Understanding Provincial Competitiveness in Vietnam

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By: Loan Quach

Da Nang, Quang Ninh, and Dong Thap were recently awarded as the top three most competitive provinces in Vietnam, according to the twelfth Provincial Competitiveness Index (PCI) of 2016, recently published by the Vietnam Chamber of Commerce and Industry (VCCI). Compiled in partnership with the United States Agency for International Development, PCI 2016 surveys private enterprises and measures economic governance of 63 provinces and municipalities in order to help promote Vietnam’s private sector development. In more conventional terms, the report assesses the regulatory environment within each province and relays this data to businesses through rankings and comprehensive information pertaining to the sentiment of established business leaders. Foreign investors can then refer to this data to make a decision regarding whereabouts to relocate or expand their businesses in Vietnam.

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Setting Up a Foreign-Invested Enterprise in Vietnam

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By: Dezan Shira & Associates
Editors: Tam Nguyen and Dam Thi Phuong Mai 

By continually issuing favorable policies and incentives aimed at attracting inflows, and deciding to decrease the country’s corporate income tax levels to 20 percent from January 1, 2016, it is clear that Vietnam’s government is intent on taking a proactive approach to foreign direct investment. Enterprises and individuals interested in taking advantage of the country’s friendly investment environment therefore need to be aware of the various market entry structures available to foreign investors.

There are two main types of vehicles for foreign investment in Vietnam: 100 percent foreign-owned enterprises (FOEs) and joint venture enterprises (JVEs).

100 percent FOEs can be established by one or more foreign investors, under the form of either a limited liability company (LLC) or a joint-stock company (JSC). JVEs can be established as an LLC, a JSC, or a partnership, and the profits and risks in a JVE are distributed among the parties in proportion to their charter capital contributions. Other options for establishing a commercial presence in Vietnam include representative offices and branch offices, but these are not legal entities.

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Podcast: Talking ASEAN Episode 1 – FDI Opportunities in ASEAN, a Look Ahead for 2017

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By: Dezan Shira & Associates

In the first-ever episode of the Talking ASEAN podcast series, Dezan Shira & Associates’ Dustin Daugherty and Max Brown provide a country-by-country prediction of ASEAN’s foreign investment future. As part of this, the recent progress and prospects for the Vietnamese economy are evaluated in a regional context. 

 

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Planting the Seed: A Guide to Opportunities in Vietnamese Agriculture

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By: Loan Quach

Vietnam has progressed to become the world’s fifth largest exporter of agro-food commodities including aquatic products, rice, coffee, tea, cashews, black pepper, rubber, and cassava according to a World Bank report released in 2016. However, while increasing its stature as a global exporter, the quality of growth in the sector overall remains low. In order to improve it and, in turn, enhance the country’s economic competitive capacity, the Ministry of Agriculture plans to introduce incentives such as tax exemptions or land use fee cuts to attract private investments, especially from overseas investors. At the forefront of this drive are hi-tech agriculture and clean agriculture which will be the two focus fields targeted to start the modernization and diversification of Vietnam’s agriculture sector.

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Annual Tax Finalization and Remittance in Vietnam

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Prior to transferring profits back to their home markets, foreign companies maintaining operations and taking in revenue in Vietnam must fulfill certain annual compliance requirements. These involve a statutory audit, audited financial statements, and tax finalization filings. Annual compliance procedures are not only required by law but are also a good opportunity to conduct an internal financial health check.

Pursuant to compliance, all foreign-invested entities are required to have their annual financial statements audited by an independent auditing firm. Statutory audits in Vietnam are performed in accordance with the Vietnam Standards on Auditing while financial reporting must be conducted in accordance with Vietnamese Accounting Standards (VAS). Standards in Vietnam can often differ significantly from those utilized in a company’s home market and should, therefore, be studied closely to ensure that all aspects of reporting and review are in compliance. During this process, the manner in which reporting and review are conducted should also be considered in the context of any and all reporting and finalization requirements that a company may have in its home market. 

DZS RELATED: Dezan Shira & Associates’ Business Advisory Services

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Filling deadlines

Audited financial statements and tax finalization filing must be done within 90 days from the end of each financial year. After fulfilling these obligations, and giving notice to local managing tax offices at least seven working days in advance, foreign investors may remit profits abroad. It should be noted that annual compliance for ROs is different from that for other foreign-invested entities. An RO is required to report on its activities to a local department of trade prior to the last working day of January of the following year.

Reporting compliance

As part of the reporting process, all of the applicable forms outlined below should be submitted in relation to the operations of a given company. The company will also be required to file forms related to any corporate income tax (CIT) incentives that are claimed or other deductions that the company has utilized during the fiscal year. 

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Late payment and tax evasion penalties

A taxpayer who pays tax later than the deadline is to pay the outstanding tax amount plus a fine equal to 0.03 percent of the tax amount for each day the payment is late. Taxpayers that make incorrect declarations, thereby reducing taxes payable or increasing refundable tax amounts are to pay the full amount of the under-declared tax or return the excess refund, and will also pay a fine equal to 20 percent of the under-declared or excess refunded tax amounts together with a fine for late payment of the tax. A taxpayer that commits acts of tax evasion or tax fraud is liable to pay the full amount of tax and a fine between one and three times the evaded tax amount.

Optimizing annual compliance

While Vietnam is one of ASEAN’s rising stars, the nation is also stuck with among the most complex and time-consuming tax systems within the region. Although many aspects of taxation can be complex, annual finalization places a particularly significant burden upon many investors. To the credit of Vietnam’s government, there have been substantial improvements to the compliance process in recent years, however, there is still significant room for improvement. On top of this, the swiftly maturing nature of tax and compliance have and will continue t0 add to a degree of uncertainty in the years to come.

To maintain compliance with Vietnamese law, and ensure that profits can be remitted without issue, it is advisable for companies to direct any and all inquiries to Vietnam’s Ministry of Finance or professional service firms operating within the country. Both parties will be able to clarify the nature of prevailing compliance and often can provide a level of practical nuance that is not available within legislation or official guidance that has been issued to date. 


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

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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_126x90px

An 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.

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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.

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Upcoming Area Code Adjustments in Vietnam

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By: Dezan Shira & Associates

Over the next six months, Vietnam will adjust nearly all of its area codes within the country. First announced in 2016, under the Ministry of Information and Communication’s (MIC) Decision No. 2036/QD-BTTT, gradual implementation of these changes come as part of a concerted effort by Vietnamese authorities to enhance cohesion with global best practices set out by the International Telecommunications Union. 

Currently, Vietnamese area codes range from one to three digits and lack in a clearly defined system of organization. Under the updated structure, all area codes outside of Vietnam’s capital, Hanoi, and its financial hub, Ho Chi Minh City, will be standardized to three digits in length. Ho Chi Minh and Hanoi will be shifted to area codes of two digits, away from their current one digit codes. In addition to standardizing length, all area codes will now start with the number two, opposed to the prevailing area code classification which allows for any number.

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Vietnam Market Watch: Retail Investment Projections, Foreign E-Commerce Preferences, and Hanoi Logistics

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Foreign investment to rise in retail sector

According to a recent Economist Intelligence Unit study, foreign investors are showing a growing interest in the country’s retail sector. The sector grew 13 percent from 2012 to 2016 driven by a growing middle class, young demographic, and an increase in consumer spending. Clothing brands, supermarket chains, shopping center developers, and convenience store chains are already investing heavily in the sector. The retail market is expected to reach US$179 billion (VND 3,580 trillion) by 2020, according to the Industry and Trade Ministry.

Consumer spending at modern chains compared to traditional retail shops is expected to rise from the current 25 percent to 40 percent by 2020. Foreign convenience stores already hold a 70 percent market share in the country. Industry experts have cautioned the government that the growing presence of foreign retail chains can affect local production and domestic retailers. However, few experts have suggested that foreign retail chains will increase competition and efficiency of the domestic retailers, suppliers, and manufacturers. Foreign retailers will have to maintain competitive prices to retain customers and will not only provide foreign-made goods but also local goods if suppliers can provide the quality at competitive prices.

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Vietnam to Implement Landmark Transfer Pricing Update in Convergence with BEPS

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Following a general trend of convergence with Base Erosion Profit Shifting (BEPS) guidelines within the Association of South East Asian Nations (ASEAN), Vietnam has introduced groundbreaking transfer pricing rules with significant implications for companies conducting related party transactions. Announced February 24, changes outlined under Decree No.20/2017/ND-CP are set to become effective May 1, replacing previously standing guidance stipulated in Circular No. 66/2010/TT-BTC. 

Broadly speaking, transfer pricing (TP) rules focus on the monitoring and regulation of transactions between entities deemed to be related to one another, through the ownership of one company by the other. Often, TP regulations are used to prevent companies from utilizing inflated or deflated transaction costs as means of minimizing tax exposure.

For foreign companies choosing to incorporate subsidiaries in Vietnam, the many benefits that these corporate profiles afford often come with the added cost of exposure to TP regulation and compliance. However, with a firm understanding of regulations, it will be possible to understand the law and to ensure compliance effectively. 

Given the rapidly changing nature of transfer pricing regulation in Vietnam, it is of utmost importance that investors employ stringent monitoring of Vietnamese legislation and direct questions to the Ministry of Finance or professional service firms operating within the country. 

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Vietnam’s New E-Visa: Eligibility and Applications Explained

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By: Dezan Shira & Associates 
Editor: Daniel Schaefer

With many countries already using the E-visa system, the time for Vietnam to jump on the bandwagon has finally arrived. In November 2016, Vietnam’s National Assembly approved a plan to issue E-visas and starting February 1st, 2017, Vietnam successfully implemented a 2-year pilot program which will allow citizens from 40 countries to be able to apply for an e-Visa.  The new pilot program will be carried out alongside Vietnam’s current visa process, which currently requires applicants to apply for a visa through a third party, which then contacts the Vietnamese embassy. The new e-visa allow eligible candidates to apply for a 30-day single-entry visa online, as well as allowing them to enter through any of the eight international airports (Hanoi, Ho Chi Minh City, Da Nang, Nha Trang, Hai Phong and Phu Quoc Island) and via any of the 13 international land border crossings. This Vids will exclusively be for 30-day single-entry visas.

DZS RELATED: Visa and Work Permit Services from Dezan Shira & Associates

Who is eligible for Vietnam’s E-Visa?

As of the date of this article being published, the Vietnamese government is allowing citizens from the following 40 countries to apply for an e-Visa:

Armenia, Argentina, Azerbaijan, Belarus, Brunei, Bulgaria, Chile, China, Columbia, Czech Republic, Cuba, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Kazakhstan, Luxembourg, Mongolia, Myanmar, Norway, Panama, Peru, Philippines, Poland, Romania, Russia, Slovakia, South Korea, Spain, Sweden, Timor Leste, United Kingdom, United States, Uruguay and Venezuela.

How to apply for Vietnamese E-Visas?

Before applying, the candidate must have prepared a scanned copy of one’s valid passport details as well as a scanned passport photo. It is important to note that the scanned passport photo being sent must have the applicant looking directly at the camera and not smiling.

Once the appropriate materials have been gathered, the inquirer must go to the following link and proceed with the following steps:

  1. Click on “for foreigners”
  2. Upload the passport details and passport photo files. It is important to note that both files must be uploaded separately.
  3. Fill in all the required information.
  4. Pay the US$25 application fee and submit the application. This fee is non-refundable, even if the application is denied.
  5. Once successfully submitted, the applicant will receive a registration code, which can be used to check on the status of the application.
  6. Wait the standard 3-5 business days and return to the website to find out if the application has been approved.
  7. If approval has been granted, print out the e-Visa as proof for travel.
Related Link Icon-VB RELATED: Vietnam’s Visa and Work Permit Procedures
Working out the Bugs

Due to this new initiative being a pilot program, there will no doubt be some kinks and bugs that will need to be worked out. Some particular difficulties that come with this form of visa is that the E-visa will only be available as a 30-day single-entry visa, and cannot be extended. If a visa extension is required, one must go through the previous method of obtaining a visa, which involves going through a third party, or the Vietnamese embassy itself (this visa is generally referred to as the Visa on Arrival).

Something else that must be remembered is that before applying for an E-visa, the border of entry must have already been determined. Once the visa is issued, the traveler cannot switch the point of arrival.

Applying for the E-visa does take longer than its Visa on Arrival counterpart. The application generally requires 3 business days, as oppose to the Visa on Arrival which can be done in two days or less. If any problems were to occur during the visa application process, it will be difficult to receive service support as there has yet to be a service support page established for it. Since its implementation, the website’s servers have also crashed due to access overload, which can make applying for it a bit cumbersome.

Takeaway

With Vietnam expecting to see a 15 percent increase in tourism over the previous year, the E-visa will allow citizens from those 40 countries to have a far smoother experience applying for Vietnamese visas. Those 40 countries were strategically picked as last year; Vietnam saw 2.2 million visitors from China, 1.2 million from South Korea, and 611,000 from Japan respectively. Despite the quirks that may arise from the early practice of this new program, it is proof that Vietnam is embracing its’ tourism industry and is taking proactive steps to adapt to 21st century tourism.


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading Icon-VB

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_126x90px

An 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.

VB_2016_12_en_Managing_Contracts_and_Severance_in_Vietnam_-_Cover (1)

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.

Vietnam Regulatory Brief: Bank Mergers, Consumer Lending Caps, and Economic Restructuring

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Compulsory M&A for weak banks

The State Bank of Vietnam (SBV) will be submitting a draft plan to the government on restructuring the credit institutions to reduce bad debts during the 2016-2020 period, by encouraging mergers and acquisitions (M&A) for weak credit institutions such as commercial banks, financial institutions, financial leasing companies, and people’s credit unions. The SBV will also have the authority to compel institutions enter into M&A deals to ensure stability. The SBV has identified five weak commercial banks in need for restructuring and aims to restructure them in 2017. Investors are also encouraged to be part of the restructuring to reduce the number of weaker firms.

Smaller banks are unable to compete in the market due to declining profits, poor administration, and reduced chartered capital, currently standing at US$131 million (VND3 trillion). Banks such as SaigonBank and DongABank also issued preferred stock to increase their chartered capital, but stockholders are not willing to invest further due to reduced growth, affecting the lending capabilities and total assets of the bank. Industry experts have suggested increasing the FDI cap in banking sector to more than 30 percent for foreign investors.

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