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1、AN INTRODUCTION TODoing Business in Vietnam2023This edition of Doing Business in Vietnam was produced by a team of professionals at Dezan Shira&Associates,with Mark Barnes as Senior Editor.Creative design of the guide was provided by Aparajita Zadoo.2023 Dezan Shira&Associates DisclaimerThe contents
2、 of this guide are for general information only.For advice on your specific business,please contact a qualified professional advisor.Copyright 2023,Asia Briefing Ltd.No reproduction,copying or translation of materials without prior permission of the publisher.VISIT US ON LINKEDINFOLLOW US ON TWITTER
3、DezanShiraVietnam BriefingVISIT US ON FACEBOOKChina GuideIndia GuideVietnam GuideASEAN GuideIndonesia GuideHong Kong GuideRussia GuideSingapore GuideBelt&Road GuideTHE DOING BUSINESS IN ASIA GUIDES SERIES3AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023About Dezan Shira&AssociatesAt Dezan Shira&Ass
4、ociates,our mission is to guide foreign companies through Asias complex regulatory environment and assist them with all aspects of establishing,maintaining and growing their business operations in the region.Since its establishment in 1992,Dezan Shira&Associates has grown into one of Asias most vers
5、atile full-service consultancies with operational offices across China,Hong Kong,India,Singapore and Vietnam,as well as liaison offices in Italy,Germany and the United States,and partner firms across the ASEAN region.With over 30 years of on-the-ground experience and a large team of professional adv
6、isers,we are your reliable partner in Asia.4AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023The year 2022 was not without its challenges for Vietnam.Rising global inflation put Vietnam on a somewhat uncertain trajectory with many industries struggling to make ends meet as a rising US dollar took it
7、s toll.In manufacturing,for example,orders were well down on previous years and toward the end of the year,the sector entered a retraction,according to S&P Globals Purchasing Managers Index.This,however,has created fertile grounds for companies looking to move into the Vietnamese market by way of hi
8、gh-value,low-cost mergers and acquisitions.In the first six months of 2022,Vietnam ran up nearly US$5 billion in M&A transactions.This figure was close to surpassing M&A transactions for the entirety of 2021.This is likely to continue into 2023 with a credit crunch forcing domestic enterprises to lo
9、ok abroad for much needed capital.Information technology,too,is another bright spot on Vietnams 2023 horizon.The COVID-19 pandemic accelerated tech sector development and though this has slowed,it is still going strong.Businesses in IT would do well to look closely at what Vietnam has to offer in te
10、rms of skilled coders and developers that come at a relatively low-cost.The digitization of Vietnams economy is also a high-priority for the Vietnamese government and this has led to a broad range of favorable policies to promote the sector.Overall,Vietnam is still expected to see growth in the 6-8
11、percent range.This is largely attributed to a broad range of free trade agreements to which it is party.A number of these,moving into 2023,will see further tariff reductions on both imports and exports,which should further cement Vietnams reputation as an economic powerhouse and a rising start in gl
12、obal trade.In this edition of Doing Business in Vietnam we look at:How to Set Up in Vietnam Tax,Audit,and Accounting Human Resources and PayrollWe also look in-depth at market entry needs and requirements,different models of investment,taxes,and labor contracts and worker rights.PrefaceALBERTO VETTO
13、RETTIManaging PartnerDezan Shira&AssociatesCONTACTDezan Shira&Associates 5AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Doing Business in Vietnam in 2023 is an invaluable resource for foreign firms looking to enter the Vietnamese market.Compiled by the professionals at Dezan Shira&Associates,it c
14、overs all of the key information a firm might need to successfully do business in Vietnam.For firms already operating in Vietnam,it provides valuable updates to tax law,human resources,and transfer pricing.These changes include:Corporate establishment procedures:We removed outdated information and r
15、eplaced market entry details with the most up to date and important information.Intellectual property:A number of additional details have been added in line with changes to the Intellectual Property Law that come into effect on January 1,2023.Public Private Partnerships:The number of PPP formats was
16、 expanded.Value added tax(VAT):VAT rates have been adjusted to reflect the removal of COVID-19 measures.Compensation:Regional minimum wages were updated in line with changes made in July of 2022.Allowances and benefits were also expanded.Severance:The criteria for unilateral termination of contracts
17、 for both employees and employers was expanded.Social insurance:New rates have been added.Whats New in this Guide?Dezan Shira&Associates can help your company overcome various market entry and expansion challenges.Through in-depth research and analysis,we provide clients with the ability to better u
18、nderstand their options in new markets and make informed decisions on where to invest.To arrange a consultation,please contact us at or visit our website at .BUSINESS INTELLIGENCE6AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Vietnam is superbly located as a gateway to Southeast Asia.Its northern
19、 land border connects to China which is a key supplier of raw materials for manufacturing enterprises from electronics to garments and textiles.To the east are Taiwan,Japan,and South Korea,three of the worlds biggest producers of high tech components.With 3,269 kilometers of coastline bordering the
20、South China Sea(East Sea in Vietnam),Vietnam is geographically situated at a critical juncture of international trade.It gives Vietnam access to both supporting industries in neighboring countries and sea freight routes to North America and Europe.Why Vietnam?Vietnam Snapshot GDP GrowthPopulationMed
21、ian AgeFTAsFDISeaportsInternational AirportsExportsImports6.3%(2023 est)198,168,829(2021)232.5(2020)315US$19 billion 44415US$336.31 billion(2021)US$332.2 billion(2021)1 Asian Development Bank Outlook Supplement 2022,December2 World Bank,World Development Indicators 2021,accessed December 21,20223 Wo
22、rldometer,Population of Vietnam(2020 and historical),accessed December 21,20224 First 11 months of 2022,Ministry of Planning and Investment7AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Vietnams Key Economic Regions Textile and GarmentTelecommunicationConsumer goodsConstruction materialsForestry
23、and Chemical and Chemical productsElectronics and Mechanical engineeringAutomobileITQuang NinhThua Thien HueDa NangQuang NamQuang NgaiBinh DinhBinh DuongTien GiangLong AnHo Chi Minh CityBa Ria Vung TauBinh PhuocDong NaiTay NinhHai PhongHai DuongHung YenBac NinhVinh PhucHanoiNorth EastSouth Central C
24、oastNorth Central CoastMekong River DeltaNorthern Key Economic Central Key Economic Southern Key Economic 8AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Dezan Shira&Associates expanded to Vietnam in 2008,and quickly set up offices in Hanoi and Ho Chi Minh City.The year 2008 also saw the launch of
25、 Vietnam Briefing,which has now become a premier source of business intelligence related to Vietnam.In 2019,we established our third office in Da Nang.Our staff includes a growing number of Vietnamese chartered accountants and lawyers,all of whom have multiple years of experience advising foreign co
26、mpanies.Specifically,our services include pre-investment and entry strategy advisory,business advisory,accounting and reporting,treasury administration,tax and compliance,payroll and human resources,and audit and financial review.Dezan Shira&Associates experienced business professionals are committe
27、d to improving the understanding and transparency of investing in emerging Asia.Our business advisors,tax experts and accountants in Hanoi,Ho Chi Minh City and Da Nang can help you with any questions related to establishing or conducting your business in Vietnam.To talk to an accountant or business
28、consultant,please contact us today.Dezan Shira&Associates VietnamHO CHI MINH OFFICEDA NANG OFFICEHANOI OFFICE7th Floor,The Address,60 Nguyen Dinh Chieu Street,Da Kao Ward,District 1,Ho Chi Minh City,Vietnam Tel:+84 28 3930 2828/+84 28 3930 2818Email:Room 702A,7th Floor,Muong Thanh Luxury Song Han,11
29、5 Nguyen Van Linh Street,Nam Duong Ward,Hai Chau District,Da Nang City,VietnamTel:+84 236 3656 889/+84 236 3656 689Email: Room 2708,27th Floor,Discovery Complex Office Tower,302 Cau Giay Street,Cau Giay District,Hanoi,Vietnam Tel:+84 24 3942 0443 Email: FILIPPO BORTOLETTIDirectorHanoi Office9AN INTR
30、ODUCTION TO DOING BUSINESS IN VIETNAM 2023Table of ContentsPreface04Whats New in this Guide?05Why Vietnam?06Part 1|What to Expect in the Year of the Cat10Part 2|An Introduction to Vietnam14Business etiquette 101 15Legal and political structure18Part 3|How to Set Up in Vietnam20Corporate establishmen
31、t procedures22Intellectual property 29Vietnams free trade agreements31Part 4|Tax and Accounting33Vietnams major taxes 34Accounting and bookkeeping36A Roadmap to IFRS42Introduction to transfer pricing45Part 5|HR and Payroll49How do I hire staff?50Employment contracts in Vietnam55Tax obligations for c
32、ompany employees6010AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023What to Expect in the Year of the Cat111AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 20231Overview Vietnams 2022 was mixed.On the one hand,the country was reopened after two years of border closures and COVID restrictions.On the ot
33、her hand,turmoil on global markets took their toll.In particular,rising inflation among key trading partners Europe and the United States saw consumers in those countries tighten their belts.This led to fewer orders for Vietnamese factories.Inflation in Vietnam,by comparison,was kept relatively stab
34、le although it came at a cost.Through petrol price regulation,credit caps,and interest rate rises the State Bank of Vietnam(SBV)managed to stay relatively close to its 4 percent inflation target.But these mechanisms led to fuel shortages and a credit crunch that saw many domestic firms unable to acc
35、ess the capital they needed to stay in business.For foreign firms,however,this presented a unique opportunity to move into the Vietnamese market with Vietnamese firms keen to find foreign capital and,as a result,low-cost,high-value targets for mergers and acquisitions have become plentiful.Labor Exp
36、ort orders are down and production has slowed.Recruitment may become easier with more workers than jobs.Rising living costs may put upward pressure on wages.Despite many COVID-restrictions being lifted,businesses in key manufacturing centers were struggling to lure workers back to their factories at
37、 the beginning of 2022.This was residue from the lockdowns that plagued 2021 wherein factory workers,many rural migrants,had left their jobs to return to their hometowns.Although Vietnam had adopted a new living with COVID approach and vaccination rates were high,many former factory workers were sti
38、ll fearful of contracting the virus and reluctant to return to the big cities.Factories responded to this challenge by coaxing workers back with additional benefits and incentives.Toward the end of the year,however,the situation changed and with orders down,workers were being laid off.In the final m
39、onths of 2022 a surplus of labor entered the market.Many of these workers are already skilled and concentrated in key manufacturing hubs,like Ho Chi Minh city.Businesses opening factories or moving their production to Vietnam in 2023 may find that because of this recruiting factory workers has becom
40、e easier.12AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Inflationary pressures,however,have not subsided and the cost of living in Vietnam continues to rise.Enterprises that wish to establish a presence in Vietnam and take advantage of this newly abundant labor force will need to clearly and eff
41、ectively manage expectations.Labor contracts will need to be developed with a clear understanding of the Labour Code and of the greater economy to ensure turnover is kept to a minimum and productivity is high.Tourism Entering the hospitality industry may be more cost effective.Tourism may still take
42、 some time to recover.Skilled labor in the tourism sector may be difficult to find.Expanding capacity may lead to sizable discounts.Mergers and acquisitions as a means of market entry may become more cost-effective.Tariff reductions as part of the EVFTA may spur export growth.Vietnam dropped all COV
43、ID-19 testing requirements for international arrivals from May 15 in line with the countrys living with COVID strategy.This saw a predictable surge in international arrivals.In the first ten months of the year,Vietnam welcomed 2.35 million foreign visitors.This was,however,well below the 19 million
44、visitors it welcomed in 2019.It was also less than half of the 5 million arrivals targeted for 2022.But,had those numbers been met the tourism industry may not have been able to sufficiently service their needs with a lack of skilled labor in the tourism sector still a problem.Many businesses had be
45、en forced to lay-off staff during the pandemic with many workers moving into other sectors.As a result,many of these workers decided not to return to tourism and a labor gap has formed in the market.Low tourism numbers led to an oversupply of tourism facilities in 2022.Hotels in key tourist destinat
46、ions,such as Danang have been available for purchase well below their peak value as tourism operators run out of money and tourists prove to be too slow to return.Notably,there are some signs that this may turn around in the near future as China,which was Vietnams biggest source of tourists in 2019,
47、reopens its border.But for now,for astute hoteliers and hospitality enterprises with the capital to last the distance,this may be a golden opportunity to buy into Vietnams tourism industry.Manufacturing 13AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023The manufacturing industry in 2022 had both it
48、s ups and downs.A shortage of workers and a backlog of orders from the COVID-19 lockdowns of 2021 kept Vietnams factories busy.However,toward the end of the year orders began to subsidean unusual occurrence approaching Christmas in the Western Hemisphere.There were,however,a number of high profile a
49、nnouncements in the manufacturing sector testament to its underlying health:Foxconn,a key Apple supplier,in August announced a further$US300 million investment in its production chain in the country;Lego also began work on a US$1 billion factory in Binh Duong;Coca-cola started work on a factory in t
50、he Mekong Delta;and Samsung announced it would be spending US$3.3 billion to expand its production capacity in a range of products across its facilities in Bac Ninh,Thai Nguyen,Ho Chi Minh City,and Hanoi.Aside from big scale investments,moving forward,there is expected to be further instability with
51、 orders only expected to recover modestly in the first quarter of 2023.This should,however,lead to expanded capacity in the manufacturing sector for firms looking to add Vietnamese suppliers to their supply chains.It may also mean that an abundance of pre-existing factories and manufacturing operati
52、ons may be available for mergers and acquisitions.Not only that,but further tariff reductions on textiles and garments from between 2 to 4 percent,as part of the European Vietnam Free Trade Agreement(EVFTA),are set to take effect from January 1.These are alongside tariff reductions in a range of oth
53、er goods that should presage a welcome boost in exports to the EU in 2023.The year of the catIn 2023,as China prepares to welcome the year of the rabbit,Vietnam will be preparing to welcome the year of the cat.This is one of only two instances where the animals of the Vietnamese zodiac veer away fro
54、m those of its northern neighbor.But this seemingly innocuous piece of trivia may say more than it at first appears.Vietnam has gone to great lengths,and with a respectable degree of success,to lure enterprises south of the border.It has presented a viable alternative to China,particularly with rega
55、rd to its management of the COVID-19 pandemic,and this has been reflected in inflows of FDI.In the first 11 months of 2022 Vietnam received a record breaking US$25 billion from foreign investors.This should bode well for Vietnam entering 2023 as the challenges facing Chinas economy show only small s
56、igns of abating.Vietnam will,however,have to be careful to avoid the pitfalls that have befallen China and make sure that its business environment becomes even more conducive to foreign investment.Our forward-looking M&A professionals create holistic solutions that will help you confidently navigate
57、 the complexities of buying a business,selling a business,and forming partnerships-letting you identify the key risks and rewards throughout the deal cycle.To arrange a consultation,please contact us at or visit our website at .MERGERS AND ACUISITIONS14AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 20
58、23Business etiquette 101Legal and political structureAn Introduction to Vietnam215AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 20232Business etiquette 101Vietnam has one of the oldest cultures in Southeast Asia.While national identity can be complex given Vietnams history,locals are proud of their l
59、anguage and its complexities,as well as the distinctiveness of their society and culture.The expression dat viet(Vietnamese land),for example,encapsulates the notion that Vietnamese society has an organic relationship to their environment.Since the introduction of Doi Moi or renovation policy in the
60、 1980s,which began the transition from the countrys socialist economy to a market economy,Vietnam has experienced many significant changes,including a steep rise in the standard of living.These factors have in turn inspired a flurry of foreign businesses looking to start operations or expand in the
61、country.But for those planning to do business in Vietnam for the first time,learning about the countrys vibrant culture and traditions can make doing business in Vietnam much easier.Greetings in VietnamWhile English is gaining in popularity,Vietnamese remains the dominant language:it is spoken by 86
62、 percent of the population.Vietnamese appreciate it if a foreigner tries to learn simple phrases in their language,such as xin chao(pronounced as seen chow),meaning“hello”in Vietnamese.A handshake and a slight bow of the head is the general custom for saying hello and goodbye.Meanwhile,Vietnamese na
63、mes are written and introduced in the following order:last name,middle name,first name.Business protocols and nuancesWhen possible,business meetings should be done in the presence of someone who can translate.Be prepared to attend several meetings as successful deals are rarely completed in a few en
64、counters.Conversations held in person are preferred over online communication and emails.Cold calling is not recommended.It is advisable to be introduced to a potential business contact by a common acquaintance or third-party reference.Business meetings should be scheduled in advance and should avoi
65、d major public holidays,such as Tet,which is the Vietnamese New Year celebration.For the first time meeting a potential business partner,its best to meet at their office.This avoids the possibility of a last-minute cancellation because of any travel difficulties on behalf of your business partner.Wh
66、en giving or receiving business cards,do so with both hands.Time should be taken to read the name on the card hastily stuffing a business card or barely giving it a glance is 16AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023deemed offensive.When possible,seek to create a business card that has bot
67、h English and Vietnamese translations.If offered tea at the reception,accept it,as this is a sign of hospitality.In the North,hot tea is typically served,while in the South,meetings take place with iced tea or soft drinks.Its best to have an agenda before the meeting so the business partners can acq
68、uaint themselves with what will be discussed.It is also helpful to have all documents translated in Vietnamese.Silence is common in meetings and means that your partners are thinking about your interests.Interrupting this time of reflection can be considered rude.Furthermore,silence may be used when
69、 someone disagrees,to avoid causing a loss of face for attendees.Seniority and hierarchy are important in Vietnam.For example,showing the oldest person respect by giving them your business card first is appropriate.Saying“yes”may merely indicate understanding,rather than actual agreement.It is best
70、to follow up and confirm with your business partner to understand if you have agreed on a deal.It is typically the guests responsibility to signal the end of the meeting.The first few meetings will involve getting to know each other.This is as opposed to in the West,where first meetings tend to rema
71、in on a business level.Social connections are important,and Vietnamese may make most of their business decisions based on how they see you as a person outside of the business.Many Vietnamese will ask questions that may seem personal to a foreigner.Discussing ones family and personal life is normal a
72、nd is seen as a sign of friendliness and interest.Its common to give gifts at the end of a business meeting.These can be small and do not need to be expensive.A possible item could be a pen or stationery with a company logo or an item typical from your country of origin.Business attireBusiness attir
73、e will depend on the location of the meeting.For example,Hanoi is known for its white-collar environment,while Ho Chi Minh City is more business casual.Typically,business partners should dress modestly,avoiding bright colors.Suits are appropriate for men,while skirts and blouses are fine for women.T
74、he Vietnamese working week is typically from Monday to Friday with office hours from 8:00a.m.to 5:00 p.m.17AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023The concept of faceAs with many other Asian countries,the concept of face is extremely important in Vietnam.While in the West being frank and di
75、rect is considered a good trait,direct disagreement or raising of questions in public can be seen as causing a person to“lose face”in Vietnam.Face is a concept that can be roughly described as reflecting a persons reputation,dignity,and prestige.Foreigners should be aware of unintentionally causing
76、a loss of face due to their words or actions.The important takeaway is to treat your business partners with respect.If you have suggestions or challenges,its best to bring them up carefully in private.Eating and drinkingIf invited as a guest in a Vietnamese home,bring fruit,sweets,flowers,or incense
77、.Avoid giving handkerchiefs,anything black,yellow flowers,or chrysanthemums.The best dishes will likely be offered to you;be sure to taste and share these dishes.Wait for the host to give the signal to start the meal before sampling any of the food.It is considered good manners to finish all the foo
78、d on your plate.At a restaurant,wait to be seated.In most cases,the oldest in the group will be seated first.Use both hands to pass items and never pass anything over someones head.When motioning for a person to come over,do not use your finger,and use your hand to beckon instead.If paying,tipping o
79、f five to 10 percent is appreciated,though not customary.SafetyVietnam is a relatively safe country to travel.However,business travelers need to be aware of petty and opportunistic theft,particularly in major cities,such as Hanoi and Ho Chi Minh City.Valuables should be stored in hotel safes,while m
80、obile phones and wallets should be kept out of sight to minimize the risk of pickpocketing,particularly in tourist areas.While the police are not always helpful,they will generally treat foreigners with respect.Taxi scams are common,including the use of faulty meters,or taking a longer route to a de
81、stination.Business travelers should book transport through their hotel or use registered taxis,such as Mai Linh(green)or Vinasun(white with green and red stripes).These taxi companies also have card machines for direct payment.18AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Legal and political st
82、ructureVietnam is a socialist country operating under the single-party leadership of the Communist Party.A nationwide congress(National Congress)of the Communist Party of Vietnam is held every five years,with the most recent being in early 2021.This gathering is held to determine the countrys orient
83、ation and strategies and adopt its key policies on socio-economic development.The National Congress elects the Central Committee,which in turn elects the Politburo.Executive power is concentrated in the government.The government is charged with the general management of the economy and the state.The
84、 head of government is the Prime Minister.The Head of State,also known as the President,represents Vietnam in internal and foreign affairs,and helps to appoint prime ministers and other officials with the help of the National Assembly.Below the central government are Peoples Councils and Peoples Com
85、mittees.Peoples Councils are directly elected by the people and Peoples Committees are elected by Peoples Councils.There are three levels of Peoples Committees and Peoples Councils:provincial,district,and commune(or ward).The National Assembly is the highest representative and legislative body and d
86、etermines domestic and foreign policies,socio-economic tasks,national defense,and security issues.Its members are elected by popular vote to serve five-year terms.While the Constitution in general establishes the rights of the people under the leadership of the Communist Party,the power of the peopl
87、e is exercised through the National Assembly at a central level and through Peoples Councils at a local level.The Vietnamese judiciary is independent of the executive.The legal system consists of the Constitution,codes,laws,ordinances,decrees,decisions,circulars,directives,and official letters.Altho
88、ugh all have the force of law,only laws passed by the National Assembly are referred to as such.The court and prosecution system in Vietnam are structured like the administrative system.At the central level,the Supreme Peoples Court is the highest judicial body in Vietnam.At the local level,courts e
89、xist at provincial and district levels.Legal decisions are made by the Peoples Courts,the Peoples Inspectorate,Military Tribunals,and Special Tribunals.The court system is based on the two-tier system,which ensures that the rulings of one court can be appealed to a higher authority.Such higher autho
90、rity may either uphold or reverse the ruling from the lower court.Most cases begin at the district or provincial court level with the possibility of appeal to the high courts.If a case has been heard initially at a district court,it may in special cases even be brought for a third hearing before the
91、 Supreme Court.All Courts,barring the District Peoples Courts,are divided into five divisions:criminal,civil,administrative,economic,and labor.Under the Civil Procedure Code,all disputes,whether civil,commercial,or labor,are subject to the same set of procedural rules.A dispute may,19AN INTRODUCTION
92、 TO DOING BUSINESS IN VIETNAM 2023depending on the type and the value of the dispute,either be heard at the district court or the provincial court at first instance.The recognition of foreign judgments and foreign arbitral awards fall under the jurisdiction of the provincial court.The current legal
93、system is similar to civil law jurisdictions in that its sources of law comprise only written legislation commonly referred to as legal instruments.These are laws and regulations enacted by state bodies,which are binding on citizens and enforceable by the state.Court judgments are not officially con
94、sidered a source of law as judges do not have the power to interpret the law and court judgments are not binding in subsequent cases.The legal system is organized in a hierarchy in which higher-ranking legal instruments set out general rules and lower-ranking legal instruments provide the details.Th
95、e Constitution stands at the top of this legal hierarchy and forms the foundation of the entire legal system.Under the Constitution are laws,ordinances,decrees,decisions,circulars,and other subordinate legal documents dealing with different aspects of social life.For the better part of three decades
96、,Dezan Shira&Associates has been assisting corporate clients with issues related to due diligence,legal contracts,intellectual property,policy formation,transactional advice,negotiations,and dispute resolutions.To arrange a consultation,please contact us at or visit our website at .BUSINESS ADVISORY
97、20AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023How to Set Up in Vietnam3Corporate establishmentproceduresIntellectual propertyVietnams free trade agreements21AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 20233Due to the countrys complex legal processes,when establishing a company in Vietnam,we re
98、commend that professional assistance is sought.A professional can guide companies through the setup process and to help them understand the roles and responsibilities of key positions.This will help ensure that your company is set up for success.Here,we discuss:Corporate establishment procedures;Key
99、 positions in foreign-invested entities;and Intellectual property.MAI TP DAMManagerBusiness Advisory ServicesHanoi Office“Working through Vietnams bureaucracy can be challenging,but with the right guidance and support establishing a presence in Vietnam can be very rewarding.”22AN INTRODUCTION TO DOI
100、NG BUSINESS IN VIETNAM 2023Corporate establishment proceduresInvestors have a number of options for entry into the Vietnamese market.In this chapter we will outline the most common forms of corporate structure options for foreign investors.Phase 1 choosing the right corporate structureRepresentative
101、 officeA Representative office(RO)offers a low-cost entry for companies seeking to gain a better understanding of the Vietnamese market.As such,this option is among the most common for first-time entrants to the Vietnamese market and often precedes a larger presence within the country.Currently,ROs
102、are permitted to engage in the following activities:per Vietnams commitments to various treaties to which Vietnam is a signatory.This includes:Conducting market research;Acting as a liaison office for its parent company;and Promoting the activities of its head office through meetings,and other activ
103、ities,that leads to business at later stages.Vietnams Ministry of Planning and Investment(MPI)does not currently specify required capital for ROs.The MPI does not impose specified capital requirements,however,they must have been operating in their home country for at least one year.ROs can be set up
104、 in between six to eight weeks.ROs only last for five years but can be extended as many times as the company deems necessary.Branch officeA Branch office(BO)can conduct business activities in Vietnam within the scope of business of its parent company.To set up a BO,a parent company must have conduct
105、ed business in its home country for at least five years.BOs are limited to certain types of service businesses,such as finance and banking.BOs can hire staff directly,make it easier to do contracts between the parent company and Vietnamese companies,and serve in similar ways to a liaison office.BOs
106、are permitted to engage in the following activities:Rent offices;Lease or purchase the equipment and facilities required for operations;Recruit local and foreign employees;Remit profits abroad;Purchase and sell goods and commercial activities per licensing;and Set up accounting,marketing,and HR depa
107、rtments to represent the parent company.23AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023The BO will need to obtain an establishment license and have a seal with the name of the parent company.The BO will also need to appoint a branch manager who is a resident of Vietnam.Foreign companies may appo
108、int a manager from their country of origin;however,this employee must get a work permit to be hired as a BO manager.The Department of Industry and Trade approves the registration of the BO after the company submits all the documents with the process taking about 20 working days.Foreign owned enterpr
109、iseThe Vietnam government allows for 100 percent foreign owned enterprises(FOE).There are capital requirements that are calculated based on the business activities to be caried out.These businesses can operate under the following structure:Joint stock companies;Limited liability companies(LLC);and J
110、oint venture.An LLC is the most common form of investment for foreign investors in Vietnam due to their reduced liability and capital requirements.LLCs can be broken down into single member LLCs,where there will only be one owner,and multiple member LLCs,where there will be more than one owner(a max
111、imum of 50).These owners can be private individuals or companies,depending on the requirements of a given investor.JSCs must have three founding shareholders when they are established.These can be individuals or companies.The setup time for a 100 percent FOE ranges between two to four months on aver
112、age.Joint ventureA joint venture(JV)creates a partnership of companies or individuals for a specific business purpose.JVs are not a unique corporate structuring option;partners usually establish an LLC for standard JVs and a joint stock company(JSC)if there is a desire to list on Vietnams stock exch
113、anges.For investors purchasing stakes in state owned enterprises equitized on Vietnams exchanges,the JSC structure is required.When entering the Vietnamese market,foreign investors can choose to enter joint ventures as majority(ownership more than 50 percent)or minority(ownership less than 50 percen
114、t)stakeholders.24AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023The capital requirements for JVs are the same as for 100 percent FOEs.Unconditional sectors are not subject to specified capital requirements.However,Vietnams MPI does apply industry specific capital requirements in many cases.The per
115、centage of ownership,and thus the amount of capital contributed,is the more important metric to use when evaluating the capital requirements for JVs in Vietnam.The government also mandates minimum contributions for domestic investors on an industry specific basis,for example businesses operating in
116、employment services required to minimum contribution of 2 billion VND(US$84,000).Set ups for JV take about two to four months.Public private partnershipA public private partnership(PPPs)entails a partnership between a foreign or domestic enterprise and the government for the completion of key infras
117、tructure projects.Vietnamese authorities are aggressively pursuing PPPs for a variety of infrastructure projects as a means of filling gaps left by the reduced role of state-owned enterprises,a rising population,and increasing urbanization.The five types of PPPs are:build-transfer-operate(BTO),build
118、-transfer(BT),build-operate-transfer(BOT),build-own-operate(BOO),build-transfer-lease(BTL),build-lease-transfer(BLT),operate-manage(OM),and other similar contracts as decided by the Prime Minister.25AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Phase 2 four step establishment guideWhile Vietnam i
119、s a highly attractive investment destination for foreign investors,it still has a complex legal process for establishing a company.In this section,we discuss the different set up procedures for companies that want to begin operations in the country.We also recommend professional assistance to guide
120、companies through the myriad of laws and procedures in the burgeoning Southeast Asian nation.Step 1:Pre-investment approvalFor some types of investment,companies need to seek the approval of Vietnamese authorities prior to starting establishment procedures.As a result,it is important to understand i
121、f an investment will require approval,and if so,preparing requisite documentation and working against the application processing times.Corporate structure PurposeAdvantagesLimitationsRepresentative Office Non-separate legal entity Market research Liaison with overseas parent company Easy registratio
122、n procedure Cannot conduct profit making activities Parent company bears liabilityBranch Office Non-separate legal entity Commercial activity within parent companys scope Can remit profits abroad Limited to certain industry sectors Parent company bears liabilityLimited Liability Company Separate leg
123、al entity Liability limited to capital contribution Can issue bonds Cannot issue shares Maximum of 50 shareholdersJoint-Stock Company Separate legal entity Liability limited to capital contribution Can issue shares and go public Three or more shareholders requires Supervisory board required for most
124、 joint stock companiesJoint Venture Partnership of companies or individuals for specific business purpose Unconditional sectors not subject to specific capital requirements Minimum contribution guidelines for foreign investors for industry specific cases Two to four months to set upPublic Private Pa
125、rtnership Entails partnership between foreign or domestic enterprise and government for infrastructure projects Government aggressively pursuing PPPs to develop infrastructure Several PPP models Investors unsure of returns26AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Step 2:Investment registrat
126、ion certificate applicationThe first step in the Vietnamese corporate establishment process is an application for an Investment Registration Certificate(IRC).This is required of all 100 percent foreign owned investment projects and establishes the right of the foreign enterprise to invest within Vie
127、tnam.To apply an investor must:Application for implementation of investment project(this should include details of the project in Vietnam);Proposal of investment project(should include the details of the investment project,including lease agreements or land use needs);Financial statements(to be prov
128、ided for the last two years of a companys operation;additional information may be required to prove financial capacity).Incorporation Certificate(for companies);Passport(for individuals);Bank statement(to show that they have sufficient capital to fund their operations);and Confirmation of tax obliga
129、tion fulfillment(if an investor cannot provide a financial statement).Timeframe:15 days from the date when documents are submitted.Step 3:Enterprise registration certificate applicationThe Enterprise Registration Certificate(ERC)is required for all projects that seek to set up new entities within Vi
130、etnam.When obtained,the ERC will be accompanied by a number that will double as the tax registration number of the entity.As part of the application process,the following information should be prepared:Application for enterprise registration;Company charter;List of all board members;(JSC and multime
131、mber LLC only)List of legal representatives;and Letters of appointment and authorization.Any foreign documents or supporting information provided will need to be notarized,legalized by consular officials,and translated into Vietnamese by competent authorities.Timeframe:Five working days and two addi
132、tional working days for a signed and sealer printed version to be issued.It should be noted that applications for the ERC and IRC cannot be processed concurrently.An IRC must be obtained first and then an ERC.However,future amendments to an IRC or an ERC,for example,a change of address,can be comple
133、ted concurrently.27AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Step 4:Post licensing proceduresOnce the IRC and ERC have been issued,additional steps have to be taken to complete the procedure and start business operations.This includes:Seal carving;Bank account opening;Labor registration;Busin
134、ess license tax payment;and Charter capital contribution.Charter capitalCharter capital is“the total value of assets that have been contributed or promised by the members/partners/owners when the limited liability company or partnership is established;or the total of nominal values of the sold or su
135、bscribed shares when a joint stock company is established.”Charter capital can be combined with loan capital or constitute 100 percent of the total investment capital of the company.The total investment,which includes the charter capital and the mobilized capital(which also includes shareholders loa
136、ns or third-party finance),must be registered with the license issuing authority of Vietnam.Investors cannot increase or decrease the charter capital amount without prior approval from the local licensing authority.Capital contribution schedules are set out in foreign-invested enterprise(FIE)charter
137、s(articles of association),joint venture contracts and/or business cooperation contracts,in addition to the FIEs investment certificate.Full injection of capital must be completed 90 days from the date the ERC is issued.To transfer capital into Vietnam,after setting up the FIE,foreign investors must
138、 open a capital bank account in a legally licensed bank.A capital bank account is a special purpose foreign currency account designed to enable tracking of the movement of capital flows in and out of the country.The account also allows money to be transferred to current accounts in order to make in-
139、country payments and other current transactions.28AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Investments and Projects Requiring ApprovalProjectAgencyRequisite documentationTime(days)Projects which currently make use of technology outlined in the Law on Technology Transfer Projects on the const
140、ruction of residential housing(at least 50,000 people);Projects where government land is obtained without the use of the tendering process;Projects on investment in golf course construction;Projects in areas that may impact on national defense and security;Projects in areas of the national relic sit
141、eProvincial Peoples Committees Application Financial statements Detailed use of restricted technology Proposed use of land35 Relocations of local populations(10,00020,000 people)Petroleum exploration Seaports Airports Gambling Development of Infrastructure in economic zones Air Transport Telecommuni
142、cations Press and publications Science or technological enterprises with 100%foreign owned capitalVarious government agencies All documents listed above in addition to:Environmental impact assessment Socioeconomic efficiency evaluation60 Projects involving nuclear power plants Projects involving the
143、 mass relocation of local populations(20,000-50,000)Projects involving protected environmental areas Projects that repurpose land for rice cultivationNational Assembly All documents listed above in addition to:Relocation plan(if applicable)Should be submitted 165 days before the start of national as
144、sembly sessions29AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Domestic protectionVietnams National Assembly passed the Law on Intellectual Property Rights(IPRs)in 2005,which forms the basis for IP protection within the country.In September 2010 and October 2013,in an effort to strengthen the pro
145、tection of IPRs after entering into a Bilateral Trade Agreement(BTA)with the US and participation in the World Trade Organization(WTO),the government issued stricter administrative sanctions for violations of industrial property rights,along with some important changes to IPR regulations in Vietnam.
146、The National Office of Intellectual Property of Vietnam(NOIP)is the agency,under the aegis of the Ministry of Science and Technology,that assumes the functions of exercising state management and providing services in the field of intellectual property.This includes administering the registration of
147、industrial designs,trademarks,brand names and other IPRs,and conducting legal appraisals to settle intellectual property disputes.Intellectual propertyVietnamese Protection of Intellectual PropertyIndustrialproperty Patents Trademarks Industrial designs Layout designs Trade names Geographical indica
148、tions Trade secrets Law on Intellectual Property via the National Office of Intellectual Property(NOIP)Vietnamese Criminal Code Vietnamese Civil Code Vietnamese Constitution The Paris Convention The Hague Agreement The Madrid Agreement WIPO The Patent Cooperation Treaty WTO via TRIPsCopyright Copyri
149、ghts Related rights Law on Intellectual Property via the Copyright Office of Vietnam Vietnamese Criminal Code Vietnamese Civil Code Vietnamese Constitution The Geneva Universal Copyright Convention The Berne Convention WTO via TRIPs WIPO The Rome Convention Brussels Convention Relating To The Distri
150、bution Of Programme-Carrying Signals Transmitted By SatelliteVarieties of plants Rights to plant varieties Law on Intellectual Property via the Copyright Office of Vietnam Vietnamese Criminal Code Vietnamese Civil Code Vietnamese Constitution WTO via TRIPS International Convention for the Protection
151、 of New Varieties of Plants WIPO30AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023International protectionAside from local IPR legislation,Vietnam also participates in international IPR conventions,such as the Paris Convention for the Protection of Industrial Property,the Berne Convention for the P
152、rotection of Literary and Artistic Works,the Rome Convention,the Trade-Related Aspects of Intellectual Property Rights(TRIPS)Agreement,the World Intellectual Property Organization(WIPO),the Patent Cooperation Treaty,and the Madrid Protocol.In addition to the aforementioned treaties,Vietnam has recen
153、tly signed on to several ambitious trade agreements,including the Comprehensive and Progressive Agreement for Transpacific Partnership(CPTPP),UK-Vietnam Free Trade Agreement(UKVFTA),and the European Union Vietnam Free Trade Agreement(EVFTA).Further,Vietnam has signed the Hague Agreement,which allows
154、 the protection of design in multiple countries through a single filing.The agreement came into effect in January 2020.These agreements enable Vietnam to bring its national IP protection regime up to par with international best practices.Free trade agreements(FTAs)are when two or more countries or c
155、ustoms unions agree on the terms of trade between them.They determine the value of tariffs and duties that countries impose on imports and exports.In 2007,Vietnam joined the World Trade Organization(WTO).This was a significant step toward integrating with world trade.Over the past few years,Vietnam
156、has been active in signing bilateral trade agreements with countries throughout the world.Additionally,due to its membership in the Association of Southeast Asian Nations(ASEAN),Vietnam has become a party to several FTAs that the regional trade bloc has signed.31AN INTRODUCTION TO DOING BUSINESS IN
157、VIETNAM 2023Vietnams free trade agreementsStay up to date on VAT and other regulatory and legal updates.FOLLOW US ON TWITTERDezanShiraFree trade agreements(FTAs)are when two or more countries or customs unions agree on the terms of trade between them.They determine the value of tariffs and duties th
158、at countries impose on imports and exports.In 2007,Vietnam joined the World Trade Organization(WTO).This was a significant step toward integrating with world trade.Over the past few years,Vietnam has been active in signing bilateral trade agreements with countries throughout the world.Additionally,d
159、ue to its membership in the Association of Southeast Asian Nations(ASEAN),Vietnam has become a party to several FTAs that the regional trade bloc has signed.Benefits The benefits of the free trade agreements will enable Vietnams economic development to continue to shift away from exporting low-tech
160、manufacturing products and primary goods to more complex high-tech goods like electronics,machinery,vehicles,and medical devices.This can be done in two ways.First,through more diversified sourcing partners created by larger trade networks and cheaper imports of intermediate goods from partner count
161、ries.This should boost the competitiveness of Vietnams exports.Second,through partnership with foreign firms that can transfer the knowledge and technology needed to make the jump into higher value-added production.An example of this is the VSmart phone manufactured by Vietnamese conglomerate Vingro
162、up.Vietnam is also touted as a low-cost manufacturer.This has attracted companies like Samsung and Nokia that now manufacture in Vietnam and then export to other parts of the world.Such sophisticated business practices and technology will help boost Vietnamese labor productivity and expand the count
163、rys export capacity.With recent trade agreements,like the CPTPP and the EVFTA,Vietnam seems to be prioritizing international trade integration with its trading partners outside of ASEAN.These trade agreements will allow Vietnam to take advantage of the reduced tariffs,both within the ASEAN Economic
164、Community(AEC)and with the EU and US.This will help to attract companies to produce in Vietnam and then export to markets overseas.Vietnams entry into these trade deals will also require the Southeast Asian nation to improve its standards in areas ranging from employee rights to environmental protec
165、tion.For example,both the CPTPP and EVFTA require Vietnam to conform to the International Labor Organizations(ILO)standards.The ILO has noted that this is an opportunity for Vietnam to modernize its labor laws and industrial relations systems.32AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Challe
166、nges The FTAs may also come with some downsides.These agreements are likely to trigger aggressive competition from foreign rivals in certain sectors.In the agriculture sector,for example,Vietnam will face steep competition from the EU,Australia,and Canada.If local firms do not adapt and make use of
167、new market opportunities and potential partnerships with foreign firms,they could find competing in the market challenging.The Vietnamese government will also need to continue its path of reforms strengthening the banking sector,removing corruption,refining legal and tax structures,and improving tra
168、de facilitation.Vietnams Ministry of Planning and Investment forecast that the CPTPP could increase Vietnams GDP by 1.3 percentage points by 2035,while the EVFTA could boost GDP by 15 percent.These trade deals along with already signed and upcoming FTAs are likely to ensure that Vietnam remains comp
169、etitive in the short-to-medium term.Dezan Shira&Associates can advise on the legal incorporation of your investment across multiple Asian countries.This important legal process,when combined with our tax planning services,provides your business with a superior and integrated corporate establishment
170、process under one service provider.To arrange a consultation,please contact us at or visit our website at .CORPORATE ESTABLISHMENT AND GOVERNANCE33AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Tax and AccountingVietnams major taxesAccounting and bookkeepingIntroduction to transfer pricing434AN IN
171、TRODUCTION TO DOING BUSINESS IN VIETNAM 2023Vietnams major taxesMany small and medium sized businesses are prioritizing investments in Vietnam and are acting on the business potential it holds.In this chapter,we examine the tax landscape so that new investors can better understand their in-country t
172、ax exposure before setting-up.All taxes in Vietnam are imposed at the national level.There are no local,city,or provincial taxes.Enterprises should pay tax in localities where they are headquartered or have registered branches.Most companies and foreign investors in Vietnam are subject to the follow
173、ing six major taxes:Business license tax;Corporate income tax;Value-added tax;Special consumption tax;Foreign contractor tax;and Customs duties.Business License Tax(BLT)BLT is an indirect tax imposed on entities conducting business activities in Vietnam,paid by enterprises annually for each calendar
174、 year that they do business in the country.All companies,organizations,or individuals(including branches,shops,and factories)and foreign investors operating businesses in Vietnam are subject to BLT.Corporate Income Tax(CIT)All income arising inside Vietnam is subject to CIT,no matter whether a forei
175、gn enterprise has a Vietnam-based subsidiary,or whether that subsidiary is considered a Permanent Establishment(PE).CIT is a direct tax levied on the profits(gross revenue minus expenses)earned by companies or organizations.Value-Added Tax(VAT)VAT is imposed on the supply of goods and services at th
176、ree different rates:0,5 and 10 percent,with the latter being the standard rate.All organizations and individuals producing and trading goods and services in Vietnam are liable to pay VAT,regardless of whether the organization has a Vietnam-based establishment.Note:The VAT rate of 10 percent was redu
177、ced to 8 percent from 1 February 2022 to 31 December 2022 per Decree 41/2022/ND-CP.This was to assist with Vietnams economic COVID-recovery.On 1 Jan 2023,this reverted to the standard 10 percent.THANG VUAssociate ManagerTaxHo Chi Minh City office“Tax incentives in Vietnam are like getting into toxic
178、 relationships.Businesses are advised to exercise skeptical judgements when assessing their eligibility for tax incentives.”35AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Special Consumption Tax(SCT)SCT is a form of excise tax that applies to the production or importation of 11 categories of pro
179、ducts and six types of services,which are luxurious or non-essential such as alcohol and tobacco products.Companies are liable for SCT both at the time of import and sale.However,to prevent an excessive tax burden,import SCT will be creditable against SCT incurred at the point of sale.Customs duties
180、Most goods exported across the borders of Vietnam,or which pass between the domestic market and a non-tariff zone are subject to export or import duties.Exceptions to this include goods in transit,goods exported abroad from a non-tariff zone,goods which are imported from abroad into a non-tariff zon
181、e and only used within that non-tariff zone and goods passing from one non-tariff zone to another.Most goods and services being exported are exempt from tax.Foreign Contractor Tax(FCT)Foreign businesses and individuals without legal entity status are considered foreign contractors if they conduct bu
182、siness or earn income in the country under contract with local organizations including foreign owned companies.FCT,normally referred to as“withholding tax”,is not a separate tax type.It comprises VAT and income tax(either CIT or PIT)imposed on payments of local organizations to foreign contractors.S
183、uch payments are considered income earned in Vietnam in which the Vietnamese parties are liable to declare and make payments on behalf of foreign contractors.Payments subject to FCT include interest,royalties,service fees,goods supplied within Vietnams territories or associated with services rendere
184、d in Vietnam.The applicable tax rates vary depending on the payment method and the nature of the transactions.Certain distribution arrangements where foreign entities are directly or indirectly involved in the distribution of goods or provision of services in Vietnam are also subject to FCT.FCT exem
185、ption is applicable in certain circumstances,such as pure supply of goods,services performed and consumed outside Vietnam,and various other services performed wholly outside Vietnam.36AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Local and foreign-invested companies doing business in the country
186、are required to comply with Vietnam Accounting Standards(VAS)when recording their financial transactions.Foreign companies may choose to manage two accounting records:one based on the VAS and another compiled specifically for the overseas head office.In practice,many foreign companies maintain an ac
187、counting system according to VAS and only convert financial statements into the International Financial Reporting Standards(IFRS)on a monthly/quarterly/yearly basis for the foreign parent companys reference.In brief,the VAS requires that accounting records:Are in the Vietnamese language,or can be co
188、mbined with a commonly used foreign language;Use VND as the accounting currency(however,FIEs are allowed to select a foreign currency as their accounting currency if they meet the requirements as per the Law on Accounting.);Comply with the Vietnamese chart of accounts;and Include reports specified b
189、y VAS regulations,printed on a monthly/quarterly/yearly basis,signed by the General Director,and affixed with the company seal.An accounting period in Vietnam is generally determined according to the calendar year,or January 1 to December 31.However,after registering with the Tax Department,this can
190、 be adapted to 12-month periods beginning the first day of each quarter.Tax authorities can penalize companies for VAS non-compliance through the disallowance of input VAT credits and the withdrawal of CIT incentives.Annual finalizationBased on the accounting periods specified above,investors and ot
191、her foreign enterprises operating in Vietnam will be required to prepare an audit and file annual financial statements no later than the last day of the third month from the end of the annual accounting period.As per current regulation,annual finalization must be filed with the following offices:Gen
192、eral Statistics Office;Ministry of Planning and Investment;and The tax office at the provincial or city level.For those companies operating in export processing zones(EPZs or industrial zones(IZs),financial statements may be required to be filed with the management board of the respective EPZ or IZ.
193、Most economic zones will qualify an investor for tax holiday incentives.Foreign investors should check with each zone to clarify its incentives,which government officials grant on a case-by-case basis.Accounting and bookkeeping37AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Retention of documenta
194、tionFollowing annual finalization,companies will be required to retain a variety of documents that may arise because of the bookkeeping and accounting process.The period of retention is tied to the nature of the documentation generated and is broadly split into five-year,10-year,and indefinite perio
195、ds of retention.The five-year retention period applies to all documentation that is used in the management and operation of the enterprise.The 10-year retention period applies to all accounting data,accounting books,financial statements,and reports of independent audit firms that have been prepared
196、on behalf of the company.The indefinite retention period is limited to documents that are deemed to be of significance to the economy,national defense,or security of the Vietnamese state.Whether it be convergence with IFRS,the growth of e-filing,or simple efforts to improve business competitiveness,
197、Vietnam has a continually changing set of audit procedures that must be followed closely in order to ensure compliance.Below we provide a step-by-step guide on this process for one of the most common investment vehicles of foreign enterprises in Vietnam foreign owned enterprises(FOEs).Audit procedur
198、es for FOEsThe FOE compliance process,which is also applicable to JVs,can be complex and time consuming.The successful completion requires the compilation of a statutory annual audit report,and the finalization of corporate and personal income taxation.Following successful submission of this informa
199、tion to various government bodies,it becomes possible for firms to repatriate profits from their operations.With rules constantly changing,prospective and established investors alike should contact a service provider or relevant government officials to ensure that reports are prepared in accordance
200、with the most up-to-date regulations.Step 1:Prepare statutory annual audit reportAll FOEs are required to produce audited financial statements on an annual basis.These statements must be prepared in accordance with Vietnamese Accounting Standards(VAS)and follow the most up to date guidance available
201、.As per Vietnamese law,financial statements of FOEs must be audited externally,by using an independent auditor.The following audit procedures must be followed,and documentation prepared to ensure compliance:38AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Statutory audit requirements Statement of
202、income;Statement of financial position;Statement of changes in equity(if any);Statement of cash flow;Balance sheet;and Notes.Requisite documentation From 04-CS/SXK:Report on Production and Business Activities,including:Actual Operating Business Lines;Labor Statistics(Number of Employees,turn over,et
203、c.);Labor Income and employer payments of social insurance,health insurance,unemployment insurance,and trade union fees;Production and business activity results(revenue,profit,cost,etc.)and Taxes and other amounts payable to the state.From 04-CD/GVGL:Report on Charter Capital contribution,including:
204、Initial registered charter capital;Current registered charter capital;Implemented charter capital in the reporting year;Charter capital accumulated by the end.The Goods and Services Tax(GST)system requires taxpayers to self-assess their tax liability and pay their tax without any intervention by the
205、 tax authorities.The law provides for a robust audit mechanism to measure and ensure compliance by the taxable person.DeadlinesFOEs need to submit audited reports to the following three government departments on the last day of the third month at the end of the calendar or fiscal year:Provincial Dep
206、artment of Planning and Investment(DPI)(or the Provincial-Level Export Processing and Industrial Zone department in the case of FOEs based in IZs or EPZs);Provincial Level Tax Departments;and Provincial level Statistical offices.Upon receipt of documentation,these offices place an incoming stamp dir
207、ectly on one copy of submitted reports for confirmation purposes.For electronic submissions,the enterprise will receive an electronic confirmation,or the documentation will be stored directly in the system of the authority without being stamped.39AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Step
208、 2:CIT finalizationIn addition to the quarterly remittance of provisional CIT payments,FOEs in Vietnam must conduct CIT finalization at the end of every year.The standard tax year applied in Vietnam is the duration of one calendar year.If a different year is utilized,the enterprise must report this
209、to the local tax agency as mentioned earlier.When preparing finalization paperwork,enterprises should pay close attention to revenue streams to ensure all requisite income is included in finalization statements.Currently,revenue applicable for CIT includes any and all income arising from production,
210、trading,and the provision of services,regardless of whether it has been generated within Vietnam.Following an assessment of revenue streams,outstanding obligations,and investment incentives,it is a possibility that taxes may be reduced substantially or avoided.If there is no tax liability or taxatio
211、n has been exempted under applicable tax incentives,enterprises must still complete tax filings with tax authorities by established deadlines.It should be noted,however,that filing is not required for enterprises whose tax-generated activities are terminated or have ceased business operations and no
212、 tax liabilities have arisen.Those finalizing corporate income taxation should prepare CIT reports in accordance with the following requirements and deadlines:Requisite documentation Form 03/TNDN CIT finalization statement;Annual Financial Statements and other related documents;and One or more annex
213、es enclosed with the declaration(depending on the actual arising of the enterprise).DeadlinesSubmission of finalization paperwork must be submitted to the head of relevant tax agencies 90 days from the end of the year.For cases of operation termination,contract termination,or corporate ownership tra
214、nsformation tax offices must be made aware within 45 days following the date at which changes were made.40AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Step 3:PIT finalizationFOEs,as employers,are responsible for the finalization of all personal income taxation(PIT)of their employees covering ded
215、uctions from salaries throughout the year.Enterprises finalizing PIT for their employees should make sure that the following forms are successfully completed by the deadlines outlined below:Requisite documentation Form No.05/QTT PIT finalization statement;Form No.05-1/BK-QTT-TNCN Detailed list of ta
216、xable income and tax deductions from salaries and wages of individuals who are subject to progressive tax rates;Form No.05-2/BK-QTT-TNCN Detailed list of taxable income of individuals who are subject to direct tax rates;and Form No.05-3/BK-QTT-TNCN-Detailed list of employees registered dependents.If
217、 enterprises are consolidated or merged,they must complete PIT finalization for deducted tax in advance of these changes and provide a voucher to employees for their PIT finalization at the end of the year.DeadlinesThe submission of finalization paperwork must be completed 90 days from the end of th
218、e calendar year and sent to the tax office that directly manages the enterprise.In most circumstances,this is the department of taxation in the province or city that the enterprise conducts its operation;however,there may be instances where local tax offices authorize alternative state bodies to col
219、lect taxes.Step 4:Social insurance finalizationIn addition to their Vietnamese counterparts,all foreign employees working in Vietnam under labor contracts with indefinite terms,or definite terms of over three months,need to be included in the mandatory social insurance scheme.Step 5:Profit remittanc
220、eFollowing tax finalization,or the termination of investment projects in Vietnam,profits may be remitted to offshore accounts if the business has completed all financial obligations under Vietnamese law.For enterprises whose investments are still in operation within Vietnam,profits may only be remit
221、ted if the FOE in question has not accumulated losses.41AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023DeadlinesIf an FOE has completed tax finalization,the relevant tax office must be notified of any plan to remit profits at least seven working days before the scheduled transfer.Profit Remittance
222、 Document Checklist FOEs1From No.04-CS/SXKReport on Production and Business Activities2From No.04-CD/GVGLReport on Charter Capital Contribution3Form No.03/TNDNCIT Finalization Statement4Form No.05/QTT-TNCNPIT Finalization Statement5Form No.05-1/BKQTT-TNCNDetailed list of taxable income and deduction
223、s from salary of individuals subject to progressive tax rates6Form No.05-2/BK-QTT-TNCNDetailed list of taxable income of individuals who are subject to direct tax rates7Form No.05/3/BK-QTT/TNCNDetailed list of employees registered dependents42AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Internat
224、ional Financial Reporting Standards(IFRS)are global accounting standards issued and regulated by the International Accounting Standard Board(IASB)to guide the preparation and presentation of financial reports.Vietnam uses IFRS as a basis for its own system,the VAS,yet there are key differences betwe
225、en the two.As all foreign and local companies operating in Vietnam are obliged to conform to VAS,foreign investors should be well aware of unique fundamental characteristics of VAS to fully comprehend compliance requirements and make informed investment decisions.Vietnams government currently has 26
226、 VAS accounting standards based on IFRS.To provide guidance for local and foreign enterprises in Vietnam on these standards,the MoF recently issued Circulars,No.200/2014/TT-BTC and No.202/2014/TT-BTC,which enhance the comparability and transparency of corporate financial statements and bring the two
227、 systems closer.Key differences between IFRS and VAS include terminology,applied methods,or presentation scope.Below are several critical differences between the two financial reporting systems.Presentation of financial statementsA complete set of financial statements based on IASBs International Ac
228、counting Standard(IAS1)includes the following:Statement of Profit or Loss and other comprehensive income;Statement of Financial position;Statement of Changes in Equity;Statement of Cash flows;and Notes to the Financial Statements.The components of financial statements under VAS are:Balance Sheet;Inc
229、ome Statement;Cash Flow Statement;and Notes.According to VAS 21,the Statement of Changes in Equity is enclosed in the Notes,rather than as a primary component of the financial statement.Furthermore,VAS does not require disclosure of managements key judgments,assumptions about the future and sources
230、of estimation uncertainty.A Roadmap to IFRS43AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Cash flow statementsUnder IFRS 7,cash flow statements are based on the balance sheets from the first and final period accounting reports and can include some information from the ledger.IFRS stipulates that
231、 receivable accounts and trade payables can be separated from receivable accounts and payables on the sale of fixed assets or long-term assets;hence,cash flow from business is distinct from cash flow from financial investment.Based on VAS 24,cash flow statements are taken from the cash book and ledg
232、er bank deposits corresponding to the side account.VAS 24 gives guidance on setting up cash flow statements using the indirect method starting from pre-tax profits plus or minus the adjustment including differences of payables excluding payables related to financial investment activities.Chart of ac
233、countsVietnams Ministry of Finance issued a uniform chart of accounts for enterprises financial statements.Circular No.200/2014/TT-BTC introduced new accounts,including corporate restricting funds(Account 417)and prize stabilization funds(Account 357),while some are omitted or amended.Roadmap of IFR
234、S in VietnamIn the future,however,VAS will be replaced by IFRS,promoting international conformity in accounting.Three stage roadmapThe MoF is responsible for the introduction of IFRS in Vietnam.The MoF approved an IFRS roadmap in 2020.The roadmap divides the IFRS implementation into three stages:Sta
235、ge 1(2019-2021):The MoF makes necessary preparations for the implementation of the roadmap,such as the publication of the Vietnamese translation of IFRS standards,training,and the preparation of guidelines for IFRS implementation.Companies that will adopt IFRS from 2022 onwards will receive special
236、support.Stage 2(2022-2025):The MoF selects certain pilot companies from among state-owned enterprises,listed companies,and(large)non-listed companies to implement IFRS in practice.Foreign companies can adopt IFRS for their individual financial statements on a voluntary basis.Stage 3(from 2025):IFRS
237、will be mandatory for the consolidated accounts of all state-owned companies,listed companies,and(large)non-listed companies.All other companies can adopt IFRS for their individual financial statements on a voluntary basis.44AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023IFRS after 2025The adoptio
238、n of IFRS will be mandatory for all SOEs,listed companies and large,unlisted public companies after 2025.The application of IFRS in Vietnam should overcome the limitations of the VAS.It should improve the legal framework for accounting,and increasing the transparency of financial information.It also
239、 aims to promote corporate accountability by facilitating Vietnamese companies access to more sources of capital and allow them ti list on international markets.The move is significant as this is in line with international best practices,enhancing transparency and effectiveness in corporate governan
240、ce.45AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Many foreign businesses have been expanding their production facilities in Vietnam and charge their foreign outposts for administrative,technical,financial,and commercial services.However,financial administration teams need to be aware that their
241、 transactions must comply with the arms length and substance-over-form transfer pricing(TP)principles.Transfer pricing rules in Vietnam were lax prior to 2017.The government released Decree 20/2017“Providing tax administration applicable to enterprises having controlled transactions”(“Decree 20”)in
242、April 2017,followed by the Decree 68/2020(“Decree 68”)and 132/2020(“Decree 132”)in November 2020,the latter replacing Decree 20 and Decree 68.Investors could previously enter the Vietnam market without worrying too much about their transfer pricing policies but this is no longer the case.Companies c
243、onsidering an investment into Vietnam or already operating in the country need to comply with stricter regulatory requirements based on the Organization for Economic Cooperation and Development(OECD)guidelines and Base Erosion and Profit Shifting(BEPS)actions.TP compliance in VietnamTransfer pricing
244、 rules are almost the same everywhere as they are generally based on the same principles and share common approaches.Of course,there are small differences between Vietnams rules and other countries,but the core is the same.Before Decree 20,Decree 68,and Decree 132 were issued,transfer pricing rules
245、in Vietnam incorporated the arms length principle as their foundation.Accordingly,the biggest impact of the new regulations is the introduction of the substance-over-form principle:foreign investors should review this when structuring supply chains.The substance-over-form is a principle by which tax
246、 authorities look past the legal forms of transactions and operating structures,and instead consider and analyze their economic substance.What does it mean in practice?Foreign parent companies that expand their production facilities in Vietnam may seek to act solely as a subcontractor,operating thro
247、ugh their Vietnamese subsidiary alone.The foreign parent company then seeks to charge its subsidiary on a periodic basis for commercial services performed regarding developing sales in Vietnam.According to the substance-over-form principle,those commercial services should contribute to the creation
248、of operating sales revenue or income for the Vietnamese subsidiary.Consequently,expenses related to commercial services are not deductible from the subsidiarys taxable income if they do not provide a direct economic benefit to the Vietnamese subsidiary.Introduction to transfer pricing46AN INTRODUCTI
249、ON TO DOING BUSINESS IN VIETNAM 2023Alternatively,if the same Vietnamese subsidiary were engaged in sales activities,then those same commercial service expenses would comply with the substance-over-form principle.These expenses could then be deducted if the prices charged were at arms length(or mark
250、et rate).Some companies,however,may seek to engage in more complicated relationships.A multinational enterprise may like to interpose a Vietnamese entity in transactions between two member companies that are residents of countries,which have not signed a double taxation agreement.According to the su
251、bstance-over-form principle,associated transactions should have a significant purpose(aside from the reduction of tax liability)and an economic effect(aside from any tax effect)to be accepted by authorities.In this case,no related expenses would be deductible from the Vietnamese entitys taxable inco
252、me.Finally,from a tax planning perspective,it is worth noting that the Decree 20 introduced limitations on the deductibility of loan interest costs,which now,after Decree 132,should not exceed 30 percent of earnings before interest,taxes,depreciation,and amortization(EBITDA).This measure is aimed at
253、 addressing thin capitalization,as Vietnam lacks specific thin capitalization rules.However,the Ministry of Finance reportedly plans to introduce thin capitalization rules in the near term to limit the deductibility of interest costs if specific debts to equity ratios are breached.How to comply with
254、 transfer pricing regulationsTaxpayers in Vietnam that have entered into related-party transactions have a number of obligations under Decree 132.These have been summarized and set out below:FormsCompanies in Vietnam that engage in related party transactions need to disclose their relationships and
255、transactions in their annual tax returns.Taxpayers subject to transfer pricing regulations need to file Form 01 which is attached to Decree 132 to disclose their transfer pricing transactions,and the value of these contracts.Further,taxpayers need to provide what the arms-length prices of the relate
256、d-party transactions would be to enable a comparison.The timeframe to do this is 90 days after the end of the financial year.This may prove very challenging given the short amount of time to collect and collate all necessary information and data careful planning and observance are therefore prudent.
257、47AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Contemporaneous documentationTransfer pricing contemporaneous documentation is designed to document taxpayers relationships and transactions with related parties,as well as their global transfer pricing policies and the allocation of profits among a
258、ll members/entities within a corporate group.Taxpayers meeting specific thresholds must,in accordance with Decree 132,prepare and then maintain TP contemporaneous documentation,which encompasses a Local File,and one or more of the Master File and Country-by-Country Report(CbCR).It is likely that the
259、 Master File and CbCR will be prepared by headquarters,as they are likely to have direct access to all necessary information.All those documents must be declared by filing Form 02 and 03,attached to Decree 132(for local file and master file respectively),and Form 04(CbCR).Safe harbors from contempor
260、aneous documentation According to Decree 132,enterprises are exempted from preparing the transfer pricing documentation if any of the following conditions are satisfied:Total revenue VND 50 billion(USD 2 million)and total value of related-party transactions;Total Revenue VND 30 billion(USD 1.2 milli
261、on);Entered into an Advanced Pricing Agreement(APA)and submitted annual APA report(s);Exercise only simple functions,sales VND 200 billion(USD 8 million)and EBIT,depending on business,of at least 5 percent(distribution),10 percent(manufacturing)or 15 percent(toll manufacturing);and Audits(See below)
262、AuditsIn case of transfer pricing audits,taxpayers will have 10 working days to provide the TP documentation,while they will have 30 working days to provide it during the consultation procedures prior to the audit.Risk/penaltiesIf the tax authorities believe the transaction was not priced according
263、to the arms length principle,they will adjust the value of the transaction and impose tax accordingly.Furthermore,according to the substance-over-form principle,costs arising from services rendered for the sole purpose of providing other affiliates with benefits or values will not qualify for a dedu
264、ction from taxable income.48AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Companies can also be held criminally liable if found to be evading tax.The tax authorities also publish the details of companies that are non-compliant,or report irregularities,on their national and provincial websites a c
265、ritical reputational risk.Managing riskConsidering the recent developments in local transfer pricing rules and the increasing interest on TP reform worldwide,it is important that companies take the necessary steps to ensure that they are compliant and effectively managing their risk.There are a vari
266、ety of measures that companies can take.These include:Providing disclosures:All companies should disclose information about their related-party relationships and transactions in the prescribed forms and in accordance with the requisite timeframes.Risk assessments:Conducting risk assessments to monit
267、or and revise intercompany transactions and planning to create a robust transfer pricing strategy is also an important risk mitigation tool.Contemporaneous documentation preparation:Taxpayers meeting the above-mentioned thresholds are required to prepare contemporaneous documentation.Companies not m
268、eeting the thresholds should however still accurately document their associated party transactions and be able to substantiate the rationale adopted in case they receive any queries or audit notices from the tax bureau.Advanced Pricing Arrangements:Taxpayers have the option to proactively manage the
269、ir transfer pricing risk profiles by entering into an Advanced Pricing Agreement(APA)with the local tax authority.An APA is a binding agreement as to how taxpayers transfer pricing arrangement will be taxed.The fast pace of tax reform,combined with sometimes inconsistent local practice and enforceme
270、nt,makes the tax landscape difficult to navigate for many.Companies face a number of tax challenges throughout all stages of their business cycle.Dezan Shira&Associates tax professionals have a deep understanding of Asias complex tax environments,as well as in-depth industry knowledge and experience
271、.Our experienced team of tax accountants,lawyers,and ex-tax officials can help on a wide spectrum of tax service areas across all major industries.To arrange a consultation,please contact us at or visit our website at .TAX49AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023HR and PayrollHow do I hire
272、 staff?Employment contracts in VietnamTax obligations for company employees550AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023After setting up your business in Vietnam,the next big hurdle is actually hiring the staff that you will need to help grow your business.Hiring,and the associated legal obli
273、gations that go along with it,can be a confusing process.It is recommended that businesses take a careful look at all relevant regulations and engage with a professional services firm where appropriate to ensure proper compliance with all laws.Vietnam is an attractive place for businesses of all typ
274、es.The country has a growing consumer class and a young and dynamic workforce that is building its skills set.In fact,Vietnams labor force is growing by more than one million people each year.There are a number of important HR trends occurring in Vietnam.While labor costs are still low,wages are ste
275、adily increasing.Over the past five years,this increase in salaries has come without a corresponding increase in productivity.Compounding the costs of employing staff in Vietnam are the comparatively high social insurance contributions and income tax rates.Due to the developing nature of the workfor
276、ce in Vietnam,it is natural that there exists some difficulty in finding highly skilled employees.Skills and talent shortages are particularly acute in industries such as technology and banking.However,many international companies,in partnership with the Vietnamese government,are sponsoring training
277、 programs to ensure that there are a growing number of highly skilled employees to choose from.The country has a young and growing workforce with new demands and high expectations for their futures.As the workforce continues to grow there is a resulting rise in competition in the job market.There te
278、nds to be a high turnover rate at companies as employees are often shopping their skills around to potential employers.Higher salaries elsewhere are certainly an attraction,but money may not be the only factor in what makes employees stay longer at a company those that find ways to build employee lo
279、yalty will be particularly successful.Companies may find it difficult to transfer employees to different cities or areas because of their strong local connections.This has the potential to put a drag on a companys expansion plans as it may struggle to relocate experienced employees.Thus,finding the
280、right partner to aid in the recruitment process is crucial.Many companies rely primarily on outsourced providers when it comes to HR,particularly for advice related to recruitment,training,and payroll.In fact,many multinationals report that they would like to outsource more of their operational HR p
281、ractices to a regional shared services function.Foreign companies wanting to do business in Vietnam must ensure they follow the provisions of the Labor Code,which contains the legal framework for the rights and obligations of employers and employees with respect to working hours,labor agreements,soc
282、ial insurance,overtime,strikes,and termination of employment contracts,to name a few.How do I hire staff?TRAN NGUYENManagerPayroll and HR Services Ho Chi Minh City Office“Vietnams Labour Code can be tricky to navigate,but compliance is essential.The right HR support is crucial for peace of mind for
283、both employers and employees.”51AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Here we discuss:Foreign employees;Contracts;and Compliance.Foreign employeesA Vietnamese entity is permitted to recruit foreign workers in order to work as managers,executive directors,and experts where local hires are
284、not yet able to meet production and business requirements.Unlike in certain other Asian countries,Vietnamese representative offices are also able to hire staff directly.At least 30 days before the date a foreign employee is expected to start work,the employer(except contractor)needs to send a report
285、 to the Ministry of Labor,War Invalids and Social Affairs or the Peoples Committee of province or central-affiliated city(hereinafter referred to as province)where the foreign workers are expected to work.This report should outline the demand for foreign workers for every job position for which Viet
286、namese workers are believed to be underqualified.Evidence of this announcement must be presented in the application for a work permit for a foreign employee.The other option is to recruit foreigners through a government-owned employment service center.When hiring foreign staff in Vietnam,there are a
287、 number of procedures and legal frameworks that must be understood.Types of visasTo enter Vietnam,a foreigner needs a visa issued by the Vietnamese Embassy or Consulate.It may be possible for a Vietnamese visa to be granted while in a third-party country or from within Vietnam,but this will depend o
288、n the type of visa.Citizens of ASEAN countries receive a free entry visa to Vietnam that lasts between 15 and 30 days,while Vietnam also has an e-visa policy for 80 nationalities lasting until 30 days.However,to work in Vietnam and remain for an extended period,foreigners need to apply for a longer-
289、term three-month single or multiple entry visa.52AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Relevant visa types are stated in the table below:Vietnam Visa TypesVisa TypeDescriptionValidityDLTourist visa3 monthsHNMeetings/conferences3 monthsLDForeign workers/working visas2 yearsLV1-LV2Working w
290、ith Vietnamese authorities12 monthsDT Investor visas5 yearsDNWorking with Vietnam businesses12 monthsNN1-NN2Chief Representative Office in Vietnam,Head of Project Office of foreign NGO12 monthsNN3NGO staff,representative office12 monthsDHStudent/internship12 monthsNG1-NG4Diplomatic visas12 monthsWor
291、k permit procedures and requirementsA work permit is generally required when working in Vietnam for more than three months.However,foreign workers are exempted from work permit if they enter Vietnam to hold the position of manager,executive,expert,or technical worker for a period of work of less tha
292、n 30 days and up to three times a year.This should ideally be applied 15 days by the employer with the provincial Department of Labor,Invalids and Social Affairs(DOLISA)before the foreign worker commences their employment.Work permit processing by law should take five business days;however,in practi
293、ce this generally takes about 30 days.Where a work permit is not compulsory,a notice must be submitted five business days in advance to the provincial MoLISA prior to working in Vietnam.Currently,work permits for foreigners are valid for a maximum of two years and can be extended one time for a furt
294、her two-year term.A new application must be made if the company wishes to continue employing the foreign worker.To be eligible for a work permit,the applicant must comply with the following conditions:At least 18 years of age;In good enough health to satisfy job requirements;A manager,executive dire
295、ctor or expert with technical skills and knowledge necessary for the job;and53AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023 Applicants may need to provide proof of three years of professional experience in the field with which they intend to work in Vietnam and five years of they have no degree.
296、Not currently subject to criminal prosecution or any criminal sentence in Vietnam or overseas or have a criminal record.A work permit may be terminated in the following circumstances:Expiration of work permit;Termination of labor contract;The content of the labor contract is not consistent with the
297、work permit granted;If the foreign employee is fired by the foreign employer;Withdrawal of work permit by authorized state agencies;Termination of operation of the company,organization,and partners in Vietnam;and The foreigner is sentenced to prison,dies,or is proclaimed missing by court.The followi
298、ng situations exempt the foreigner from needing a work permit:Workers that enter Vietnam to hold the position of manager,executive,expert,or technical worker for a period of work of less than 30 days but only up to three times a year.A member of a limited liability company with two or more members;T
299、he owner of a limited liability company with only one member;A member of the board of a joint stock company;Coming to Vietnam to market products and services;Coming to Vietnam for less than three months in order to resolve an emergency or technologically complex situation that could affect productio
300、n,which Vietnamese experts or foreign experts currently in Vietnam are unable to resolve;Lawyers granted a professional permit in Vietnam;Heads of representative offices,chiefs of project offices or someone working for foreign non-government organization in Vietnam;Internally transferred within an e
301、nterprise,which has a commercial presence in the committed service list of Vietnam with the World Trade Organization,including business service,information service,construction services,distribution service,education service,environment service,financial service,health service,tourism service,cultur
302、al and recreational services,and transportation service;and Coming to Vietnam to supply consulting services on tasks serving to research,build,appraise,monitor and evaluate,manage and process programs and projects that use Official Development Assistance(ODA)in accordance with regulations or agreeme
303、nts in an international treaty on ODA signed between an authorized Vietnam agency and foreign agency.Vietnamese authorities are becoming stricter regarding work permits.Those who violate the regulations by working in Vietnam without a work permit may be penalized or,if unable to meet work permit req
304、uirements,deported back to their home countries within 15 days.In addition,the employer may be fined up to US$3,300.54AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Temporary residence cardsForeigners who hold work permits valid for one year or more,as well as senior management,can be granted a Te
305、mporary Residence Card(TRC).A TRC is issued by the immigration agency under the Ministry of Public Security and is valid from one to five years depending on the visa type.People granted a TRC can enter and exit Vietnam without a visa within the valid terms of their TRC.The processing time typically
306、takes five working days while the fee varies between US$60 to US$100 depending on the duration of the card.Permanent residence cardsA foreigner who has a legal residence while earning a living in Vietnam may also apply for a Permanent Residence Card(PRC);however,they are subject to the following con
307、ditions:The expat works for the development of Vietnam and is awarded a medal or title by the government;The expat resides temporarily in Vietnam for three or more consecutive years and is sponsored by his parent,spouse or child who is a Vietnamese citizen and has a permanent residence in Vietnam;an
308、d Foreign scientists or experts recommended by the head of a ministerial or government agency.The processing time typically takes five working days with a fee of US$100.A PRC holder can stay in Vietnam without a visa.A PRC must be re-issued every 10 years.55AN INTRODUCTION TO DOING BUSINESS IN VIETN
309、AM 2023As per the new labor code which took effect in January 2021,there are now only two types of labor contracts:Indefinite term-a contract in which two parties do not determine the term and the time for its termination.Definite term-a contract in which two parties determine the time for its termi
310、nation and the duration of the contract as a period not exceeding 36 months.If an employee continues working after the expiration of his or her definite term labor contract,the contract must be renewed within 30 days after the expiry date,or it will become an indefinite term labor contract.In additi
311、on,e-contracts are now officially recognized and have the same validity as those in written form.A verbal labor contract is also recognized if its valid for less than one month.A labor contract must contain provisions such as the scope of work,working hours,rest breaks,wages,job location,term of con
312、tract,occupational safety and hygiene conditions,and social insurance.Both employer and employee can unilaterally terminate a contract.In some cases,the employer will be required to discuss the termination with the executive committee of the trade union.The notice period required can vary depending
313、on the type and length of the contract.Employment contracts in VietnamTypeLengthNotice period Indefinite term contractsN/A45 daysDefinite term contracts12 to 36 months30 daysDefinite term contractsLess than 12 months3 daysCompanies which employ 10 or more people must have a copy of the company rules
314、 or internal labor regulations registered with the provincial labor department.Company working rules include contents such as working and rest hours,rules and orders in the company,labor safety,hygiene in the workplace,protection of assets,business and technology confidentiality,and sanction methods
315、 to name a few.56AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Grounds for the Unilateral Termination of a Contract in VietnamEmployeeEmployer1.Employee is not assigned to the job or workplace or is not given the working conditions as agreed in the labor contract*.2.Employee is not paid in full o
316、r on time as agreed in the labor contract.3.Employee is maltreated,sexually harassed,or is subject to forced labor.4.A female employee who is pregnant and must take leave as prescribed by a competent health establishment.5.Having reached the prescribed retirement age,unless otherwise agreed by both
317、parties.6.The employer provides false information affecting the performance of the labor contract.1.The employee often fails to perform his/her job stated in the labor contract.2.The employee is sick or has an accident and remains unable to work after having received treatment for 12 consecutive mon
318、ths,in case he/she works under an indefinite-term labor contract,or for 6 consecutive months,in case he/she works under a definite-term from 12 months to 36 months labor contract,or more than half the term of the labor contract,in case he/she works under a definite term under 12 months contract.3.If
319、,as a result of natural disaster,fire or another force majeure event as prescribed by law,the employer,though having applied every remedial measure,has to scale down production and cut jobs.4.The employee is absent from the workplace after the time limit specified in Article 31*of the Code.5.The emp
320、loyees reach the prescribed retirement age,unless otherwise agreed.6.The employee fails to attend their job without a valid reason for five consecutive working days or more.7.The employee provided false information when entering into a labor contract,affecting the recruitment of other employees.Sour
321、ce:Limitations as prescribed under Law No.45/2019/QH14*Article 31 allows for a 15-day grace period for all employees returning to work following a temporary suspension of their contracts.Severance and payment in VietnamIf a labor contract is terminated,employers may be liable for a severance payment
322、 to the employee in question.The nature of severance payment is dependent on the salary of a given employee,the amount of time that the employee in question has been working in their current position,and the amount of time the employee has been covered under social insurance.Eligibility for severanc
323、e payments is open to all employees who have been working for a company for 12 months or longer.Severance payments will be required in instances where an employer or employee can prove that one or more general termination triggers or unilateral termination provisions have occurred during employment.
324、Under the Vietnamese Labor Code,severance compensation shall amount to half a months wages for every year that the employee has been working.For example,an employee that had been with a company for three years would be eligible for one and a half months pay.Working time to calculate the severance al
325、lowance is the total time the employee has worked for the employer minus the time the employee has used unemployment insurance.The working time must have been approved by the employer.57AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023Vietnam Minimum Wage 2022Business enterprises locationsIn 2021(VN
326、D)from Jan 1,2021 to June 30,2022In 2022(VND)since July 1,2022Increase(%)Region 14,420,000(US$189)4,680,000(US$199)5.88Region 23,920,000(US$167)4,160,000(US$177)6.12Region 33,430,000(US$146)3,640,000(US$155)6.12Region 43,070,000(US$131)3,250,000(US$138)5.86Source:Decree No.145/2020/ND-CP and Decree
327、No.38/2022/ND-CPCompensationIn Vietnam,there are two kinds of minimum wages.The first type is the Common Minimum Wage VND 1,490,000(US$64)from July 1,2019 which is used to calculate salaries for employees in state-owned organizations and enterprises,as well as to calculate the social contribution fo
328、r all enterprises(the maximum social insurance contribution is 20 times the common minimum wage).The second type of minimum wage is the Regional Minimum Wage,which is used for employees in all non-state enterprises based on zones as defined by the government.Vietnam Overtime CompensationOvertime Typ
329、eCompensation RateWeekday,day time150%Weekend,day time200%Public holiday,paid leave days300%Nighttime30%extra,above aforementioned ratesFor Vietnamese employees that work in foreign companies in Vietnam,compensation is determined through negotiations between the two parties.However,the compensation
330、should be no lower than the Minimum Regional Minimum Wage rates as stipulated by the government.The above minimum wage rates only apply to Vietnamese employees doing the most basic work under normal working conditions.For those who have passed vocational training courses,including company training,w
331、ages are at least seven percent higher than minimum wage rates.Employees who work extra hours are also paid for those extra hours based on their current hourly wages,as immediately below.58AN INTRODUCTION TO DOING BUSINESS IN VIETNAM 2023In cases where an employee works extra hours at night,they are
332、 paid extra in accordance with the applicable regulations.Furthermore,employees who are given time off in compensation for working extra hours will need to be paid the difference between their wages during normal working hours and overtime work.Finally,employees who work night shifts should be paid
333、at least 30 percent higher than normal.Salaries paid to Vietnamese staff working for foreign companies must be denominated in Vietnamese dong.Foreign employers may base salary rates in either Vietnamese dong or US dollars,but salaries that are based in US dollars must be converted into Vietnamese dong.In general,an employees typical monthly salary package includes their gross salary and mandatory