Law on CIT 2014 - Circular No. 103/2014/TT-BTC provides guidelines for fulfillment of tax liability of foreign entities doing business in Vietnam or earning income in Vietnam - Decree No. 118/2015/ND-CP provides guidelines for some articles of the Law on Investment - Decree No. 96/2015/ND-CP provides guidelines for some articles of the Law on Enterprises - Decree No. 15/2015/ND-CP on investment in the form of public-private partnership 2015 - Circular No. 38/2015/TT-BTC on customs procedures, customs supervision and inspection, export tax, import tax, and tax administration - Law No. 107/2016/QH13 on Export and Import Duties - Decree No. 134/2016/ND-CP provides guidelines for the Law on Export and Import Duties - Circular No. 83/2016/TT-BTC guides the implementation of investment incentive programs 2016 - Circular No. 130/2016/TT-BTC on guidelines on some articles of the Law on Value Added Tax, and the Law on Special Sales Tax - Law No. 04/2017/QH14 about provision of assistance for small and medium-sized enterprises (coming into force from January 1st, 2018) - Decree No.32/2017/ND-CP on state investment credit 2017 - Decision No. 3610A/QD-BCT slashes 675 conditions on business and investment under state management - Drafted Amendment of Law on Tax Administration - Drafted Amendment of Laws on Value Added Tax, Special Sales Tax, Corporate Income Tax, Personal Income Tax, Natural Resources Tax and Export – Import Duties - Decree No. 09/2018/ND-CP on trading activities of foreign investors 2018 - Decree 08/2018/ND-CP on business conditions under State management of the Ministry of Industry and Trade 10 Doing business in Vietnam 2018. Investing in Vietnam, Engaging the world RESTRUCTURING AND EQUITISING STATE-OWNED ENTERPRISES The Vietnamese Government upholds its commitments to economic reform. The equitisation of state-owned enterprises (SOEs) in recent years is an example economy forward. The 2016-2020 roadmap for the equitisation of SOEs has been outlined in Decision No. 58/2016/QD-TTg. 220 NUMBER OF EQUITISED SOES DURING 2011-2018 175 86 73 55 45 26 14 2011 2012 2013 2014 2015 2016