Lawyer in Vietnam Dr Oliver Massmann Vietnam on a new course with Europe

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Vietnam on a new course with Europe - The EU
Vietnam Free Trade Agreement - market access
benefits for European companies - Investing and
doing business with Vietnam
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AGENDA
• VIETNAM’S LATEST ECONOMIC DEVELOPMENTS
• THE EU- VIETNAM FREE TRADE AGREEMENT AND
INVESTMENT PROTECTION AGREEMENT – WHAT
ARE THEY?
• MARKET ACCESS BENEFITS FOR EUROPEAN
COMPANIES
• OPPORTUNITIES AND CHALLENGES IN CERTAIN
SECTORS
• DOING BUSINESS AND INVESTING IN VIETNAM
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Vietnam’s latest economic developments
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Vietnam 2022 Economy at a glance
• 2022 GDP Growth predicted by World Bank: 7.5%
• Inflation: 2.58%
• FDI capital up to Sep 2022: USD18.75 billion, equal to
84.7% of same period last year.
• Population: About 96.4 million
• Labor force aged 15 and above: 59.1%
• Total goods export and import turnover of the first 9
months of 2022: US$ 558.5 billion (increase by 15.1%
compared with same period last year)
• Regional Minimum wage (Region I): VND 4,680,000
(US$ 201.7) per month (effective from July 2022)
• Vietnam’s average age: 30.9 years old
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Welcome to the most dynamic country on this
planet: Vietnam!

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SOUTHEAST ASIA GDP GROWTH

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The 4th fastest-growing high net worth country
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Source: High Net Worth Handbook 2019, Wealth-X

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EU – Vietnam Free Trade Agreement
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EVFTA AND IPA
• The EVFTA is a new generation free trade agreement between Vietnam
and 28 EU member countries
• On 2nd December 2015, both Vietnam and the EU concluded the
negotiations.
• On 26 June 2018, the EVFTA was divided into 2 agreements in terms of
trade and investment following the European Court of Justice’s opinion
on the EU – Singapore FTA
• The EVFTA covers trade issues while investment protection and
investment-related dispute settlement are under the IPA.
• On 30th June, the EVFTA and the IPA were signed in Hanoi.
• EVFTA takes effect from 01 August 2020.
• The EVFTA is the first comprehensive and ambitious trade and
investment agreements that the EU has ever concluded with a
developing country in Asia
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EVFTA – Comprehensive agreement
• Trade in goods
Market access for goods – tariffs
Rules of Origin
Export duties
Technical Barriers to Trade (TBT)
Sanitary and Phytosanitary Measures
Customs and Trade Facilitation
Administrative Cooperation in Customs Matters
• Services and investment:
E-commerce/ Renewable energy generation
Liberalisation commitments / market access
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Cross-cutting issues
Dispute Settlement
Government Procurement
State Owned Enterprises & Subsidies
Intellectual Property Rights
Geographical Indications
Trade and Sustainable Development
Cooperation and Capacity building
Annexes (car; green tech and pharma)

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EVIPA
• Applies to covered investment and its investors
“Investment” means every kind of asset which is owned or controlled,
directly or indirectly, by an investor of EU/ Vietnam in the territory of
Vietnam/ EU, which has the characteristics of an investment (for
example, commitment of capital or other resources, the expectation of
gain or profit, the assumption of risk and a certain duration).
• Investment protection
• Investor-to-State dispute settlement mechanism (“ISDS”)
• EVIPA will replace all bilateral investment agreements between
Vietnam and other EU members
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MARKET ACCESS COMPARISON OF
CERTAIN COMMERCIAL SECTORS IN
THE WTO, AEC, EVFTA

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Notes regarding the market access
commitments
• The WTO, AEC and EVFTA take a positive approach,
meaning what is open to foreign investment is listed.
• In WTO Market Access Service Sector the principle applies:
Who does not ask and demand might not get the market
access for investment. There is NO Automatic Right for
Market Access for the WTO members in the WTO Services
Sectors in principle.
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Distribution sector
WTO / AFAS EVFTA
The establishment of outlets for
retail services (beyond the first one)
shall be allowed on the basis of an
Economic Needs Test (ENT)
Same as in the WTO / AFAS but
added the following:
In case of establishing an outlet less
than 500m2 within the area planned
for trading activities and already
completed construction of
infrastructure, ENT is not required.
5 years from the date of entry into
force of the Agreement, the
requirement of the ENT will be
abolished.
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Transport Services
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Maritime Transport
WTO =
AFAS
EVFTA
Internal Waterways Transport
WTO
AFAS =
EVFTA
Low High

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Transport
Sub-sectors WTO AFAS EVFTA
Maritime transport
services
Mode 3 MA: joint
venture with
maximum 49%
foreign ownership
Same as WTO Mode 3 MA: joint
venture with maximum
70% foreign ownership
Internal Waterways
transport
+ Passenger
transport
+ Freight transport
Mode 1: No
commitment
Mode 3: joint
venture with
maximum 49%
foreign ownership
Mode 1: No restriction
Mode 3: joint venture
with maximum 51%
foreign ownership
Same as AFAS
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* Mode 1: cross-border supply
Mode 3: commercial presence

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Securities services
WTO/ AFAS EVFTA
Commitments on 6 sub-sectors
Mode 3:
foreign securities service suppliers are
permitted to establish representative
offices and joint ventures with
maximum foreign ownership of 49%.
After 5 years from the date of
accession, securities service suppliers
with 100% foreign-invested capital shall
be permitted.
Same commitments in 6 sub-sectors
Commitments on 2 additional services:
Provision and transfer of financial data
processing; and credit reference and
analysis.
Mode 3: Same as the WTO/ AFAS
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Telecommunication Services
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Sub-sectors WTO/ AFAS EVFTA
Non facilities-based services
Other services - Virtual
Private Network (VPN)
Mode 3: Joint venture with
maximum 65% foreign
ownership
Mode 3: Joint venture with
maximum 70% foreign
ownership
Mode 3: Upon entry into force,
Joint venture with maximum
65% foreign ownership
5 years from the date of entry
into force of the Agreement,
this capital limitation will be
75%.
Mode 3: Upon entry into force,
Joint venture with maximum
70% foreign ownership
5 years from the date of entry
into force of the Agreement,
this capital limitation will be
75%.

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Opportunities and challenges in some
specific sectors
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Automotive
• Almost fully liberalization of EU machinery and appliances exports
• EU exported car parts will be duty free after seven years
• Cars and motorcycles will be duty free after ten years
• 3 years after the FTA comes into effect, Vietnam will accept UNECE
(standards adopted from the EU, U.S., Russia and many other states
which settle e.g. Worldwide harmonized Light vehicle Test Procedures)
certification without any further testing requirements
• Demand for automobiles in Vietnam is at no other time set to surge like
this moment
• Vietnam is going to be the new production hub in Asia for the
machinery and especially automotive tier two manufacturing industry
where several German and European automotive companies already
experienced their own success story
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Pharmaceutical Products
• 53% of imported pharmaceutical products to
Vietnam are from the EU (2021)
• Improvement of intellectual property right
• Simplification of marketing authorization
• Centralized procurement system for pharmaceuticals
which will legally secure market access
• Fiercer competition in bids procured by hospitals in
Vietnam
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Alcoholic Beverages
• Geographical Indications will be better protected
• Tariffs for alcoholics will be reduced after 7 or 10
years
• Vietnam removed /decreased restrictions in
manufacturing of beverages
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Impacts
• EVFTA will make trading more transparent and
competitive
• It will be much easier for investors to access new
markets in Vietnam
• A high quality standard is settled
• Intellectual property will be safer
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DOING BUSINESS AND INVESTING IN
VIETNAM

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Investment environment in Vietnam
• Main governing laws: Investment Law, Enterprise Law and their
implementing documents
• Forms of doing investment in Vietnam:
– Economic entity establishment;
– Business cooperation contract: a contractual arrangement
between two or more investors without creating a legal entity
– Public-Private Partnership; a contractual agreement
between competent state authorities and investors, an
enterprise project in order to implement an investment
project;
– purchase of shares or capital contribution.
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Investment environment in Vietnam
• Forms of enterprises in Vietnam
– Limited liability company: members are liable to the extent of their
capital contributed
– Shareholding Company: charter capital (authorized share capital) is
divided into shares and members are liable to the extent of their capital
contributed
– Partnership: established between two or more partners;
– Business Cooperation Contract: an agreement without constituting a
legal entity and each party is individually responsible for paying taxes.
– Branch: a branch of a foreign company permitted to conduct
commercial activities
– Representative Office: represents the parent company, no actual
business operations. A suitable tool for market research
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Investment procedure under 2020 Investment Law
• Under the Investment Law and Enterprise Law: 2 separate steps - Application
for Investment Registration Certificate (“IRC”) and Application for Enterprise
Registration Certificate (“ERC”)
• Step 1: IRC
– IRCs for projects required to obtain preliminary approval of the National
Assembly/ People’s Committee are issued within 05 working days upon
issuance of such approval
– For other projects, IRCs are issued within 15 days upon receipt of the
application dossier
• Step 2: ERC
– Submit an application dossier to the licensing authority upon issuance of
the IRC
– ERCs are issued within 03 working days upon receipt of the application
dossier
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How to get deals done (1)
• Check whether the target company operates in a
conditional business sector.
• Determine the total charter capital foreign investor(s) will
hold in the target company (51% or more?).
• It then decides whether the foreign investor must file a
registration application to the local DPI or the target
company only needs to conduct procedures to change
members/ shareholders at local DPI.
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How to get deals done (2)
• Conduct a careful Due Diligence
(including legal and financial)
• Make sure all business lines of the target entity are
transferred to the new entity upon the deal completion
• Note that M&A activities are administered by the
Foreign Department under the Department of Planning
Investment and dossiers are subject to very strict
examination
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INVESTMENT INCENTIVES
Items 2019
Inside SEZ Outside SEZ
Tax rates 10% for first 15
years
20%
CIT Holidays 04 years 2 years
CIT reduction 50% for subsequent
09 years
50% for subsequent
04 years
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• Carrying forward losses
• Reduction or exemption of land rental, land use fee
• Incentives for enterprises employing female workers

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Personal Income Tax
• For foreigners being resident individuals:
i) being present in Vietnam for 183 days or more in one calendar year or in 12
consecutive months from the first day of entry within Vietnam; or
ii) having a permanent residence in Vietnam, including a place to live under
permanent residence registration or a rented house in Vietnam under a term lease
 income tax regime is applied for income from business, salaries and wages with
rates specified by Partial Progressive Tariff in article 7.2 of the Circular
111/2013/TT-BTC
• For foreigners being NON-resident individuals:
- Income from business activities: 1% for goods trading; 5% for the service business;
and 2% for production, construction, transportation and other business activities
- Income from salaries and wages: tax rate is 20% of taxable incomes from salaries
and wages
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Taxation in Vietnam
• Value-added Tax (“VAT”)
– Tax applied to goods and services used for
production, trading and consumption in Vietnam
(including goods and services purchased from abroad)
– Tax rate: 0-10% depending on types of goods and
services
• Other taxes: special sales tax (applied to luxury goods or
amusement places), natural resources tax, land and
housing tax, etc.
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Labor and Employment
• Minimum regional wages: ranging from US$140 –
US$201.7/month
• Social security:
– both employer and employee have to contribute to social fund (social
insurance, health insurance, unemployment insurance)
– The Fund covers the employees’ benefits during sick leave, maternity leave,
retirement, allowances for work related accidents and occupational diseases,
and survivors’ benefits
• Pension: Monthly pensions are provided from the Social
Insurance Fund where an individual has contributed social
insurance for more than 20 years and when they reach 62 years
of age for men (in case they retire from 2028 onwards), or 60
years of age for women (in case they retire from 2035 onwards).
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Conclusion
• EVFTA and IPA will open a more secure and
transparent investment and trading market supported
by a new dispute resolution system
• European investors get access to a group of 96 million
consumers and a young and dynamic workforce
• Vietnam will reduce many of its strict regulations and
opens up; it will get the chance to establish itself as a
worldwide trading partner and will get more
independent from China
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CONNECTIONS ARE BUSINESS
PLEASE CONNECT WITH ME ON
LINKEDIN:
OLIVER MASSMANN
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WHEREVER YOU ARE - BE ALL THERE
Jim Elliot
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DUANE MORRIS VIETNAM LLC
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Contact email:
omassmann@duanemorris.com
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