By: Dezan Shira & Associates
Editor: Eugenia Lotova
In response to growing concerns over lagging competitiveness, Vietnamese authorities have begun the process of revamping numerous aspects of their investment environment. The most recent reform is Decision No. 1134/QD-BTC, issued by Vietnam’s Ministry of Finance on 23 May 2016. This document details Vietnam’s national strategy to implement Resolution No. 19/NQ-CP and No. 19-2016/NQ-CP, which are earlier versions of the government’s plan to update the way business is conducted and thereby improve the status of the Vietnamese market in relation to its regional competition by 2020.
The resolution heavily focuses on simplifying the customs and tax code, switching to electronic databases, and identifying the logistics of the one-stop mechanism. If successfully carried out, these proposals will drastically decrease the cost and time involved in doing business in Vietnam.
In the face of Vietnam’s growing integration into global commerce, customs modernization has been at the core of reform efforts. Key changes articulated under Decision 1134/QD-BTC include amendments to existing procedures, creation of a one-stop shop for customs processing, and efforts to transition customs to electronic processing.
With regard to existing laws in the customs field, 1134/QD-BTC outlines plans to amend Decision No. 2026/QD-TT concerning specialized inspection in the fourth quarter of 2016. In the first months of 2017, officials plan to release a clear list of items subject to specialized inspection and oversee the creation of regulations and standards to manage the quality of goods subject to specialized inspection. The transparent introduction of these changes is projected to decrease clearance times by an average of 10 days.
In addition to revising laws, customs officials are also planning to draft new legislation facilitating the establishment of a “national one-stop mechanism”. As early as June 2016, electronic procedures for ships entering and exiting a variety of Vietnamese ports will be established. Along a similar timeline, Vietnam’s Ministries of Finance and Science and Tech are due to jointly issue a circular on how to implement inspection procedures under the one-stop mechanism. Further joint circulars should also be expected from the Ministry of Finance and Ministry of Information and Communications regarding administrative procedures.
A long-term goal of customs reform involves the adoption of electronic paperwork exchanges at ports throughout the country. This is expected to have a significant impact on the ability of traders to prepare for entry and egress, and is also likely to cut down on the ability of corruption to penetrate customs proceedings. While specifics of the program are still a ways out, the following dates should be watched:
- October 2017: The system through which electronic exchange will be conducted is due to be released.
- December 2017: Electronic issuance of appropriate documents needed at seaports is due to commence & an upgrading of existing systems that electronically manage customs related tasks.
Apart from immediate concerns arising over the transport of goods to and from Vietnam, taxes are likely to be the main concern for investors. With this in mind, several of Vietnam’s plans to improve competitiveness, outlined under Resolution No. 1134/QD-BTC, deal with tax related improvements. Key improvements articulated include increased utilization of electronic based recordkeeping and improved regulation of transfer pricing.
Concerning the adoption of electronic recordkeeping, Vietnam has stated its intension to put in place policies that will result in 95 percent of enterprise documents being filed via IT applications. The timeline during which this is projected to be implemented is set for 2016 and 2017. To facilitate a transition away from paper filing and towards electronic declarations, government officials will be presenting amendments to Decree No. 27/2007/ND-CP in July of 2016 followed by Circular No. 92/2015/TT-BTC in October. Together these laws cover the manner in which electronic transactions and filing of taxes are currently administered in Vietnam.
In addition to updating legislation, government officials have indicated plans to launch a centralized tax database through which businesses will be able to file their taxes. Current government estimates project the finalization of the database to be completed in August followed by its establishment in December. During the period leading up to December, officials have indicated that they will determine a method by which companies will be able to submit documents to this system.
A final area of taxation that is likely to change in the months ahead is that of transfer pricing regulation. In recent years, Vietnam has maintained limited regulation of transfer pricing, but has increasingly indicated its determination to regulate these transactions. For all transferring assets between subsidiaries or between a parent company and its subsidiaries, it is important that upcoming developments be monitored closely. Current Vietnamese plans indicate that a study of current practices and legislation will be carried out this year followed by a formal release of a Decree to fight transfer pricing in late 2016.
Tapping Into Competitiveness
This article details some of the major changes Vietnam hopes to enact in the business sector. While this piece provides a necessary overview of the upcoming changes, it is important to monitor the situation closely. Many initiatives have yet to be detailed in full and others may be subject to change in the months ahead. For prospective and existing investors alike, it is of utmost importance that any of these developments are discovered quickly and that any questions are directed to relevant government agencies or investment professionals.
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 firstname.lastname@example.org or visit www.dezshira.com.
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