Proposed Increase in Business Licensing Fees on the Horizon for 2017
Draft legislation, published by the Vietnamese Ministry of Finance on March 25th, proposes significant adjustments to business licensing for those seeking to establish and license operations within the country. These changes have the potential to raise fees by as much as three times their current levels and, if approved, could become effective as soon as January 1st of 2017.
The draft, in its current form, outlines progressive fees which correspond to the level of income generated by respective businesses. As with all Vietnamese legislation, fees are quoted in Vietnamese Dong (VND), which traded against the US dollar (USD) at a rate of 22,291:1 as of April 11, 2016. Under the newly proposed guidelines, companies with registered capital in Vietnam would be subject to one of the following fee levels:
- VND 3 million (USD 135): Levied on businesses with charter capital under VND 10 Billion
- VND 5 million (USD 224): Required when licensing companies with registered capital between VND 10 and 100 billion
- VND 10 million (USD 448): Companies with registered capital over VND 100 billion would be required to pay this fee.
In addition to fees listed above, individual business owners with turnover exceeding levels outlined below would also be faced with increased fees. The following fee levels should be noted for those considering starting individual businesses within the country:
- VND 1 million (USD 44): Required for individuals with an annual turnover in excess of VND 300 million
- VND 300,000 (USD 12): Levied on business households with an annual turnover between VND 100 million and VND 300 million
Although fees outlined above are likely to impact the vast majority of foreign investors within the Vietnamese market, certain exceptions have been made. Those meeting any of the following:
- Business households with turnover under VND 100 million
- Salt-making households
- Aquaculture households
- Fishery logistics service providers
Outlook for Investment
The proposed changes at present do not represent a significant tax liability for individuals or corporations investing within the Vietnam. Despite this, increases are projected to nearly double the current levels of taxation. Government estimates indicate that revenue from business licensing collections will surpass current levels – currently around VND 1.7 trillion – to reach VND 2.7 trillion.
In the context of a strong national fiscal position, investment friendly reforms, and significant progress on trade negotiations, it is unlikely that the increases represent an effort to discourage investment. A more likely explanation lies in a recent statement by deputy finance minister Vũ Thị Mai, who explained that the increases were “intended to match the business situation of the last 14 years”.
For prospective and ongoing investors in particular, the takeaway from these changes will most likely be confined to an issue of compliance. In this regard, it is of utmost importance that the progress of the proposed changes be followed closely and any adjustment to the decree’s fees or implementation date be noted.
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