Q&A: Capitalizing on New Support Measures for Your Business and Easing of Foreign Work Permits
Notwithstanding the last COVID-19 outbreak and the implementation of restrictive measures to contain the spread of the virus, Vietnam is still a hotspot for foreign trade and businesses.
Companies operating in Vietnam can access and benefit from several incentives and recovery measures to ease the transition from the pandemic emergency status to business as usual. Also, companies relying on the expertise of foreign workers now find a more favorable legal framework aimed at easing the procedures required to issue and renew work permits.
Recently, Filippo Bortoletti, International Business Advisory Senior Manager at Dezan Shira & Associates provided an overview of the government’s latest support packages to ease recovery for businesses in a webinar. While the full webinar can be viewed here, we have shared a few highlights below:
What is the COVID-19 situation in Vietnam?
The outlook is positive. While there are new cases every day, the strict lockdown restrictions implemented earlier have been lifted. Besides, Vietnam’s vaccination rates are improving. As of December 1, 52.8 percent of the population has been fully vaccinated and the government wants to fully vaccinate all adults by the end of the year. The government is also slowly but cautiously opening up the country for tourism. Since November 20, the government has opened up five locations for fully vaccinated international tourists as part of approved packaged tours. These locations include Phu Quoc, Nha Trang, Quang Nam, Da Nang, and Quang Ninh in the first phase. Gradually more locations will be added until Vietnam is fully open for international tourists.
What are the main government measures put in place recently to help businesses affected by the pandemic?
The government has put forward several measures to help businesses affected by the pandemic. The first one is Decree 57/2021/ND-CP (Decree 57) for businesses involved in the supporting industry and issued in June 2021. The main highlight of Decree 57 is to increase incentives for eligible manufacturers and overall increase processing and manufacturing industries in the local economy. Decree 57 is retroactive and covers investment prior to 2015. These incentives incorporate a CIT rate of 10 percent for 15 years, plus a tax holiday for 4 years, followed by a reduced CIT rate by 50 percent for the next 9 years. The decree also gives financial support for businesses that have been hit hard by the pandemic. The incentives apply to textile and garment, footwear, electronics, automobiles, machinery engineering, and hi-tech industries under certain conditions.
These conditions are as follows:
- Businesses have to manufacture products on the list of prioritized industrial supporting products as per Decree 111/2015/ND-CP and
- The products are not on the same list published in Circular 55/2015/BTC (Circular 55)
- Manufactured products are on the list of prioritized industrial supporting products in Circular 55, manufactured domestically before 2015 but are also granted a certificate of conformity equal to EU technical regulations or something equivalent.
What is the procedure to obtain these incentives?
Businesses must prepare a dossier which includes a written request using Form 01 found in Circular 55, along with the enterprise registration certificate, the description of the project, an audited financial statement (for existing projects), the decision on approval for environmental impact (for new projects) or commitment to environmental projection (existing projects). The process should take 35 days at a minimum but may last longer. The dossier can be submitted directly at the department of heavy industry under the Ministry of Industry and Trade (MoIT) or online on the MoIT portal.
Can you tell us about any other government measures?
The government issued Resolution 68/2021/NQ-CP (Resolution 68) in July 2021, which is valid until December 31, 2021. Resolution 68 unveils financial incentives for employers and employees affected by the pandemic. We focus on the policy for loan support for payment of employment suspension and production recovery. For example, employers can access short-term loans at a 0 percent rate. These loans are either for supporting payments for furloughed employees or pay wages for production. The main requirement to access this incentive is that the business does not have bad debt, or the maximum loan amount does not exceed the regional minimum wage for each employee but does not exceed by more than three months. There is no minimum revenue requirement for accessing the loan.
Another incentive is a 10 percent reduction in electricity as per Official Letter 5411/BCT/DDL. This applies to factories or production facilities located in areas that were implementing social distancing measures as per Directive 16/2020/CT-TTg. Directive 16 required people to stay at home and only go out for emergencies while suspending production.
Apart from these, the government issued Decision No 27/2021/QD-TTg (Decision 27) on reducing land rent by 30 percent for those affected by the pandemic. Eligible parties include businesses, households, and individuals that directly lease land from the State or are under contract with the relevant government agency with annual land rental payments. If an entity is already enjoying a land rent reduction, the 30 percent reduction will come into effect after the existing reduction is over. Eligible entities can submit a request using the application form in Decision 27 before December 31, 2021, and include appropriate documents like the land lease contract. However, you are responsible for doing a self-assessment to check eligibility.
Next up is Resolution 116/2021/NQ-CP (Resolution 116) on reducing contribution rates to the unemployment insurance (UI) fund. The reduction is 0 percent from the standard 1 percent of the monthly wage fund for employees participating in unemployment insurance. This applies to all employees participating in UI before October 1, 2021 and is valid from October 1, 2021 to September 30, 2022.
And finally, one of the most important government measures is Resolution 406/NQ/UBTVQH14 (Resolution 406) on several incentives including a 30 percent corporate income tax cut for businesses for the fiscal year 2021. The Resolution applies to all businesses that have not earned more than VND 200 billion (US$8.8 million) in 2021 and that have decreased revenue in 2021, compared to 2019. The reduced amount is calculated based on the entire income of enterprises; therefore, the reduced amount will then be the payable CIT for the tax period 2021 minus the CIT amount subject to incentives according to the Law on Corporate Income Tax. The government has issued Decree 92 guiding the implementation of the Resolution. Again, these tax reductions are based on the principle of self-assessment.
What are the developments on the easing of foreign work permits?
Requirements for obtaining work permits for foreign workers have been eased as per Resolution 105/2021/NQ-CP. As of April 2021, there were more than 101,000 foreign workers in Vietnam. As per the new regulation regarding proof of experience, the work permit can be used as proof of experience rather than certificates, diplomas issued by other foreign organizations.
In addition, the university degree does not have to be related to the job position in Vietnam. Therefore, businesses have more flexibility to hire experts and technicians whose educational background and initial experience may not necessarily match the exact specifications of the position.
Also, now a valid copy of the passport is sufficient rather than a certified true copy. While these regulations are welcome, there are still some bottlenecks including the lengthy procedure to obtain all approvals as well as the quarantine requirements for foreigners.
Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Hanoi, Ho Chi Minh City, and Da Nang. Readers may write to firstname.lastname@example.org for more support on doing business in Vietnam.
We also maintain offices or have alliance partners assisting foreign investors in Indonesia, India, Singapore, The Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.
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