Vietnam Regulatory Brief: European Visa Waivers, Preferential Income Tax Guidelines, and Emerging Insurance Standards
Visa Waiver Program Extended for More Countries in Europe
On June 30, Vietnam extended its visa waiver program to a number of countries in Europe. Implementing these changes, Resolution No. 56/NQ-CP will grant visa free entry to citizens from the United Kingdom, France, Germany, Spain, and Italy who wish to enter Vietnam for a maximum of 15 days.
The waiver of visa requirements applies regardless of the passport and immigration purpose. The waiver extension will remain valid for at least a year and end on June 30, 2017 if it is not renewed. The resolution directs relevant ministries, government agencies, and provincial administration officials to implement changes immediately. The new law will enable easy access to Vietnam for nationals from the aforementioned countries. This is a favorable development for companies from United Kingdom, France, Germany, Spain, and Italy that wish to invest in Vietnam, as it makes entry more convenient for business personnel to travel to the country.
New Guidelines Announced for Preferential Enterprise Income Tax
Vietnam has issued circular No. 83/2016/TT-BTC clarifying regulations related to preferential enterprise income tax (EIT), import duties, taxes, and non-agricultural land use. The circular will be effective from August 1, 2016 and states that for investment projects involving car manufacturing, including production of cars with less than 24 seats, passenger cars, and medium cargo cars, access will be granted to a new preferential EIT. In addition, new industrial parks and export-processing zones will enjoy preferential tax rates. Separately, the government will, in some cases, also offer preferential import tax and preferential tax rates for the use of non-agricultural land.
The preferential tax rates highlight Vietnam’s attitude to improving its business climate. The government wants to reduce the tax burden within the economy, encourage entrepreneurial ventures, and attract more foreign investment into the country. The circular aims at pushing the domestic economy towards these goals.
Laws Regarding New Insurance Standards for Employees Now Operational
The Safety Act, Occupational Health 2015 law took effect on July 1, 2016. The law was passed in 2015 but became operational only recently. The notable provisions of the law state that an employer must pay labor accident insurance and cover for occupational diseases along with the payment of mandatory social insurance for the employee. Before this, an employer only had an obligation to insure the employee after the conclusion of the first labor contract.
For employees who are already under a labor contract, the employer must pay the mandatory social insurance; however, the employer does not need to provide insurance against occupational accidents or diseases. For new employees, the employer must pay for such insurance and pay the mandatory social insurance as well.
The regulations will potentially affect a company’s bottom line. Companies that undertake a critical overhaul of the Human Resource (HR) and Payroll process will significantly mitigate the financial and compliance risks that the new regulations entail.
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