Why Vietnam?

Set up a company

Tax framework

Employment Law

Capital Control

Location In Vietnam

HOW FIDINAM CAN HELP YOU?

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WHY VIETNAM?

Vietnam GDP has been growing at an average of 6% per year over the last decade, positioning the country as one of the fastest developing economy in the world. This positive trend allowed Vietnam to become a middle-income country with a population of more than 95 Million people, placing after Indonesia and the Philippines as the third most populated country among the Southeast Asian nations.

A high percentage of the population is still living in the country side and average wages and labor costs are cheap compared to other countries in Asia. Moreover, from a geographical prospective, Vietnam surely benefits from being a close neighbor of China — the world’s largest manufacturer.

Indeed, as average wages keep increasing in China, Vietnam becomes the natural substitute country for those companies seeking lower-costs of production while simultaneously securing proximity to China’s advanced logistical infrastructures.

The relatively young population of Vietnam is also contributing to maintain the momentum. In comparison to China where the average age is 36 years old, Vietnam shows an impressive average of 31 years old. The government is also showing great commitment to develop a skilled young workforce, with more than 5.5% of GDP being allocated on education. A key strength of Vietnam is the development of a middle class with a growing purchasing power and strongly oriented to foreign products consumption. Vietnam’s middle income, affluent population is growing at around 12% per year (2018).

The government’s initiative to further develop the country has an attractive investment hub also turned out to be successful, with foreign companies feeling always more confident to set up operating centers in Vietnam. Reforms have resulted into a partial privatization of state-owned enterprises, liberalization of the trade regime, and into an increased recognition of private property rights. In essence, a gradual integration into the global trade and investment scene allowed Vietnam to transform itself over the years into a more market-oriented economy.

The key industry sectors of the Vietnamese economy are textile, electronics, food & beverage, furniture, plastic materials, tourism and IT/telecommunication. In terms of FDI, Vietnam remains one of the most attractive locations for foreign investors in South East Asia. FDI inflows have seen a steady and strong increase. The main investors in Vietnam are Korea, Japan, China, Singapore and Hong Kong. The United States is Vietnam’s largest export market with a turnover of USD47.5 billion (year 2018).

VIETNAM KEY FIGURES

241 $USD

GDP

94.6 Million

Population

413 Million USD

FDI

30 Years Old

Average Age

HOW CAN I SET UP A COMPANY IN VIETNAM?

A limited liability company is a legal entity established by capital contribution from its members which is treated as equity (or charter capital). A limited liability company is not allowed to issue shares. The total number of members in a limited liability is restricted to 50.

A liability company may be established by foreign investors either in one of the two following forms:

1° A 100% foreign-owned enterprise (where all members are foreign investors) or

2° A foreign-invested join-venture enterprise with at least one domestic investor

A joint-stock company is a legal entity established by its founding shareholders on the basis of their subscription of shares of the joint-stock company. The charter capital of a joint stock company is divided into shares and each founding shareholder holds a number of shares corresponding to their subscribed and paid-up shares in the joint stock company.

A joint-stock company is required to have at least three shareholders (with no maximum number of shareholders). A joint- stock company may take the form of either (cf. 1° LIMITED LIABILITY COMPANY) 100% foreign- owned; or (cf. 2° LIMITED LIABILITY COMPANY) a joint venture between foreign and domestic investors.

A foreign company may set up a branch office in Vietnam.

However, this form of foreign direct investment is only permitted in a few sectors (e.g. banking, education or law firms).

A branch is a part of a foreign company that does not have its own legal personality, although it is permitted to conduct business activities in Vietnam. The head office is fully liable for the activities of its branch.

A foreign company also may set up a representative office (RO). A representative office may not engage in any commercial activities and does not have the status of a separate legal entity. It may carry out marketing and promotional activities for the head office, act as a liaison office and/or import goods for marketing and promotion.

 

COMPANY SET-UP PROCEDURES

RO SET-UP PROCEDURES

WHAT IS THE TAX FRAMEWORK IN VIETNAM?

The Vietnamese tax system is comprised of the followings:
.

  • Corporate Income Tax (CIT)
    .
  • Personal Income Tax (PIT)
    .
  • Value Added Tax (VAT)
    .
  • Foreign Contractor Withholding Tax (FCWT); and
    .
  • Others (i.e. Special Sales Tax, Import & Export Duties, Natural Resources Tax, Property Taxes, Environment Protection Tax, Business License Duty & Registration fee)

HOW CAN I EMPLOY STAFF WITHIN MY COMPANY IN VIETNAM ?

As a member of WTO and FTA’s being initiated, Vietnam is in urgent domestic and international demand for the incorporation and implementation of international labour standards. Protection wise there is no distinction between foreigners with a local labour contract and Vietnamese employees. Indeed, the general rule is, that foreigners working in Vietnam must comply with Vietnamese Labour Law.

Concerning labor contract, three types of labor contract are available: (i) seasonal labour contract (under 12 months); (ii) definite labor contract (12 – 36 months) and (iii) indefinite labor contract;

Social insurance, health insurance and unemployment insurance has to be paid by both employer and employee. Foreign employees are not subject to unemployment insurance

All foreign individuals require a Work Permit issued by the Department of Labour, Invalids and Social Affairs (DOLISA) in order to undertake any employment in Vietnam.

Work permits are issued for a maximum period of 2 years and may be renewed if certain conditions are met.

HOW CAN I FINANCE MY OPERATIONS IN VIETNAM?

Cross border financial transactions between foreign-invested companies (FICs) in Vietnam and foreign entities are strictly regulated by the State Bank of Vietnam (SBV).

FICs must register the total investment capital (equity capital + debt capital) on the Investment Certificate and the Investment Registration Certificate before the entity gets incorporated.

The equity capital has to be paid up within 90 days after company establishment. After the FIC has audited its yearly financial statements, dividends can be distributed back to the foreign mother company.

Concerning foreign loans, limitations are defined at the time the FIC is established. Medium- and long-term loans must be registered with the SBV; if the registered amount exceeds the registered total investment capital, the registration will be rejected.

Usually, cross-borders transactions take place by way of foreign entities (lenders) providing loans to FICs in Vietnam (borrowers), due to high interest’s rate for financing provided by local banks.

It is our knowledge that existing FICs in Vietnam have often made misuse of capital and current accounts while receiving, repaying offshore loans and dividends.

HOW CAN I FIND THE CORRECT LOCATION FOR MY INVESTMENT?

Industrial Parks (IPs), Economic Zones (EZs) and Export Processing Zones (EPZs)

Since the implementation of Đổi Mới (economic rejuvenation) policy in 1986, the government of Vietnam has been encouraging foreign investments into the country by creating favorable legal environment and infrastructure.

Industrial Parks (IPs), Economic Zones (EZs) and Export Processing Zones (EPZs) have made the essential contribution to attracting investment, creating jobs and improving the economic growth of Vietnam for the past 32 years.

According to the latest news from Ministry of Planning and Investment of Vietnam (MPI), by the end of June 2018, there were 325 industrial zones established nationwide with a total natural land area of nearly 95 thousand hectares.

Choosing a suitable Industrial Park is crucial to guarantee competitiveness and secure production within a work friendly environment.

Choosing a suitable Industrial Park is crucial to guarantee competitiveness and secure production within a work friendly environment.

Northern Key Economic Zone

The economic triangle of Hanoi – Hai Phong – Quang Ninh is one of the key economic zones of the country. Computers, Electronic and Optical Products’ are the more common occupiers with 25%, then there are ‘Machinery and Equipment with 15% and ‘Fabricated metal Product’ with 12%.

Central Key Economic Zone

The economic zone in central area is considered at the infancy stage, but Da Nang –has been known as one of the top tourist cities in Vietnam with an infrastructure and transportation system and a port that are giving benefits to the industrial and commercial activities.

Southern Key Economic Zone

The Southern key economic zone is leading the industrial development of the whole country

The majority of the industrial parks were developed by local group of developers with reputable names such as Becamex IDC, Sonadezi and Vietnam Rubber Group. The key occupiers by sectors in the are ‘Machinery and Equipment’, ‘Textile and apparel’, ‘Fabricated Metal Product’, ‘Rubber & plastic’ .

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