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  • 1. DisclaimerThis publication contains information in summary form and is therefore intendedfor general guidance only. It is not intended to be a substitute for detailedresearch or the exercise of professional judgment. Neither Ernst & YoungVietnam Limited nor any other member of the global Ernst & Young organizationcan accept any responsibility for loss occasioned to any person acting orrefraining from action as a result of any material in this publication. On anyspecific matter, reference should be made to the appropriate advisor.This book is one in a series of country profiles prepared for use by clients andprofessional staff. Additional copies may be obtained from:Ernst & Young Vietnam LimitedHo Chi Minh City office8th Floor, Saigon Riverside Office Center2A-4A Ton Duc Thang StreetDistrict 1, Ho Chi Minh CitySocialist Republic of VietnamTel : +84 8 3824 5252Fax : +84 8 3824 5250E-mail : eyhcmc@vn.ey.comHanoi officeDaeha Business Center14th Floor, 360 Kim Ma StreetBa Dinh District, HanoiSocialist Republic of VietnamTel : +84 4 3831 5100Fax : +84 4 3831 5090Email : eyhanoi@vn.ey.comWebsite: www.ey.com/vn3 | Doing business in Vietnam
  • 2. PrefaceThis book was prepared by Ernst & Young in Vietnam. It was written to provide aquick overview of the investment climate, forms of business organization,taxation, and business and accounting practices in Vietnam. While theinformation contained in the book was, to the best of our knowledge, current atthe time of writing, the rapid pace of change in Vietnam means that laws andregulations may have changed to reflect the new conditions. Making decisionsabout foreign operations is complex and requires an intimate knowledge of acountry’s commercial climate with a realization that the climate can changeovernight. Companies doing business in Vietnam, or planning to do so, areadvised to obtain current and specific information from experiencedprofessionals. This book reflects information available as of 31 December 2009. Doing business in Vietnam | 4
  • 3. Glossary of acronymsThe following acronyms have been used in this guide.ADSL Asymmetric Digital Subscriber LineAFTA ASEAN Free Trade AgreementAPEC Asia-Pacific Economic CooperationASEAN Association of Southeast Asian NationsATM Automated Teller MachineBCC Business Cooperation ContractBOT Build Operate TransferBT Build TransferBTA Bilateral Trade AgreementBTO Build Transfer OperateCDMA Code Division Multiple AccessCIF Cost, Insurance, FreightCIT Corporate Income TaxDTA Double Taxation AgreementEPE Export Processing EnterpriseEPZ Export Processing ZoneEU European UnionFCWT Foreign Contractor’s Withholding TaxFOE Foreign-owned enterpriseFIE Foreign-invested enterpriseFOB Free On BoardGAAP Generally Accepted Accounting PrinciplesGDP Gross Domestic ProductGSM Global System for Mobile CommunicationsGSO General Statistics OfficeGTI Gross Taxable IncomeHTZ High Technology ZoneIAS International Accounting StandardsIFRS International Financial Reporting StandardsIZ Industrial zoneMFN Most Favored NationMoF Ministry of FinanceMOLISA Ministry of Labor, War Invalids and Social AffairsMPI Ministry of Planning and InvestmentNTR Normal Trade RelationsPIT Personal Income TaxPNI Produced Nation IncomeSBV State Bank of VietnamSME Small and Medium-sized EnterprisesSOE State-owned enterpriseSSC State Securities CommissionSST Special Sales TaxUSD United States Dollar(s)VAS Vietnamese Accounting SystemVAT Value Added TaxVND Vietnamese DongWTO World Trade Organization5 | Doing business in Vietnam
  • 4. ContentA Introduction ................................................................................. 8A.1 Vietnam as an investment location ................................................. 9A.2 Geography.................................................................................... 9A.3 Population and labor force............................................................. 9A.4 Language................................................................................... 10A.5 Government ............................................................................... 10A.6 Time .......................................................................................... 10A.7 Connectivity............................................................................... 10A.8 Climate ...................................................................................... 10A.9 Public Holidays ........................................................................... 11A.10 Useful contacts........................................................................... 11B. Economy ................................................................................... 12B.1 Economy overview ...................................................................... 13B.2 Recent economic performance..................................................... 13B.3 Leading industries....................................................................... 14B.4 Major exports and imports ........................................................... 14C. Financial system ......................................................................... 16C.1 Money and banking ..................................................................... 17C.2 Currency ................................................................................... 21C.3 Foreign exchange controls ........................................................... 21C.4 Stock exchange........................................................................... 23D. Regulations on investment/enterprises ........................................ 26D.1 General ...................................................................................... 27D.2 Government owned industries and privatization............................. 28D.3 Investment guarantees ................................................................ 28D.4 Forms of Enterprises ................................................................... 29D.5 Forms of direct investment .......................................................... 30D.6 Investment incentives.................................................................. 32D.7 Conditional sectors ..................................................................... 33D.8 Investment licensing.................................................................... 33 D.8.1 Licensing authorities ..................................................... 33 D.8.2 Licensing procedures .................................................... 34 D.8.3 Business registration ..................................................... 34 D.8.4 Investment registration ................................................. 35 D.8.5 Evaluation procedures ................................................... 35 D.8.6 Application dossier........................................................ 36 D.8.7 Post licensing procedures .............................................. 37D.9 Labor and recruitment regulations ............................................... 37 D.9.1 Labor recruitment by a Foreign Invested Enterprise............ 37 D.9.2 Registration of expatriate employees .............................. 37 D.9.3 0 Social Insurance (SI), Health Insurance (HI) and Unemployment Insurance (UI) contributions for employees..................................................................................37 D.9.4 Minimum salary ............................................................ 38D.10 Mergers and Acquisitions............................................................. 39 D.10.1 Regulatory aspects ....................................................... 39 D.10.2 Buying shares in existing companies ............................... 39 Doing business in Vietnam | 6
  • 5. D.11 Dispute settlement...................................................................... 40D.12 Exit provisions ............................................................................ 41D.13 Other investment related regulations............................................ 41 D.13.1 Foreign investment in the securities market..................... 41 D.13.2 Accession to trading service by foreign investor............... 41 D.13.3 Intellectual property rights ............................................ 42 D.13.4 Competition regulations ................................................ 42 D.13.5 Use of electronic documents .......................................... 43 D.13.6 Government inspection of Foreign Invested Enterprises ........... 43E. Taxation ................................................................................... 44E.1 Corporate Income Tax ................................................................. 45E.2 Value Added Tax ......................................................................... 51E.3 Import duty and export duty ........................................................ 53E.4 Special sales tax ......................................................................... 54E.5 Business license tax .................................................................... 55E.6 Taxes on individuals: Personal Income Tax..................................... 56E.7 Transfer pricing .......................................................................... 59E.8 Penalties for tax offences ............................................................ 60E.9 Double tax relief and tax treaties .................................................. 60F. Financial Reports and Auditing..................................................... 62F.1 Statutory requirements ............................................................... 63F.2 Accounting principles and practices.............................................. 63F.3 Disclosure, reporting and filing requirements ................................ 65F.4 Audit requirements ..................................................................... 66G. Visas and permits ....................................................................... 68G.1 Entry visas ................................................................................. 69G.2 Work permits .............................................................................. 69G.3 Residence permits....................................................................... 70H. Living in Vietnam ........................................................................ 72H.1 Housing ................................................................................... 73H.2 Education................................................................................... 73H.3 Medical services.......................................................................... 73H.4 Leisure and tourism .................................................................... 74Appendices ............................................................................................. 75Appendix 1: Economic Performance Indicators .................................. 75Appendix 2: Foreign Exchange Rates................................................. 75Appendix 3: Principal Imports And Exports........................................ 76Appendix 4: Principal Trading Partners.............................................. 78Appendix 5: Depreciation Periods ..................................................... 79Appendix 6: Personal Income Tax Rates............................................. 80Appendix 7: Double Taxation Agreements ......................................... 82Appendix 8: Demographic Statistics .................................................. 83Appendix 9: Comparative Data: Vietnam And Selected Countries............. 85Appendix 10: Useful Addresses And Contact Information...................... 887 | Doing business in Vietnam
  • 6. A. Introduction
  • 7. A.1 Vietnam as an investment locationVietnam has emerged as one of the most popular investmentdestinations in Asia, offering advantages, such as: A well-educated population, which offers potential as both a workforce and a consumer market Under-exploited mineral resources A central location from which to reach other markets in southern Asia Continued support by foreign aid A commitment by the Government for economic pragmatism; and Significant investment incentives for selected types of businessesA.2 GeographyVietnam occupies the eastern coastline of the Southeast Asian peninsula, andshares land borders with China to the north, and Laos and Cambodia to the west.Its coastline provides direct access to the Gulf of Thailand and the East Sea.Vietnam has a land area of 331,114 square kilometers. Most of the country is hillyor mountainous, with flat land representing only about 20 percent. The primarytopographical features in the north are highlands and the Red River Delta and thesouth includes the central mountains, coastal lowlands and the Mekong RiverDelta.Hanoi, the capital of Vietnam, is located in the north of the country and Ho ChiMinh City, the largest city in terms of population and economic activity, is situatedin the south. Other major cities include Hai Phong, Da Nang, Hue, Vinh, Quy Nhon,Nha Trang, Can Tho, and Da Lat.A.3 Population and labor forceAs of 1 April 2009, Vietnam had an estimated population of 86 million, 25.6million of those reside in urban areas accounting for 29.6% of total population and60.4 million are in rural areas that covers 70.4% of total population. The annualaverage population growth rate for the period 1999 to 2009 is 1.2%. Thispopulation is predominantly young, with approximately 27% below the age of 15and a median age of 25.9 years. The population density is 259 persons per squarekilometer1.The population is composed of nearly 90% ethnic Vietnamese, with Chinese,Hmong, Thai, Khmer, Cham and mountain groups forming the remainder.1Source : GSO, www.gso.gov.vn (Report on result of general investigation of population andhouses 2009)9 | Doing business in Vietnam
  • 8. A.4 LanguageVietnamese, a tonal language in the Austro-Asiatic language family, is theofficial language. The modern written language uses the Vietnamese alphabet, aRomanized representation of spoken Vietnamese.While English is increasingly favored as a second language, other languages used toa lesser extent in Vietnam are French, Russian, Chinese, Khmer and mountain arealanguages (Mon-Khmer and Malayo-Polynesian).The literacy rate (percentage of the population aged 15 years or older who canread and write) was estimated at 90.3% as surveyed in 20052.A.5 GovernmentVietnam is a one-party state run by the collective leadership of the Communist PartySecretary-General, the Prime Minister (PM) and the President. Policy is set every fiveyears by the Party congress and adjusted twice a year by plenary meetings of theCentral Committee. The Government and other state organs are responsible forimplementing policy.A.6 TimeVietnam local time is seven hours ahead of Coordinated Universal Time, or UTC. Businesshours in Vietnam are generally from 7:30 a.m. to approximately 4:30 p.m., howeverinternational companies located in the urban areas operate from 8:00 a.m. to 5:00 p.m.Shops tend to be open from 9:00 a.m. to 9:00 p.m.A.7 ConnectivityVietnam is served by several digital mobile phone networks using GSM 900 and CDMA 800technology. ADSL, dial-up Internet services are available in the major cities. Recently, Vietnamhas awarded licenses to the first 4 operators to offer high-speed 3G mobile phone services,promising millions of cellular phone users a better service. Vinaphone and MobiFone are the first3G service providers in Vietnam.A.8 ClimateNorthern Vietnam has four seasons: spring, summer, autumn and winter. Spring isfrom January to March, summer is from April to end of July, autumn is fromAugust to end of September and winter is the rest of the year. Autumn is the bestand the most beautiful weather in the north with the average temperature on theday ranging from 27˚C to 32˚C and decreases to 24˚C or 27˚C at night. Incontrast, Central Vietnam is subject to occasional typhoons. The South is generallywarm with two seasons: dry and wet. During the hottest months at the end of thesouthern dry season, March through May, temperatures reach the low 30˚C. Thisperiod is followed by the May-October monsoon season.2 United Nations Development Program – Vietnam at a glance 2007 Doing business in Vietnam | 10
  • 9. A.9 Public holidaysNational public holidays are listed below. Dates for the Vietnamese New Year(Tet) vary from year to year, because they are based on the lunar calendar. 1 January – New Year’s Day January or February – Tet. This is the most significant Vietnamese annual holiday and is celebrated from the last day of the old lunar year to the third day, or later, of the New Year according to the traditional lunar calendar 10th day of the 3rd lunar month – Kinh Hung’s death anniversary (Gio to Hung Vuong) 30 April – Liberation Day 1 May – Labor Day 2 September – National DayA.10 Useful contactsFor a list of useful addresses and other contact details in Vietnam, please seeAppendix 10.11 | Doing business in Vietnam
  • 10. B. Economy
  • 11. B1. Economic overviewVietnam is a densely populated, developing country in Southeast Asia. In thedecade after the 1976 reunification, the economy was in stagnation while thecountry attempted to recover from three decades of independence wars. In1986, Vietnam started economic reforms aimed at moving from a planned to amarket economy. Dramatic progress has been made in economic developmentsince then, and the country has become one of the fastest growing economies inthe world. Traditionally an agrarian society, the agricultural sector, includingforestry and fisheries, still employs about 65% of the population, but itscontribution to GDP has declined to about 20% in recent years from 40% in theearly 1990s. The industrial sector has been growing rapidly, and now accountsfor about 40% of GDP, with relatively well-diversified sub sectors including steel,fertilizer, cement and vehicle production, whilst the private sector is nowestimated to contribute around 35% of GDP and is rapidly growing, due to thecontinuing privatization of State Owned Enterprises (SOEs) and positiveunderlying macroeconomic factors3.Vietnam has continued its efforts of transition towards a market economy throughadopting more flexible, market-oriented policies that are aimed at promoting privatesector growth, improving the quality of public investment and achievingmacroeconomic stability. However, further reforms are needed to achieve long termsustained rapid growth, and emphasis should be put on more prudentmacroeconomic policies, improving public sector financial management,accelerating reforms of SOEs and fair and transparent laws and regulations. Theprivate sector will continue to grow as governmental involvement in themanagement of SOEs and investment decision making in them is reduced.B.2 Recent economic performanceVietnam has achieved substantial progress in economic development following thedeclaration by the Sixth Party Congress, in 1986, of a broad economic reformpackage called “Doi Moi”, or “renovation”, which dramatically improved Vietnam’sbusiness environment. Vietnam became one of the world’s fastest growingeconomies, averaging 8.4% annual GDP growth from 2005 to 2007, 6.1% in 2008and 5.3% in 20094. Vietnam’s inflation rate, which stood at an annual rate of over300% in 1987 had fallen to 12.6% in 2007 and significantly increased to 23% in2008. In 2009, as the result of the global economic crisis, basic good prices fellsignificantly and Vietnam economic growth slowed down leading to the decrease ininflation rate to 6.9%5 . Simultaneously, investment grew three-fold and domesticsavings quintupled. Agricultural production doubled, transforming Vietnam from anet food importer to one of the world’s top rice exporters.Foreign trade and Foreign Direct Investment (FDI) increased significantly in 2008and the shift away from a centrally planned economy to a more market-orientedeconomic model improved business conditions and quality of life for many3 World Bank: Taking stock (Update report on Vietnam’s recent economic development)4 GSO, www.gso.gov.vn (December update report)5 ADO update 2009 (ADB)13 | Doing business in Vietnam
  • 12. Vietnamese. In 2009, due to the global economic crisis, FDI to Vietnam waslower than previous year. From the beginning of the year to 15 December2009, total FDI capital was US$21.5 billion decreased by 70.0% relative to thesame period last year. The registered FDI capital of 839 new licensed projects isUS$16.3 billion (decreased by 46.1% in number of project and by 75.4% incapital). The implemented FDI capital is estimated at US$10 billion, decreasedby 13.0% compared to 2008.The Bilateral Trade Agreement (BTA) signed between the United States andVietnam on 13 July 2000 represented a significant milestone for Vietnam’seconomy. The BTA provides for the Normal Trade Relations (NTR) status ofVietnamese goods in the US market. In turn, access to the US market will allowVietnam to accelerate its transformation into a manufacturing based,export-oriented economy.Vietnam’s economic stance following the East Asian recession emphasizedmacroeconomic stability. Although the Government maintains a tight rein onmajor sectors of the economy, such as financial services, telecommunicationssectors and areas of foreign trade and economic reform,equitization/privatization of SOEs have fallen behind schedule. The Government,however, appears committed to economic liberalization and internationalintegration. Vietnam’s membership of the ASEAN Free Trade Area (AFTA) andentry into the BTA in December 2001 has contributed to this change of pace.Vietnam achieved accession to the World Trade Organization (WTO) in January2007 to become the 150th WTO member that brings to Vietnam’s businesscommunity many opportunities in integrating into the international trade andchallenges at the same time.B.3 Leading industriesVietnam’s leading industries are oil and gas; textiles and footwear; agricultureand fisheries, banking and construction.B.4 Major exports and importsIn 2009, Vietnam’s total exports amounted to US$56.6 billion; decreased by9.7% against 2008, in which export amount from local sector is US$26.7 billion,and from FDI (including oil) is US$29.9 billion6. Since the BTA betweenVietnam and the US came into force in 2001, the US has overtaken theEuropean Union (EU) as Vietnam’s largest trading partner with estimatedexports of US$11.2 billion. The Association of Southeast Asian Nations(ASEAN) and Japan rank third and fourth with US$8.5 billion and US$6.2billion, respectively. The most impressive export increase is to the Africanmarket with 8 times increase against in 2008 with estimated amount up toUS$1.1 billion.In contrast, total imports in 2009 are estimated at US$68.8 billion, decreased14.7% against same period in 2008.7 Imports from China, which has the largest6.7 GSO, www.gso.gov.vn (Update report in December 2009) Doing business in Vietnam | 14
  • 13. volume with US$16.1 billion, increased by 2.7% compared to the 2008 makingChina now by far, the largest source of imports into Vietnam. The US, EU, Japan,members of ASEAN, newly industrialized countries (Korea, Taiwan and HongKong) and China remain major export markets of Vietnam.Vietnam is a major exporter of crude oil, marine products, rice, coffee, rubber,tea, garments and footwear. In 2009, garment and crude oil exports were thetop earners and footwear and seafood were the second most significant exportproducts, followed by rice, coffee and wooden products. Due to the financialcrisis, exports to all major markets have declined, sometimes substantially.Vietnam exporters have been especially active trying to win markets over inLatin America and Middle East8.Vietnam’s leading imports include petroleum products, steel, motorbikes andfertilizers, with a large proportion of Vietnam’s imports coming in the form ofcapital goods. Although Vietnam is an exporter of crude oil, imports ofpetroleum products reached US$6.2 billion in 2009, decreased by 43.8% inquota due to decrease in price but increases 0.6% in volume. Imports of garmentand textile material for processing also decreased by 17.8%. Foreign Trade in 2009 compared to 2008 (US$ billion) (%) Imports 68.8 85.3 Exports 56.6 90.3 Major export products in 2009 Major export products in value compared to 2008 in value US$ million (%) Seafood 4,200 93.3 Coffee 1,700 81.0 Rice 2,700 92.0 Oil 6,200 60.0 Garment 9,000 98.7 Footwear 4,000 85.0Source: GSO, www.gso.gov.vn (Report on 2009 economic development)8 Taking stock report by WB June 200915 | Doing business in Vietnam
  • 14. C. Financial system
  • 15. C.1 Money and bankingUntil 1988, the financial system in Vietnam consisted of the State Bank ofVietnam (SBV) and its agency network up to provincial level, which distributedcredit to SOEs and other entities under directives of the central plan, andhandled deposits of these SOEs and entities. In 1988-89, the governmentinitiated banking reforms that transformed the mono-banking system into atwo-tiered banking system, that is, the SBV restricted itself to acting as thecentral bank, and its commercial banking activities were taken over bysector-specialized state-owned commercial banks. In 1990, the rules on thesectoral specialization of these banks were removed.During the 1990s, the Government stimulated the entry of new players into thefinancial sector, a policy which led to a substantial increase in the number ofrepresentative offices and branches of foreign banks as well as so-called jointstock commercial banks. Joint ventures between foreign banks and state-ownedcommercial banks were also established, but the services they offered werestrictly circumscribed. Non-bank financial institutions, such as finance, leasinginsurance companies and later on, securities brokerage, fund managementcompanies have also been established.As a young and newly developing country, the Vietnam bank-based financialsystem is assessed as under developed. The Vietnamese government hasundertaken several reforms of the financial system, i.e. renovation of the legalframework for the banking sector including en-action of the Law on the SBV,Law on Credit Institutions and ordinance on foreign exchange as well as anissuance of implementation guidelines. The SBV has also issued measures toenhance the soundness of the country’s banks. These laws and measures helpsecure loans granted by credit institutions and improve their financialtransparency. The SBV has also reduced its intervention in state-owned bank’soperation to encourage their commercial orientation, leading to a diversificationof the financial system.From 2007 to 2009, the foreign currency market has fluctuated unusually. In2008, FDI capital increased significantly up to US$6.4 billion and decreased by70% in 2009. At the same time, there have been many complicated fluctuationsin the international financial and foreign currency market. The value of somestrong currencies also had increased and decreased irregularly. Price of somemajor products, such as oil, rice, steel, etc. changed continuously. Even thoughthe SBV and related government ministries have been implementing severalmeasurements to stabilize the foreign currency market, the VND still has beendevalued.In 2009, while the currency market has not overcome the devaluation pressure,the world financial crisis has continued to impact the Vietnam economy leadingto significant decrease in export quota, FDI capital and international tourists toVietnam. International trade balance from a surplus of US$10.17 billion in2007, US$273 million in 2008 to a deficit of US$1.9 billion in 2009, the highestdeficit in recent years.17 | Doing business in Vietnam
  • 16. Share in the banking capitalThe year 2009 saw significant equitization and listing of two major stated-owned banksnamely Vietinbank and Vietcombank, the largest stated owned bank in Vietnam. By theend of 2009, there are three state-owned commercial banks, namely: BIDV, VBARD andMekong Housing Bank; five 100% foreign invested Banks namely HSBC, StandardChartered Bank (Vietnam) Ltd, ANZ, Shinhan Vietnam Bank Limited, Hong LeongBank Vietnam Ltd with charter capital nearly VND8,000 billion; and several branches offoreign banks including large names, such as Citibank, Deustch Bank, Calyon, MayBank, etc. The rest of the market is shared by joint-stock and joint venture banks. Theaverage charter capital of each state-owned commercial bank ranged between US$450million to US$500 million. Most joint-stock banks have an average capital of US$150million to US$200 million9.Restrictions on the use of foreign currencyThe Government is committed to seeing the VND secure the status of the primarycurrency used in the economy. For that reason, certain restrictions were imposed onthe use of foreign currency in Vietnam.The local foreign exchange market in Vietnam is, however, subject to regulatory controls.While sale and conversion regulations were relaxed in 1999, foreign companies wereonly given the right to convert VND into US$ to cover current payments in January2001. The requirement for the compulsory conversion of foreign currency revenue fromcurrent transactions, at the rate of 80%, was also introduced in September 1998. Thisrequirement was, however, removed in May 2003. On 13 December 2005 and 28December 2006, the government issued the Ordinance on Foreign Exchange Controlsand Decree No.160-2006-ND-CP providing regulations for implementation of Ordinanceon Foreign Exchange Controls respectively which provides detailed regulations forimplementations of foreign exchange activities of residents and non-residents in currenttransactions, capital transactions and use of foreign currency, etc.Within the territory of Vietnam, all transactions, payments, listings andadvertisements of residents and non-residents must not be affected in foreignexchange except for the following cases:1. Transactions with credit institutions and other institutions permitted to provide foreign exchange services2. Residents being organizations shall be permitted to transfer capital internally by a telegraphic transfer of foreign currency (as between an entity with legal status and a dependent accounting entity or vice versa)3. Residents shall be permitted to contribute capital in foreign currency in order to implement a foreign investment project in Vietnam4. Residents shall be permitted to receive payment by a telegraphic transfer of foreign currency pursuant to a contract entrusting import or export5. Residents being domestic or Foreign Contractors (FCs) shall be permitted to receive payment by a telegraphic transfer of foreign currency from investors or head contractors in order to make payment and disbursement transactions and to remit money overseas9 Source: GSO, www.gso.gov.vn and SBV’s news Doing business in Vietnam | 18
  • 17. 6. Residents being institutions providing insurance business services shall be permitted to receive a telegraphic transfer of foreign currency from insurance purchasers for all types of goods and services which must be reinsured offshore7. Residents being institutions conducting business in duty free goods, providing services in separated areas in international border gates or providing customs bond warehouse services shall be permitted to receive payment in foreign currency and VND for the supply of goods and services8. Residents being customs and police offices of international border gates and customs bond warehouses shall be permitted to receive foreign currency from non-residents for all types of taxes and fees for entry/exit visas and fees for the provision of services9. Non-residents being diplomatic offices and consulates shall be permitted to collect fees for entry/exit visas and other types of fees and charges in foreign currency10. Non-resident and residents being foreigners shall be permitted to receive salary, bonuses and allowances in foreign currency from residents and non-residents being organizations11. Non-residents shall be permitted to make telegraphic transfers of foreign currency to other non-residents or to make payment to residents of money for the export of goods and services12. Other necessary cases after consideration by and permission from the Governor of the SBV10Use of foreign currency cash by individuals1. Residents and non-residents being individuals with foreign currency cash shall be permitted to store or carry such cash personally to donate or bequeath it, to sell it to an authorized credit institution, to remit or carry it overseas to service lawful purposes, or to pay it to entities entitled to collect foreign currency pursuant to this Decree.2. Residents being individuals with foreign currency cash shall be permitted to deposit it in savings accounts at authorized credit institutions, and to withdraw the principal in and to receive interest in foreign currency cash in accordance with the Law on foreign currency savings accounts11.Use of VND by non-residentsNon residents being organizations and individuals shall be permitted to open and useVND accounts at authorized credit institutions in order to implement the followingrevenue and disbursement transactions:1. To collect proceeds from sale of foreign currency to an authorized credit institution2. To collect revenue from other legal sources in Vietnam3. To make cash payments or to withdraw cash to spend in Vietnam4. To disburse in payment of a current transaction of capital transaction in accordance with this Decree5. To disburse by way of gift or payment of an inheritance in accordance with law10 Article 29, Chapter IV of Decree No. 160-2006-ND-CP on providing regulations forimplementation of ordinance on foreign exchange control. (Decree No. 160)11 Article 32 of Decree No. 16019 | Doing business in Vietnam
  • 18. 6. To disburse by way of purchase of foreign currency at an authorized credit institution for remittance abroad7. To disburse for other purposes permitted by law12Use of currencies of countries with a common border with Vietnam1. Residents being organizations and individuals who have lawful revenue in currencies of a country with a common border with Vietnam from activities of export and import goods and services or who have other lawful revenue shall be permitted to open VND accounts at authorized credit institutions in order to implement the following revenue and disbursement transactions:a. To collect proceeds from the sale of goods and servicesb. To collect proceeds being the purchase at an authorized credit institution of a currency of a country with a common borderc. To collect revenue from other legal sources in Vietnamd. To disburse by way of payment for the import of goods or servicese. To disburse by way of sale to an authorized credit institution or exchange bureauf. To withdraw in cash in order to pay salary, bonuses and allowances to foreigners working for an organization or to spend in a country with a common borderg. To disburse for other purposes permitted by law2. The use of currencies of countries with common borders with Vietnam to purchase or sell goods in border areas and in economic zones of border gates must comply with regulations of the SBV13.Exchange ratesThe foreign exchange rate is set by averaging rates from the previous day’sinter-bank transactions. This crawling peg system has established a trading bandthat allows VND/US$ exchange deals to be executed within a tight band. TheGovernment is, however, planning to move towards a more market-determinedexchange rate in coming years.Daily spot exchange rates are announced by the SBV based on the previousday’s average rate on the interbank market. Other banks must then trade within+/- 3% of this official rate.Government assistance on foreign currency matters to enterprises withforeign owned capitalEnterprises with foreign owned capital and parties to Business CooperationContracts (BCCs) may buy foreign currency from commercial banks to meet thedemands of their current transactions and other allowable activities.12 Article 33 of Decree No. 160: Use of VND by non-residents13 Article 35 of Decree No. 160: Use of currencies with a common border with Vietnam Doing business in Vietnam | 20
  • 19. The Government has given assurance to provide assistance in meeting theforeign currency balance of particularly significant investment projects inaccordance with Government programs during a specific period. In addition, theGovernment assures its assistance in the foreign currency balance for projects toconstruct infrastructure facilities and certain other significant projects wherecommercial banks do not provide sufficient foreign currencies.The SBV’s role on interest ratesThe SBV has intervened in local currency interest rates since May 2008 apartfrom setting the base rate. Commercial banks are therefore required to set theirown mobilizing and lending rates lower than 150% of the base rate.C.2 CurrencyThe official currency of Vietnam is the VND. In 2003, the SBV released coinsdenominated in VND200, VND500, VND1,000, VND2,000 and VND5,000following a 20-year hiatus. Vietnam has completed the conversion of paperbanknotes to Polymer banknotes denominated in VND10,000, VND20,000,VND50,000, VND100,000, VND200,000 and VND500,000 which were issuedfrom 2004 to 2006.Access to cash is now becoming more convenient with the presence ofAutomated Teller Machines (ATMs) network throughout the country. Traveler’schecks and charge or credit cards, such as American Express, MasterCard andVisa are now widely accepted by travel agencies, hotels, and major restaurantsand shops.C.3 Foreign exchange controlsThe inflow of foreign currency into Vietnam is generally welcomed with minimumrestrictions, although the transfer of foreign currency out of the country is stillcontrolled. Enterprises with foreign owned capital must open accountsdenominated in a foreign currency or VND at a bank located in Vietnam andapproved by the SBV. All foreign exchange transactions, such as payments oroverseas remittances, must be in accordance with policies set by the SBV.Enterprises with foreign owned capital and foreign parties to BCCs may buyforeign currency from a commercial bank to meet the requirements of currenttransactions or other allowed transactions, subject to the bank having availableforeign currency. The Government may guarantee foreign currency to significantinvestment projects or assure the availability of foreign currency to investors ininfrastructure facilities and other significant projects.Under current regulations, all foreign currency income generated in Vietnamfrom exports, services and any other sources must be deposited at or sold tolicensed banks in the country, except in special cases approved by the SBV.Before May 2003, Vietnamese companies, foreign-invested enterprises, partiesto BCCs, FCs and foreign branches were required to sell at least 30% (loweredfrom 40% in May 2002) of their current foreign-currency earnings upon receiptof foreign currency. From May 2003, the compulsory conversion percentage wasreduced to 0%.21 | Doing business in Vietnam
  • 20. Generally, banks prioritize the sale of foreign currency to companies that need itto import materials and supplies for the production of exports.Foreign investors are allowed to repatriate the following: Profits made from business operations Payments received for service provision and technology transfer Principal and interest from offshore loans and credits Invested capital Other sums of money and assets legally owned by the foreign partnerForeign exchange is regulated by the Foreign Investment Law of Vietnam. Whilst theself-sufficiency rule has been in effect for some time, the SBV has, in the past, beenflexible on currency conversion. A substantial trade imbalance may lead the SBV toenforce the self-sufficiency requirement in the future.Opening of bank accounts by foreign invested enterprisesEnterprises with foreign owned capital and foreign parties to business co-operationcontracts must open a direct investment capital foreign currency account at anauthorized credit institution in order to implement the following revenue anddisbursement transactions: 1. Receipt of charter capital monetary contributions, receipt of capital for implementation of direct investment and receipt of medium and long-term foreign loan capital 2. Receipt of foreign currency from a foreign currency savings account of a resident being an enterprise with foreign owned capital or a foreign party to a business co-operation contract 3. Disbursement of foreign currency remitted into a foreign currency savings account of a resident being an enterprise with foreign owned capital 4. Disbursement to outside Vietnam of principal, interest and fees on a foreign medium or long term loan 5. Disbursement to outside Vietnam of capital, profit and other legal revenue of a foreign investor 6. Other revenue and disbursement transactions relating to direct foreign investment activities14In addition, Foreign Invested Enterprises (FIEs) may open current accounts in aforeign currency and VND at authorized banks in Vietnam for their businesstransactions.Registration of overseas borrowingsAll medium and long-term loans from foreign sources must be registered with andperiodically reported to the SBV. The borrower is required to comply with severalother requirements in purchasing foreign currency from financial institutions to repaythe loan, e.g. the repayment must be in line with the repayment schedule.14 Article 11: Decree No. 160 Doing business in Vietnam | 22
  • 21. C.4 Stock exchangeVietnam’s stock market was established in July 2000 in Ho Chi Minh City withtwo listed companies. The market trades in company issued shares and bondsissued by the Government, credit institutions and corporate. By the end ofDecember 2009, there are 443 companies listed on the Hanoi and Ho Chi Minhstock exchange with total market capitalization of nearly VND210 trillion.The Government has taken measures to develop the market by amendingregulations relating to the capital market, reorganizing authority structures,accelerating and linking the SOE equalization process to the stock market.In order to enhance the role of regulators, Decree No. 66/2004/ND-CP placedthe SSC under the direct supervision of the Ministry of Finance (MoF) on 19February 2004. This represents a rational step to the process of stock marketdevelopment in Vietnam. The MoF is the governing body responsible for themacro-finance policies and development of the financial market, therefore isable to enforce these policies efficiently and effectively. First and foremost, itwill increase the volume of high-quality securities in the stock market - a crucialelement to the development of the market, and in addition to that, otherfinancial policies by the MoF (i.e. issuing bonds, taxes and fees) would delivercoherence and unification between the stock market and other financialmarkets, hence ensuring safety for these markets.In September 2005, the PM increased the cap on total foreign shareholdings ondomestic companies listed on the securities market from 30% to 49% of the totalshares of a listed company, except for listed banks, of which the cap still remainsat 30%. Foreigners purchasing or selling shares in Vietnam’s securities marketmust, however, register for a foreign investment management code with theStock Exchange Department through a depository bank as prescribed by theSSC. In respect of bonds listed on the stock exchange, foreign investors areallowed to buy unlimited units.Foreign securities institutions who wish to engage in securities businesses inVietnam must establish a joint venture company with a Vietnamese partner inaccordance with a SSC-issued license. The maximum foreign holding allowed insuch a joint venture is 49% of the charter capital. Similarly, a foreign investmentfund that wishes to invest in the Vietnamese securities market must be licensedby the SSC.Representative offices of foreign securities companies and fund managementcompanies in Vietnam151. Foreign securities companies and foreign fund management companies shallbe permitted to establish a representative office in Vietnam after they haveregistered its operation with the SSC.2. An application file for registration of the operation of a representative office15 Article 78 of Law on Securities passed by Legislature XI of the National Assemblyof the Socialist Republic of Vietnam at its 9th Session on 29 June 2006.23 | Doing business in Vietnam
  • 22. of a foreign securities company or foreign fund management company inVietnam shall contain the following documents: a. Application for registration of the operation of a representative office b. Copy of the operation license of the foreign securities company or foreign fund management company c. Copy of the charter of the foreign securities company or foreign fund management company d. Curriculum vitae of the person proposed to be appointed as head of the representative office in Vietnam and a list of the staff (if any) proposed to work in the representative office3. Within a time-limit of seven (7) days from the date of receipt of a validapplication file, the SSC shall issue a certificate of registration of the operationof the representative office of the foreign securities company or foreign fundmanagement company in Vietnam. In a case of refusal, the SSC shall provide awritten notice specifying its reasons for the refusal.4. The operational scope of a representative office may comprise one, a number,or all of the following items: a. Implementation of the function of a contact office and the conduct of market research b. Promotion and formulation of co-operative projects in the securities and the securities market sector in Vietnam c. Advancement and supervision of the performance of contracts already agreed and signed between a foreign securities company or foreign fund management company on the one hand and economic organizations of Vietnam on the other d. Advancement and supervision of the performance of projects which the foreign securities company or foreign fund management company finances in Vietnam5. A representative office shall not be permitted to conduct securities businessactivities.6. A representative office shall be subject to administration and supervision bythe SSC.100 % foreign invested securities firms will be permitted to be established inVietnam once Vietnam complies with WTO regulations.At the beginning of 2007, governing agencies launched several measures toestablish a legal basis to help develop a stable and healthy market, including: Issuance of the Laws on Securities (which are validated from 1 January 2007), Decree No. 14/2007/NÐ-CP providing detailed regulations on the implementation of a number of articles on the Law on Securities. Decision No. 27/2007/QD-BTC promulgating regulations on the organization and operation of securities companies, Decision No. 35/2007 QD-BTC on the organization and operation of fund management companies, Decision No. 45/2007/QD-BTC on establishment and management of securities investment funds, Decision No. Doing business in Vietnam | 24
  • 23. 03/2007/QD - NHNN on 19/1/2007, Decision No. 18/2007/QD-NHNN on 25/4/2007 and Directive No. 03/2007/CT-NHNN regulating the management of loan portfolios for securities investment Decision No. 12-2007-QD – BTC dated on 13 March 2007 of the Ministry of Finance to promulgating regulations on corporate governance applicable to companies listed on the stock exchange or a securities trading center, Decision No. 15-QD-TTLK dated 2 April 2008 of SSC issuing regulations on exercise of shareholders rights; and Special coordination between the MoF, the SSC and the SBV which will help to gradually improve the supervision over the market in terms of registration, custody, publicity and transparency, etc.In 2008, the global crisis and the turbulence of the domestic economy placedpressure on the stock market. During the first few months of the year, inflationincreased unexpectedly leading to the concerns on the liquidity and vulnerabilityof the banking system. The monetary market was expanding with interest ratesincreasing dramatically. As a result, the SBV was adopting amonetary-tightening policy. The stock index plunged continuously and a widerange of investors suffered from losses and capital shortage. Many investors leftfor real estate or gold investments while the stock market attracted few newinvestors. Consequently, the Vietnamese stock market was on a decreasingtrend in the first 6 months of 2008 and witnessed the lowest point in June2008. In the second half of 2008, the Vietnam stock market had suffered from acontinuous decrease trend.The year 2009 is continued to be recognized as a turbulent year with securitiesstock exchange. At the beginning of the year, VN-Index decreased significantlyfrom 303.21 to 235 on 24 February 2009. With positive information on a betterfuture for Vietnam and global economy, the VN-Index increased to over 600points in middle of October and HNX- Index also increased to over 200 pointssuccessfully with significant increase of banking securities. However, aftersuccessful transactions, VN-Index continued to decrease in the last two monthsof the year. Many analysts concluded that the turbulent change in Vietnam stockmarket was partly caused unstable sentiment of investors due to recenttightening of credit policies17.Currently, there are about 103 securities firms in operation with an averagechartered capital at more than VND200 billion. Their main activities arebrokerage and proprietary trading. In addition, there are 43 funds managementcompanies and 8 custody/deposited banks.18 With the gradual improvement ofthe legal framework along with the expertise and experience of the managersand investors, the Vietnamese stock market has strongly adjusted and achievedcertain development.17 Source: www.dantri.com.vn (Dan Tri’s analysis on most outstanding economic events ofVietnam in 2009)18 Mekong Capital, www.mekongcapital.com (Updated information from SSC departmentmanaging securities firms and funds on 28 Dec 2009)25 | Doing business in Vietnam
  • 24. D. Regulations oninvestment/enterprises
  • 25. D.1 GeneralAll investment activities in Vietnam are regulated by the Law on Enterprise (LOE)passed by the National Assembly dated 29 November 2005 and the Law onInvestment (LOI) passed by the National Assembly dated 29 November 2005. Bothlaws became effective as of 1 July 2006.The LOE addresses the types of companies and business establishments permitted tooperate in Vietnam, their governance, liability and way of operation.The LOI includes provisions on investment activities, rights and obligations ofinvestors, the registration and evaluation of investment projects, investmentincentives, investment guarantees and State management of investment. This Lawreplaces the old Law on Foreign Investment in Vietnam and the Law onEncouragement in Domestic Investment and is commonly applicable to both foreignand domestic investors.Vietnam has signed and acceded to various bilateral and multilateral arrangements oninvestment, such as agreements for the promotion and protection of investments with47 countries and territories, the ASEAN Framework Agreement on Investment (AIA),the BTA with the United States of America containing an investment charter, theConvention on the Establishment of the Multilateral Investment Guarantee Agency(MIGA), and other related international investment agreements.Where the international agreements contain provisions inconsistent with theprovisions of the legal instruments on FDI, the provisions of those internationalagreements shall be applied.In 1995, Vietnam became a member of ASEAN and three years later it joinedAsia-Pacific Economic Cooperation (APEC). In 2000, Vietnam signed a BilateralTrade Agreement (BTA) with the United States. This trend towards regional andglobal integration is expected to promote socio-economic stability, better mobilizationof domestic resources, and improve efficient allocation of these resources. Moreover,the Government has embarked on and prioritized a long-term reform program for theadministrative and regulatory framework governing foreign investment. Thiscombination of internal and external factors should serve to improve the generalinvestment climate.Vietnam officially joined the WTO on 7 November 2006 and put its commitments intoforce from 11 January 2007.The accession of Vietnam to WTO has brought a positive impact to Vietnam’s marketand economy, including: The considerable reduction of import duties on goods for domestic production as well as for private and government consumption The liberalization of Vietnam’s services market. Under the WTO’s classification, provision of services is divided into four modes: (i) cross-border (e.g., electronic money transfer services between countries; (ii) services consumed abroad (e.g., tourist services); (iii) commercial presence (e.g., FDI in services in Vietnam); and (iv) people (e.g., foreigners providing services in Vietnam). The liberalization of the services sector, especially in27 | Doing business in Vietnam
  • 26. modes (i) and (iv), will affect FDI flow in Vietnam. The services sub-sectors that used to be closed or restricted to foreign investment (such as distribution, transport, telecommunication, finance, etc.) is largely liberalized from the year 2009 (despite some limited conditions and a transitional period of three or five years)D.2 Government owned industries and privatizationThe Government is working towards improving the investment environment for theprivate sector despite a high degree of state control of the key sectors of theeconomy. The privatization process is proceeding slowly, and from 4,700 SOEs in2001, the Government intends to divest them all by 2010: a process which involvedthe equalization of 350 SOEs in 2006 and 116 in 2007. Additionally, the State willreduce its holding in the equitized SOEs to 51% or 35%. The State has establishedthe State Capital Investment Corporation (SCIC) which holds the majority of theState’s share in equitized and privatized enterprises, in addition to conducting otheractivities, akin to other sovereign wealth funds like Singapore’s’ Temasek. LargeSOEs operating in key areas, such as electricity, cement, metallurgy, chemicals,construction, transportation, banking, telecommunication, the airlines andinsurance industries are being equitized. One major example is the December 2007Bank for Foreign Trade of Vietnam (Vietcombank) share issue – supported bynewly-issued Government regulations.To promote this, the Government has fulfilled the conditions of economic reformthat were necessary for its WTO entry and in efforts to meet its obligations underthe bilateral trade agreement with the US.The new laws streamlining the formation and operation of private companies haveresulted in an increase in the number of Small and Medium-sized Enterprises(SMEs). This process is being encouraged by the World Bank structural adjustmentprocesses and by reform in the banking sector.D.3 Investment guaranteesThe Vietnamese Government guarantees fair treatment for investors. Investors’capital and other legal assets will not be expropriated or confiscated by law oradministrative measures, and businesses with foreign-invested capital will not benationalized. Foreign investors are allowed to remit abroad investment capital andprofits, loan principal and interest, and other legal proceeds and assets.Expatriates working for businesses with foreign-invested capital or for a BCC areallowed to remit their income abroad.The interests of foreign investors are satisfactorily guaranteed in the event ofadverse effects caused by a change in law through the application of a number ofmeasures. The LOI warrants that such changes will be disregarded or thatdisadvantages to the investor stemming from a change in law will be compensatedby permission to amend its operations, the granting of compensatory taxexemptions or by other means of compensation for damages.Moreover, where more favorable provisions are enacted, existing investors will beable to reap those benefits. Doing business in Vietnam | 28
  • 27. Upon the completion of company liquidation procedures, foreign investors maytransfer abroad any remaining capital.D.4 Forms of enterprisesLimited liability companyUnder the LOE, the following forms of enterprise exist in Vietnam: Limited liability company with one member (one-member LLC) Limited liability company with more than one membersA limited liability company is a legal entity established by its members by way ofcapital contribution to the limited liability company. The capital contribution ofeach member is treated as equity. The members of a limited liability company areliable for the financial obligations of the limited liability company to the extent oftheir capital contributed – or undertaken to be contributed - to the limited liabilitycompany.A limited liability company established by one or more foreign investors may takethe form of either a 100% Foreign Owned Enterprise (FOE) (where all membersare foreign investors) or of a foreign-invested joint-venture enterprise betweenone or more foreign investors and one or more domestic investors.Joint stock company/shareholding companyA joint stock company is a legal entity established by its founding shareholderson the basis of their subscription of shares of the joint stock company. Thecharter capital of a joint stock company is divided into shares and each foundingshareholder holds a number of shares corresponding to their subscribed and paidup shares in the joint stock company.A joint stock company is required to have at least three shareholders (with nomaximum number of shareholders).PartnershipsA partnership is required to have at least two members and the unlimited liabilitypartners are liable for the obligations to the extent of all their assets.Private enterpriseA private enterprise is owned by one individual who is liable for all activities ofthe enterprise to the extent of all his/her assets. Private enterprises may notissue any type of security. An individual may only establish one privateenterprise.The LOE does not address the establishment of a private enterprise of a foreigninvestor. It will be regulated by separate regulations issued by the Governmentwhich are not available at this time.29 | Doing business in Vietnam
  • 28. D.5 Forms of direct investmentThe LOI provides for the following basic forms of direct investment: jointventures, 100% FOEs and BCC.Joint ventureFundamentally, the foreign investor and its Vietnamese partner jointly apply toestablish a company. The investor has two ways to create a joint venture: (i)create a new enterprise (including merger & acquisition); or (ii) participate in anexisting enterprise via the purchase of a proportion of the company’s shares.There is no requirement on the minimum amount of foreign equity, unless it is ajoint venture between the State or its bodies and the foreign investor.A joint venture may be established as a limited liability company with more than onemember, as a joint stock company or as a partnership and is a legal entity withlimited liability established on the basis of a joint venture contract between:(1) A Vietnamese party and a foreign party(2) A Vietnamese party and a 100% FOE(3) A joint venture enterprise and a foreign party(4) A joint venture enterprise and a 100% FOE; or(5) Two joint venture enterprises.100% FOEs/wholly foreign-ownedA 100% FOE is a legal entity set up by one or more foreign investors under a formof enterprise as set out above. The common form of 100% FOE is a limitedliability company or a joint stock company, except in cases where a partnership isa compulsory form.Foreign investors are prevented from engaging in certain sectors in form of 100% FOE.Foreign investors are not subject to minimum investment capital restrictions asVietnam does not have thin capitalization rules. It previously had a maximum70:30 debt to equity limit; however, this was removed in 2006, and the debt toequity structure of the company will be subject to, negotiation with, and approvalof, the licensing authority, except certain sectors where a fixed amount of legalcapital (equity) is regulated.Business cooperation contractA BBC is an agreement between one or more foreign investors and one or moreVietnamese partners with the objective of cooperating to operate one or morespecific business activities. This form of investment does not constitute a new legalentity and the investors have unlimited liability for the debts of the BCC. This formof investment is generally only chosen by foreign investors with respect to projectswhere investment is restricted to a BCC, such as certain telecommunicationsprojects or projects in relation to airlines, railways or sea transportation. A BCCprovides, however, more flexibility than a joint venture or a 100% FOE. Within theframework of Vietnamese law, the parties involved are Doing business in Vietnam | 30
  • 29. free to decide on the subject, content, interests, obligations and responsibilities of andrelations among the parties, and to specify these in the contract.Build operate transfer, build transfer, build transfer operate or build operatearrangementsBuild Operate Transfer (BOT), Build Transfer Operate (BTO), Build Transfer (BT) andBuild Operate (BO) investments are recognized under the Law on Foreign Investment,but are largely governed by a separate legislation. Foreign investors may sign a BOT,BT and BTO contract with a competent state body to implement infrastructureconstruction projects in Vietnam. These are often in the areas of traffic, electricityproduction and trade, water supply or drainage, and waste treatment. The rights andobligations of foreign investors will be regulated by the signed BOT, BT and BTOcontracts.Under BOT, the investor is fully in charge of construction and management of a projectfor a specific duration, after which the project is to be transferred to the state withoutany compensation.Under BTO, the title has to be transferred to the state immediately upon completion ofconstruction; however, the state will allow the investor to operate the project over theperiod of time agreed by both parties in the contract so that the investor can recovercapital and reasonable profits.Under BT, the project is transferred to the state on completion of construction and theState pays the investor by either granting the right to implement another project ormaking payment as agreed in the BT contract.Other facilities for business and investment in VietnamBranchA branch office is a dependent unit of a foreign entity and may conduct commercialactivities for direct profit-making purposes in line with international treaties to whichVietnam is a signatory.This is not a common form of foreign direct investment but banks, tobacco companies,airlines, law firms, and foreign companies operating in the fields of culture, educationand tourism are allowed to establish branches in Vietnam. Foreign companies may alsoestablish branches in Vietnam to conduct trading activities and activities directlyrelated to trading of goods.The establishment of a foreign company branch is simpler than the establishment of a100% FOE (i.e. time frame for granting branch license is within 15 days), with thedifference that a 100% FOE is a Vietnamese legal entity separate from its parentcompany while a branch still holds foreign legal entity status and is dependent on itsparent company.Representative officeIn addition to obtaining investment licenses for establishment of a legal entity inVietnam, foreign companies which have business relations with Vietnam, or investmentprojects in Vietnam, can apply to open representative offices in Vietnam.31 | Doing business in Vietnam
  • 30. A Representative Office (RO) is not an independent legal entity and is notpermitted to conduct direct commercial activities (such as execution of contracts,direct payment or receipt of monies, sale or purchase of goods, or provision ofservices). However, a RO can: Act as a liaison office to study the business environment Search for trade and/or investment opportunities and partners Act on behalf of its head office to negotiate and sign contracts for the supply or purchase of goods and services at the authorization of the parent company (care needs to be taken for tax purposes) Supervise and accelerate the implementation of contracts Act on behalf of the parent company to supervise and direct the implementation of investment projects in Vietnam; and Publicize and promote its company’s goods and/or services A RO is allowed to hire local Vietnamese and expatriate staff and conduct various administrative functions on behalf of its companyA representative office may, however, not engage in any profit generating activities.D.6 Investment incentivesThe system of tax and other incentives offered to foreign investors and domesticbusinesses is relatively complex. Standard benefits include reduced corporate taxrates, tax-free periods or tax reductions during the start-up phase, land-rentreductions and import-duty exemptions. As a general guide, the followingincentives are available to investors:BOT projectsIncentives offered to BOT projects include the following: Reduced Corporate Income Tax (CIT) rates e.g. 10% or 20% relative to the statutory rate of 25% Tax holiday for 4 years from the first profit-making year and a 50% reduction in the applicable rate for the following 9 years Exemption from certain import and export duties; and Exemption from paying land use feesLocation in special zonesThe Government encourages Vietnamese enterprises in all economic sectors,foreign economic organizations and FIEs to invest in IZs, Economic andHigh-Technology Zones (HTZs).In Ho Chi Minh City, there are over 10 IZs which are in operation, covering a totalarea of about 3,000 hectares. The city’s master plan for IZs until 2020 envisages21 zones (17 IZs, 3 EPZs and 1 HTZ) covering a total area of 7,100 hectares.There is a high-tech zone in Ho Chi Minh City.These zones have the following infrastructure conditions: Location: situated on a primary road transportation artery, or next to the port, 5km to 8km from the city center Doing business in Vietnam | 32
  • 31. Power source: directly connected to the national power network Water source: connected to the city’s water system Land rental: ranging from US$100 to US$250 per square meter, depending on the leased area, its location, lease term, payment terms and infrastructure conditionsIndirect investmentIn addition to carrying out direct investment activities, foreign investors mayconduct indirect investments by way of purchasing shares, bonds and other valuablepapers; investing through securities investment funds and investing through otherintermediary financial institutions, where the investor does not participate directlyin the management of the investment activity.D.7 Conditional sectorsUnder the LOI, certain sectors are subject to particular conditions for investment. Inorder to engage in these sectors, a foreign or local investor must meet certainconditions set by the Vietnam Government including the conditions regarding formsof investment, the conditions applicable to establishment of economic organizationsand conditions on market access.In addition, a number of investment sectors are unconditional for Vietnameseenterprises but conditional for foreign investors (e.g., exploitation and processingof mineral resources, and investment in the fields of importing, exporting, tradingand distribution, etc.). The LOI and its guiding Decree No. 108/2006/ND-Cpdated 22 September 2006 provide for such list of investment sectors, however,relevant sectoral legislation shall provide the "conditions" that foreign investorsare required to meet. In certain industries, this may mean that the FOE may onlyoperate in the form of a foreign-invested JVE with the majority or minorityparticipation of a Vietnamese enterprise. In other sectors, FOEs operating inconditional investment sectors may nevertheless operate as 100% FOEs but mustmeet certain conditions of capital structure, project-specific experience and soforth.The List of Conditional Investment Sectors include the following sectors: television,production and publishing of cultural products, telecommunications, transportationby all means, cigarette manufacturing, exploring and processing natural resources,real-estate business, education, and medical services distribution.D.8 Investment licensingD.8.1 Licensing authoritiesThe authorities who are authorized to issue establishment licenses to Vietnameseand foreign-owned companies include (i) the PM of the Government whoseapproval is limited to “investment policy”, (ii) the People’s Committees (PCs) inthe provinces and cities under the central state administration and (iii) themanagement authorities of industrial zones, export processing zones, high-techzones and economic zones in the provinces and cities under the central stateadministration (Management Authorities (MAs)).33 | Doing business in Vietnam
  • 32. The hierarchy of the investment approval and licensing authority is as follows: Prime Minister: Projects regardless of capital source or capital amount within specific sectors (airports, seaports, mining, oil & gas, TV broadcasting, casinos, cigarette manufacturing, universities, development of IZs, EPZs, HTZs and ECs (Zones) Projects regardless of capital source with capital amount over VND1,500 billion within specific sectors (electricity, metallurgy, alcohol and beer production, trading, etc.) FDI projects regardless of capital amount within specific sectors (sea transportation, post, telecom and internet networks, printing, etc.) People committees (which almost all of the technical issues, i.e. receiving application, reviewing application, etc. are handled by local Department of Planning and Investment): Projects outside Zones and not under PM’s approval authority Projects for development of infrastructure in Zones in localities with no MA MAs: Projects in zones and not under PM’s approval authority Projects for development of infrastructure in ZonesAll investment certificates (previously called “investment licenses”) are nowissued by either the relevant PCs or MAs. However, in specialized sectors, suchas banking or insurance, the relevant line ministries are still empowered with theapproval and licensing authority.D.8.2 Licensing proceduresDepending on the size and the sector of investment, different licensing andregistration procedures will be applied: Business registration Investment registration; or Investment evaluationD.8.3 Business registrationDomestic projects of less than VND15 billion (approximately US$830,000),and which are not included in conditional sectors are subject to businessregistration procedures.However, these projects shall be subject to investment registration where (i) they fallwithin a conditional sector, or (ii) if they wish to apply for investment incentivesrecorded in their license. Doing business in Vietnam | 34
  • 33. D.8.4 Investment registrationRegistration procedures under the LOE and LOI apply to foreign investment projectswhich have an invested capital of less than VND300 billion (approx. US$16.75 million)and are not in a conditional investment sector.Domestic invested projects with total invested capital of between VND15 billion toVND300 billion (approx. US$16.75 million) are also subject to this registrationprocedure. Local investors tend to set up their corporate entity separately and then filefor registration of any project without receiving an investment certificate.Enterpriserises can register additional investment projects without the need to create alegal entity.D.8.5 Evaluation proceduresApply to foreign and domestic invested projects which are: Invested capital of VND300 billion or more; or Included in the list of conditional investmentsForeign investors investing in Vietnam for the first time must have an investmentproject and carry out either registration or evaluation procedures, in order for aninvestment certificate to be issued. What investment What investment Who is entitled? process applies? document is issued?Business Domestic investment None, unless None, Businessregistration projects with invested investment Registration Certificate(only) capital below VND15 incentives are issued under the (new) billion (i.e. desired. LOE US$830,000) excluding conditional projectsInvestment Domestic investment Registration of For foreign projects,registration projects with invested investment on sample Investment License (which capital from VND15 form at provincial is also Business billion to VND300 State administrative Registration Certificate) in billion; foreign invested body for investment, the case of initial projects with invested accompanied by establishment of economic capital below VND300 prescribed organization to undertake billion (approx. documentation first investment project); US$16.7 million), (more onerous for For domestic projects, excluding conditional foreign projects) Investment Certificate and projects Business Registration Certificate (a one-step but two-part process)35 | Doing business in Vietnam
  • 34. What investment What investment Who is entitled? process applies? document is issued?Investment Project which are in The Application For foreign projects,evaluation/ conditional sectors; Dossier varies from Investment Licensecertification Projects with invested (i) projects below (which is also Business capital of VND300 VND300 billion Registration Certificate billion (approx. which are in in the case of initial US$16.7 million) or conditional sectors, establishment of more (ii) projects over enterprise to undertake VND300 billion first investment which are in project); For domestic conditional sectors, projects, Investment and (iii) projects Certificate and Business over VND300 Registration Certificate billion which are (a one-step but not in conditional two-part process). sectors.Note: See the exchange rate at Appendix 2, page 75.D.8.6 Application dossierIn general, the following documents are required for the establishment of a 100% FOE: Request for the issuance of an investment certificate in the prescribed form A draft charter of the company to be established A list of investors in the prescribed format A report of the financial capability of the investors An economic and technical explanation of the project “Feasibility Study” An explanation of how the conditions will be satisfied The investor’s Certificate of IncorporationDepending on particular case and during the evaluation process, the licensingauthority may request the investors to provide additional documents (such asaudited financial reports or banker letter of comfort) or further clarifications. Doing business in Vietnam | 36
  • 35. D.8.7 Post licensing proceduresUpon obtaining the Investment Certificate, a FOE is required to conduct certainadministrative formalities, including, but not limited to:(i) Obtaining the seal and the seal registration(ii) Placing an announcement of its establishment in a print or electronic newspaper permitted to be circulated in Vietnam in three consecutive issues(iii) Opening a bank account(iv) Registering the tax code(v) Arranging accounting team/policy(vi) Recruitment/register employees with relevant labor authoritiesD.9 Labor and recruitment regulationsD.9.1 Labor recruitment by a FIEUnder the revised Labor Code, a FOE may either directly recruit Vietnameseemployees or recruit via an authorized labor agency. The FOE is then required toregister the list of recruited Vietnamese employees with the local labordepartment, and submit reports on the utilization of and changes to staff to thelabor department on a periodic basis.D.9.2 Registration of expatriate employeesAll expatriates working for a Vietnamese employer for a period of more thanthree (03) months are required to obtain a work permit. The employer isrequired to submit applications to the local labor department to obtain workpermits for its expatriate employees.D.9.3 Social insurance, health insurance and unemployment insurance contributions for employeesThe Law on Social Insurance (SI) became effective on 1 January 2007 whichproviding guidance of SI and Unemployment Insurance (UI). The Law on HealthInsurance (HI) became effective on 1 July 2009. SI, UI and HI contributions arecompulsory for Vietnamese employees.The SI contributions, 15% by the employer and 5% by the employee, are requiredwith respect to Vietnamese employees.The UI contributions, 1% by the employer and 1% by the employee, are requiredwith respect to Vietnamese employees. It is only required for the employer thathas 10 employees or more.HI contributions, which are 2% by the employer and 1% by the employee, arealso required to be made with respect to Vietnamese employees and also foreignemployee (effective from 1 October 2009). HI contributions, which willincrease to 3% by the employer and 1.5% by the employee effective from 1January 2010. These contributions are calculated based on the contracted basicsalary, but capped at 20 times the minimum salary.37 | Doing business in Vietnam
  • 36. D.9.4 Minimum salaryUnder the Decree No. 97/2009/ND-CP dated 30 October 2009 of theGovernment, the current monthly minimum salary applicable to governmentstaff, employees working for SOEs and domestic enterprises from 1 January2010 is divided into four levels depending on the location of the enterprises,detail as follows: For enterprises located in urban districts of Hanoi and Ho Chi Minh City (Area I), the minimum salary paid for Vietnamese employees is VND980,000 For enterprises located in Hanoi and Ho Chi Minh City’s rural districts, and in certain districts of surrounding provinces, such as Hai Phong, Quang Ninh, Vung Tau, Binh Duong, Dong Nai etc. (Area II), the minimum salary paid to Vietnamese employees is VND880,000 For enterprises located in the rest of Hanoi, Ho Chi Minh City, Hai Phong, Binh Duong, Dong Nai’s rural districts, and in certain districts of surrounding provinces, such as Bac Ninh, Bac Giang, Hung Yen, Hai Duong, Khanh Hoa, etc. (Area III), the minimum salary paid to Vietnamese employees is VND810,000; and The minimum salary of VND730,000 for Vietnamese employees shall apply for enterprises located in other localities which are not defined above (Area IV).The monthly minimum salary for Vietnamese employees working for FOEs isalso divided into similar four levels depending on the location of theenterprises, provided in Decree No. 98/2009/ND-CP dated 30 October 2009which will be effective on 1 January 2010 detail as follows: For enterprises located in Area I the minimum salary paid monthly for Vietnamese employees is VND1.34 million For enterprises located in Area II, the minimum salary paid to Vietnamese employees is VND1.19 million monthly For enterprises located in the Area III the minimum salary paid monthly to Vietnamese employees is VND1.04 million The minimum monthly salary of VND1 million for Vietnamese employees shall apply for enterprises located in Area IV Doing business in Vietnam | 38
  • 37. D.10 Mergers and acquisitionsD.10.1 Regulatory aspectsDuring the process of investment within Vietnam, businesses withforeign-invested capital and BCC are allowed to restructure their investment byway of division, separation, merger or consolidation, or foreign investors mayconvert their investment into a different legal form. Foreign investors can alsotransfer their interest to other entities.The LOI provides that investors are permitted to (i) contribute capital to; and(ii) purchase shareholding in companies and branches operating in Vietnam.However, the LOI also provides that the ratio of capital contribution andpurchase of shareholding by foreign investors in a number of sectors, industriesand trades will be regulated by the Government.The Government Decree No. 108/2008/ND-CP issued on 22 September 2006,stated that investors who intend to acquire an interest in businesses in Vietnammust implement the provisions in the international treaties of which Vietnam isa member with respect to the ratio of capital contribution, form of investmentand schedule for opening market; comply with the provisions in Law onCompetition and LOE and other related regulations.D.10.2 Buying shares in existing companiesForeign investors who intend to acquire an interest in a joint venture company ora FOE 100% may do so by acquiring the capital contribution portion of anotherexisting foreign investor. A new foreign investor may acquire some or all of theshares in an offshore company that holds the interest of an existing FOE, or theforeign party in a joint venture may acquire the capital contribution portion ofits Vietnamese partner to convert the joint venture to a 100% FOE. AVietnamese party to a joint venture may also buy the foreign investors’ interestto become a 100% local entity.Gains from transfer of shares shall be subject to income tax on capital gains.Transfer/purchase of assets (Assets deal)In addition to purchasing shares from an existing company, the buyer buys theassets of the target company. The cash the target receives from the sell-off ispaid back to its shareholders by dividend or through liquidation. This type oftransaction leaves the target company as an empty shell, if the buyer buys outthe entire assets. A buyer often structures the transaction as an asset purchaseto "cherry-pick" the assets that it wants and leave out the assets and liabilitiesthat it does not. This can be particularly important where foreseeable liabilitiesmay include future, unquantified damage awards, such as those that could arisefrom litigation over defective products, employee benefits or terminations, orenvironmental damage.Asset deals have not been common in practice to date. The transaction is likelyto involve the following main steps: Conduct a due diligence Enter into a Memorandum of Understanding (MOU)39 | Doing business in Vietnam
  • 38. Obtain an approval in principle from the licensing authority for the proposed transaction Establish the FOE and obtain a tax code Enter into a formal Asset Assignment Contract Conduct procedures for transferring the Land Use Rights (LURs) and the ownership of the factoryTax treatment in this case shall differ from transfer of shares.Sellers must charge output VAT (capital gains are VAT exempt). The gain andloss derived from the sale of assets is taxable and deductible, respectively, forEIT purposes.Buyers must pay registration fees for assets of which the ownership is requiredto register (i.e. housing, land, vehicles, boats or vessel). The applicable rate is1% for housing, land, boats and ships, and 2% for other specified assets (such asmotor vehicles). However, registration fees are capped at VND500 million perasset per transaction.D.11 Dispute settlementIn Vietnam, legal disputes may be settled by negotiation, in court or by domesticor foreign arbitration.The judiciaryThe hierarchy of Vietnamese courts include: (i) Supreme People’s Court; (ii)Provincial People’s Courts; and (iii) District People’s Courts. The courts operatein five divisions: (i) Criminal; (ii) Civil; (iii) Administrative; (iv) Economic and(v) Labor.Unlike common law countries, Vietnam does not follow the doctrine ofprecedence under which cases decided by judges in the past are used asauthority for later cases. Judgments are based only on legislation andprinciples of interpretation of the laws.Running parallel to the court systems is the People’s Procuracy which isresponsible for supervising the operation of judicial authorities and exercisingthe power of public prosecution. The People’s Procuracy can lodge protestsagainst a judgment and ask for its review.Arbitration and dispute resolutionTo supplement the court system, Vietnam has a system of independentarbitration centers, established under the Commercial Arbitration Ordinance(2003). An arbitral award given by an arbitration center or an arbitration panelestablished by the parties in accordance with the provisions of the Ordinancewill be enforceable in Vietnam without need for prior recognition.Disputes involving foreign investors may be also settled by foreign arbitration. In1995, Vietnam became a member of the 1958 New York Convention on theRecognition and Enforcement of Foreign Arbitral Awards. An arbitral award Doing business in Vietnam | 40
  • 39. given by a foreign arbitration will be enforceable in Vietnam after it isrecognized by a Vietnamese court.Accordingly, where a dispute occurs: Between parties in a BCC, between parties in a joint venture contract, or between enterprises with foreign-owned capital or parties in a BCC and Vietnamese economic enterprises: these shall firstly be resolved through negotiation and conciliation. If the negotiation is not successful, the parties involved in the dispute can agree to use one of the following methods to settle: The Vietnamese court A Vietnamese arbitration body (the Vietnam International Arbitration Center or an Economic Arbitration Center) An international arbitration body; or An arbitration tribunal as agreed by the parties, etc.D.12 Exit provisionsThe termination, liquidation, or dissolution of a FOE or a BCC shall occur in thefollowing circumstances: Term of operation stated in investment license has expired In accordance with JV contract, charter of company, etc. In accordance with the decision by the investors The licensing authorities decide to terminate the operation of a FOE or a BCC Relevant FOE or BCC is responsible for establishing a liquidation committee to liquidate the assets of the enterprises or of the BCC Where the liquidation process is complete, the FOE or BCC must submit a report on the liquidation to licensing and other relevant authoritiesD.13 Other investment related regulationsD.13.1 Foreign investment in the securities marketForeign organizations and individuals are allowed to buy shares and other typesof securities (listed or non-listed) in the Vietnamese securities market.D.13.2 Accession to trading service by foreign investorUnder WTO’s commitments, from 2009, 100% FOE on trading is allowed. Tradingactivity and activities directly related to trading are defined under theCommercial Law as exportation, importation, distribution, etc.The importation right under Decree No. 23/2007/ND-CP dated 12 February2007 (Decree No. 23) on trading and related activities of foreign-investedcompanies in Vietnam is the right to import goods into Vietnam for sale todealers who have the right to distribute such goods in Vietnam. The right toimport, however, does not include the right to organize or take part in thedistribution of goods in Vietnam.41 | Doing business in Vietnam
  • 40. Based on Decree No. 23, a foreign invested company in Vietnam can carry outimportation activities, provided that the imported goods are sold to licenseddistributors.Decree No. 23 sets out procedures for a foreign invested company to obtain atrading license. Depending on the location of the company to be established andthe activity to be carried out, the licensing authority may be the Ministry ofIndustry and Trade (a merger of former Ministry of Trade and Ministry ofIndustry), the Management Board of Industrial Zones or the Provincial Peoples’Committees.D.13.3 Intellectual property rightsIn recent years the Government has taken various measures to increase thelegal protection of intellectual property, and created an environment of respectfor intellectual property. Intellectual property rights are protected by the CivilCode (1995 and 2005), the Law on Intellectual Property (2005) and a host ofsubordinate legislation.Vietnam is a long time signatory to the Paris Convention, the Madrid Agreementon International Trademark Registration, and the Patent Cooperation Treaty(PCT) and became a member of the World Intellectual Property Organization in1976. On 27 June 1997, Vietnam entered into an Agreement on Copyright withthe US. According to the Vietnam - US Bilateral Trade Agreement, Vietnam isalso obliged to adhere to the Berne Convention.The National Office of Industrial Property (NOIP) is the authority responsible forthe registration of industrial property and the resolution of disputes with regard toindustrial property in the first instance. Foreign organizations and individuals whoseek to register their industrial ownership should file their applications through anauthorized agent, who will transfer their application to the NOIP. Also, trademarklicense agreements must be registered with the NOIP. The Office of CopyrightProtection under the Ministry of Culture and Information has also been establishedand is responsible for the protection of copyright. Works may be registered with theMinistry of Culture and Information; registration is however, not a prerequisite forcopyright protection.Currently, patents are protected for a period of 20 years. A certificate of utilitysolutions may be granted for 10 years. A certificate of industrial design is grantedfor five years and may be renewed every five years; however, the totaleffective period of a certificate cannot exceed 15 years. Certificates oftrademarks are granted for 10 years with no restrictions on the number ofrenewals. Some moral rights of copyrighted works are protected indefinitely, andother rights are protected up to 50 years for post mortem actors.D 13.4 Competition regulationsWith the Government’s committed and continuous efforts, Vietnam istransforming from a centrally planned, socialist economy into a morecompetitive market. On the one hand, SOEs continue to occupy monopolypositions in key industries like electricity generation and distribution andtelecommunications with a market share of at least 80%. Other heavily regulatedindustries tend to have some foreign and private sector participation but are Doing business in Vietnam | 42
  • 41. dominated by a state owned oligopoly where several large firms have a marketshare of 10% to 40% each. These industries include cement, sugar, minerals andpetroleum, in which prices tend to be high and most firms are neither efficientnor competitive.On the other hand, the Government sees the merits of market competition andas a result, the long-awaited Competition Law was passed in November 2004 byVietnam’s National Assembly. This law applies to business individuals andorganizations, professional associations, including foreign enterprises operatingin Vietnam, public utilities and state monopoly enterprises. If measures in otherlaws contradict the Competition Law, the latter will prevail. The Competition Lawprohibits the following four broad types of anti-competitive activity: Agreements that substantially restrict competition Abuse of a dominant or monopoly market position Concentrations of economic power that substantially restricts competition; and Acts of unhealthy competitionAn enterprise in a dominant or monopoly market position is prohibited fromcarrying out the following practices aimed at maintaining or strengthening thatmarket position: Deliberately (either directly or indirectly) increasing prices or temporarily reducing prices to below production cost Limiting production or distribution, or restricting the market or technical or technological developments Applying discriminatory commercial conditions Imposing conditions for signing contracts for the purchase and sale of goods and services, or forcing other enterprises to agree to obligations that are not directly related to the object of the contract; or Preventing market entry by new competitorsD.13.5 Use of electronic documentsUnder the Law on Electronic Transaction issued on 29 November 2005 and theDecree No. 26/2007/ND-CP dated 15 February 2007of the GovernmentElectronic documents are valid for implementing financial operations, accountentry or checking purposes only. They are not valid for transactions orpayments if they have been converted from written documents. An electronicsignature on an electronic document bears the same validity as a signature on awritten document.D.13.6 Government inspection of FIEsFOEs may be inspected by the following entities: Investment license issuing bodies are entitled to carry out periodic checks and inspections of FOEs Other organizations as stipulated by law, may undertake random inspections relating to their area of jurisdiction (i.e. tax authorities, labor authorities)Procedures for inspection are defined by regulations.43 | Doing business in Vietnam
  • 42. E. Taxation
  • 43. The Vietnamese taxation system has the following forms of taxes: Corporate Income Tax Value Added Tax Foreign Contractor Withholding Tax Special Sales Tax Import and Export Tax Personal Income Tax; and Natural Resources Tax (applicable to those engaged in exploiting natural resources)E.1 Corporate income taxCIT ratesOne uniform income tax regime is applied to both foreign-owned and domesticcompanies. Taxpayers are subject to tax rates provided in the CIT Law. The standardCIT rate effective from 1 January 2009 is 25%.Oil and gas companies and companies involved in exploitation of precious minerals aresubject to CIT at rates ranging from 32% to 50% depending on the specific project.CIT incentivesTax incentives are granted based on the location of the investment (i.e. in difficult orespecially difficult social-economic locations, economic zones and high-tech zones) orregulated encouraged sectors.The sectors which are encouraged by the Vietnamese Government includehigh-technology as stipulated by law; scientific research and technologicaldevelopment; investment in development of water plants, power plants and watersupply systems; in bridges, roads and railways; in airports, seaports and river-ports; inair fields, stations and other specially important infrastructure works as decided by thePM of the Government; computer software products; education and training,occupational or vocational training, medical health care, culture, sport and theenvironment.Tax incentives include a preferential tax rate and a tax holiday provided for a definedperiod as follows: Preferential tax rates of 10% and 20% are available for 15 years and 10 years respectively, starting from the first year of generating revenue from the activities entitled to preferential tax rate. When the period for preferential rate expires, the CIT rate generally reverts to the standard rate. For certain specific sectors, the preferential tax rates could be applied to a certain extended point of time or for the whole life of projects Tax holiday is in the form of CIT exemption which is granted for a period from 2 to 4 years from the first profit making year. For tax incentive purposes, the “first profit making year” is the first year an enterprise derives a profit before offsetting losses (if any) from previous years. A subsequent 50% reduction of CIT payable is granted for a period from 445 | Doing business in Vietnam
  • 44. years to 9 years. Where an enterprise has not derived profits within 3 years of the commencement of operations, the tax holidays/tax reduction will start from the fourth year of operation. Criteria for eligibility to these holidays and reductions are set out in the CIT regulations. Additional tax reductions may be available for businesses engaging in manufacturing, construction, and transportation activities or employing many ethnic minority people, in particular they shall be entitled to a reduction of CIT equal to the additional amount of expenses incurred for female employees or ethnic minority people in accordance with the guidelines in the CIT regulationsIt is noted that tax incentives previously awarded according to export turnoverhave been repealed. The removal of the incentives takes general effect from2011, but took immediate effect from 2007 for investors operating in the textileindustry.Computation of CITCIT is computed under the following formula:CIT payable = Assessable income * tax rateAssessable income = Taxable income – (Tax exempt income + Loss carried forward in accordance with law)Taxable income = (Turnover – Deductible expenses) + Other incomeDetermination of taxable incomeThe taxable income of an enterprise is the income shown in the financialstatements, subject to certain adjustments due to the differences between taxrules and accounting rules. Taxable income includes income derived by businessoperations and other activities (including income from the capital or securitiestransfer, transfer of immovable property which will be discussed in the nextsections and extra earnings).Deductibility of expensesIn general, expenses will be deductible provided that they are related to revenuegeneration, supported by proper invoices/documentation and not specificallyidentified as being non-deductible items for CIT calculation purposes. Examplesof non-deductible expenses include: Depreciation of fixed assets which is not in accordance with the prevailing regulations Employee remuneration expenses which are not actually paid or are not stated in a labor contract or collective labor agreement Life insurance premiums for employees Interest on loans from non-credit institution organizations or non-economic organizations exceeding 1.5 times of the basic interest rate set by the SBV Interest on loans corresponding to the portion of charter capital not yet contributed Provisions for stock devaluation, bad debts, financial investment losses, product warranties, or construction work which are not in accordance with the prevailing MoF’s regulations Accrued expenses Doing business in Vietnam | 46
  • 45. Advertising, promotion (except certain items), conferences/parties, commissions, prompt payment discounts exceeding 10% of total other deductible expenses (this cap is increased to 15% for newly-established enterprises for the first 3 operating years) Donations except certain donations for education, health care, natural disasters, or building charitable homes for the poor Management expenses allocated to permanent establishments in Vietnam by the foreign company’s head office which are not in accordance with the regulations Administrative penalties Creditable input VAT, CIT, and PIT Etc.For certain businesses, such as insurance companies, securities trading, andlotteries, the MoF provides specific guidance on deductible expenses for CITpurposes.Business entities in Vietnam are allowed to set up a tax deductible Research andDevelopment fund with the amount up to 10% of assessable income to the fund.Various strict conditions apply.Tax depreciationDepreciation for tax purposes must follow the MoF’s regulations. Currentregulations on fixed asset depreciation provide three methods for calculation offixed asset depreciation. Among the regulatory methods, the straight-linemethod is the most common.Depreciation rates must be in accordance with the MoF’s rules. A brief summaryof maximum allowable annual depreciation rates are as follows: Categories Annual depreciation rate (%) Machinery and equipment 6.6 - 50 Means of transportation 3.3 - 16.6 Solid house/building 2-4 Other types of houses and buildings 4 - 16.6 Warehouses, containers, bridges, roads, parking places, and driving yards 5 - 20 Other construction work 10 - 20Accelerated depreciation is possible in certain cases. The accelerateddepreciation rate shall be capped at 2 times higher than the rate set by the MoF.Loss carried forwardTaxpayers are allowed to carry forward their losses incurred in operations for amaximum period of five years. Carrying back losses is not allowed. Currently,Vietnam’s taxation laws do not provide any provision for forms of consolidatedfiling or group loss relief.47 | Doing business in Vietnam
  • 46. Tax administrationThe tax year is in accordance with fiscal year which is the calendar year asregulated. A tax year (fiscal year) other than calendar year is allowable. In thiscase, notification to the relevant local tax authorities on a different fiscal year isrequired.Provisional quarterly CIT returns are required to be filed based on either actualrevenue/expenses arising in the quarter or the estimated ratio of taxable incomeover revenue deriving from the previous year’s result. The provisional return hasto be submitted to tax authorities by the 30th day of the following quarter.Provisional CIT must be paid at the time of submitting the return.The final CIT is filed on an annual basis. The annual tax finalization return must besubmitted within 90 days from the end of the tax year (fiscal year). Outstandingtax (if any) must be paid on the same day the final return is submitted.There are penalties for late payment of tax. A fine of 0.05% per day on the total latepayment amount shall be imposed. Tax evasion/fraud is subject to more severepenalties (i.e. a penalty of 1 to 3 times for the evaded amount).A notable point effective from the tax year of 2009 is that the amounts of CIT shallbe assessed and payable where the business has its main head office and where thebusiness has its dependently accounting production establishments (if they are in aprovince or city under central authority other than the locality of the main headoffice).The amount of tax payable in the province where the enterprise has its dependantestablishment shall equal the amount of CIT payable in the period multiplied by theratio of expenses of the dependant establishment over the total expenses of theenterprise.The enterprise lodges its annual tax finalization with the local tax authority wherethe headquarter is located. The outstanding CIT payable upon finalization shallequal the amount payable in accordance with the tax finalization less the provisionalquarterly tax paid amounts by its headquarters and its dependant establishments.The outstanding or refundable tax amount after tax finalization shall also beallocated at the same ratio to the places where the headquarter and its dependantestablishments are located.Income tax on capital gains and from transfers of securitiesGains from a capital transfer (capital gains) or the sale of securities (includingshares, bonds, fund certificates and other regulated securities) are taxed at 25%CIT.The taxable gain is determined as the excess of the sales proceeds less purchaseprice of transferred capital portion less transfer expenses.Where the transferor is a domestic business, they shall be responsible for declaringthe gains from capital and securities transfer as other income in their CITdeclaration. Doing business in Vietnam | 48
  • 47. Where the capital transferor is a foreign organization having no legal status inVietnam, the transferee is required to withhold the tax due from the payment to thetransferor, and account for this to the tax authorities. The tax return and payment isrequired within 10 days from the date of the approval of the assignment by thecompetent authorities or the date of the assignment agreement in case no approvalis required.When foreign investment funds or foreign organizations having no legal status inVietnam sell securities, e.g. shares (listed or non-listed), CIT is payable on adeemed basis at 0.1% of the total value of the securities sold.In respect to bonds, 0.1% CIT will be calculated on the face value of the bond plusinterest at the time the interest is received.Income tax on transfer of immovable propertyIncome from transfer of immovable property includes those from transfer on LUR,land leased rights, sub-lease of land of real estate companies irrespective ofwhether or not there are any associated infrastructure and/or architecture work.The assessable income from the transfer will be calculated based on the saleproceeds less the initial cost less deductible transfer expenses less losses carriedforward (if any) from immovable transfer activities of previous years. CIT rate of25% will apply.If a company does not regularly conduct immovable property assignments, the gainon such transfer should be provisionally declared per each transaction. At theyear-end, it will be included in the annual CIT finalization of the company.Foreign contractor taxThe Foreign Contractor Tax (FCT) regime applies to payments made by aVietnamese contracting party to a foreign entity carrying out projects in Vietnam,or providing services to Vietnamese customers without setting up a legal entity inVietnam, except for the pure supply of goods at border gates, services performedand consumed outside of Vietnam, and certain other services performed outside ofVietnam, such as repair of transportation means, machinery and equipment;advertising and marketing services; brokerage services; training, etc.).A foreign contractor is defined to include a foreign individual or entity that doesbusiness in Vietnam or have income arising in Vietnam on the basis of a contract,agreement or undertaking between such foreign contractor and a Vietnameseorganization or individual.The FCT consists of two components (i.e. VAT and CIT). The rates vary dependingon the nature of the payment.FCT payment methodsUnder the prevailing regulations, FCs may choose either of the following methodsfor tax payment:49 | Doing business in Vietnam
  • 48. Deduction methodAccording to this method, FCs will file VAT under the deduction method inaccordance with VAT Law and declare CIT on the actual net profits at the standardtax rate in accordance with CIT Law. The FC can recover the input VAT charged bythe local subcontractors.In order to adopt this method, FC is required to satisfy the following conditions: i) FC has a PE in Vietnam or tax residents of Vietnam ii) The duration of the project in Vietnam is more than 182 days iii) FCs adopt the full Vietnamese Accounting System Direct methodFC who fails to satisfy one of the above-mentioned conditions shall adopt the directmethod. Under this method, VAT and CIT shall be withheld and filed by theVietnamese contracting party upon the payment to the FC. VAT and CIT shall bedefined based on a deemed percentage of taxable turnover. The deemed tax ratesdepend on the nature of service performance and the type of goods supplied. TheVAT element withheld will be available as an input VAT credit to the Vietnamesecontracting party if it supplies VATable goods/services.The deemed VAT and CIT rates under the Direct Method are as follows:Industry Effective VAT Deemed CIT rate rateTrading: distribution, supply of goods,materials, machinery and equipment in Vietnam Exempt 1%General services 5% 5%Services together with provision of goods 3% 2%Construction, installation without supply ofmaterials or machinery, equipment 5% 2%Construction, installation with supply ofmaterials or machinery, equipment 3% 2%Leasing of machinery and equipment 5% 5%Leasing of aircraft, vessels (includingcomponents) Not specified 2%Transportation 3% 2%Interest Exempt 10%Royalties Exempt 10%Re-insurance Exempt 2%Transfer of securities Exempt 0.1%Manufacturing, other business activities 3% 2%Foreign tax reliefVietnam has signed tax treaties with many countries that provide relief fromdouble taxation. Details are given in our discussion about foreign tax relief andtax treaties. Doing business in Vietnam | 50
  • 49. E.2 Value added taxOverallUnder the conventional VAT system, output tax is collected from a customer byadding VAT at the applicable rate to the amount charged. However, a businessalso pays input VAT to its suppliers on purchases that it makes. The output taxmust be paid to the tax offices after deducting the creditable input VAT. The taxis actually borne by the end consumer or enterprises which engage innon-VATable goods/services supply.Scope of VAT applicationVAT is applicable to goods and services consumed within Vietnam. Thedefinition of “consumed within Vietnam” is unclear, and so leads to uncertaintyin the VAT treatment in certain cases. VAT is also applied at the import stage onimported goods. The import VAT must be paid to relevant customs concurrentlywith the import duty payment.VAT exemptionThere are 26 categories of goods and services out of the scope of VATapplication. Examples of these include: Transfer of LURs Credit services Financial derivative services Certain insurance services (including life and non-commercial insurance) Medical services Cross border leases of drilling rigs, aero planes, and ships which cannot be produced in Vietnam Equipment, machinery, spare parts, specialized means of transportation and necessary materials used for prospecting, exploration and development of oil and gas fields (which cannot be produced in Vietnam) Goods in transit or trans-shipment via the territory of Vietnam; goods temporarily imported and re-exported and goods temporarily exported and re-imported; and raw materials imported for production or processing of goods for export in accordance with production or processing contracts for export signed with foreign parties Imported goods and goods or services to be sold to organizations and individuals for humanitarian aid or non-refundable aid (subject to limitations)VAT ratesThe standard VAT rate is 10%. A 0% rate applies to exported goods and servicessubject to certain conditions. A 5% rate exists for “essential” goods and servicessuch as clean water, fertilizer, teaching aids, books, foodstuffs, medicine andmedical equipment, husbandry feed, various agricultural products and services,technical/scientific services, rubber latex, sugar and its by-products.51 | Doing business in Vietnam
  • 50. Output VAT calculationThe output VAT is calculated by multiplying the taxable price (net of VAT) bythe applicable VAT rate.Claiming input VAT creditInput VAT (including input VAT withheld on FCs under the withholding taxmechanism) credit must be claimed within 6 months from the month that theinvoice is issued. Input VAT credit that is beyond this time limit will be rejected.In case the invoice total value (i.e. sale price plus VAT) is VND20 million ormore, a bank payment proof must be made available for the input VAT to beclaimable.Method of VAT calculationVAT regulations provide two methods of VAT calculation:Deduction methodUnder this method, VAT payable is calculated as the output VAT charged tocustomers less the creditable input VAT paid on purchases of goods andservices. Proper bookkeeping and invoices are requisite requirements forapplying for this method.Direct methodIn order to calculate VAT payable under this method, the added value in theperiod must firstly be calculated. The applicable VAT rate shall be applied to theadded value to calculate the VAT payable.Enterprises which fail to satisfy the requirements on bookkeeping/invoices andcertain deemed goods/services (i.e. trading gold/foreign currency) shall bedeemed to apply for this method.VAT administrativeVAT code registrationAll businesses (including foreign contractors, branches, operating offices offoreign organizations in certain cases) must register for a VAT code with localtax authorities within 10 working days from the date the investment license orcertificate of business registration is granted.VAT declaration and paymentThe filing due date for monthly VAT return is 20th of the following month.Annual VAT finalization or reconciliation is not required for those who pay VATunder the deduction method. The differences (if any) on VAT payable isadjusted to the returns of the following months.VAT payable is due on 20th of the following month. Doing business in Vietnam | 52
  • 51. VAT refundAn input VAT refund is allowed in certain cases (e.g. input VAT credit is largerthan output VAT for 3 consecutive months). A refund may be conductedmonthly, quarterly or annually depending on the circumstances of taxpayers.E.3 Import duty and export dutyImport duty tariffImport duty is generally assessed on an ad valorem (on value) basis. Import andexport duty rates are subject to frequent changes (as often as quarterly) and itis therefore strongly recommended to check the latest position.Import duty tariffs fall into three categories: standard rates, preferential ratesand special preferential rates.Preferential rates are applicable to imported goods from countries that haveMost Favored Nation (MFN) status with Vietnam. As Vietnam is now a memberof WTO, the MFN rates shall be in accordance with WTO’s rules and shall beapplicable to goods imported from other WTO’s member countries. Inimplementing WTO’s commitments, waivers and exceptions are available forregional agreements, such as CEPT/AFTA or agreements between ASEANmember states and China, Korea, Japan, Australia and New Zealand.Special preferential tariffs apply to goods imported from countries that have aspecial preferential agreement with Vietnam, such as the ASEAN memberstates, China, Korea, Japan, Australia and New Zealand.To qualify for special preferential rates, the imported goods must beaccompanied by a Certificate of Origin (C/O). Without this C/O or if goods aresourced from non-preferential treatment countries, the preferential (i.e. MFN)rates or the standard rates (being the preferential rate with a 50% surcharge)will be imposed.The preferential rates, generally ranging from 0% to 140% (there are someitems of imported goods entitled to 0% rate), tend to be used as the basis forcalculating import duty.Import duty calculationThe dutiable value of imported goods for calculation of import duty is generallyin accordance with WTO Valuation Agreement with certain modifications.Commonly, the dutiable value of imported goods is the Transaction Value. Wherethe Transaction Value is unable to be defined or the determination is notsatisfied, alternative methodologies are used: Value of Identical Goods Value of Similar Goods Deductive Value Computed Value; and Fall-back Method53 | Doing business in Vietnam
  • 52. In principle, the minimum price index issued by customs authorities which wasused as the dutiable price for import duty calculation has been abolished.However, in certain cases, the minimum price is still applicable in form of a“reference price” by customs authorities.The basis for the computation of import duty is the Cost, Insurance and Freight(CIF) price (i.e. the purchase price at the exporting port stated in the contract,plus freight and insurance costs) plus possibly other payables made by theimporter (i.e. payables up to the first importing port in Vietnam).Import duty exemptionsExemption from import duty is granted for: Goods temporarily imported, then re-exported, for exhibition purposes if they meet certain requirements Goods imported to form fixed assets of projects which are included in encouraged projects in the Investment Law, including: machinery and equipment; certain means of transportation and construction materials (which cannot be produced in Vietnam; raw material, spare parts, etc.) Certain goods imported by BOT enterprises and their contractors for carrying out BOT, BTO, BT projects Certain goods imported for oil and gas activities Goods temporarily imported (and then re-exported) for carrying out ODA projects Goods (i.e. material, semi-finished products) imported for implementing export processing contract with foreign parties, etc.Export dutyExport duty is only imposed on a few items, basically natural resources, such asrice, minerals, forest products, fish and scrap metal. These rates range from 0%to 40%. The basis for calculating export duties is the free on board (FOB)price–that is, the selling price of goods at the exporting port as stated in thecontract, excluding freight and insurance costs.Certain goods are exempt from export duty, e.g. goods exported from non-tariffzones, etc.E.4 Special sales taxSST which is similar to excise tax applies on certain imported and domesticallyproduced goods and certain provisions of services which are not encouraged fordomestic consumption or those considered luxurious.Under SST regulations, subjects of SST include: Commodities: cigarettes, beer, spirits, automobiles, motor vehicles with cylinder capacity above 125cm3, aircraft and yachts19, fuel, air conditioners up to 90,000 BTU, playing cards, votive paper; and19 Motor vehicle, aircraft and yacht are newly added by the Law No.27/2008/QH11 on SST Doing business in Vietnam | 54
  • 53. Services: casinos, betting entertainment (i.e. horse and motor racing), discotheques, massage salons, karaoke, jackpot games, slot games20, golf clubs and lotteriesTaxable price For domestically produced goods, the taxable price is the selling price exclusive of SST and VAT, and is determined as follows: SSTable price Sales price excluding VAT = 1 + SST rate For imported goods: taxable price is the dutiable price (which is the CIF price) plus import duty Taxable price for certain goods (i.e. canned beer, etc.) or particular cases that are provided in SST regulationsSST rates vary from 10% to 70%21 as follows: Goods/services Tax rates (%) Cigars/cigarettes 65 20 - 6522 Spirits/wine 25 - 5023 Automobiles 10 - 60 Motor vehicles with cylinder capacity above 125cm3 20 Aircraft and yachts 30 Fuel 10 Air-conditioners (equal or less than 90,000BTU) 10 Playing cards 40 Votive paper 70 Discotheques 40 Massage salons, karaoke 30 Casinos, jackpot games, betting entertainment 30 Golf clubs 20 Lottery 15The Law No.27/2008/QH11 on SST from 2009 took effect from 1 April 2009, exceptfor spirit and beer from 1 January 2010.E.5 Business license taxA FIE is required to pay business license taxes on an annual basis (at the beginning ofthe calendar year) at the following rates:20 Slot games is newly added by the Law No. 27/2008/QH11 on SST21 Law No.27/2008/QH11 on SST22 Applicable up to 31 December 200923 New SST rates apply from 1 January 201055 | Doing business in Vietnam
  • 54. Level of business Registered capital Business license tax Payable perlicense tax (VND billion) year (VND)Level 1 Over 10 3,000,000Level 2 From 5 to 10 2,000,000Level 3 From 2 to 5 1,500,000Level 4 Below 2 1,000,000E.6 Taxes on individuals: personal income taxGeneralThe first law on PIT in Vietnam came into effect on 1 January 2009 replacingOrdinance 35 on PIT for high income earners.The new PIT Law provides various significant changes in comparison with theold Ordinance. Under the current PIT Law, the scope of application is widened toalmost all income derived by individuals, including those which are currentlyexempt from PIT. The previous dual tax system for Vietnamese and foreignershas been abolished (a single tax tariff now applies) and new administrative andfiling procedures have been introduced.TaxpayersTax is imposed based on residency status. Residents are taxed on their totalworldwide income, while non-residents are subject to tax on their Vietnamsourced income only. There are different tax rates for residents andnon-residents and for various types of income.Resident taxpayers are those who: Stay in Vietnam from 183 days or more for 12 consecutive months or the calendar year in a tax year; or Have a regular residential location in Vietnam (including a permanent/registered residence, or a house lease in Vietnam where the lease contract has a term of ninety (90) days or more within a tax year)Resident taxpayers are subject to PIT on their worldwide income at progressivetax rates regardless of where the income is paid.Non-resident taxpayers are those who do not satisfy the above conditions. Theyare subject to PIT at a flat tax rate of 20% on their employment income inrelation to the work performed in Vietnam, and at various other rates on theirnon-employment income. In some cases, the provisions of any applicable DTAcould provide some tax relief.Taxable incomeTaxable income includes employment, non-employment and business income.Employment income covers all income received by the employee from theiremployer in cash or in kind, such as: Doing business in Vietnam | 56
  • 55. Salary, wages and remuneration, bonus, allowance and subsidies Income received from participating in professional and business associations, company’s board of management, management councils, etc. Benefits-in-kind paid by the employer including, but not limited to, housing rental, electricity, water charges and other utilities, premiums for non-compulsory insurance, certain membership fees (conditions apply), and other benefits provided in accordance with applicable lawsSome items of income that were previously non-taxable are now included intaxable under the new PIT scope including non-employment income, such asincome from capital investment, capital transfer, transfer of real property,income from winnings, royalties, commercial franchises, inheritance and gifts.In addition, business income of individuals which was governed by the Law onCIT is now included under the PIT scope.Non-taxable incomeNon taxable income includes: Interest on money deposited at banks, credit institutions (in Vietnam) and from life insurance policies Excess of night shift or overtime salaries/wages over the normal hours stipulated in the Vietnam Labor Code Compensation payments from life and non-life insurance policies Pension payments to individuals under applicable social insurance laws Income from certain approved charitable institutions Fixed payments for stationery, telephone, per diem, and clothing Income from property transfers between husband and wife, parents and children Income from inheritance/gifts between husband and wife, parents and childrenTax deductions and tax reliefCertain tax deductions and relief are deductible against business income andemployment income as follows: Personal relief of VND4 million per month or VND48 million per year is automatically granted to the taxpayer Dependants’ relief of VND1.6 million per month per dependant or VND19.2 million per year. Dependant relief is subject to certain conditions Supporting documentation is required to claim the dependent relief Compulsory statutory social and health insurance contributions in accordance with the provisions of the Law Contributions to certain charitable, humanitarian and educational promotion fundsTax ratesThe progressive tax rates for resident foreigners and Vietnamese citizens forbusiness income and employment income are as follows:57 | Doing business in Vietnam
  • 56. Level Taxable income/ annual Taxable income/ month Tax rate (VND million) (VND million) (%) 1 Up to 60 Up to 5 5 2 Above 60 to 120 Above 5 to 10 10 3 Above 120 to 216 Above 10 to 18 15 4 Above 216 to 384 Above 18 to 32 20 5 Above 384 to 624 Above 32 to 52 25 6 Above 624 to 960 Above 52 to 80 30 7 Above 960 Above 80 35Other taxable income and the relevant tax rate applicable are as follows:Items Tax rate (%)1. Income from capital investment 52. Income from transfer of commercial rights, royalties 53. Income from prize-winnings, inheritances and gifts 104a. Income from capital transfers 204b. Income from share transfers 0.15a. Income from real-estate transfers 205b. Income from real-estate transfers where cost value is unable to be determined 2Non-residents are taxed at twenty percent (20%) of their employment income inrelation to the work performed in Vietnam. The following table represents otherkinds of taxable income and the tax rates applicable:Items Tax rate (%)1. Income from salary, wages 202. Income from business activities For business activities in goods 1 For business activities in services 5 For business activities in production, construction, 2 transportation and other activities3. Income from capital investment 54. Income from the transfer of commercial rights (*), royalties (*) 55. Income from prize-winnings (*), inheritances and gifts (*) 106. Income from capital transfers 0.17. Income from real-estate transfers 2Note: (*) taxed on part of income exceeding VND10 million only.Where the income received is on net basis, it is required to be grossed up for taxcalculation purposes. Formulas for grossing up are provided the by PIT regulations. Doing business in Vietnam | 58
  • 57. AdministrationTax code registrationTax registration is compulsory for income paying bodies and individuals havingincome subject to PIT. The place for submission of the tax registration form is the taxoffice directly in charge of the income paying body and/or individual.Tax filing and paymentProvisional PIT is required to be filed and paid on a monthly basis on the 20th day ofthe following month in respect of employment income. The employer is required towithhold tax from the employee’s income, declare and pay tax (provisionally) to thestate budget. Monthly PIT payments will be reconciled at the end of each calendaryear.An individual is required to file tax directly with the tax authority if his employmentincome is paid by overseas organizations and/or individuals. Likewise,non-employment income is required to be declared by the individual separately pereach type of taxable income and the applicable tax paid as provided in theregulations.A foreign resident individual terminating their employment contract in Vietnam isrequired to submit the tax final return before departure.E.7 Transfer pricingIn December 2005, the MoF issued a circular providing detailed guidance on TransferPricing (TP) “Circular 117” which is effective from the tax year 2006 and is largelybased on the OECD Transfer Pricing Guidelines.Circular 117 provides that, for CIT purposes, related party transactions must beconducted on an arm’s length basis, i.e. these transactions should be transacted onthe same terms and conditions as between independent parties. The Circularempowers the General Department of Taxation to determine the arm’s length price ina related party transaction and to revise CIT liability of the party concerned.Circular 117 applies to transactions between related parties. ”Related parties” isspecifically defined in Circular 117 and includes the following scenarios:a. Either party, directly or indirectly, holds at least 20% of the equity or the total property of the other business establishmentb. Both business establishments have at least 20% of their equity or the total property held directly or indirectly by a third party; orc. Either business establishment is the biggest shareholder directly or indirectly holding shares of at least 10% of the equity or of the total property of the other business establishment; ord. Either business establishment directly or indirectly controls more than 50% of the total value of raw materials, supplies or input products of the other partyAccording to the Circular, the tax authorities may use the following methods toadjust transfer prices:59 | Doing business in Vietnam
  • 58. Comparable uncontrolled price method Resale price method Cost-plus method Profit split method; or Transactional net margin methodTaxpayers must use the “most appropriate method” among the above. There isno hierarchy among the methods.For TP compliance purposes, two (2) things are required contemporaneous TPdocumentation and the disclosure form. The TP documentation must beprovided to the tax authority within 30 days upon request, which period can beextended once for another 30 days.The disclosure form (Form GCN-01/TNDN) on the other hand must besubmitted together with the CIT return which is filed within 90 days from theend of the fiscal year.E.8 Penalties for tax offencesTax offences are defined by the Law on Tax Administration as tax evasion, taxfraud or the wrong treatment of the tax without the intention of committing atax offence.The level of penalties range from paying multiple tax assessments (asmentioned in the EIT section) to criminal sanctions.E.9 Double tax relief and tax treatiesVietnam has signed a double tax treaty with 59 countries. Some treaties havenot been enforceable as yet.A list of countries with which Vietnam has signed a double taxation agreementwith is given in Appendix 7. Doing business in Vietnam | 60
  • 59. 61 | Doing business in Vietnam
  • 60. F. Financial Reports and Auditing
  • 61. F.1 Statutory requirementsA newly established company is required to appoint a chief accountant, whomeets the qualifications prescribed under the Accounting Law, within the firstfiscal year. During this period, a qualified accountant appointed by the FIE shallbe responsible over all accounting activities.All FIEs operating in Vietnam are required to apply the Vietnamese AccountingStandards and System (VAS) as statutory financial reporting framework.Provided the VAS is applied without modifications, the registration for the use ofVAS with the MoF is not required.F.2 Accounting principles and practicesSourceThe VAS is comprised of the Vietnamese Accounting Standards, the AccountingSystem for Enterprises and any related guidance promulgated by the MoF’sDepartment of Accounting and Auditing Policy.An official English translation of the VAS had also been published by the MoFand is widely circulated.ApplicabilityThe VAS applies to both state-owned and private Vietnamese companies as wellas to FIEs.The VAS prescribes in detail the method by which transactions are to beaccounted for, including the use of specific accounting codes and accountnames. The VAS also prescribes a standard chart of accounts, the format ofinternal accounting documentation, the bookkeeping journals for all types oftransactions to be used, and a financial statement and disclosure template. Allaccounting records are required to be maintained in the Vietnamese language orboth Vietnamese and a foreign language. The required accounting currency isthe VND.Deviations from the VAS, such as accounting records maintained in a currencyother than the VND or deviations resulting from the use of an accountingsoftware, etc. require prior approval from the MoF.VAS and international financial reporting standardsRecognizing the need for the harmonization of the VAS with InternationalFinancial Reporting Standards (IFRS), formerly known as InternationalAccounting Standards (IAS), the MoF has released a total of 26 VietnameseAccounting Standards, which are as follows:63 | Doing business in Vietnam
  • 62. VAS 1 Framework VAS 2 Inventories VAS 3 Tangible fixed assets VAS 4 Intangible fixed assets VAS 5 Investment property VAS 6 Leases VAS 7 Accounting for investments in associates VAS 8 Financial reporting of interests in joint ventures VAS 10 The effects of changes in foreign exchange rates VAS 11 Business combination VAS 14 Revenues and other incomes VAS 15 Construction contracts VAS 16 Borrowing costs VAS 17 Income tax VAS 18 Provisions, contingent liabilities and contingent assets VAS 19 Insurance contracts VAS 21 Presentation of financial statement VAS 22 Disclosures in the financial statements of banks and similar financial institutions VAS 23 Events after the balance sheet date VAS 24 Cash flow statements VAS 25 Consolidated financial statements and accounting for investments in subsidiaries VAS 26 Related parties disclosures VAS 27 Interim financial reporting VAS 28 Segment reporting VAS 29 Changes in accounting policies, accounting estimates and errorsThe provisions of the current VAS are largely consistent with IFRS with certainmodification to reflect and address local circumstances.Notwithstanding the similarities with IFRS, VAS-based financial statements haveto conform to a set of prescribed chart of accounts and a report format whichdiffer from IFRS-based financial statements. Doing business in Vietnam | 64
  • 63. Currently, there are industry-specific accounting guidelines for insurancecompanies, security trading companies and financial institutions thatsupplement the VAS.The accounting and reporting regimes of banks, leasing and financial institutionsare further governed by regulations issued by the SBV.Changes in the VASThe VAS continues to be in a development phase, with notable limitations orabsence of standards for several types of complex transactions, such as financialinstruments, fair value, impairment, etc. The MoF, however, continues to workwith the accounting profession in Vietnam in order to update and refine the VAS.F.3 Disclosure, reporting and filing requirementsReport format and disclosure requirementsThe basic set of financial statements prepared under VAS is comprised of thefollowing: Balance sheet, including a separate schedule for off balance sheet items Income statement Cash flow statement; and Notes to the financial statementsFlexibility in the preparation of VAS financial statements is limited in that the reportformat and disclosure requirements have been prescribed by the MoF. Theinformation required to be disclosed in the notes to the financial statements includeamong others: a disclosure on the change in equity, calculation of taxable income,commitments and contingencies and related-party transactions.Reporting and filing requirementsFinancial statements must be prepared annually, audited and filed with thefollowing: The city or provincial tax office The MoF or the provincial Department of Finance The MPI or the relevant delegated investment license-granting authority in the case of FIEs The General Statistics Office (GSO); and For enterprises located in an Export Processing Zone (EPZ) or Industrial Zone (IZ), the EPZ or IZ Management BoardAll FIEs and parties to BCCs are required to file annual audited financialstatements. Companies must file their audited financial statements within 90days after the close of their registered financial period, although extensions aregenerally granted on submission of a written request explaining the reasons forthe delay in filing the audited financial statements.An enterprise’s financial year is generally the calendar year; however, a formalnotice should be lodged with the MoF prior to using a different financial year end.65 | Doing business in Vietnam
  • 64. Financial statements or summarized financial information are generally not madeavailable to the public except for the financial statements or summarized financialinformation of listed companies, insurance companies and certain financialinstitutions.Statistical reportsAll companies in Vietnam must submit monthly and quarterly statistical reports tothe GSO.Retention of documents and other accounting recordsThe following general guidelines apply to the retention of documents and otheraccounting records: Documents to be kept for at least five years include those used for management or operation of the enterprise Documents to be kept for at least 10 years include accounting data, accounting books, financial statements and reports of independent auditing firms Documents to be kept permanently include those that are significant in terms of economics, national security and defenseAccounting treatment of establishment and pre-operating expensesEstablishment costs are those incurred before the establishment of the FIE,meaning before the date of the Investment License, whereas pre-operatingexpenses are those incurred from the establishment date to the date the businessgoes into commercial operation.VAS prescribes two alternative approaches in accounting for establishment costsand certain pre-operating expenses (like training and advertisement expenses) asfollows: (a) charging to the income statement as incurred; or (b) capitalized asdeferred assets and amortizing the establishment costs and pre-operating expensesover a period not exceeding five and three years respectively.F.4 Audit requirementsUnder existing regulations, the annual financial statements of FIEs, listed entities,BCCs, insurance companies, financial institutions and state-owned enterprises arerequired to be audited by a duly licensed independent audit company.There is currently a total of 37 Vietnamese Standards on Auditing issued bythe MoF. Doing business in Vietnam | 66
  • 65. 67 | Doing business in Vietnam
  • 66. G. Visas and permits
  • 67. G.1 Entry visasTo visit Vietnam, nationals of most countries require a visa which must beobtained in advance from an overseas Vietnamese embassy or consulate. Visasare only issued on entry to the country in exceptional circumstances, such asnatural calamity or departure from a country that does not have a Vietnameseconsulate or diplomatic representative. A business or tourist visa for Vietnamcan be obtained on submission of the relevant application form, photographs,passport (valid for at least six months) and an invitation letter or otherdocuments indicating the purpose of the visit.Citizens of the following countries do not require a Vietnamese entry visa forstays of specified periods, ranging from 15 to 30 days: Denmark, Finland,Norway, Sweden24; Japan, Korea25 (South); Laos26, Indonesia27, Malaysia,Singapore, Thailand, Philippines, and Cambodia. Moreover, those enteringVietnam with diplomatic, official and special passports enjoy entry visaexemption for up to 90 days in accordance with bilateral treaties (to date,Vietnam has signed 54 bilateral treaties on entry visa exemption)28.Single or multiple-entry visas are available for business and tourist visas. Afterentering Vietnam, individuals may obtain an extension to their current visa,allowing a maximum stay in the country of twelve months, after which a newvisa must be obtained29. Recently, there appears to be stringent scrutiny on visarenewals and it is becoming more common to see visas issued with the period ofone month only where evidence of a work permit or tax code is not furnished.The fee for obtaining a new visa and a visa extension in Vietnam is from US$25to US$100. The residence permit costs from US$60 to US$100. Business visasrequire the sponsorship of an organization operating in Vietnam. Single visas,valid for 15 days, can be granted to those persons applying entry without anyinvitation or sponsorship.Foreign investors or their assistants who enter Vietnam to implement licensedinvestment projects may be granted multiple-entry visas for a period notexceeding one year. These may be renewed for an additional one year period inaccordance with the term of the contract. Residence permits are available tolong-term expatriates working and living in Vietnam (please see H.3).G.2 Work permitsAll foreigners working in Vietnam and enterprises and organizations in Vietnamwhich employ foreign employees for more than three (3) months are requiredby law to obtain a work permit. This is in accordance with their Vietnamese laborcontract or assignment letter, except for the following: those working for lessthan three months, owner of a one member limited liability company or a24 Under Ministry of Foreign Affairs Decision No. 808/2005/QD-BNG dated 13 April 2005.25 Under Ministry of Foreign Affairs Decision No. 09/2004/QD-BNG dated 30 June 2004.26 Under Treaty No. 86/2004/LPQT dated 16 September 2004.27 Under Treaty No. 03/2004/LPQT dated 5 February 2004.28 Extracted from the Summary of entry visas exemption in Vietnam issued by the Ministry of Foreign Affairs.29 Under Article 3 of Government Decree No. 21/2001/ND-CP dated 28 May 2001.69 | Doing business in Vietnam
  • 68. member of a limited liability company with two or more members, on the Board ofManagement, entering Vietnam to offer services, entering Vietnam to work/resolvean emergency technical or technologically complex situations and foreignlawyers30.To obtain a work permit, a work permit application form must be submitted with therequired documents attached (as listed on the application form). Work permitapplication forms can be obtained from the local Department of Labor, War Invalidsand Social Affairs (DOLISA), which issues the work permits.The work permit is separate from and in addition to the need for a valid visa. Theemployer is required to apply for a work permit; however, the onus rests with theemployee to provide all the necessary personal paperwork required for the workpermit application dossier.Once issued, the work permit remains the property of the employer and must bereturned to the Labor Department when an employee ceases employment with theemployer.Work permit can be extended for a maximum duration of thirty six months for eachextension. The application to file for extension must be lodged with DOLISA at leastthirty days prior to expiry date.G.3 Residence permitsTemporary Residence permit/cards (TRC) are required for long-term foreignersliving in Vietnam. However, the Government does not strictly enforce this rule and asa result, many foreigners do not have a TRC. To obtain a TRC, an individual mustapply to the Police Department and establish that he or she is currently employed inVietnam by producing a work permit. The period of TRC will be depended on thelength of time on the work permit. The TRC replaces the need for a visa.30 Under Article 9 of Government Decree No. 34/2008/ND-CP dated 25 March 2008. Doing business in Vietnam | 70
  • 69. 71 | Doing business in Vietnam
  • 70. H. Living in Vietnam
  • 71. H.1 HousingHigh quality housing suitable for foreigners is becoming increasing expensive.Rent for houses in Hanoi and Ho Chi Minh City ordinarily range from US$1,500to US$6,000 per month, with many of the larger houses featuring gardens andswimming pools. Houses can be either furnished or unfurnished.In addition, many serviced apartments have been built in the last few years,resulting in good quality accommodation being available from between US$500to US$5,000 per month, depending on location and service facilities.In general, accommodation in Hanoi is slightly more expensive than in Ho ChiMinh City.Six months’ rent in advance may be required for some accommodation, butadvance rent of one to three months is more common. Many foreigners chooseto employ household staff, such as maids, cooks, drivers, or guards. Wagesrange from US$100 to US$400 per month, depending on the servicesperformed.H.2 EducationSeveral privately run international schools are located in Hanoi and Ho Chi MinhCity for foreign children. These schools educate children of all nationalities frompre-school to high school and offer examinations under the InternationalBaccalaureate program. Standard Aptitude Tests are also available at certainschools. Each school establishes its own curriculum, but the Australian,American and French education systems appear to be the most common. Annualtuition at these schools ranges from US$5,000 to US$20,000.H.3 Medical servicesAs of December 2009, Vietnam had 1,094 hospitals and more than 30,000clinics with over 53,000 doctors working both in state owned and privatesectors. 31Hanoi and Ho Chi Minh City are home to international medical facilities andforeign doctors operating in private practice, providing a range of services fromgeneral medical advice and medical testing, to gynecology, obstetrics anddentistry. The doctors are internationally trained and come from variouscountries.Most clinics are not equipped for serious emergencies or surgery and it is notadvisable to have these procedures performed at a local Vietnamese hospital.Clinics can arrange medical evacuation, if required, at a cost of upwards ofUS$30,000. As a result, foreigners living or traveling in Vietnam are advised tobuy medical and medical-evacuation insurance.31 Source: Vietnam Public Health Association, www.vpha.org.vn73 | Doing business in Vietnam
  • 72. H.4 Leisure and tourismNotwithstanding its war-riddled history, Vietnam as a culture and civilization hasexisted for more than 4,000 years. The traumatic interruptions in its peace havebrought foreign influences into the culture, this is particularly apparent fromChina, France, Japan and the United States. These influences have merged withrather than replaced Vietnam’s own long-standing heritage. Traditional farmingmethods as well as traditional clothing can still be seen in the countryside; whileVietnam’s lively urban Street life remains one of its most characteristic features.Tourism is a booming sector in the economy. Vietnam welcomed some 4.1million foreign tourists in 2007, representing a year-on-year increase of 116% incomparison to 2006 (3.5 million). However, in 2009, due to the financial crisis,the number of tourists coming to Vietnam was 3.4 million which decreased by12.3% as compared to the same period in 2008. 32 Nevertheless, Vietnamexpects total revenue from tourism in 2010 to reach US$4 billion to US$5billion. Vietnam has over 9,350 hotels with around 184,830 rooms, including25 five-star hotels, 85 four-star hotels, and 166 three-star hotels33.As in much of developing Asia, the influence of Western culture is growing.Western compact discs and DVDs are available in local stores, and shoppingmalls and supermarkets continue to emerge. Sports popular in more developedcountries, such as golf and tennis, are being played here. Cycling is a highlyvisible recreational pastime.The Mekong River which flows for approximately 4,023 kilometers (2,500miles) down through the Himalaya Mountains and the country’s 2,897kilometers (1,800 miles) coast offers beautiful beaches and recreationalopportunities. Vietnam’s tourism infra-structure, including first-class hotels andresorts, has been extensively developed. Over the last few years, resorts haveopened in Dalat, Phan Thiet, Nha Trang, Da Nang and Sapa , and numerousfirst-class hotels have also opened in these cities.32 Source: Vietnam National Administration of Tourism, www.vietnamtourism.gov.vn33 Source: figures from Vietnam National Administration of Tourism Doing business in Vietnam | 74
  • 73. AppendicesAppendix 1: Economic performance indicatorsAppendix 2: Foreign exchange ratesAppendix 3: Principal exports and importsAppendix 4: Principal trading partnersAppendix 5: Depreciation periodsAppendix 6: Personal Income Tax ratesAppendix 7: Double Taxation AgreementsAppendix 8: Demographic statisticsAppendix 9: Comparative data: Vietnam and selected countriesAppendix 10: Useful addresses and contact informationAppendix 1: Economic performance indicatorsThe following table shows selected performance indicators for Vietnam’s economyas of recent years.Indicator 2009 2008 2007 2006 2005GDP (VND trillion) 1,645.5 1,477.7 1,143.3 974 845GDP (US$ billion) 90.5 86.6 71.4 60.6 53.1GDP per capita (US$) 1,043 1035 824.5 709.5 637.8GDP growth (%) 5.3 6.2 8.5 8.2 8.4Inflation rate (%) 6.9 22.97 23.1 7.5 8.3Exports (US$ billion) 56.6 62.7 48.4 39.6 32.2Imports (US$ billion) 68.8 80.7 60.8 44.4 36.9Trade deficit (US$ billion) 12.2 18 12.4 4.8 4.7Source: GSO, www.gso.gov.vn Business Monitor International, www.businessmonitor.comAppendix 2: Foreign exchange ratesThe following table shows average inter-bank rates between the VND and majorforeign currencies as of 31 December for the years shown.Currency 2009 2008 2007 2006 2005 2004US dollar 18,177 17,060 16,421 16,678 15,905 15,746Euro 25,730 24,047 22,050 22,020 18,839 21,541British pound 29,361 24,690 32,870 32,674 27,369 30,417Japanese yen 201.57 188.75 139.56 140.14 134.97 153.21Australian dollar 16,448 11,776 13,774 13,164 11,612 12,316Source: OANDA Corporation, OANDA.com75 | Doing business in Vietnam
  • 74. Appendix 3: Principal imports and exportsThe following tables list Vietnam’s major imports and exportsExport 2009 2008 2009/2008 Value Value Value (US$ million) (US$ million) (%) Grand total 56,584 62,662 90.3 Domestic sector 26,730 28,166 94.9 Foreign invested sector 29,854 34,513 86.5 Major goods Garment and textile 9,004 9,123 98.7 Raw oil 6,210 10,350 60.0 Aquatic products 4,207 4,509 93.3 Shoes and sandal 4,015 4,768 84.2 Electronic products, computers and computer’s devices 2,774 2,639 105.1 Precious stone and metals and jewelry 2,723 794 343.1 Rice 2,662 2,893 92.0 Wood and wooden products 2,550 2,830 90.1 Machines and equipments 2,028 1,859 109.1 Coffee 1,710 2,111 81.0 Coal 1,326 1,388 95.5 Rubber 1,199 1,603 74.8 Transportation vehicles and spare parts 922 1,099 83.9 Electronic line and cables 879 1,001 87,8 Petrol and oil 854 966 88.4 Plastic product 802 921 87.1 Doing business in Vietnam | 76
  • 75. Import 2009 2008 2009/2008 Value Value (US$ million) (US$ million) (%) Grand total 68,830 Domestic sector 43,957 52,833 83.2 Foreign invested sector 24,873 27,885 89.2 Major goods Petroleum and oil 6,159 10,959 56.2 Steel and Iron 5,327 6,909 77.1 Cloth 4,224 4,456 94.8 Electronic products, computers and computer’s devices 3,931 3,712 105.9 Car 2,943 2,871 102.5 Plastic 2,823 2,913 96.9 Animal food 1,723 1,747 98.6 Other common metals 1,616 1,786 90.5 Materials for textile, shoes and sandals 1,935 2,354 82.2 chemical substances 1,598 1,776 90.0 Chemical products 1,555 1,605 96.9 Fertilizer 1,349 1,473 91.6 Plastic Products 1,081 1,145 94.4 Wood and wooden material 888 1,098 80.9 Paper of all kinds 761 750 101.5 Motorbikes 742 757 98 Milk and milk products 514 542 94.8 Animal and plant fat 507 666 76.177 | Doing business in Vietnam
  • 76. Appendix 4: Principal trading partnersThe following tables list Vietnam’s major trading partners.ExportsExport partners Country of destination Value by year (US$ million) 2009 2008 2007 2006 2005 1 United States 11,200 11,868 10,104 8,422 5,930 2 Japan 6,200 8,537 6,090 4,927 4,411 3 P.R. of China 4,800 4,535 3,646 2,259 2,916 4 Australia 2,200 4,225 3,802 3,656 2,570 5 Singapore N/A 2,660 2,234 1,499 1,808 6 Germany N/A 2,073 1,855 1,789 1,086 7 United Kingdom N/A 1,581 1,431 1,356 1,015 8 Malaysia 1,681 1955 1555 1,286 949 9 France N/A 970 884 872 652 10 Philippines N/A 1,824 965 959 829Source: GSO, www.gso.gov.vnImportsImport partners Country of destination Value by year (US$ million) 2009 2008 2007 2006 2005 1 P.R. of China 16,100 15,652 12,710 8,215 5,778 2 Singapore N/A 9,392 7,613 6,004 4,597 3 Taiwan 6,200 8,362 6,946 4,824 4,304 3 Japan 7,300 NA 6,188 4,480 4,093 4 South Korea 6,700 7,066 5,340 4,224 3,600 5 Thailand N/A 4,905 3,744 3,407 2,393 6 Malaysia N/A 2,596 2,289 1,933 1,258 7 Hong Kong N/A 2,633 1,950 1,661 1,235 8 United States 2,800 2,635 1,700 1,210 864 9 Germany N/A 1,480 1,308 978 662 10 Indonesia N/A 1,728 1,353 883 702Source: GSO, www.gso.gov.vnNote: N/A: not available in this version Doing business in Vietnam | 78
  • 77. Appendix 5: Depreciation periodsThe following are the minimum and maximum taxable depreciation periods for fixedassets used by joint ventures, 100% FOEs and foreign parties to BCCs.Category of asset Depreciation period (years) Minimum MaximumHotels and commercial center buildings 25 50Used buildings 6 25Dynamic machines 8 10Power generators 7 10Voltage transferring equipment and voltagesuppliers 7 10Machinery tools 7 10Machines for exploitation and construction 5 10Machines for agriculture and forestry 10 20Other machinery and equipment (varies by type) 5 12Transportation vehicles (varies by type) 6 30Office equipment other than air conditioners(varies by type) 3 10Source: MoF, www.mof.gov.vn (Decision No. 206/2003/QD-BTC, Circular203/2009/TT-BTC (coming into effect from 1 January 2010))79 | Doing business in Vietnam
  • 78. Appendix 6: Personal income tax ratesIn Vietnam, the income of individuals is currently classified as either regular orirregular income (see Section E.6, page 56). From 1 January 2009, the incomeof individuals is classified as one of the following: Business income Employment income Investment income Capital gains Income from sale of real estate Winnings Royalties Income from franchising Inheritance Gifts and presentThe following tables list the tax rates in 2008 for the regular income of residentforeigners and Vietnamese citizens working abroad; and the regular income ofVietnamese employees. To calculate the tax for regular income, multiply thetaxable income by the tax rate and subtract the bracket amount to adjustincome tax for the lower progressive tax rate.For the regular income of resident foreigners and Vietnamese citizensworking abroadTax ratesMonthly average gross taxable income (GTI) Progressive Income tax liability Exceeding Not exceeding rate (%) (VND) (VND) (VND) 5,000,000 5 5 (assessable income) 10% (assessable income)- 5,000,000 10,000,000 10 0.25 million 15% (assessable income) –10,000,000 18,000,000 15 0.75 million 20% (assessable income) –18,000,000 32,000,000 20 1.65 million 25% (assessable income) –32,000,000 52,000,000 25 3.25 million 30% (assessable income) –52,000,000 80,000,000 30 5.85 million 35% (assessable income) –80,000,000 35 9.85 million Doing business in Vietnam | 80
  • 79. Grossing-up formulas Net income (NI) (VND million) Grossed-up income Annual income (VND) Monthly income 57 4.75 NI/0.95 57 - 111 4.75 – 9.25 (NI – 0.25)/0.9 111.0 – 192.6 9.25 – 16.05 (NI – 0.75)/0.85 192.6 – 327.0 16.05 – 27.25 (NI – 1.65)/0.8 327 – 507 27.25 – 42.25 (NI – 3.25)/0.75 507.0 – 742.2 42.25 – 61.85 (NI – 5.85)/0.7 Above 742.2 Above 61.85 (NI – 9.85)/0.6581 | Doing business in Vietnam
  • 80. Appendix 7: Double taxation agreementsThe withholding tax rates under Vietnam’s current double taxation agreementswith various countries are listed in the following table. Country Dividends (%) Interest (%) Royalties (%) Australia 10 10 10 Bangladesh 5 15 5 Belarus 15 10 15 Belgium 5/10/15 (a) 10 15 Bulgaria 15 10 15 Canada 5/10/15 (a) 10 7.5/10 China 10 10 10 Cuba 5/10/15 (a) 10 10 Czech Republic 10 10 10 Denmark 5/10/15 (a) 10 5/15 Finland 5/10/15 (a) 10 10 France 7/10/15 (a) – (b) 10 Germany 5/10/15 (a) 10 7.5/10 Hungary 10 10 10 Iceland 10/15 (a) 10 10 India 10 10 10 Indonesia 15 15 15 Italy 5/10/15 (a) 10 7.5/10 Japan 10 10 10 Korea (South) 10 10 5/15 Laos 10 10 10 Luxembourg 5/10/15 (a) 10 10 Malaysia 10 10 10 Mongolia 10 10 10 Myanmar 10 10 10 Netherlands 5/10/15 (a) 10 5/10/15 Norway 5/10/15 (a) 10 10 Pakistan 15 15 15 Philippines 10/15 (a) 15 15 Poland 10/15 (a) 10 10/15 Romania 15 10 15 Russian Federation 10/15 (a) 10 15 Singapore 5/7/12.5 (a) 10 5/15 Spain 7/10/15 (a) 10 10 Sweden 5/10/15 (a) 10 5/15 Switzerland 7/10/15 (a) 10 10 Taiwan 15 10 15 Thailand 15 10/15 15 Ukraine 10 10 10 Doing business in Vietnam | 82
  • 81. Country Dividends (%) Interest (%) Royalties (%) United Kingdom 7/10/15 (a) 10 10 Uzbekistan 15 10 15 Non-treaty countries 0 10 10(a) The rates vary depending on the percentage of the payer’s capital that is owned by the recipient of the dividends.(b) The treaty with France does not cover the taxation of interest.Vietnam has signed double taxation agreements with Algeria, Australia, BruneiDarussalam, Egypt, Hong Kong, Korea (North), Morocco, Oman, Seychelles, theSlovak Republic, Sri Lanka and Venezuela but these treaties have not yet beenratified or have not yet taken effect.Appendix 8: Demographic statisticsThe following tables show selected demographic statistics for Vietnam.Average population per yearPopulation 2009* 2007 2005 2004Average population (million persons) 85.790 85.171 83.106 80.902Annual growth rate (%) 1.22 1.23 1.31 1.47Male population (% of total) 49.16 49.16 49.15 49.14Female population (% of total) 50.84 50.84 50.85 50.86Urban population (% of total) 28.11 27.47 26.88 25.80Rural population (% of total) 71.89 72.53 73.12 74.20Source: GSO, www.gso.gov.vn*estimated figures83 | Doing business in Vietnam
  • 82. Average population by region Million persons Area 2008 2007 2006 Whole country 86.2 100% 85.1 100% 84.1 100.0% Red River Delta 19.6 22.7% 19.4 22.7% 19.3 22.9% which includes: Ha Noi 6.10 3.3 3.2 Hai Phong 1.84 1.82 1.8 Northern Midland and mountainous regions 11.2 13% 11 12.9% 10.9 12.9% North and South Central Coast 19.8 22.9% 19.6 23.03% 19.4 23% South Central Coast which includes: Da Nang 0.81 0.8 0.7 Central Highlands 5.01 5.8% 4.9 5.7% 4.8 5.7% which includes: Dak Lak 1.77 1.75 1.73 South East 12.8 14.8% 12.4 14.6% 12.1 16.4% which includes: Ho Chi Minh City 6.60 6.3 6.1 Dong Nai Province 2.29 2.25 2.2 Tay Ninh 1.05 1.05 1.0 Binh Duong Province 1.07 1.02 0.9 Ba Ria – Vung Tau 0.96 0.95 0.9 Binh Phuoc Province 0.83 0.82 0.8 Mekong River Delta 17.6 20.4% 17.5 20.5% 17.4 20.7%Source: GSO, www.gso.gov.vn Doing business in Vietnam | 84
  • 83. Appendix 9: Comparative data: Vietnam and selected countriesThe following tables show comparative data for Vietnam and selected countries. Country or area Population Surface Population Gross National Gross National PPP Gross National Gross Domestic area density Income Income per Income a Product growth rate Capita millions thousand people per US$ billions US$ US$ billions US$ per % growth per capita sq. km sq. km capita % growth 2007 2007 2007 2007b 2007b 2007 2,007 2006-07 2006-07 Bangladesh 159 144 1,218 74.9 470 211.4 1,330 6.4 4.7 Cambodia 14 181 82 8.0 550 24.9 1,720 10.2 8.3 85 | Doing business in Vietnam China 1,318 9,598 141 3,126.0 2,370 7150.5 5,420 13 12.4 Hong Kong, China 7 1 6,647 218.6 31,560 304.3 43,940 6.4 5.3 India 1,125 3,287 378 1071.0 950 3,082.5 2,7400 9.1 7.6 Indonesia 226 1,905 125 372.6 1,650 804.5 3,570 6.3 5.1 Japan 128 378 351 4,828.9 37,790 4,440.2 34,750 2.1 2.1 Korea, Rep. 48 99 491 955.8 19,730 1,203.6 24,840 5.0 4.6 Lao PDR 6 237 25 3.7 630 12.2 2,080 7.9 6.0 Malaysia 27 330 81 170.5 6,420 351.2 13,230 6.3 4.6 Mongolia 3 1,567 2 3.4 1,290 8.3 3,170 10.2 9.2 Myanmar 49 677 74 5.0 4,1
  • 84. Doing business in Vietnam | 86 Country or area Population Surface Population Gross National Gross National PPP Gross National Gross Domestic area density Income Income per Income a Product growth rate Capita millions thousand people per US$ billions US$ US$ billions US$ per % growth per capita sq. km sq. km capita % growth 2007 2007 2007 2007b 2007b 2007 2,007 2006-07 2006-07 Nepal 28 147 197 9.9 350 29.8 1,060 3.2 1.5 Pakistan 162 796 211 140.2 860 412.9 2,540 6.0 3.7 Philippines 88 300 295 142.1 1,620 326.4 3,100 7.2 5.2 Singapore 5 1 6,660 148.4 32,340 220.0 47.950 7.7 3.3 Sri Lanka 20 66 310 30.8 1,540 84.0 4,200 6.8 6.1 Thailand 64 513 125 217.2 3,400 502.8 7,880 4.8 4.1 Vietnam 85 329 275 65.4 770 215.4 2,530 8.5 7.2 World 6,610s 133,946s 51w 52,850.4 t 7,995 w 65,725.3 t 9,947 w 3.8 2.6 w East Asia & Pacific 1,912 16,299 121 4,172.8 2,182 9,503.1 4,969 11.4 10.5 South Asia 1,522 5,140 318 1,338.7 880 3,853.6 2,532 8.4 6.8a. PPP - purchasing power parityb. Calculated using the World Bank Atlas methodc. Estimated to be low income ($935 or less)d. The estimate is based on regression; others are extrapolated from the 2005 InternationalComparison Program benchmark estimatese. Included in the aggregates for lower middle – income economies based on earlier dataf. Estimate based on bilateral comparison between China and the United States (Ruoen and Kai 1995)employing a different methodology than that used for other countriesBasic data: World Bank Development Indicators 2009
  • 85. Country or Area Electric power Telephone Mobile phones Daily newspaper Televisions Personal Internet users consumption main lines computers Per capital in kwh per 100 people per 100 people per 100 people % household per 100 people per 100 people 2006 2007 2007 2000-07a 2006 2007 2007Bangladesh 146 1 22 0 48 2.2 0.3Cambodia 88 0 18 0 43 0.4 0.5China 2,041 28 42 74 89 5.7 16.1Hong Kong, China 5,883 60 155 222 100 68.6 57.2India 503 4 21 71 53 3.3 7.2Indonesia 530 8 36 65 2.0 5.8Japan 8,220 40 84 551 99c 0 69Korea, Rep 8,063 46 90 0 100 57.6 75.9Lao PDR 2 25 3 30 1.8 1.7Malaysia 3,388 16 88 109 95 23.1 55.7 87 | Doing business in VietnamMyanmar 93 1 0 0 3 0.9 0.1Nepal 80 2 12 0 13 0.5 1.4Philippines 578 4 59 79 63 7.3 6.0Singapore 8,520 41 129 361 98 74.3 65.7Sri Lanka 400 14 40 26 32 3.7 3.9Thailand 2,080 11 124 0 92 7.0 21.0Vietnam 598 34 28 0 89 9.6 21.0World 2,751 20 51 105 89 15.3 21.8East Asia & Pacific 1,669 23 44 74 53 5.6 14.6Basic data: World Bank Development Indicators 2009
  • 86. Appendix 10: Useful addresses and contact informationIf telephoning from an international location, use the international telephonecountry code for Vietnam, 84, as a prefix.Ministries and other national government agencies Immigration Department 89 Tran Hung Dao Street, Hanoi Telephone: 4 3822 0579 254 Nguyen Trai Street, District 1 Ho Chi Minh City Telephone: 8 3920 1701/3824 4074 Facsimile: 8 3825 6829 Ministry of Agriculture and 2 Ngoc Ha Street, Ba Dinh District, Hanoi Rural Development Telephone: 4 3846 8161/3843 6171 http://www.mard.gov.vn Facsimile: 4 3845 4319/3737 0752 135 Pasteur Street, Ward 6, District 3 Ho Chi Minh City Telephone: 8 3822 8471/3822 4106 Facsimile: 8 3822 4776/3823 8241 Ministry of Construction 37 Le Dai Hanh Street, Hai Ba Trung District, http://www.moc.gov.vn Hanoi Telephone: 4 3976 0271 Facsimile: 4 3976 2153/3974 1709 14 Ky Dong Street, Ward 9, District 3, Ho Chi Minh City Telephone: 8 3843 8635/3846 8407 Facsimile: 8 3931 7152 Ministry of Information 18 Nguyen Du Street, Hanoi, Vietnam and Communications Telephone: 4 3943 5602 http://www.mic.gov.vn Facsimile: 4 3826 3477 27 Nguyen Binh Khiem Street, Da Kao Ward, District 1, Ho Chi Minh City Telephone: 8 3823 5404 Facsimile: 8 3822 2988 Ministry of Defense 1A Hoang Dieu Street, Ba Dinh District, Hanoi Telephone: 69 388 2041/4 353 2090 Doing business in Vietnam | 88
  • 87. Ministry of Education and 49 Dai Co Viet Street Training Hai Ba Trung District, Hanoi http://www.edu.net.vn Telephone: 4 3869 2394/3869 4904/ 3869 4794 Facsimile: 4 3869 4085 3 Quoc Te Square, District 3, HCMC Telephone: 8 3823 9022/3829 0396/ 3829 5501 Facsimile: 8 3823 9021 Ministry of Finance 28 Tran Hung Dao Street, http://www.mof.gov.vn Hoan Kiem District, Hanoi Telephone: 4 3220 2828 Facsimile: 4 3220 8091 138 Nguyen Thi Minh Khai Street, District 3 Ho Chi Minh City Telephone: 8 3930 3375/3930 5030/3930 3685 Facsimile: 8 3930 3375 Ministry of Foreign Affairs 1 Ton That Dam Street, Ba Dinh District, Hanoi http://www.mofa.gov.vn Telephone: 4 3199 2000/3199 3000 Facsimile: 4 3823 1872 Ministry of Health 138A Giang Vo Street, Ba Dinh District, Hanoi http://www.moh.gov.vn Telephone: 4 3844 3463/3846 4416/ 3846 4051 Facsimile: 4 3846 0196/3846 2195 51 Pham Ngoc Thach Street, District 3 Ho Chi Minh City Telephone: 8 3829 0433/3822 1382 Facsimile: 8 3822 3500 Ministry of Industry and 54 Hai Ba Trung Street, Hanoi Trade Telephone: 4 3220 2222 http://www.moit.gov.vn Facsimile: 4 3220 2525 45 Tran Cao Van Street, District 3 Ho Chi Minh City Telephone: 8 3829 4631 Facsimile: 8 3824 327389 | Doing business in Vietnam
  • 88. Ministry of Justice 56-58-60 Tran Phu Street, Ba Dinh District, Hanoihttp://www.moj.gov.vn Telephone: 43733 6213/3733 8068 Facsimile: 4 3843 1431 30 Tran Cao Van Street, District 3 Ho Chi Minh City Telephone: 8 3823 9046 Facsimile: 8 3829 9277Ministry of Labor, War 12 Ngo Quyen Street, Hoan Kiem District, HanoiInvalids and Social Affairs Telephone: 4 3826 4222/3826 9557http://www.molisa.gov.vn Facsimile: 4 3824 8036 45 Pham Ngoc Thach Street, District 3 Ho Chi Minh City Telephone: 8 3823 0853 Facsimile: 8 3822 4115Ministry of Marine Products 10 Nguyen Cong Hoan Street,http://www.mofi.gov.vn Ba Dinh District, Hanoi Telephone: 4 3771 8817/3771 6269 Facsimile: 4 3771 6702 30 Ham Nghi Street, District 1 Ho Chi Minh City Telephone: 8 3829 4864 Facsimile: 8 3829 0067Ministry of Planning and 2 Hoang Van Thu Street, Ba Dinh District, HanoiInvestment Telephone: 4 3845 5298http://www.mpi.gov.vn Facsimile: 4 3823 4453 289 Dien Bien Phu Street, District 3 Ho Chi Minh City Telephone: 8 3930 7083/3930 7850 Facsimile: 8 3930 7460Ministry of Police 44 Yet Kieu Street, Hoan Kiem District, Hanoihttp://www.moha.gov.vn Telephone: 4 3694 2545 Facsimile: 4 3942 0223 258 Nguyen Trai Street, District 1 Ho Chi Minh City Telephone: 8 3837 5134 Facsimile: 8 3920 2065/3920 0961 Doing business in Vietnam | 90
  • 89. Ministry of Science, 39 Tran Hung Dao Street, Hanoi Technology Telephone: 4 3943 9731/3943 9734 http://www.most.gov.vn Facsimile: 4 3943 9733 Ministry of Natural 83 Nguyen Chi Thanh Street, Dong Da Resources and Environment District, Hanoi http://www.monre.gov.vn Telephone: 4 3834 3911/3835 6419 Facsimile: 4 3835 9211/3835 2191 42 Mac Dinh Chi Street, District 1, Ho Chi Minh City Telephone: 8 3827 4987 Facsimile: 8 3825 8365 Ministry of Transport 80 Tran Hung Dao Street, Hoan Kiem District, http://www.mt.gov.vn Hanoi Telephone: 4 3942 4015 Facsimile: 4 3942 3291 92 Nam Ky Khoi Nghia Street, District 1 Ho Chi Minh City Telephone: 8 3829 5939/3821 8383 Facsimile: 8 3822 4120 Ministry of Culture Sport 51 Ngo Quyen Street, Hanoi and Tourism of Vietnam Telephone: 43943 6488/3943 8101 http://www.cinet.gov.vn Facsimile: 4 3945 4330 170 Nguyen Dinh Chieu Street, District 1 Ho Chi Minh City Telephone: 8 3930 6486/3930 3369 Facsimile: 8 3930 5237 Office of Government 1 Hoang Hoa Tham Street, Ba Dinh District, Hanoi Telephone: 4 0804 3700 Facsimile: 4 0804 4130 7 Le Duan Street, District 1, Ho Chi Minh City Telephone: 8 3825 1763 State Bank of Vietnam 49 Ly Thai To Street, Hoan Kiem District, Hanoi http://www.sbv.gov.vn Telephone: 4 3824 1534 17 Ben Chuong Duong Street, District 1 Ho Chi Minh City Telephone: 8 3829 2157/3829 215891 | Doing business in Vietnam
  • 90. Central Overseas 32 Ba Trieu Street, HanoiVietnamese Committee Telephone: 4 38240401 Facsimile: 4 3824 0403 147 Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City Telephone: 8 3930 3063 Facsimile: 8 3930 6737Vietnam Chamber of 9 Dao Duy Anh Street, Dong Da District, HanoiCommerce and Industry Telephone: 4 3574 2022http://www.vcci.com.vn Facsimile: 4 3574 2020/3574 2017 171 Vo Thi Sau Street, District 3, Ho Chi Minh City Telephone: 8 3932 5143/3932 5171 Facsimile: 8 3932 5143/3932 5281 256 Tran Phu Street, Da Nang Telephone: 511 356 2538 Facsimile: 511 382 2930 10 Dinh Tien Hoang Street, Hai Phong Telephone: 31 384 2894 Facsimile: 31 384 2243 44 Nguyen Thi Minh Khai Street, Khanh Hoa Telephone: 58 352 1571 747 Ba Trieu Street, Truong Thi, Nghe An Telephone: 38 375 4640 155 Nguyen Thai Hoc Street, Vung Tau Telephone: 64 357 0266 Facsimile: 64 385 9651General Department of Civil 200 Nguyen Son Street, Long Bien District, HanoiAviation of Vietnam Telephone: 4 3873 2732http://www.vietnamair.com.vn Facsimile: 4 3270 0222 Tan Son Nhat Airport 49 Truong Son Street, Tan Binh District Ho Chi Minh City Telephone: 8 3844 6667 Doing business in Vietnam | 92
  • 91. General Department of 162 Nguyen Van Cu Street, Long Bien District Hanoi Customs Telephone: 4 3872 7033 http://www.customs.gov.vn Facsimile: 4 3872 5949 15B Thi Sach Street, District 1, Ho Chi Minh City Telephone: 8 3823 3536 General Department of Lang Trung Street, Hanoi Land Administration Telephone: 4 3834 3309/3834 3914 Facsimile: 4 3835 2191 Directorate for Standards 8 Hoang Quoc Viet Street, Cau Giay District, and Quality Hanoi http://www.tcvn.gov.vn Telephone: 4 3756 2608 Facsimile: 4 3836 1556 49 Pasteur Street, District 1, Ho Chi Minh City Telephone: 8 3822 2872 Facsimile: 8 3829 3012 General Statistics Office 2 Hoang Van Thu Street, Ba Dinh District, Hanoi http://www.gso.gov.vn Telephone: 4 3843 2772 Facsimile: 4 3733 3846 29 Han Thuyen Street, District 1, Ho Chi Minh City Telephone: 8 3829 9847 Facsimile: 8 3824 4734 Investment and Foreign 92-96 Nguyen Hue Street, District 1 Trade Development Association Ho Chi Minh City of Ho Chi Minh City Telephone: 8 3823 1530 Facsimile: 8 3823 0993 State Securities 164 Tran Quang Khai Street, Hanoi Commission of Vietnam Telephone: 4 3934 0750 http://www.ssc.gov.vn Facsimile: 4 3934 0739 1 Nam Ky Khoi Nghia Street, District 1 Ho Chi Minh City Telephone: 8 3821 1412 Facsimile: 8 3821 462393 | Doing business in Vietnam
  • 92. Vietnam Social Insurance 7 Trang Thi Street, Hanoi Telephone: 4 3934 4165/3936 1749 7 Le Duan Street, District 1, Ho Chi Minh City Telephone: 8 3824 4164State Auditing (National 111 Tran Duy Hung Street, Cau Giay District,audit office) Hanoihttp://www.kiemtoannn.gov.vn Telephone: 4 3556 6211/3556 5786 Facsimile: 4 3556 6029 37 Phan Dang Luu Street, Phu Nhuan District Ho Chi Minh City Telephone: 8 3803 0662 Facsimile: 8 3803 0659Vietnam News Agency 5 Ly Thuong Kiet Street, Hanoihttp://www.vnanet.vn Telephone: 4 3825 5433/3825 2931 Facsimile: 4 3825 2984 120 Nguyen Thi Minh Khai Street, District 3 Ho Chi Minh City Telephone: 8 3930 3921/3933 0757 Facsimile: 8 3933 0086Vietnam Oil and Gas 22 Ngo Quyen Street, Hoan Kiem District,Corporation (Petrovietnam) Hanoihttp://www.petrovietnam.com.vn Telephone: 4 3824 9130/3825 2526 Facsimile: 4 3826 5942Vietnam Television 43 Nguyen Chi Thanh Street, Hanoihttp://www.vtv.org.vn Telephone: 4 3822 4403/3822 3422 Facsimile: 4 3934 4169Vietnam Trade Information 45 Ngo Quyen Street, Hoan Kiem District,Center Hanoi Telephone: 4 39341911 Facsimile: 4 39348177 173 Hai Ba Trung Street, District 3 Ho Chi Minh City Telephone: 8 3823 7217/3823 7316 Facsimile: 8 3822 8756Voice of Vietnam 58 Quan Su Street, Hanoihttp://www.vov.org.vn Telephone: 4 3934 4231 E-mail: vovnews@hn.vnn.vn Doing business in Vietnam | 94
  • 93. People’s Committee Hanoi 12 Le Lai Street, Hoan Kiem District, Hanoi http://www.hanoi.gov.vn Telephone: 4 3825 3536 Facsimile: 4 3824 3126 Ho Chi Minh City 86 Le Thanh Ton Street, District 1 http://www.hochiminhcity.g Ho Chi Minh City ov.vn Telephone: 8 3822 6191/3825 0028 Facsimile: 8 3829 6116/3827 5564 Ba Ria-Vung Tau Province 26 Thong Nhat Street, Vung Tau http://www.baria-vungtau.g Telephone: 64 385 1737 ov.vn Facsimile: 64 385 2324 Binh Duong Province 1 Quang Trung Street, Thu Dau Mot http://www.binhduong Telephone: 650 385 8221 .gov.vn Facsimile: 650 382 2174 Can Tho Province 2 Hoa Binh Street, Ninh Kieu District, Can Tho http://www.cantho.gov.vn Telephone: 71 383 6800 Da Nang 42 Bach Dang Street, Da Nang http://www.danang.gov.vn Telephone: 511 382 1339/382 2527 Facsimile: 511 382 1286 Dong Nai 2 Nguyen Van Tri Street, Bien Hoa http://www.dongnai.gov.vn Telephone: 61 394 2566 Facsimile: 61 382 3854 Hai Phong City 18 Hoang Dieu Street, Hai Phong http://www.haiphong Telephone: 31 382 1055 .gov.vn Facsimile: 31 374 7352 Quang Nam Province 62 Hung Vuong Street, Tam Ky town http://www.quangnam Quang Nam .gov.vn Telephone: 510 381 1910/385 2744 Facsimile: 510 385 2748 Tien Giang Province 23 30 Thang 4 Street, My Tho http://www.tiengiang Telephone: 73 388 5130/387 3153 .gov.vn Facsimile: 73 387 368095 | Doing business in Vietnam
  • 94. Department of Planning and Investment An Giang DPI 8/18 Ly Thuong Kiet Street, Long Xuyen town, http://sokehoachdt. An Giang Province angiang.gov.vn/ Tel: 76 385 2913 Fax: 76 385 3380 Ba Ria - Vung Tau DPI 01 Nguyen Chi Thanh Street, Ward 2 http://www.sokhdt. Vung Tau City baria-vungtau.gov.vn Tel: 64 385 2401/385 2320/385 8286/ 385 1381/385 2502 Bac Can DPI Group 4, Duc Xuan Ward, Bac Kan town http://www.backan.gov.vn Bac Kan Province Tel: 281 387 1287 Fax: 281 387 1287 Bac Giang DPI Nguyen Gia Thieu Street, Bac Giang town http://www.bacgiangdpi. Bac Giang Province gov.vn Tel: 240 385 4317/385 9606 Fax: 240 385 4923 Bac Lieu DPI 23 Hai Ba Trung Street, Ward 3, Bac Lieu Town, http://www.baclieu.gov.vn Bac Lieu Province Tel: 781 382 7616 Fax: 781 382 3874 Bac Ninh DPI 6 Ly Thai To Street, Suoi Hoa Ward www.bacninhdpi.gov.vn Bac Ninh Town, Bac Ninh Province Tel: 241 382 2569/382 4902 Fax: 241 382 5777 Ben Tre DPI 6 Cach Mang Thang Tam Street, Ward 3 Ben Tre www.dpi-bentre.gov.vn town, Ben Tre Province Tel: 75 382 1280/381 7358 Fax: 75 382 5543 Binh Dinh DPI 35 Le Loi Street, Quy Nhon City www.sokhdt.binhdinh. Binh Dinh Province gov.vn Tel: 56 381 8888/381 8889 Fax: 56 382 4509/381 8887 Binh Duong DPI 188, Binh Duong Street, Phu Hoa Ward Thu Dau http://skhdt.binhduong. Mot town, Binh Duong Province gov.vn Tel: 650 382 2926/382 7954 Fax: 650 382 5194 Doing business in Vietnam | 96
  • 95. Binh Phuoc DPI The 14th National Highway, Dong Xoi town Binh http://www.binhphuoc. Phuoc Province gov.vn Tel: 651 387 9253/387 0772 Fax: 651 388 7088 Binh Thuan DPI 290 Tran Hung Dao Street, Binh Hung Ward, http://www.binhthuan.gov. Phan Thiet City , Binh Thuan Province vn/songanh/Sokh_dt/ Tel: 62 382 1128/382 7170/383 1890 Fax: 62 382 8656 Ca Mau DPI 93 Ly Thuong Kiet Street, Ward 5 http://www.camau.gov.vn Ca Mau City Tel: 780 383 1332/780 382 5972 Fax: 780 383 0773 Can Tho DPI 61/21 Ly Tu Trong Street, An Phu Ward http://www.cantho.gov.vn/ Can Tho City , Can Tho Province wps/portal/sokhdt Tel: 71 383 0235/373 0259/383 0630 Fax: 71 383 0570 Cao Bang DPI Xuan Truong Street, Hop Giang http://www.caobang.gov.vn Cao Bang Town, Cao Bang Province Tel: 26 385 8743/385 2535 Fax: 26 385 3335 Dien Bien DPI 9 - Muong Thanh Ward, Dien Bien City Dien Bien http://www.dienbiendpi. Province gov.vn Tel: 23 382 5409/382 5896 Fax: 23 382 5944 Dong Nai DPI 2 Nguyen Van Tri Street, Thanh Binh www.dpidongnai.gov.vn Bien Hoa City, Dong Nai Province Tel: 61 382 4283/382 7116 Fax: 61 394 1718 Dong Thap DPI 11, Vo Truong Toan Street, Ward 1 http://www.dongthap.gov.vn/ Cao Lanh town, Dong Thap Province wps/portal/sokhdt Tel: 67 385 1101/385 1960 Fax: 67 385 2955 Gia Lai DPI 02 Hoang Hoa Tham Street http://www.kehoachdautugia Pleiku City , Gia Lai Province lai.gov.vn Tel: 59 382 2204/382 3717 Fax: 59 382 380897 | Doing business in Vietnam
  • 96. Ha Giang DPI 156 Tran Hung Dao Street, Ha Giang townhttp://www.hagiang.gov.vn Ha Giang Province Tel: 19 3866 256/3867051 Fax: 19 3867 623Ha Nam DPI 15 Tran Phu Street, Phu Lyhttp://www.hanam.gov.vn Ha Nam Province. Tel: 351 385 2701/385 4317 Fax: 351 385 2701Ha Tay DPI 2 Phung Hung Street -Ha Dong Cityhttp://www.hatay.gov.vn/coqua Ha Tay Provincenhanhchinh.asp?catid=KHDT Tel: 34 382 4184/382 8064 Fax: 34 382 4608Ha Tinh DPI Phan Dinh Phung Street, Ha Tinh townwww.dpihatinh.gov.vn Ha Tinh Province Tel: 39 385 6750/388 1267 Fax: 39 385 5576Hai Duong DPI 58 Quang Trung Street, Hai Duong Cityhttp://www.haiduong.gov.vn Hai Duong Province Tel: 320 385 3574/385 5762 Fax: 320 385 0814Hai Phong DPI 1 Dinh Tien Hoang Street, Hong Bangwww.haiphongdpi.gov.vn Hai Phong Tel: 31 384 2614/384 2119 Fax: 31 384 2021Hanoi DPI 17 Tran Nguyen Han Street - Hoan Kiem Hanoiwww.hapi.gov.vn Tel: 4 3825 6637/3826 0257 Fax: 4 3825 1733Hau Giang DPI 2 Le Hong Phong Street, Vi Thanh townwww.skhdt.haugiang.gov.vn Hau Giang Province Tel: 71 387 8872/387 0210 Fax: 71 387 8871Ho Chi Minh City DPI 32 Le Thanh Ton Street, District 1www.dpi.hochiminhcity Ho Chi Minh City.gov.vn Tel: 8 3829 7834/3827 2192/3829 3174 Fax: 8 3829 5008 Doing business in Vietnam | 98
  • 97. Hoa Binh DPI 3 Tran Hung Dao Street, Hoa Binh town http://www.hoabinh.gov.vn Hoa Binh Province Tel: 18 385 1457 Fax: 18 385 3152 Hung Yen DPI 8 Chua Chuong Street, Hien Nam, http://www.hungyen.gov.vn Hung Yen, Hung Yen Province Tel: 321 386 5127 Fax: 321 355 0834 Khanh Hoa DPI 01 Tran Phu Street, Nha Trang City http://www.khanhhoainvest.g Khanh Hoa Province. ov.vn Tel: 58 382 4243 Fax: 58 381 2943/382 4243 Kien Giang DPI 29 Bach Dang Street, Rach gia town http://kehoach.kiengiang.g Kien Giang Province ov.vn Tel: 77 386 2037 Fax: 77 386 2037 Kon Tum DPI 123B Tran Phu Street , KonTum town http://www.kontum.gov.vn Kon Tum Province Tel: 60 386 4277 – 386 3676 Fax: 60 386 4253 Lai Chau DPI Tan Phong Ward, Lai Chau hamlet Lai Chau Province Tel: 23 387 6438/387 6501 Fax: 23 387 6437 Lam Dong DPI 2 Tran Hung Dao Street http://www.dalat.gov.vn/xucti Da Lat City, Lam Dong Province endautu Tel: 63 382 2311/383 0306 Fax: 63 383 4806 Lang Son DPI 2 Hoang Van Thu Street, Chi Lang www.langson.vn/khdt Lang Son town, Lang Son Province Tel: 25 381 2122/381 2561 Fax: 25 381 3067 Lao Cai DPI 266 Hoang Lien Street, Kim Tan http://laocai.gov.vn Lao Cai town, Lao Cai Province Tel: 20 384 0810 Fax: 20 384 241199 | Doing business in Vietnam
  • 98. Long An DPI 61 Truong Cong Dinh Street, Ward 1http://www.longan.gov.vn Tan An town, Long An Province Tel: 72 382 3461/328 6199 Fax: 72 382 5044Nam Dinh DPI 172 Han Thuyen Street, Nam Dinh Cityhttp://www.namdinh.gov.vn Nam Dinh Province. Tel: 350 364 8482/364 5227 Fax: 350 364 7120Nghe An DPI Truong Thi Ward, Vinh City,www. khdtnghean.vn Nghe An Province Tel: 38 384 4636/384 3102 Fax: 38 359 2246Ninh Binh DPI 15 Le Hong Phong Street, Ninh Binh townwww.ninhbinh.gov.vn Ninh Binh Province Tel: 30 387 1156/387 4913 Fax: 30 387 3381Ninh Thuan DPI The 16th April Street, Phan Rang townwww.ninhthuan.gov.vn/ Thap Cham, Ninh Thuan Provincesokhdt Tel: 68 382 2694/382 5880 Fax: 68 382 5488Phu Tho DPI Tran Phu Street, Tan Dan, Viet Tri Cityhttp://www.dpi.phutho.gov.vn Phu Tho Province Tel: 210 384 7778 Fax: 210 384 0955/384 7419Phu Yen DPI 2A Dien Bien Phu Street, Tuy Hoa townhttp://www.phuyen.gov.vn Phu Yen Province Tel: 57 384 1112Quang Binh DPI 9 Quang Trung Street, Dong Hoihttp://www.quangbinhbusine Quang Binh.ss.gov.vn Tel: 52 382 4611/382 4635 Fax: 52 382 1520Quang Nam DPI 02 Tran Phu Street, Tam Ky townhttp://www.dpiqnam.gov.vn Quang Nam Province Tel: 510 381 0394 /381 0866 Fax: 510 381 0396 Doing business in Vietnam | 100
  • 99. Quang Ngai DPI 96 Nguyen Nghiem Street http://www.quangngai.gov.vn Quang Ngai City, Quang Ngai Province /quangngai/tiengviet/chuyen Tel: 55 382 2868/382 6266 nganh/sokhdt Quang Ninh DPI Hong Ha Ward, Ha Long City www.quangninhdpi.gov.vn Quang Ninh Province Tel: 33 383 5687/33 383 5693 Fax: 33 383 8072 Quang Tri DPI 34 Hung Vuong Street, Dong Ha town http://dpiquangtri.gov.vn Quang Tri Province Tel: 53 355 0167 Fax: 53 385 1760 Soc Trang DPI 21B Tran Hung Dao Street Soc Trang town, Soc Trang Province Tel: 79 382 2333 Fax: 79 382 2333 Son La DPI Khau Ca Street, Son La town http://www.sonla.gov.vn Son La Province Tel : 22 385 9866 Fax: 22 385 2032 Tay Ninh DPI 300 Cach Mang Thang Tam Street, Ward 2 http://www.tayninh.gov.vn Tay Ninh town, Tay Ninh Province Tel: 66 382 2166/382 7638 Fax: 66 382 7947 Thai Binh DPI 233 Hai Ba Trung Street, Thai Binh City, http://www.thaibinh.gov.vn Thai Binh Province Tel: 36 383 1774/ 036 383 0437 Fax: 36 383 0326 Thai Nguyen DPI 17 Doi Can Street, Thai Nguyen City http://www.thainguyen.gov.vn Thai Nguyen Province Tel: 280 385 5688/385 4211/375 9605 Fax: 280 385 1363 Thanh Hoa DPI 45B Le Loi Street, Lam Son Ward, http://www.thanhhoa.gov.vn Thanh Hoa City, Thanh Hoa Province Tel: 37 385 2366/375 6149 Fax: 37 385 1451101 | Doing business in Vietnam
  • 100. Thua Thien Hue DPI Ton Duc Thang Street, Hue Citywww.skhdt.hue.gov.vn Tel: 54 382 2538 /382 4680 Fax: 54 382 1264Tien Giang DPI 38 Nam Ky Khoi Nghia Streethttp://www.tiengiang.gov.vn My Tho City Tien Giang Province Tel: 73 387 3381/387 1961 Fax: 73 387 5487Tra Vinh DPI 9A Nam Ky Khoi Nghia Streethttp://xuctientravinh.com.vn Tra Vinh town Tel: 74 386 2289/386 6300 Fax: 74 386 4348Tuyen Quang DPI Tran Hung Dao Street, Minh Xuanwww.tuyenquang.gov.vn Tuyen Quang town, Tuyen Quang Province Tel: 27 382 2814/382 1366 Fax: 27 382 3160Vinh Long DPI 1 Trung Nu Vuong Street, Ward 1www.skhdt.vinhlong.gov.vn Vinh Long town, Vinh Long Province Tel: 70 382 3319/383 4031 Fax: 70 382 8033Vinh Phuc DPI 40 Nguyen Trai Street, Vinh Yen townhttp://www.vinhphuc.gov. Vinh Phuc Provincevn/sokhdt Tel: 211 386 2480/384 2743 Fax: 211 386 2480Yen Bai DPI Yen Ninh Street, Dong Tam, Yen Bai City Yen Bai Province Tel: 29 385 2409/385 3052 Fax: 29 385 1626 Doing business in Vietnam | 102
  • 101. Ernst & Young at a glanceErnst & Young GlobalErnst & Young is a global leader in assurance, tax, transaction and advisoryservices. Worldwide, our 144,000 people are united by our shared values and anunwavering commitment to quality. We make a difference by helping our people,our clients and our wider communities achieve their potential.Our people in 140 countries around the globe pursue the highest levels ofintegrity, quality and professionalism to provide clients with a broad array ofservices. We are recognized for “delivering value” to our clients through ourcommitment to understand our client’s business challenges and strategies, andproviding practical solutions to help them achieve their business goals andobjectives. We serve our clients with the highest levels of integrity, quality andprofessionalism.Ernst & Young’s clients are among the world’s most successful businesses. Theyhave chosen us because of our solutions that help them tackle challenges in thefast and ever-changing business world, in a faster, better and more confidentway than other professional services firms.Ernst & Young in Far EastThe integrated Far East Area includes some 20,000 people across the emerging anddeveloped markets of Asia. Our vast and dynamic Area spans the entire region andis made up of some of the most exciting and rapidly developing markets in the worldtoday.Our goal is to be number one in the markets we serve. This requires us to build amarket-leading share of accounts in our key markets and industry sectors. Itrequires us to work with the world’s largest companies of today, and the emergingleaders of tomorrow. And it requires us to achieve market leadership in the Far East– in terms of brand, relationships and share. To achieve this we know we need to bebold and to be the first to seize opportunities. By integrating we are making such abold move and in doing so, we are sending a clear message to the market of ourintention and ability to achieve market leadership.Ernst & Young in VietnamErnst & Young in Vietnam is one of the leading professional services firms. Our morethan 700 professionals and support staff are available anywhere in Vietnam,working out of offices located in Hanoi and Ho Chi Minh City. Besides, We alsomanage other two offices in Laos and Cambodia.We are dedicated to providing the highest quality professional services to all itsclients through assisting them to achieve their objectives, whilst realizing thegrowth aspirations of the firm and our people and making a positive differenceto the community it serves.In Vietnam, Ernst & Young serves organizations ranging in size from mediumscale and family owned businesses to major multinational corporations. Our103 | Doing business in Vietnam
  • 102. clients comprise of entities in many legal forms, including public and privatecompanies, cooperatives, nonprofit organizations, public works and publicbodies. We also assist individuals with all types of personal tax and expatriateissues. Ernst & Young offers the following professional services: Assurance ServicesStrong independent assurance provides a timely and constructive challenge tomanagement, a robust and clear perspective to audit committees and criticalinformation for investors and other stakeholders. The quality of our audit startswith our 60,000 assurance professionals, who have the experience of auditingmany of the world’s leading companies. We provide a consistent worldwide auditby assembling the right multidisciplinary team to address the most complexissues, using a proven global methodology and deploying the latest, high-qualityauditing tools. And we work to give you the benefit of our broad sectorexperience, our deep subject matter knowledge and the latest insights from ourwork worldwide. It’s how Ernst & Young makes a difference. Audit and Accounting Services Financial Accounting and Advisory Services Financial Statement Audit Financial Statement Review Agreed-upon Procedure Engagement on Financial Information Fraud investigation & Dispute Services (FIDS) Fraud Investigation (F&I) which includes FCPA Investigations Dispute Services (DS) Forensic Technology and Discovery Services Anti-Fraud Solutions Corporate Compliance Advisory ServicesThe relationship between risk and performance improvement is an increasinglycomplex and central business challenge, with business performance directlyconnected to the recognition and effective management of risk. Whether yourfocus is on business transformation or sustaining achievement, having the rightadvisors on your side can make all the difference. Our 20,000 advisoryprofessionals form one of the broadest global advisory networks of anyprofessional organization, delivering seasoned multidisciplinary teams that workwith our clients to deliver a powerful and superior client experience. We useproven, integrated methodologies to help you achieve your strategic prioritiesand make improvements that are sustainable for the longer term. Weunderstand that to achieve your potential as an organization you requireservices that respond to your specific issues, so we bring our broad sectorexperience and deep subject matter knowledge to bear in a proactive andobjective way. Above all, we are committed to measuring the gains andidentifying where the strategy is delivering the value your business needs. It’show Ernst & Young makes a difference. Doing business in Vietnam | 104
  • 103. Performance Improvement Risk Finance Enterprise-wide Governance, Risk and Compliance Supply Chain Internal Controls Customer Internal Audit IT Risk & Assurance IT Internal Controls IT Enterprise-wide Governance, Risk and Compliance External Audit IT Support IT Internal Audit Transaction Advisory ServicesHow organizations manage their capital agenda today will define their competi-tive position tomorrow. We work with our clients to help them make better andmore informed decisions about how they strategically manage capital andtransactions in a changing world. Whether youre preserving, optimizing, raisingor investing capital, Ernst & Youngs Transaction Advisory Services bringtogether a unique combination of skills, insight and experience to delivertailored advice attuned to your needs – helping you drive competitive advantageand increased shareholder returns through improved decision making across allaspects of your capital agenda. Transaction Support Transaction Integration Valuation & Business Modeling Transaction Tax Project Finance Restructuring Transaction Real Estate Merger and Acquisition Advisory Services Tax & Advisory ServicesYour business will only achieve its true potential if you build it on strong founda-tions and grow it in a sustainable way. At Ernst & Young, we believe thatmanaging your tax obligations responsibly and proactively can make a criticaldifference. So our 25,000 talented tax professionals in over 135 countries giveyou technical knowledge, business experience, consistent methodologies and anunwavering commitment to quality service — wherever you are and whatever taxservices you need. It’s how Ernst & Young makes a difference. Business Tax Services Customs Income Tax Compliance International Tax Services Tax Accounting Transaction Tax Tax Risk Services Transfer Pricing Human Capital Indirect Tax105 | Doing business in Vietnam
  • 104. ContactsMr Cuong Dinh TranCountry Managing PartnerAssurance Services LeaderMr Jun TorresHo Chi Minh City Office Managing PartnerMs Huong VuHanoi Office Managing PartnerMr Tom ChongAdvisory Services LeaderMr Nam NguyenTax & Advisory Services LeaderMr Van Tan Hoang VoFinancial Services LeaderMr Tom ChongTransaction Advisory Services LeaderMr Tony DuongBusiness Development Leader Office locationsHo Chi Minh City Hanoi8th Floor, Saigon Riverside 14th Floor, Daeha Business CenterOffice Center 360 Kim Ma Street, Ba Dinh District2A-4A Ton Duc Thang Street, District 1 HanoiHo Chi Minh City Telephone: +84 4 3831 5100Telephone: +84 8 3824 5252 Facsimile: +84 4 3831 5090Facsimile: +84 8 3824 5250 E-mail: eyhanoi@vn.ey.comE-mail: eyhcmc@vn.ey.comVientiane office Phnom Penh 0fficeANZ Vientiane Commercial SSN Center No. 66 3rd FloorBuilding, 3rd Floor, Room No. 03-04 Norodom Blvd. (41)33 Lane Xang Avenue, Vientiane Sangkat CheyChumneasLao People Democratic of Republic Khan Daun Penh, Phnom PenhTel: +856 21 222 715 Tel: +855 23 217 814/824/825Fax: +856 21 222 735 Fax: +855 23 217 805Email: eylao@laotel.com Email: eykoc@vn.ey.com Doing business in Vietnam | 106
  • 105. Ernst & YoungAssurance | Tax | Transaction | AdvisoryAbout Ernst & YoungErnst & Young is a global leader in assurance, tax,transaction and advisory services. Worldwide, our144,000 people are united by our shared values and anunwavering commitment to quality. We make adifference by helping our people, our clients and ourwider communities achieve their potential.For more information, please visitwww.ey.comErnst & Young refers to the global organization ofmember firms of Ernst & Young Global Limited, each ofwhich is a separate legal entity. Ernst & Young GlobalLimited, a UK company limited by guarantee, does notprovide services to clients.©2010 Ernst & Young Vietnam Limited.All Rights Reserved.FEA no. 16000040This publication contains information in summaryform and is therefore intended for general guidanceonly. It is not intended to be a substitute for detailedresearch or the exercise of professional judgment.Neither Ernst & Young Vietnam Limited nor anyother member of the global Ernst & Youngorganization can accept any responsibility for lossoccasioned to any person acting or refraining in thispublication. On any specific matter, reference shouldbe made to the appropriate advisor.www.ey.com/vn

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