Vietnam Market Watch: Workforce Increases, Real Estate Tax, and Digital Wallet Adoption

Modest Increase in Workforce Expected in Q2

The Ministry of Labor, Invalids and Social Affairs (MoLISA) and the General Statistics Office (GSO) released a labor report stating that slowing economic growth is posing problems for the employment market. While some sectors such as processing, manufacturing and construction are expected to attract close to 400,000 workers, it’s only a slight rise of 0.4 percent over the first quarter numbers. Sectors with the highest rise in employment were fiance and banking, while the processing and manufacturing industry, agro-forestry, and fisheries also saw a slight drop.

Around one million people in Q1 reported unemployment, a 20,700 increase when compared to Q4 2015; this included 411,000 skilled workers. In addition, several businesses sent around 23,000 workers abroad, mainly to Taiwan, Japan, Malaysia and South Korea, but this number was down 2,000 workers when compared to Q4 2015. At present, around 225,000 workers are needed mostly in sectors that require unskilled laborers. The country’s workforce is expected to reach 54.47 million by the end of the second quarter of the year; this figure accounts for around 76 percent of the country’s above 15 year old population.

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Recovery in Real Estate Yields Higher Tax Receipts

The recovery of the real estate market allowed the Ho Chi Minh City Tax Department to collect more revenue form real estate firms in the first five months of the year. The results were revealed in a meeting on May 23 between department leaders. The tax office of District 3 had collected over US $107 million (VND 2.4 trillion), meeting 76 percent of the yearly target. In addition, according to the head of the HCMC Tax Department, local tax officials between January and May, collected 42.4 percent of the 2016 target, up 9.7 percent year-on-year. Collections from foreign-invested companies and the non-state business sector also increased significantly – non-state sectors contributed to a jump of over 34 percent, back up mainly be the expansion in their productive output.

The authorities expect that tax revenue from domestic sources (excluding crude oil) will meet 52 percent of the yearly estimates in the first half of 2016. While increased taxes have been collected, real estate firms are calling for the scrapping of a policy that prohibits them from offsetting losses in other business lines against profits in their real estate business. As this stipulation applies only to the property business, real estate firms deem this rule unfair. Tax authorities have stated that they will look into the issue and are keen to simplify procedures to support continued business growth.

Related: Key Takeaways from Obama’s Vietnam Visit

Digital Wallets Gain in Popularity

Digital wallets in Vietnam have become increasingly popular and have started to develop after several years of slow development. This has been attributed to increased ownership of smartphones, better connectivity, an improving legal framework and the growing presence of several e-commerce shopping platforms. Market players such as FPT, Vietnam Esports, MobiFone and VTC have launched digital wallets for payments catering to electricity, water, games, internet bills and withdrawal of cash.  Nevertheless payment by cash on delivery is still the major payment method for e-commerce websites. Only 53 percent of websites have designed functions for making orders online and only 17 percent accept online payment.

Government officials have stated that e-commerce firms must invest in infrastructure related to non-cash payment services so that they can increase online payment in the sector from the current level of five percent. Analysts have also stated that while traditional digital wallets catered to goods ordered online, the latest generation of digital wallets are designed for mobility thereby allowing more flexibility for consumers. Given the strong forecasts for growth within the sector, e-commerce and mobile payments looks set to remain a promising avenue for foreign investment in Vietnam.

Annual Audit and Compliance in Vietnam 2016
In this issue of Vietnam Briefing, we address pressing changes to audit procedures in 2016, and provide guidance on how to ensure that compliance tasks are completed in an efficient and effective manner. We highlight the continued convergence of VAS with IFRS, discuss the emergence of e-filing, and provide step-by-step instructions on audit and compliance procedures for Foreign Owned Enterprises (FOEs) as well as Representative Offices (ROs).

Navigating the Vietnam Supply Chain
In this edition of Vietnam Briefing, we discuss the advantages of the Vietnamese market over its regional competition and highlight where and how to implement successful investment projects. We examine tariff reduction schedules within the ACFTA and TPP, highlight considerations with regard to rules of origin, and outline the benefits of investing in Vietnam’s growing economic zones. Finally, we provide expert insight into the issues surrounding the creation of 100 percent Foreign Owned Enterprise in Vietnam.

Tax, Accounting and Audit in Vietnam 2016 (2nd Edition)
This edition of Tax, Accounting, and Audit in Vietnam, updated for 2016, 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 must navigate Vietnam’s complex tax and accounting landscape in order to effectively manage and strategically plan their Vietnam operations.

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