Indian Investment in Vietnam – How to Structure Operations for Success

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By: Dezan Shira & Associates
Editor: Koushan Das

India and Vietnam relations have been marked by growing economic, commercial, and strategic engagement in the last few years. India ranks amongst the top ten trading partners of Vietnam. By 2020, both countries aim to achieve trade worth US$15 billion. Major areas of focus include hydrocarbons, power generation, renewable energy, infrastructure, tourism, textiles, footwear, medical and pharmaceuticals, ICT, electronics, agriculture, agro-products, chemicals, machine tools and other supporting industries.

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Tax, Accounting, and Audit in Vietnam 2017-2018 – New Publication from Vietnam Briefing

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Tax, Accounting, and Audit in Vietnam 2017-2018, the latest publication from Dezan Shira & Associates, is out now and available for complimentary download through the Asia Briefing Publication Store.

This edition of Tax, Accounting, and Audit in Vietnam, updated for 2017, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.

Taxation permeates business transactions in Vietnam, and a strong understanding of tax liabilities enables foreign investors to maximize the tax efficiency of their foreign investment while ensuring full compliance with all tax laws and regulations. This guide overviews taxes for businesses and individuals and discusses accounting and audit in the Vietnam business context.

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Renewables in Vietnam: Current Opportunities and Future Outlook

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By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam is one of the most efficient power market in Southeast Asia, driven by low-cost resources such as hydro and coal. The country has achieved almost 99 percent electrification with relatively low cost in comparison to neighboring countries, leading it to be a net energy exporter. With energy demand projected to increase by more than 10 percent annually in the next five years and required power capacity to double; the government is moving forward to develop the renewable energy sources to ensure energy security and addressing the growing power demand.

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Vietnam’s Payment Preferences: Four Trends to Watch

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By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam is aiming to move towards a 90 percent cashless economy by 2020 by reducing cash transactions and increasing electronic payments. With 90 percent of current transactions conducted in cash and only 30 percent of citizens having a bank account, the government faces an uphill task to achieve its goals. Nonetheless, recent regulatory reforms and emergence of private players in the last few years have been encouraging towards creating a sustainable digital payments market. In this article, we will look at the current state of the cash based economy, rise of fintech solutions, government cashless policies, rising internet penetration, and what the government needs to do to ensure the transition.

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Vietnam Market Watch: Russian Investment, US Trade, and the Rise of Innovation

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Vietnam / EAEU FTA Produces US$10 Billion In Russian Investments

The Free Trade Agreement signed between Vietnam and the Eurasian Economic Union  (EAEU) has resulted in Russia announcing US$10 billion worth of deals with Vietnam.  The EAEU is a trade bloc between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia, and has a GDP of US$2.2 trillion.

Russian President Vladimir Putin has announced that Russia and Vietnam have agreed on more than 20 high-profile joint investment programs, following a bilateral meeting with Vietnamese counterpart Tran Dai Quang in Moscow. 

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How to Draft Vietnamese Probation Contracts That Will Reduce Your Turnover

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Finding the right workers can be a difficult task in any market, Vietnam being no exception. Fortunately, prior to entering into a binding labor contract in Vietnam, probationary periods provide both the employer and the employee an opportunity to assess their relationship. With minimized compliance, reduced compensation requirements, and fewer restrictions surrounding termination, probation contracts are an invaluable asset allowing foreign investors to safeguard their operations and reduce turnover.

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Who should use probationary contracts? 

Companies seeking to employ workers in high-skilled positions stand to gain most from use of probation contracts as a first step to prior to standard labor contracting. Not only are the skills for these jobs more subjective and difficult to assess within an interview, wage premiums attached to skilled labor in Vietnam can exacerbate the risks of onboarding of unqualified or unsuited candidates. Generally speaking, the higher the salary of a potential employee, the greater value is added by a probation contract arrangement.

Given the shifting position of Vietnam in the value chain, many sectors are susceptible to turnover. At present, IT, professional business services, and managerial positions in manufacturing are all in high demand and thus experience heightened levels of churn. Employers in all sectors, however, should be sure to assess the Vietnamese labor market and to implement probationary contracting if needed. 

How do probationary contracts differ from standard labor contracts?

Under the prevailing labor code of 2012, probation contracts are provided as a separate agreement to a standard labor contract.  As such, probationary contracts are subject to a reduced list of information and documentation requirements. The specifics of these requirements can be found above in the chart below outlining the differences in contract structuring: 

contract structure (2)

While separated from a legal standpoint, probation contracts can be issued in conjunction with a standard labor contract which will enter into force upon the successful completion of the probation contract. To tie the two agreements legally, clauses within the probationary contract may specify the continuation of a working relationship through a standard labor contract following the successful conclusion of the probation contract. This approach is popular in practice as it allows employers to effectively negotiate with potential candidates prior to the probation stage. Alternatively, it is also possible to incentivize performance over the period of probation by inserting clauses within the probation contract which offer employment but leave salary and benefits negotiations until after the probation period. 

Related Link Icon RELATED: Social Security in Vietnam: Understanding Your Obligations

What length of probation is permitted? 

Probationary periods permitted for a given position are proportional to the education required for the position and range from six days to 60 days. These contracts are limited to a one-time usage and must be converted to a standard contract of one year or more if both parties wish to continue the relationship beyond the period specified in the probation contract. Existing probationary contract lengths specified under Vietnamese employment law include:

60 days: probationary periods of up to 60 sixty days are reserved for positions that require professional or technical skills that demand a collegiate education or higher.

30 days: probation periods of up to 30 days may be applied for jobs that require a professional skill set, technical qualifications, some of which may require some degree of education to obtain. 

06 days: For all other employment in Vietnam, including most manual labor and manufacturing, probation is limited to six days.

The distinction between the 30 and 60 day probationary periods is subject to clarification at the circular level and should be monitored closely when drafting contracts. As a matter of compliance, pursuant to Circular No. 05/2015/NĐ-CP, companies will be required to notify those undergoing 30 and 60 day probationary periods of their results three days prior to the conclusion of the probation contract.

How much do employers have to pay employees under probation contracts? 

Compensation for probationary employment is subject to the agreement set out by the parties involved and must be stipulated in the agreement negotiated by the employer and employee. While there is considerable latitude with regard to the amount of compensation that is to be provided for probationary employment, employers are obligated to provide compensation no lower than 85 percent of the going wage applied to the position for which the probation is in preparation.


About
 Us

Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEANChinaIndiaIndonesiaRussia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com

 

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dsa brochureDezan Shira & Associates Brochure 
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

 Managing Contracts and Severance in Vietnam 
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

 

3PL Networks in Vietnam: How to Engage Partners to Boost Sales

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Vietnam’s New Solar Power Policy

By: Maxfield Brown

Vietnam is a significant target for companies in the consumer goods sector. The country’s blossoming middle class, shifting spending habits, and a sizable population of over 90 million is rapidly becoming the focal point for investors building up brand identity and sales networks throughout the Association of Southeast Asian Nations (ASEAN). As the fundamentals of the Vietnamese economy continue to fall into place, foreign companies who are able to develop and implement effective market-entry strategies will be well positioned to gain increasing market share in the years to come.

For the largest players, Vietnam’s demographics and proximity to other markets present an opportunity to establish localized production and to expand distribution networks through mergers and acquisitions. Small and medium sized players, however, for whom the costs of setting up can often be inhibitive, increasingly turn to third-party logistics providers to boost their sales and build brand identity within Vietnam. 

In general terms, third-party logistics, or 3PL as it is commonly referred, involves the outsourcing of logistics functions – such as customs clearance, storage of products, and order fulfillment – to a third party. Depending on the 3PL provider and range of services utilized, third party logistics can completely remove the need for a foreign company to establish a market presence in Vietnam. Instead, all operations can be run out of a single regional management center where the costs and risks of doing business are lower.

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Vietnam / EAEU FTA Produces US$10 Billion In Russian Investments

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By: Dezan Shira & Associates

The Free Trade Agreement signed between Vietnam and the Eurasian Economic Union  (EAEU) has resulted in Russia announcing US$10 billion worth of deals with Vietnam.  The EAEU is a trade bloc between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia, and has a GDP of US$2.2 trillion.

DZS RELATED: Pre-Investment, Market Entry Strategy Advisory Services from Dezan Shira & Associates

Russian President Vladimir Putin has announced that Russia and Vietnam have agreed on more than 20 high-profile joint investment programs, following a bilateral meeting with Vietnamese counterpart Tran Dai Quang in Moscow. 

Relations between Moscow and Hanoi have been developing as the latter is one of the biggest consumers of Russian military equipment. Vietnam signed a free trade agreement with the Eurasian Economic Union (EAEU) on May 29, 2015. Bilateral trade between Vietnam and the EAEU is expected to rise to US$30 billion by 2030 from a previous base of close to zero. 

Related-Reading-Icon-Asean Link RELATED: Vietnam in 2017: Spotting Opportunities for FDI

Vietnam is the first country to have negotiated a free trade agreement with the EAEU, and consequently, has the benefit of early bird status in both attracting investment from Russia in particular, and in exporting products to the EAEU. The EAEU bloc is strategically important as Belarus borders the European Union and goods entering the EAEU can easily be transported to EU markets. This is expected to be further enhanced as China, India, and Singapore are also all known to be negotiating free trade deals with the EAEU.  

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Assisting Foreign Investors into Russia
Dezan Shira & Associates´ Russian investment brochure offers an overview of the services provided by the firm – both foreign investment into Russia and Russian investment into Asia. It is Dezan Shira´s mission to guide investors through Russia´s complex regulatory environment and assist with all aspects of establishing, maintaining and growing business operations in the region.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

Import & Export in Vietnam: Key Industries & Free Trade Agreements
In this issue of Vietnam Briefing magazine, we discuss the key aspects of Vietnam’s import and export landscape, focusing on textiles, telephones and computer products. We then analyze opportunities for Vietnam among its inclusion in multilateral regional trade blocs, before examining the European Union-Vietnam Free Trade Agreement. 

 

HCMC City Attracts US$ 2.15 billion FDI in Six Months

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By: Dezan Shira & Associates
Editor: Koushan Das

In the first half of 2017, the city has attracted US$2.15 billion in foreign direct investment (FDI), double the amount from the same period last year. Major sectors that attracted investments include the processing and manufacturing sector, followed closely by wholesale and retail. Other sectors include automobile and motorbike maintenance businesses along with the information and communications industry. Looking forward, investment into the city will continue to surpass previous levels, driven by growing working age population, investor friendly policies, and slow but steady transition to high-value manufacturing.

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Vietnam’s Solar Power Policy: The Dawn of a New Age in Utilities Investment

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By: Chau Pham

Offering a low-cost production hub and a young workforce, Vietnam is quickly becoming the best alternative to China for investors across Asia. Attracting more and more investments every year, the demand for power in Vietnam is also rising rapidly. In order to encourage the development of solar power facilities, an alternative power source thought to help Vietnam reduce its reliance on coal-fired power and deal with environmental concerns, Decision No. 11/2017/QD-TTg (“Decision 11”) was signed on April 11, 2017 to support the development of solar power projects. It officially entered into force on June 1, 2017.

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