Vietnam Regulatory Brief: Timber Export Standards, Venture Capital Funding, and Proposed Increases to Business Licensing Fees

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Timber Export Regulations Agreed by Vietnam, EU

Representatives of Vietnam and the European Union (EU) reached an agreement on export regulations for the timber market. Vietnam will apply the Timber Legality Assurance System of Vietnam (VNTLAS) for timber exports to the EU as well as other countries and the domestic market. The EU is the fourth largest importer of Vietnam’s timber and wood products, after the US, Japan, and China. In turn, the EU reached an agreement on applying a licensing mechanism called the Forest Law Enforcement, Governance & Trade (FLEGT) to timber exported to the EU. As such, all FLEGT licensed timber products from Vietnam will be considered legal and not subject to requirements of the EU Timber Regulation.

The developments come after the sixth negotiating session between EU and Vietnam officials on April 13. Negotiations have been ongoing since October 2010. In the first eight months of 2015, Vietnam exported timber and wood products worth around U.S. $442 million. The next negotiation session is scheduled for July 2016.

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Proposed Venture Capital Regulations to Ease Funding for Start-ups

The Ministry of Planning and Investment (MPI) is drafting a law on creating a legal framework for Venture Capital (VC) funds to help start-ups secure funding. The Circular will guide the establishment, organization, and management of venture funds. VC funds will not be covered by laws that regulate operations of securities investment funds. The draft has been released for public knowledge and comments. As per the draft, VC is defined as investors contributing funds in a start-up or buying stakes to launch the business or increasing equity when a business has not earned a pre-tax profit. The law hopes to ease capital flow into start-ups with simpler procedures.

The MPI’s Agency for Enterprise Development (AED) stated that the new regulation would trigger a significant increase of VC funds, particularly from the private sector for start-ups. It also stated that the government views start-ups as a new driver for growth. As per current laws, angel investors can contribute funds to start-ups through the Securities Law, which mandates that there must be at least 100 investors with the minimum value of a fund to be U.S. $2,243,500 (VND 50 billion), which is a high requirement. Analysts estimate that only 10 start-ups receive investment capital per year. Many register in other countries to easily access capital.

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Government Keen to Increase Business License Fees

The Ministry of Finance may double or triple business license fees, according to a draft being prepared for approval. The proposed decree will have different fee levels for businesses.

  • Business with a registered capital between U.S. $447,838 and under U.S. $4,487,000 will be required to pay a fee of U.S. $225 per year, while those over U.S. $4,487,000 will be regarded as large businesses, and be required to pay U.S. $448 per year.
  • Businesses with charter capital of under U.S. $448,700 would pay U.S. $135 per year.
  • Business households and individuals with an annual turnover of U.S. $13,461 would have to pay U.S. $45 per year. Those earning between U.S. $4,487 and under U.S. $13,461 per year would pay VND, 300,000.
  • Business households and individuals with an annual turnover of below U.S. $13 would be exempt from any fee.

If the decree is approved, it will be effective from January 1, 2017 and will be called a fee rather than a tax. Currently, annual revenue from the business license tax is around U.S. $76,279,000 (VND 1.7 trillion); the ministry expects to collect U.S. $121,149,000 (VND 2.7 trillion) if the new law is enacted. The ministry is expected to complete and submit the decree to the government in July.


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