KPMG - Investing in Vietnam 2021

Investing in Vietnam
Redrawing
the horizon
2021 and beyond
kpmg.com.vn
KPMG was established in Vietnam
in 1994, at a time when Vietnam was
reopening its doors to investment.
KPMG is one of largest professional services firms in Vietnam with offices in Hanoi,
Ho Chi Minh City, and Da Nang. KPMG also has an office in Phnom Penh, the capital
of Cambodia. With more than 1,700 professionals, KPMG is proud of its ability to
deliver international standard professional services encompassing:
– Audit – Consulting – Deals - Tax & Legal
KPMG is recognised by the Ministry of Finance (MOF) and Vietnam Association

of Certified Public Accountants (VACPA) as Vietnam’s largest Audit and Advisory
firm in terms of revenue, partner numbers, and overall human resources. KPMG
has also received awards and accolades from the Vietnamese government for its
contribution to the nation’s audit, tax, legal and advisory professions.
As a leader in the professional services industry, KPMG regularly advises the
Government of Vietnam and international organisations in support of Vietnam’s
reform and integration programmes.
2 Investing in Vietnam 2021

2020
06
Table of contents
Introduction to Vietnam
08 Vietnam economy
10 Integration to global economy
12 Investment climate for FDI
14 Taxation
16 Banking and foreign exchange control
18 Accounting and reporting
20 Employment
22 Land
24 Intellectual property
Investing in Vietnam 2021 3

Vietnam in numbers
Vietnam in numbers
Land area
Approximately 330,000km2
Capital City Ha Noi
Provinces & Cities 63
Avg annual 58.0%

Income is working age
Over US$2,700 Average age 32
Population Total FDI capital

96.5 million (2019) US$38 billion (2019)
98.2 million (2021(f)) New FDI projects 3,883 (2019)
Inflation GDP Growth%

2.8% (2019) 7.0% (2019)
6.3% (2021(f))

GDP
US$262 billion (2019)
) US$332 billion (2021(f))
GDP/capita GDP by sector (2019)

US$2,715 (2019) 41.5% Service
34.4% Industry
US$3,380 (2021(f)) 14.0% Agriculture
Source: GSO, EIU, Worldbank

Landscape Main cultivated areas
Mainly mountainous country, Red River Delta (North) Mekong River Delta (South)
with mountains and forests covering
75% of the land area

15,000 km2 40,000 km2
Climate
Vietnam is located in the tropical monsoon zone
South
tropical climate with only two major
North
temperate climate with four distinct seasons: spring
seasons: a rainy season from May (from February to April); a hot and humid summer (from
to October and a dry season from May to July); autumn (from August to October) and a
November to April cold and humid winter (from November to January)
Import ($billion) 2019

Total $253.1 billion USD
Plastics
Computers, Machinery, and related
Electronics Instruments products
51.4 19.0% 36.8 11.8% 15.5 3.5%

(year to year growth)
Export ($billion) 2019

Total $264.2 billion USD
Telephones
and parts Computers, Textiles
thereof Electronics and garments
51.4 4.4% 35.9 21.5% 32.9 7.8%

(year to year growth)

2020
Chemicals Automotive
and related components
products and spare parts
10.6 3.4% 4.2 16.0%
Machinery,
Footwear Instruments
18.3 12.8% 18.3 11.9%
Source: GSO
Investing in Vietnam 2021

2020 7
Introduction to Vietnam
The Socialist Republic of Vietnam is a
Southeast Asian country with a rich history
and a long track record of political, civil and
commercial achievements.
Warrick Cleine
Chairman & CEO
KPMG in Vietnam and Cambodia
A key turning point was Vietnam’s “golden population structure”, which are Viet (Kinh) and the remaining 14%
accession to the World Trade means for every two people or more are ethnic minorities, for instance the
Organization (“WTO”) in 2007, followed working, there is only one dependent Tay, Thai, Hoa (Chinese), Khmer, Hmong
by its participation in the ASEAN person. This demographic bonus and others.
Economic Community (“AEC”) in 2015. provides Vietnam with a unique socio-
1.3 Language and Religion
economic development opportunity
In addition, Vietnam successfully held
to take advantage of the young labour The national language is Vietnamese,
APEC in November 2017 has positioned
force and push its economic growth. which is widely spoken throughout the
the country to more investment
country by all ethnic groups. More than
opportunities. The average population density is
96% of the Vietnamese population
about 290 people per square kilometer
1.1 Key Factors aged 15 and older is literate, as a result
in 2019. Approximately 65.6% of the
of the Government’s continued efforts
Located in the heart of South East Asia population resides in rural areas, while
to prioritise development of a quality
and along the coastline of the Pacific 1/3 of the remaining urban resides in Ho
training and educational system.
Ocean, Vietnam offers numerous Chi Minh City and Hanoi.
advantages in providing access to the English is the most popular foreign
Vietnam is a multi-nationality country
world’s major trade routes. language and is commonly used in
with 54 ethnic groups, of which 86%
major urban areas. English study is
Natural resources and conditions allow
Vietnam to develop the fundamental Population age pyramid 2019
and seasonal structure of agricultural
products and application of different
cultivation in regions.
With its rapid economic growth
and development, the workforce is
gradually shifting towards industry Male Female
in manufacturing and services from
agricultural in terms of % of the total
employment.
The south has been the traditional
centre of manufacturing and trade,
and a major logistics hub. However,
the northern region has become
an increasingly popular destination
for foreign manufacturers looking
to diversify their production bases,
notably for South Korean and Japanese
companies.
1.2 Population
Vietnam’s total population reached
96.5 million in 2019 and is estimated
to increase to 98.2 million by 2021.
Vietnam enjoys what is known as the
Source: Population Pyramid

obligatory in most schools. Other commune) governs management affairs City are expected to alleviate pressure
common foreign languages are French, within its administrative location. on existing road transportation and boost
Chinese, and Japanese. economic growth. The first metro lines
The People’s Committee manages,
are expected to commence operation in
Vietnam’s population practices a directs and operates daily activities of
Ha Noi by 2018 and in Ho Chi Minh City
variety of religions. These include local state bodies, and executes policies
by 2020.
religions based on popular beliefs, issued by the relevant People’s Council
religions brought to Vietnam from and higher state bodies. Airport Infrastructure
other countries, and several indigenous
Political Stability In recent years, the country has also
religious groups. Buddhism is the
witnessed a significant increase in air
largest of the major world religions Vietnam, as a single-party country,
transportation. As the economy expands
in Vietnam, followed by Catholicism, enjoys political stability and certainty
both domestically and internationally,
Cao Dai, Hoa Hao and others. that supports economic growth and
the volume of freight and passengers
development and is a major attraction
1.4 Government carried by air transport has been
for foreign investments. According to
increasing sharply. The government
Vietnam is a one party state. The the Country Watch report, Vietnam
is expanding and modernising the
Politburo and Central Committee of the exhibits a high level of political stability
airport infrastructure, most notably the
Communist Party of Vietnam decide with an average political stability index
construction of Long Thanh airport in
on major policy issues, which are then of 4.5 in 2019.
the southern province of Dong Nai when
implemented by the Government
1.5 Infrastructure completed. When completed, Long
Constitutional and legislative powers are
Thanh Airport will become the largest
vested in the National Assembly, which The Vietnamese Government
airport in Vietnam accommodating up
is “the highest organ of state power”. recognises the importance of an
to 25 million passengers and 1.2 million
efficient infrastructure for economic
The National Assembly has the power tons of cargo a year.
development. Recent years witnessed
to approve and revise the Constitution
ambitious plans from the Government Seaport Infrastructure
and Laws, make important decisions
to expand and upgrade the existing
on national matters (policies on internal Sea transportation remains a significant
transportation infrastructure system.
and foreign affairs, socio-economic component of the Vietnamese
factors, political factors, security Road Infrastructure infrastructure system. There are over
factors, operations of state bodies) and 100 ports throughout the country, of
In addition to the major national road,
supervise all operations of state bodies. which the major ones are located in Hai
Highway No. 1A, stretching from the
Phong, Da Nang and Ho Chi Minh City.
The President, as Head of State, border with China in the north to the
In an effort to address the increasing
represents the Socialist Republic Mekong Delta Provinces in the south
demand of exporters, plans to upgrade
of Vietnam in internal and foreign via Ho Chi Minh City and the Trans-Asia
and expand the existing capacity are
affairs. The Government is the highway, the country is also progressing
underway, most notably the plan to
highest administrative state body, and with the completion of Ho Chi Minh
develop the mega-port Hon Khoai in
responsible for executing and managing Road (known as Ho Chi Minh Trail during
Ca Mau province, which is expected
political, economic, cultural, social, war time).
to be incorporated into National
national defense, security and foreign
This 3,167 km long road will run parallel Investment Promotion Program in
affairs of the country.
to the existing national road No. 1A to 2020. Once completed, the port will
Ministries are responsible for the connect the North with the South. Other accommodate ships with a capacity of
execution of state power in a certain notable highways linking key economic up to 250,000DWT.
industry or sector. The People’s regions have also been upgraded.
Committee (province, district and

Vietnam economy
2.1 Overview 2.2 Economic growth 2.3 Inflation
Vietnam is considered to be one of the Vietnam’s real GDP achieved an average The consumer price index (CPI)
fastest and relatively stable-growing growth rate of 7.3% in period of 2005- increased to a record 23.1% in 2008.
economies in Asia over the past 2009 before it declined to 5.3% in The Vietnamese Government had
years. The country was seen to have 2009. Recovery began in 2012, with implemented various monetary and
weathered the global financial crisis GDP growth gradually increasing and credit tightening measures. This
well with encouraging macro-economic reaching 6% in 2014. Despite the global coupled with a drop in the world’s food
indicators observed in 2009 and 2010. trade recession and China’s economic and fuel prices after the crisis resulted
growth slowing down, which impacted in a slower growth rate of CPI of 6.7%
Recent years observed the effort of the
most parts of Southeast Asia, Vietnam in 2009. The economy was once again
Vietnamese Government in boosting
proved to be resilient to the turbulences under great inflation pressure in 2011
international economic integration
and still scored a growth rate of 7.1% with an inflation rate at 18.7% before
through the participation into many
in 2018, highest rate in nearly 10 years. reducing down to 9.1% in 2012, and
free trade agreements/ communities
However, the GDP growth rate was 6.6% in 2013 as various inflation control
such as the World Trade Organization
slightly decrease to 7.0% in 2019. measures from the Government came
(WTO), the Eurasian Economic Union,
into effect. The rate further fell to 0.6%
the European Union, and the ASEAN Vietnam’s economic growth prospects
in 2015 and 2.7% in 2016 on the back of
Economic Community (AEC). This led to a are forecast to remain positive in the
the drop in the oil price.
significantly increasing FDI year on year. forthcoming years. Forecasted GDP
growth rate is 6.3% in the 2021 period. However, the rapid increase in demand
With a stable political environment,
The country’s economic growth will be for goods and services, increasing
low labour and operating costs, as well
underpinned by rising consumption, credit issuance and investment from the
as promising economic prospects,
increased foreign direct investment, country’s economic growth pushed up
Vietnam presents a dynamic market and
robust export performance, deeper inflation rate to 3.5% in 2017. In 2019,
an attractive destination for both foreign
integration into global economy and inflation rate is at 2.8%, and expected
and private investors to participate in
improvements of the regulation system. to increase 3.1% and 3.3% in 2020 and
the economy.
2021 respectively.
GDP, GDP Growth, Inflation
7.1% 7.0%
6.7% 6.8% 6.7%
6.2% 6.3%
303
270 332
241
221
201
191
4.1% 4.0%
3.3%
3.1%
2.7% 2.5%
0.6%
2015 2016 2017 2018 2019 2020 2021
Source: Economist Intelligence Unit ; World Bank

2.4 Economic structure 2.5 Labour force
Over the years, Vietnam has seen a Labour force remains a key competitive
boom in the number businesses in - and advantage of Vietnam to attract foreign
an increase in the role of - the private investment as well as sustaining future
sector in the economy, especially since growth. Vietnam is famous for its
the promulgation of the Enterprise Law young, hard- working, highly a literate
and Investment Law in 2005. There and easy- to-train labour force.
are more than 714,755 businesses
In 2019, Vietnam’s work force were
operating in accordance with the
approximately 49.1 million people
Enterprise Law, 99% of them are
representing 51.0% of total population.
privately run mostly in trade, services,
Better quality training provided by
construction, industry and craft
professional experts is required
production. Private business sector
for Vietnamese workers to meet
contributes approximately 77% of the
increasingly sophisticated requirements
country’s GDP.
of investors.
The economic structure has seen
a gradual shift from agriculture to
industry-services. This transition has
resulted in wealth creation growth
and rising consumption which is
a fundamental indicator to attract
foreign investors to expand business
in Vietnam, particularly in the domestic
retail market.

Integration to global economy
Vietnam officially became the 3.1 Goods schedule, services 3.2 Moving up the value chain
WTO’s 150 th member on 11 schedule and Vietnam’s further
FTAs also play an important role
liberalised market
January 2007. WTO accession in helping Vietnam move up the
has created both opportunities Under the EU-Vietnam Free Trade value chain in a number of sectors
Agreement (EVFTA), both the EU and supporting high-skilled jobs
and challenges for Vietnam
and Vietnam have pledged to abolish and knowledge transfer. Vietnam is
to become an attractive over 99% of import duties on a wide expected to have a more significant
investment destination. range of goods. Depending on the contribution to the global and regional
In addition, Vietnam’s goods, Vietnam will have 10 years to manufacturing landscape with regards
liberalise its tariff regime, while the EU to textiles, garments and apparel, as
participation in the ASEAN
will liberalise over a 7-year period. The well as hi-tech sectors like electronics.
Economic Community (AEC), EVFTA will open up Vietnamese markets Yet, moving up the value chain will
as well as the Comprehensive to EU companies and it also could boost further increase the sophistication of
and Progressive agreement Vietnam’s booming economy. production processes, require additional
for Trans-Pacific Partnership capital investment, cause a growing
Over 6 years, the Regional
demand for high-skilled labour, and an
(CPTPP) and the conclusion of Comprehensive Economic Partnership
array of other considerations to take into
several free-trade agreements (RCEP) has entered the final official
account such as sourcing.
negotiation session and is expected
(FTAs) such as the EU-Vietnam to be signed in 2020. This is a great
FTA (EVFTA) and the South opportunity for Vietnam to expand
East Asia Vietnam – Korea FTA its market. export markets as well
has shown the nation’s efforts as participating more deeply in the
production value chain of the world.
to further integrate into the
world economy.
FTAs
VN MY TH PH ID KH CN
AFTA √ √ √ √ √ √ X
AFTA-China √ √ √ √ √ √ √
India √ √ √ √ √ √ X
Korea √ √ √ √ √ √ √
Japan √ √ √ √ √ √ X
CPTPP √ √ X X X X X
EU √ O O O X X X
US X O O X X X X
Legend O In negotiations
Source: WTO (2019)
12 12 Investing in Vietnam 2021

European Union will abolish Vietnam will abolish import duties
import duties for about 85.6% for about 48.5% of tariff lines,
of tariff lines, equivalent to equivalent to 64.5% of the
70.3% of the export turnover import turnover of Vietnam from
of Vietnam to European Union European Union
3.3 Regulatory reform foreign investment. Under the new

Policy development will be focused on
regulations, foreigners are now allowed “
to purchase rights in land, apartments EVFTA is a new free trade
further economic liberalisation. During
preparations for accession to the WTO
and houses and hold a 100% stake in agreement with high standards,
public companies in most industries. comprehensive and different
and other FTAs, Vietnam revamped
much of its legal system, making The new laws on investment and from the 12 free trade
revisions to major legal frameworks, enterprises provide a more business agreements (FTAs) that Vietnam
specifically the Labour Code, Land friendly regulatory framework for
Law, Competition Law, Enterprise Law, both domestic and foreign players.
signed previously. More than
Investment Law and Tax Laws in order Although some restrictions remain, 99% of Vietnam’s tariff lines of
to make the investment environment the regulatory changes illustrate a export goods will be eliminated
more transparent. Indeed, - further progressive approach, which is typical after 7 years of validity.”
integration into the global economy with for developing countries.
associated challenges relating to MNC’s
Policy is also built around strengthening Tran Tuan Anh
market entries has helped revise the
the banking sector, with focus on Minister of Industry and Trade
Vietnamese legal framework toward
restructuring non-performing loans
more transparency to conform with
(NPLs), transparency in reporting, and
international standards.
consolidation of the lenders towards
Recently, the residential property international standards in reporting, and
market and the stock market went consolidation of the lenders towards
through major reform to open up for international standards.

Newly registered FDI by sector (2019)
Industrial Manufacturing
$3,524 million of total capital, 450 new projects 21%
US$16.75 billion
Electronics
Textiles & Garments
Building & Construction
Consumer goods
Others 27%

Newly registered FDI by nationality (2019)
21%
South Korea
17% 14%
China
Hong Kong
12%
Singapore
11% 23%
Others
Japan
Japanese Desk Chinese Desk

Taninaka Yasuhisa (Ho Chi Minh City) Chang Hung Chun (Hanoi - Ho Chi Minh City)
E: [email protected] E: [email protected]
Furuya Hideki (Hanoi) Wu Vincent C.Y. (Hanoi - Ho Chi Minh City)
Toboku Takanori (Danang)
E: [email protected] Thai Desk
Kaewsrion Punnika (Hanoi - Ho Chi Minh City)
Korean Desk E: [email protected]
Lee Jun Seok (Ho Chi Minh City) Phakkhanit Ua-Amornwanit (Ho Chi Minh City)
Lee Chi Hyun (Hanoi)
E: [email protected]

Investment climate for foreign
direct investment
4.1 Investment climate In 2017, FDI sector contributed 40% Vietnam’s Government has issued
of GDP of Vietnam. Manufacturing and many resolution as well as action plans
Vietnam is one of the leading investment
Real Estate & Construction account in order to realise the commitment to
destinations in Southeast Asia. With
for 61%. In 2019, total registered improve the investment climate and
the advantages of geography, natural
capital was US$17.0 billion, in which business community for investors. A
resources, and an affordable labour
Manufacturing accounts for 72%. revised Law on Corporate Income Tax
force, Vietnam attracts a large amount of
Japan and South Korea were the most has been included in the terms of the
capital each year. Vietnam has a number
remarkable investors into Vietnam in expansion project that are also entitled
of unexplored sectors and a growing
2017 – 2019 period. to investment incentives. Investment
consumer market.
incentives on industrial parks have
In 2007, Vietnam’s FDI increased to The Vietnamese Government has been restored. The adjusted tax rate of
more than US$21 billion from US$12 made considerable efforts to improve Corporate Income Tax has been reduced
billion in 2006. The country’s FDI hit the business and investment climate to 20%, effective 1st January 2016.
a record high in 2008, trebling 2007’s in Vietnam, for example by issuing
The role of the private sector and
figure, reaching almost US$72 billion favourable laws and regulations.
foreign investors in the Vietnamese
in registered capital. Due to the global
economy has increasingly been
financial crisis, the FDI registered in the Combined with the accession to the
emphasized. “Business forum”
2009 – 2012 period decreased, yet the WTO in January 2007 these efforts
meetings and dialogues between the
disbursement - both in terms of value have significantly paved the way for FDI
Government and the private sector and
and percentage - improved compared in the country.
foreign investors are frequently held,
to 2007, indicating the continued
and provide great opportunities for
confidence of foreign investors in Vietnam’s success in attracting FDI
businesses - especially in the foreign
Vietnam. Vietnam experienced a decline should be measured not only by the
sector - to make themselves heard on
in FDI in 2012. amount of registered capital or
important legislative issues.
disbursements but also by the efforts to
Following the decline in 2012, FDI in
improve the investment climate.
Vietnam increased again from 2013
and reached US$23.0 billion in 2015.
Foreign Direct Investment in Vietnam
Source: Economist Intelligence Unit ; World Bank

4.2 Forms of investment
Foreign investors may carry out the following forms of investment in Vietnam:
Direct investment Indirect investment

– Establishment of a new legal entity; – Purchase of shares, share certificates, bonds and other valuable
– Investment by way of contractual arrangement: papers traded on the stock exchanges;
– Business Cooperation Contracts (BCC) signed with other local or – By way of securities investment funds; and
foreign investors; – Investment through other intermediary financial institutions.
– Public Private Partnership (PPP) contracts with Vietnamese state
bodies (e.g. Build Operate Transfer (BOT), Build Transfer Operate
(BTO) and Build Transfer (BT) Agreements); and
– Invest by way of share/capital acquisition of an existing entity
4.3 Forms of commercial presence

The forms of commercial presence that foreign investors are allowed to take in Vietnam are the following:
Representative Office (RO)
RO is a common form of early or initial establishment for foreign organisations looking to invest or to do business in Vietnam.
From legal perspective, the RO is a dependent unit of a foreign business entity, and allowed to survey the market and
undertake a number of commercial promotion activities permitted by the laws of Vietnam. The key limitation of the scope of
activities of the RO is that it’s not allowed to engage in any “direct profit-making” activities.
Branch
Technically speaking, a branch of a foreign business entity in Vietnam is a dependent unit of the foreign business entity,
established and conducting commercial activities in Vietnam in accordance with the law of Vietnam or an international treaty
to which Vietnam is a member. However, in practice a branch is not a common form of presence in Vietnam because it is only
open for foreign investors in certain sectors like banking, financial and construction services.
Legal entity
Depending on the business industry, the number of investors, and whether there is any intention to list the entity, a foreign
entity may establish its presence in Vietnam as a limited-liability company, a joint-stock company, or a partnership.
Feature Limited liability company (LLC) Joint stock company (JSC) Part
Required number One (for single member LLC); At least three shareholders; – Unlimited liability partners: At least two
of members/ Two or more members, but not no restriction on maximum general partners (individuals)
shareholders exceeding fifty members (for multi- number of shareholders – Limited liability partners (optional):
member LLC) (organizations or individuals)
Liability of Limited to the extent of the Limited to the extent of the – Unlimited liability partners: Unlimited
members/ registered capital contributions into registered capital contributions – Limited liability partners: Limited to the
shareholders the company into the company extent of the registered capital contributions
into the company
Issuing bonds Allowed Allowed Not allowed
Issuing shares Not allowed Allowed Not allowed
Listing on stock Not allowed Allowed Not allowed
exchange

4.4 Conditional business lines 4.5 Investment incentives project; exemption from CIT and
reduction of CIT for a definite period
The new Law on Investment, which Investment incentives are granted
(see table below);
came into effect on 1 July 2015, as to investment projects based on the
amended on 22 November 2016, following criteria: Import duty incentives: Exemption
provides a consolidated and unified from import duty in respect of goods
Location: investment projects located in
list of 243 conditional business imported to form fixed assets,
areas with difficult or especially difficult
lines, amongst which there are ones raw materials and components for
socio-economic conditions or special
especially conditional for foreign implementation of an investment
purpose zones;
investors such as trading/distribution, project; and
logistics services. This list, together Business industry: investment projects
Incentive relating to land rental and land
with the business conditions thereof engaged in encouraged business
use tax: Exemption or reduction of land
are publicly posted in the National Portal activities such as high- tech businesses,
rental and land use tax.
on Business Registration at https:// socialised businesses (e.g. education,
dangkykinhdoanh.gov.vn/ and https:// medical), infrastructure development
dautunuocngoai.gov.vn/ businesses, etc.;
Companies doing business in Others: investment projects with
conditional business industries are large investment capital or engaging
required to fully satisfy the applicable in the manufacture of support industry
conditions (i.e. minimum capital, foreign products.
ownership limitation, requirement
Investment incentives granted to
on facilities and personnel, operation
qualified investment projects include:
license, etc.). Failure to comply with
these requirements will result in Corporate income tax (CIT) incentives:
the penalties imposed by the state Preferential CIT rate (i.e. lower CIT rate
bodies and unfavorable tax treatment in comparison with the standard CIT
to expenses incurred from these rate of 20%) for a definite period or for
businesses. the entire duration of the investment
No. Condition CIT incentive

1 – Projects in specially difficult locations specified by Government; – Tax rate of 10% for 15 years or for whole
– Hi-tech; biotech, specific supporting industries; life for special projects
– Important infrastructure projects, socialized projects in education,sporting, health care. – CIT Exemption: 4 years
– Large manufacturing projects (e.g. investmnt capital of VND6,000 billion and number – 50% CIT Reduction: 5 to 9 years
of labor 3000, capital of VND12,000 billion).
– Projects of manufacturing or processing agricultural products in difficult locations.
– Software production, environment protection
2 Projects in difficult locations, manufacturing of agricultural machinery and equipment, – Tax rate of 17% for 10 years
high quality steel – Exemption: 2 years
– Reduction: 4 years
3 Projects of manufacturing or processing agricultural products in normal locations – Tax rate of 15% for whole life
4 Investment projects located in industrial zones (except for those located in areas having – Exemption: 2 years
favorable socio economy conditions) – Reduction: 4 years
– No preferential tax rate is given

4.6 Investment procedures
Foreign investors who invest in Vietnam for the first time must have investment projects. The investment procedures vary,
depending on each investment form:
No. Investment Investment Licensing Statutory Note

form procedure authority timeframe(*)
1 Establishment (i) Application for an – Investment Registration 15 days The In-principle approval of the National
of a legal Investment Registration Division of provincial Assembly, Prime Minister, or provincial
entity Certificate (IRC) Department of Planning People’s Committee before the issuance of
and Investment (DPI); or IRC shall be required in case of investment
– Management Board of projects which make significant economic-
special purpose zones social impacts as stipulated at law.
(ii) Application for an Business Registration 3 working
Enterprise Registration Division of provincial DPI days
Certificate (“ERC”)
2 Investment
by way of
contractual
arrangement
BCC (i) Application for an IRC Investment Registration 15 days The In-principle approval of the National
Division of provincial DPI; Assembly, Prime Minister, or provincial
or People’s Committee before the issuance of
IRC shall be required in case of investment
Management Board of
projects which make significant economic-
special purpose zones
social impacts as stipulated at law.
(ii) Application for a Business Registration 15 days
Certificate of Operation Division of provincial DPI
Registration (“COR”)
from the foreign
investors’ project offices
PPP (i) Approval of project – Ministry / provincial 30 days
proposal People’s Committee
(ii) Assessment of Assessment Committee 30 - 90 days
feasibility study of the State, or as assigned
by a Minister or Chairman
of a provincial People’s
Committee
iii) Application for an IRC Ministry of Planning and 25 days
Investment; or Provincial
People’s Committee
(iv) Application for an Same as above 3 working
ERC days
3 Investment (i) Application for Investment Registration 15 working This step is required in the following cases:
by way of approval for share/ Division of provincial DPI days
(i) The target company operates in
share/ capital capital acquisition
conditional business for foreign investors; OR
acquisition
(ii) As a result of the share transfer, the
foreign ownership ratio in the target
increases to 51% or more
(ii) Application for Business Registration 3 working
updating the new Division of provincial DPI days
shareholding members
(iii) Application for Investment Registration 3 working
updating the new Division of provincial DPI days
investor
(*)Where the investment projects are subject to the In-principle approval of the National Assembly, Prime Minister or provincial
People’s Committee; and/or subject to evaluation by various competent authorities, the above timeline will be longer

Taxation
Investors should consider conducting a
comprehensive risk assessment and readiness
analysis for the regulatory change related to
domestic and international tax treaties.
Ta Hong Thai
Partner, Head of Energy & Natural resources
KPMG in Vietnam
5.1 Overview 5.2.1 Tax Year taxable income of the subsequent year,
subject to year-end reconciliation.
The Vietnamese taxation system has A Corporate Tax-payer can elect to
undergone (and is expected to continue adopt a calendar year, or a fiscal year Carry-back of losses is not permitted
undergoing) many major transformations ending on a quarter of a calendar year, and there is no provision for transfer of
that include major changes in Corporate as the basis for the tax year. losses within the group.
Income Tax, Value Added Tax, Foreign
5.2.2 Taxable Income 5.2.5 Tax Rates
Contractor Tax and Personal Income
Tax. The changes generally occur Taxable income is defined as income The corporate tax rates are classified
frequently, however, the enforcement derived from production, operation, trade into the following three categories:
mechanism as well as the ruling process of goods and services and other sources
is often limited in capacity. from all business sectors and industries. From 1 January 2016
Standard tax rate 20%
The main categories of tax imposed in 5.2.3 Deductions
Vietnam are as follows: Preferential tax 17%, 15% or 10%
In general, deductible expenses for rates
– Corporate Income Tax (CIT) corporate income tax purposes are
– Value Added Tax (VAT) reasonable expenses actually incurred Other tax rates
(e.g. oil & gas
– Personal Income Tax (PIT) that relate to the activities of production
operations, 32% - 50%
and business of the enterprise and are natural resources
– Foreign Contractor Tax (FCT)
accompanied by legal and complete industry)
– Special Sales Tax (SST) and invoices and vouchers as required by law.
– Import and Export Duties (IED).
5.2.4 Losses Carried Forward 5.2.6 Tax Incentives
Furthermore, other taxes may apply to
Tax losses may be carried forward for Preferential tax treatments such as
certain businesses:
a maximum of five (5) consecutive tax exemption, tax reduction, and
– Natural Resources Tax years. Ordinary losses may be offset preferential rates (17%, 15% or 10%)
– Property Tax and against income that does not enjoy are limited to:
– Environmental Protection Tax. tax incentives and vice versa. Losses – Encouraged sectors such as:
from transfer of real estate, transfer healthcare, education, training,
All taxes are national taxes and of investment projects and transfer of sports, art activities, environment,
administered locally. There are no local, the right to participate in investment scientific research, high-tech,
municipal or provincial taxes in Vietnam. projects can be offset against profits infrastructure development and
5.2 Corporate Income Tax from the main business activities. software.
The Law on CIT applies to all domestic After offsetting, any losses from such – Economic zones, industrial zones
and foreign entities that invest in activities will be consecutively carried without favourable conditions
Vietnam. The Law expands the taxpayer forward for a maximum period of or locations with difficult socio-
pool to include all foreign enterprises that five years to taxable income of those economic conditions.
have income from Vietnam, regardless activities in the following years.
In particular, CIT rate of 10% for 15
of whether they have a permanent Losses of prior years may be rolled over years will be applied to:
establishment in Vietnam or not. and offset against provisional quarterly

– Income of enterprise from Tax exemption for 2 years and a 50% 5.4 Special Sales Tax (SST)
performance of new investment reduction of tax payable for the 4
Special Sales Tax is imposed on a
project in the area with extremely subsequent years will be applied in
selected number of goods and services,
difficult socio-economic conditions. such cases.
either at the stage of production,
– Income of enterprise from performing Effective from 1 January 2012, following provision of services or import. Export
new investment project in the high Vietnam’s WTO commitments, export- products are exempted from SST.
technology field. based tax incentives are no longer The tax is calculated based on the
– Income of enterprises from available to exporters. Exporters who selling price at the place of production
performing new investment have lost export-based tax incentives excluding this tax and VAT.
projects in the field of environmental may elect an alternative tax incentive
Imported goods liable to SST shall also
protection. scheme (if eligible) and must notify
be subject to SST upon importation
– High-tech enterprises and agricultural the tax authorities of the election.
from overseas and sales to the
enterprises applying high-tech. The taxpayer must self-assess the
domestic market, accordingly:
applicable incentives in accordance
The income of an enterprise from the with the current tax regulations. – SST taxable price at the import
implementation of a new investment stage = taxable price for import duty
project in production if the conditions on 5.3 Value Added Tax (VAT) calculation + import duty
scale of investment, disbursement time The VAT system in Vietnam applies to
and total annual revenue or labour usage – SST Selling
goods and services used for production, Environmental
are satisfied. taxable price
business and consumption in Vietnam. _ protection tax
price exclusive (if any) %
Enterprises currently applying a CIT Two methods can be used to calculate
at the of VAT
VAT payable. Taxpayers meeting the
rate of 20% as mentioned above will trading =
apply a CIT rate of 17% from 1 January requirements can apply the credit 1+ SST rate
stage
2016. Tax exemption for 4 years and method. VAT payable under the credit
a 50% reduction of tax payable for 9 method is calculated on the difference Taxpayers producing SST goods from
subsequent years will also be applied in between output VAT (VAT collected SST inputs are entitled to claim a credit
such cases. for sales) and input VAT (VAT paid on for the amount of SST paid on the
purchases). Taxpayers that do not materials imported or purchased from
And, a CIT rate of 20% for 10 years will qualify for the credit method can apply local suppliers.
be applied to: the direct method. Under the direct
5.5 Personal Income Tax (PIT)
– Income of an enterprise from method, the taxpayer will pay VAT by
performing a new investment applying a deemed rate on the added Both foreigners working in Vietnam
projects in the areas with difficult value of the transaction. A Corporate and Vietnamese citizens are subject
socio-economic conditions. Tax-payer is required to file and pay VAT to PIT. For tax residents, a progressive
on a monthly basis, or on a quarterly taxing system, where the marginal rate
– Income of an enterprise from
basis if relevant conditions are met. The ranges from 5% to 35%, is applied to
performing a new investment project
standard VAT rate is 10%, but the rates worldwide income.
in production of equipment, high-
quality steel and other products. are classified into four groups: exempt, For tax non-residents, a flat rate of 20%
0%, 5% and 10%. is applied to the income derived from

Vietnam. In general, a tax resident is a Most exports are duty-free, except for a metre basis at progressive rates from
person: certain natural resources such as sand, 0.03% to 0.15%.
– Present in Vietnam for at least 183 chalk, marble, granite, ore, crude oil,
5.10 Environment Protection Tax
days in a tax year; or forest products and scrap metal.
Effective from 1 January 2012, Vietnam
– Having a regular place of abode in 5.7 Foreign Contractor Tax introduced Environment Protection Tax
Vietnam, i.e. an individual rents Foreign organisations and individuals (“EPT”) which is aimed to impose tax
– A house in Vietnam according carrying out permitted businesses on goods that may cause damage to the
to legislation on housing under a in Vietnam without a legal entity are environment.
contract that lasts 183 days or longer subject to Foreign Contractors Tax EPT is in effect an indirect tax applicable
in the tax year; or (“FCT”) comprising VAT and CIT. to the production and importation of
– Not a tax resident of another country Applicable tax rates vary depending on certain goods such as petroleum, coal,
(subject to applicable double tax whether a foreign contractor registers to plastic bags and restricted chemicals.
agreement). use the Vietnamese Accounting System
5.11 Relief from tax
If an individual has a regular place of (“VAS”) or not. The standard FCT rate
is 10% but different rates can apply Vietnam has now signed DTAs with 73
abode in Vietnam, but is actually only
depending on the transactions and countries, out of which 61 DTAs are
present in Vietnam for less than 183
taxpayer’s tax filing status. currently in force. Generally, these DTAs
days in the tax year and fails to prove
follow the basic principles contained in
their residence in any other country, that 5.8 Natural Resources Tax the OECD Model Convention.
individual will be considered to be a tax
Natural Resources Tax (also known For a country which has a DTA with
resident of Vietnam.
as royalty tax) is imposed on the Vietnam, a foreign tax credit is also
5.6 Import and Export Duties exploitation of Vietnam’s natural available to resident taxpayers in
All goods entering Vietnam are generally resources including petroleum, mineral respect of foreign taxes paid.
subject to import duty. Import duty resources, forest products, seafood and
Under current regulations, if a taxpayer
rates vary depending on the nature of natural water. Tax rates vary depending
fails to submit the DTA notification
goods involved and origin of the goods. on the specific classification of natural
dossier within 3 years from the tax
There are three import duty rates resource and are applied to the
payment deadline, the DTA entitlements
applicable (ordinary, preferential and production output at a specified taxable
will be forfeited.
especially preferential), based on the value per unit.
Generally, provisions of DTAs prevail
trading relationship between Vietnam 5.9 Property Tax over the domestic tax laws. The amount
and the exporting country.
Property Tax in Vietnam is levied in of credit given is the lower of the tax
A partial or full exemption from import the form of a “land use fee” or “land suffered in the foreign country and
duty may be granted on application. rental”. A foreign investor requiring land Vietnamese CIT attributable to the
Raw materials and components for an investment project may apply foreign income. There is no provision
imported into Vietnam for the to the land management authority by in Vietnamese tax law allowing excess
manufacture of goods for export are way of an allotment and paying the foreign tax credits to be carried forward.
usually exempt from import duty land use fee or by way of lease and The application of a DTA clause is not
provided that the goods are actually paying the land rental. The land rental automatic. An official approval for tax
exported within 275 days. rates vary depending on the location, relief must be obtained from the tax
Enterprises with foreign-invested infrastructure and industrial sector authorities.
capital and parties to a BCC in especially where the business operates.
encouraged projects are exempt Effective from 1 January 2012, owners
from import duty in respect of certain of houses and apartments are required
imported goods which form part of their to pay land tax charged on a square
fixed assets.

We set the
standard
in industry
1 st International Tax
Review, 2019
Tier 1 Tax Advisory firm
1 st Global M&A
Professionals, 2018
Global M&A Professionals in 2018
1 st Global Sourcing
Association, 2017
Advisory Firm of the Year
1 st Vietnam Ministry of Planning

and Investment, 2017
M&A Advisory firm of the Year
1 st International Tax
Review, 2018
Tier 1 Transfer Pricing firm

Banking and foreign
exchange control
Foreign banks can immediately take
advantage of the local bank’s network,
operating systems, and existing customer
portfolio.
Tran Dinh Vinh
Partner, Head of Financial Services
KPMG in Vietnam
6.1 Bank accounts to approval by the State Bank of All monetary transactions in Vietnam
Vietnam (SBV). must be made in Vietnamese Dong,
6.1.1 Direct investment
except for a limited number of
6.1.2 Indirect investment
Foreign invested enterprises and transactions allowed by law to be made
foreign parties to business co-operation Non-resident foreign investor must in foreign currencies (i.e. salary payment
contract must open a direct investment open an Indirect Investment Capital to foreign employees).
capital account (DICA) at an authorised Account (IICA) in Vietnamese Dong
Foreign invested enterprises may,
credit institution to undertake the at an authorised credit institution
subject to certain conditions, buy
following transactions: to conduct indirect investment in
foreign currency from banks to carry
– Receipt of capital contributions, Vietnam. Investment capital in a
out a number of obligations in foreign
funds from assignment of capital foreign currency must be converted to
currencies from their transactions.
contribution, and receipt of foreign Vietnamese Dong before the indirect
loan; investment is carried out. Generally speaking, the flow of
foreign currencies into Vietnam is less
– Disbursement outside Vietnam An IICA will be used to implement carry
constrained by the SBV compared to
of principal, interest and fees on a out the following transactions:
the outflow, which has been restricted
foreign medium or long-term loan; – Receipt of funds from the assignment to certain transactions such as payment
– Disbursement outside Vietnam of of capital contribution, from the sale for imports of goods and services,
capital, profit and other legal revenue of securities, dividends and other repayment of loans contracted abroad
of a foreign investor; and items of revenue arising from indirect and payment of interest accrued thereon.
– Other revenue and disbursement investment activities;
Only banks, non-bank credit institutions
transactions relating to foreign direct – Disbursement of, for purchase of
and other authorised institutions are
investment activities. capital contribution of securities or
eligible to provide foreign exchange
payment of other expenses relating to
Of note, all transfer of capital for a direct services.
indirect investment activities;
investment project in Vietnam and to
– Other revenue and disbursement 6.3 Foreign currencies and exchange
other countries must be conducted via
transactions relating to indirect rate
such DICA opened at an authorised
credit institution. investment in Vietnam. The VND is the country’s official
6.2 Foreign exchange control currency; foreign currencies may
Foreign invested enterprises may
be chosen as a means of payment
open current accounts and transaction The Vietnamese Dong is not freely and remittance in the following
accounts in foreign currency and convertible and the market is still heavily circumstances.
Vietnamese Dong at authorised banks dependent on foreign currencies,
in Vietnam for their daily business – Payment and remittance of money
especially the U.S. dollar.
transactions. relating to import and export of goods
The Government has implemented and services;
In addition, foreign invested enterprises measures to gradually reduce its –
may be permitted to open offshore reliance on the dollar.
foreign currency bank accounts subject

– Income generated from direct and 6.4 Capital transactions of foreign currency for the remittance abroad via
indirect investments; investors in Vietnam authorised credit institutions. There is
– Money transfers when the decrease no tax imposed on profit remittance.
Foreign invested enterprises are
of direct investment capital is required to open DICAs in VND or Under the current regulations, profit
permitted; foreign currencies, at banks permitted remittances can be made as follows:
– Payments of interest on and to operate in Vietnam or foreign banks – Annual remittance of all profits at the
installment repayments of principal of with the approval of the SBV, which is end of financial year provided that the
foreign loans; a bank account used for all transactions foreign invested enterprises do not
– One-way payments for consumption in regard to capital transactions, foreign have any accumulated losses and are
purposes; and loans, profits and other legitimate types able to pay the due debts after profit
of income of foreign investment. remittance; and
– Other similar transactions.
Foreign investors are now permitted to – Profit remittance upon termination
Residents and non-residents who
open non-resident payment accounts of business activities and investment
would like to transact in foreign
in a foreign currency at an authorised projects in Vietnam.
currencies in Vietnam will be
bank in Vietnam. Through this account,
responsible for presenting supporting A foreign investor is required to submit
foreign investors will transfer money
documents to the authorized credit a notification of profit remittance abroad
to Vietnam in order to conduct pre-
institutions. Individuals are allowed to to tax authority at least 7 working days
investment activities before the
buy foreign currencies from banks to prior to the date of profit remittance.
issuance of an investment certificate.
settle current transactions and other
Accordingly, the foreign investor may go
permitted transactions only if relevant Offshore borrowings may now be used
to its banks in Vietnam and buy foreign
documents proving their demand for to finance the investment project in
currency to repatriate the profits. Please
foreign currencies are fully submitted. Vietnam and only offshore medium
note that although it has a right to buy
or long term loans are required to be
From early 2016 onwards, the SBV has foreign currency, the bank does not
registered with the SBV.
announced a central exchange rate have an obligation to sell. The availability
every day for the VND/USD, which All medium and long term foreign loan of foreign currency would depend on
would be used by financial institutions transactions that a foreign invested the market liquidity from time to time.
authorised to trade in foreign currencies firm undertakes must be conducted Having a good relationship with a bank
with margin limit at +/-3%. via the DICAs. is therefore important and this is an
issue that should be negotiated when
This regime has facilitated stronger 6.5 Profit Remittance Regulations
selecting which bank to use in Vietnam.
performance in the foreign currency
Lawful revenue in VND derived from
derivatives market, meeting the
foreign direct investment as well as
requirements for risk prevention in
foreign indirect investment will be
exchange rates and increase liquidity
permitted to be converted into foreign
in the market.

Accounting and Reporting
Enterprises need to establish an effective
internal control system to ensure its assets
are safeguarded and protected.
Chong Kwang Puay

Managing Partner, Head of Audit
KPMG in Vietnam
7.1 Accounting requirements Vietnamese, but not mandatory to registration, etc. When the enterprise
translate all supporting documents ceases its operation in Vietnam,
7.1.1 Vietnamese accounting
except for specific request from a its legal representative will decide
standards & system and the Law on
competent authority; the place where the accounting
Accounting 2015 (the Law)
– VND is the default currency unit documents are stored, unless
Enterprises with foreign-owned capital, in accounting. An FIE is permitted otherwise prescribed by law.
foreign parties to business co-operation to use a “foreign currency” as the – Companies, and branches of foreign
contracts and foreign contractors currency unit in their accounting companies that are required to
that have a resident base in Vietnam records if certain criteria are met. submit financial statements to
(collectively “FIE”) are required to adopt However, in such cases the financial parent companies or use the same
Vietnamese Accounting Standards, statements submitted to local management software with the
the Vietnamese Accounting System authorities must be converted into parent companies, are allowed to use
for enterprises and their interpretive VND and must be audited. the comma (,) as the digit grouping
guidance (VAS). symbol and the dot mark (.) as the
– Electronic vouchers and accounting
The Vietnamese Accounting System books are not required to be decimal symbol. However, for those
for enterprises is issued by the Ministry printed out for retention. However, financial statements to be submitted
of Finance (MOF) in the form of a enterprises must ensure information to the tax authority, statistical
bookkeeping manual that provides a security and ensure data is accessible authority and government agency,
standard chart of accounts, financial during the retention period; The the dot mark (.) must be used as the
statements template, accounting enterprises shall print the electronic digit grouping symbol and the comma
books and voucher templates as well accounting documents and (,) must be used as the decimal
as detailed guidance on accounting have them signed and stamped symbol.
double entries for each specific by the legal representative or – The prescribed VAS chart of accounts
account. The requirements of VAS chief accountant (or acting chief and forms of financial statements
and the Law include: accountant) whenever a competent must be complied with.
– If a foreign language is used on authority requests them for
There are some industry-specific VAS
an accounting voucher, both inspection or audit purposes.
besides the general one for enterprises
the Vietnamese language and – Accounting documents and such as those for credit institutions,
foreign language should be used accounting books of an FIE must be insurance companies, securities
simultaneously in the preparation stored at the enterprise‘s premises companies, fund managers and
of accounting records and financial in Vietnam or in an external archive investment funds.
statements. faulty in Vietnam over its operating
– And minimum content of accounting period specified in its certificate of
voucher should be translated into investment, certificate of enterprise

7.1.2 Fiscal year Foreigners may be appointed to act as industrial zones (IZs), Annual Financial
the Chief Accountant of the enterprise, Statements may be required to be filed
The fiscal year applicable to FIEs
provided that they have a certificate of with the management board of the
in Vietnam is normally 12 months,
accounting expertise or an accounting/ respective EPZs or IZs.
commencing on 1 January and ending
auditing certificate issued by a foreign
on 31 December. FIEs with specific 7.1.5 Retention of accounting
professional body recognised by
operation characteristics may adopt records and supporting documents
the MOF; or an accounting/auditing
their own 12-month fiscal year,
professional practicing certificate issued Types of accounting documents are
commencing from the first day of a
by the MOF; or a Chief Accountant accounting vouchers, sub-ledgers,
solar calendar quarter and ending on the
certificate obtained after having general ledgers, financial statements.
last day of the previous solar calendar
passed the chief accountant’s training Accounting documents archived should
quarter in the following year and have
course as prescribed in regulations be original except for copied accounting
to inform the local tax authority of the
of the MOF; and they must have at documents specified in the Law.
adoption of such a fiscal year.
least 2 years’ working experience in
Retention duration depends on the type
Where the first fiscal year is of practicing accounting with at least 1
of documents with minimum periods
shorter duration than 90 days, it will year experience in practicing accounting
of five and ten years. And certain
be permitted to add this period to the in Vietnam.
types of documents must be retained
following fiscal year in order to make up
The Law prohibits any individual perpetually.
one fiscal year.
responsible for direction and
7.1.6 Internal control system
7.1.3 Appointment of Chief management of the entity to assume
Accountant or person in charge of the role as accountant, storekeeper, The enterprise must establish an
accounting cashier or the responsibility for internal control system to ensure its
purchasing and sales. assets are safeguarded and protected
The enterprise is required to appoint
from inappropriate and inefficient
a Chief Accountant who must satisfy 7.1.4 Annual Financial Statements
use; and transactions are approved by
the criteria and conditions stipulated
Within 90 days following the close of authorised persons and completely
by the Law on Accounting and guiding
the fiscal year, enterprises operating in recorded to serve as the basis for
regulation (or if not ready, a person
Vietnam are required to prepare and file preparation and presentation of the
in charge of accounting, but only for a
Annual Financial Statements to relevant financial statements that give a true and
period not exceeding 12 months).
local authorities. fair view.
A very small enterprise may appoint a
For those enterprises operating in
person in charge of accounting instead
export processing zones (EPZs) or
of a Chief Accountant.

Employment
Andrea Goffrey
Partner, Head of Global Mobility Services
KPMG in Vietnam
8.1 Recruitment and more than half of contractual 8.2.3 Wage Rates
duration of seasonal term contracts;
Under the Labour Code, an FIE may The wage costs in Vietnam are
either directly recruit Vietnamese – The employer has to narrow generally low. However, the cost of
employees or recruit via an authorised production and reduce the number Personal Income Tax (PIT) and other
labour agency. The FIE is then of jobs due to natural disasters, fire mandatory contributions such as
required to register the list of recruited or other force majeure reasons as Social Insurance, Health Insurance and
employees with the local labour prescribed by law; and Unemployment Insurance as mentioned
department and submit reports on the – The employee failed to attend the below may significantly increase total
utilisation of and changes to staff to the workplace within 15 days from expiry labour costs.
labour department on a periodic basis. of temporary suspension of the
In respect of expatriates, these costs
labour contract
8.2 Labour contract depend on the residency status
When unilaterally terminating the.
According to the Vietnamese Labour and the remuneration structure of
labour contracts, employers must
Code, labour contracts signed by and the expatriates. There are other
inform the employees in advance:
between employer and employee must administrative costs associated with
be made in one of the following forms: – At least 45 days in the case of an the employment of expatriate staff such
indefinite term labour contract; as work permits, residency registration
– Labour contract with an indefinite
term; – At least 30 days in the case of a and insurance.
definite term contract; and
– Labour contract with a definite term The minimum wage of Vietnamese
(of no less than 12 months and no – At least 3 working days in case the employees working for FIEs or
more than 36 months); and employee is ill or injured and remains other foreign organisations will
unable to work for a long time, or in vary depending on different zone
– Labour contract for seasonal jobs or
the case of a seasonal or specific job classifications set forth by the
specific jobs with a term of less than
labour contract with a duration of less Government.
12 months.
than 12 months.
An employer will be entitled to sign 8.2.4 Annual Leave
8.2.2 Working Hours
a maximum labour contract with an In addition to having time off on public
employee. After that, if that employee Normal working hours are eight hours holidays with full pay, an employee
continues to work for the employer, per day (or 48 hours per week based working for a full 12 months under
an indefinite labour contract must be on a six-day working week). Employers normal conditions is entitled to 12 days
signed. are entitled to schedule working hours of annual leave with full pay, with one
on an hourly or daily or weekly basis. additional day for every five years of
8.2.1 Notice for termination
For heavy, noxious or dangerous jobs, service. Employees working in certain
Employers will be entitled to unilaterally working hours will be 6 hours per day. areas, of a certain age or who have been
terminate labour contracts in the with an enterprise for a certain time,
Overtime hours will not exceed 50% of
following cases: may be eligible for longer periods.
the normal working hours or 30 hours
– The employee repeatedly failed to per month or 200 hours per year. In 8.2.5 Severance Allowance
perform the work in accordance with case a company wishes to extend the
the terms of the labour contract; amount of overtime to more than 200 From 1 January 2009, the Law on
– The employee is ill or injured and hours a year, it must seek the approval Social Insurance has introduced the
remains unable to work after having from the local Department of Labour, unemployment insurance scheme to
received treatment for a period of 12 Invalids and Social Affairs (“DOLISA”). replace severance payments.
consecutive months for an indefinite However, any approval is subject to a The company is required to make a
term contracts, 6 consecutive cap at 300 hours a year. severance payment to an employee at
months for definite term contracts the time of termination of employment
if an employee has worked for the (“HI”) and Unemployment Insurance There are certain countries whose
company for twelve (12) months (“UI”) contributions. citizens are not required to obtain a
or more and is not covered by the – Expatriates contractually employed Vietnamese entry visa for stays of
unemployment insurance scheme for 3 (three) months or more are specified periods in accordance with
(including working periods before 31 required to make statutory HI the bilateral treaties signed between
December 2008). contribution. Vietnam and such countries.
Severance allowance paid by the – Expatriates who have work permits Foreigners who temporarily reside
employer will not be less than 50% of or practising licences-issued by a in Vietnam for employment with a
the average monthly salary during the Vietnamese State authority will be valid work permit are able to apply
6 months prior to termination for each required to make SI contribution for temporary residence cards (TRC)
year of employment. effective 1 January 2018. which will be issued by the Immigration
– The basis for statutory SI and HI Division of the Department of Public
Odd lengths of employment will be
contributions is the contractual salary Security (“DOPS”). The duration of
calculated as follows:
and is capped at 20 (twenty) times each temporary residence card will
– Period of under one month will not be follow validity of the work permit
the national statutory minimum
counted; (maximum 2 years). A foreigner who
monthly salary which is adjusted from
– Period of over one month but less time to time (currently the cap being has a temporary residence card will be
than six months will be counted as 6 VND26,000,000 and to be increased exempted from applying for a visa when
months; and to VND27,800,000 from 1 July 2018). entering and leaving Vietnam during
– Period of from six full months but less the period of validity of the temporary
– The basis for calculating statutory UI
than 12 months will be counted as a residence card.
contribution is contractual salary and
full year. is capped at 20 (twenty) times of the 8.3.4 Work Permits
8.3 Other issues regional statutory minimum monthly
Foreigners working for business
salary which is adjusted from time
8.3.1 Trade Unions entities and organisations in
to time (currently the cap being VND
Vietnam must have a work permit
Within six months after an enterprise VND 79,600,000).
either under the classification of
commences operation, trade unions – Statutory SI, HI and UI contributions “expert”, “management/executive”
could voluntarily be organised to shall be deducted, withheld and paid or “technician”, except for limited
represent and protect the legitimate to the local social insurance authority exempted cases specific cases
rights and interests of individual on a monthly basis by the employer. stipulated by the law.
labourers and labour collectives.
The rates for statutory SI, HI and UI Enterprises which will recruit foreigners
All enterprises, regardless if they are contributions are as below: must explain their need to recruit
domestic or foreign invested, have an expatriate for each job position
to submit a remittance of 2% of their Contributed by SI HI UI
before applying for work permit for the
salary fund which is used as the basis Employee 8% 1.5% 1% foreigners at least 30 days before the
for social insurance payment for Employer 17.5% 3% 1% foreigners commence work in Vietnam.
employees. This salary fund will be
Total 25% 4.5% 2% After obtaining the approval on the
the total salaries of employees under
objects payable social insurance in recruitment of foreigners, enterprises
8.3.3 Visa/Temporary Residence can apply for work permit for the
accordance with the law on social
Card foreigners at least 15 working days
insurance. Enterprises can claim back
65% of the fund for its trade union To visit Vietnam, foreigners, except for before the foreigners commence work
membership activities only if trade those from exempted countries like in Vietnam. The application for work
unions are organised. ASEAN, require visas which must be permit must include amongst other
obtained in advance from an overseas documents, qualifications, experience
All acts of obstructing the setting up and certificate, criminal record, health
Vietnamese embassy or consulate.
operation of trade unions at enterprises check. The work permit remains
are strictly forbidden. Visas are only issued at the border gate valid for up to 24 months and may be
on entry to the country in exceptional extended under specific circumstances
8.3.2 Statutory Insurance
circumstances, such as for funerals as indicated by law.
Regulations state that both employers of relatives, for visits to seriously ill
in Vietnam and Vietnamese employees relatives, urgent technical support Also, in case an expatriate is exempt
with a labour contract of one month for specific programmes, projects or from having to apply for a work permit,
or more (effective 1st January 2018) departure from a country that does not the employer is still required to notify
are required to make statutory Social have a Vietnamese Consulate or any the local DOLISA for administrative
Insurance (“SI”), Health Insurance diplomatic representatives. management purposes.

Land
Ninh Van Hien
Partner, Head of KPMG Vietnam M&A Tax
and Real Estate Practice
KPMG in Vietnam
The Vietnamese Constitution stipulates an administrative body of the State for 9.1.1 Allocation from the State for
that land in Vietnam belongs to the land management, and the Ministry investment purpose
people with the State acting as the of Construction, an administrative
representative owner and exerting its Under current prevailing regulations
body of the State for construction
control over the land in practice on the the allocation of land by the State
activities; and, at local level by the
people’s behalf. to an FIE is limited. An FIE can be
People’s Committees, supported by
allocated land for the construction of
Although private ownership of land their administrative bodies such as the
residential housing for sale or lease
is technically not permitted, legal Department of Natural Resources and
according with its granted investment
ownership can in essence be derived Environment and the Department of
registration certificate. In this case, the
through the right to use land (i.e. the Construction.
maximum term of the allocated land is
land use right (“LUR”)). The State may 9.1 Foreign investor ownership of 50 years, but limited by the duration of
allocate or lease LURs to individuals, Land and Assets attached to land corresponding investment project. The
households and organizations to use FIE has the right to assign, lease, donate
land for a defined or undefined term. In order to be a “land user” and be
and mortgage the allocated land as well
allocated, leased or recognized to hold
Vietnam’s legal framework for the as contribute its rights as capital into a
LUR, the foreign investor must establish
management and administration of JVC.
a “foreign invested enterprise” or “FIE”
LURs is composed of: various key in Vietnam, which may be granted 9.1.2 Lease from the State
laws and in particular the Land Law ownership and quasi-ownership
which was amended in 2014 for Both Vietnamese local company’s and
interests in respect of land and assets
some important reforms relevant to FIE’s can lease land from the State for
attached to land. An FIE can be a wholly
Foreign Invested Enterprises (FIE’s); agriculture, production and business
owned subsidiary, a joint venture
supplementing laws including the Civil purposes, which includes infrastructure
company (JVC) or a majority stake
Code which provide clarity on areas not construction, manufacturing facilities,
acquired in a Vietnamese company.
specifically addressed in the key laws hotels and resorts, mining and
and including areas relating to foreign The choice of FIE will depend on the residential housing for lease. The land
investment; and, auxiliary rules and investment being considered. is leased for a definite period up to a
regulation. maximum of 50 years (70 years for
An FIE may obtain LUR’s as follows:
projects of national importance), but
The ownership of LUR and other assets – Allocation of land from the State for limited to the duration of the relevant
attached to land is evidenced by the investment purposes investment project. The lessees
Certificate of Land Use Right, – Lease of land from the State can seek extensions on the term of
Ownership of House and Other Assets – Lease of land from specified lessors the lease. However, the term of the
Attached to Land (the “LURC”). This (including local or FIE developers extension will be capped at the original
LURC sets out fundamental information licensed to engage in infrastructure term.
on the land use, including the term and development for sub-lease) The lessee is required to pay rental fee
purpose of the land use, and the assets – Assignment of the LUR by way of for the leased land. The rental fee will be
attached to the land (if any). capital contribution to a JVC by the structured either as an annual payment
The State’s power over land local Vietnam partner or a lump sum payment determined
construction activities is exercised by – Acquisition of the LUR as part of the from the lease commencement date.
the following government bodies: at purchase of an entire Real estate project A lump sum payment gives much more
the national level, by the Ministry of or project encompassing an LUR. flexibility to the lessee of the LUR. The
Natural Resources and Environment,

lessee who has paid the rental fee as 9.1.5. As part of the purchase of an
a lump sum payment has the right to Real estate project or an investment
assign, lease, donate and mortgage the project with an LUR encompassed
LUR as well as contribute the LUR as as part of the project
capital into a JVC. By contrast, a lessee
An FIE who receives an LUR by way
who makes an annual payment for
of acquisition of a Real Estate project
the rental fee does not have the same
or an investment project with an LUR
rights other than to potentially assign,
encompassed within the project will
lease, mortgage and contribute assets
reserve the same rights as those held
attached to the land, not the LUR itself.
by the person/ organisation initiating
9.1.3 Lease from the specified lessors the transfer. Of note, the land use form
of the LUR must be “land leased by
An FIE is also able to sub-lease from
the State with collection of one-off rent
licensed local or FIE developers of
payment for the entire lease term”.
specific zones for development, i.e.
industrial, export-processing or high- 9.2. Purchase of residential property
tech zones. As above, the sub-lessees by foreigners
can pay the land rental fee in either
Since the effective date of Law on
annual payment or one-off lump sum
Housing 2014, 1 July 2015, the new
payment to the developers that pay land
regulations have eased the restrictions
rental fee on a lump sum basis.
on the purchase of residential houses by
For the developers making land rental the foreigners.
payment annually, the same payment
A foreign individual may now purchase
method, i.e. annually, is required
and own a house in Vietnam, provided
to apply to the sub-lessees. The
that he is allowed entry into Vietnam.
sub-lessees may be also subject to
other fees including management or Foreigners should be aware the
infrastructure fees in accordance with regulatory limit on housing purchase as
their lease contract. They are entitled to follows:
be issued with an LURC.
30% of the total units within one
9.1.4. Assignment by way of capital condominium complex;
contribution
10% of the total separate landed homes
Vietnamese laws allow a Vietnamese within one residential compound; or
entity, which is established and
250 homes within an administrative unit
incorporated under Vietnam Law
equivalent to a ward.
on Enterprise, to make a capital
contribution in the form of the value of Generally, the foreign owners have
the LUR in the following circumstances: the same rights as the owners who
directly allocated land from the State,
It has obtained the land under the
including the rights to sell, mortgage,
allocation regime and the land use fee is
lease, donate, or contribute as capital.
fully paid; or
Foreign individuals are limited to own
It has obtained the land under the lease their house for a maximum duration of
regime including the LUR transfer from 50 years unless they are married to a
another organisation and fully paid the Vietnamese citizen.
land rental for the entire lease term.
Three months prior to the expiry
Once contributed, the JVC has the of ownership duration, foreign
same rights as the land users who homeowners can apply for tenure
were allocated or leased directly from renewal which must not exceed fifty
that State with full payment of land use (50) years. They can also sell or bequest
fee or rental fee. The JVC may assign, their property. If the foreign homeowner
lease, donate, mortgage or contribute fails to do so before the expiry date, his
as capital the LUR to a JVC. property will be converted into State
property.

Intellectual property
To become integrated into the world economy,
Vietnam has taken many steps to modernize
legal systems with the help of international
donors.
Richard Arthur Mark Stapley-Oh
Partner, Head of Law
KPMG in Vietnam
10.1 Protection of intellectual The protection of IPRs is further commencing from the date of
property reinforced under the CPTPP Agreement submitting application but such
including the following obligations: protection period will not be extended.
10.1.1 Types of intellectual Property
Right to be protected in Vietnam – In addition to civil and administrative (II) Copyright
remedies, the CPTPP insists the
Under the Law on Intellectual Property, application of criminal procedures and Copyright means rights to the works
“Intellectual Property Rights” (“IPRs”) penalties to protect IPRs. created or owned by an organisation or
means the rights of an organisation an individual. “Works” means a creation
– Accordingly, each member country
or individual (either a Vietnamese or of the mind in the literary, artistic or
shall ensure that criminal liability for
foreign organisation/ individual who scientific sector, expressed in any mode
aiding and abetting is available under
satisfies the conditions stipulated by or form.
its law.
the laws) to possess intellectual assets
– Geographical indications may be Copyright will comprise moral rights
comprising copyright and copyright
protected through a trademark or Sui and economic rights. The copyright will
related rights, industrial property rights
generis system or other legal means. enjoy the following terms of protection:
and rights to plant varieties. Intellectual
property that is protected under the – Member nations must establish Copyrights to cinematographic works,
prevailing Vietnamese laws include: policies on monitoring Internet photographic works, applied art works
– Copyright in literary, artistic and service providers to prevent IPRs and anonymous works will have a term
scientific works, and derivative infringement transmitted through of protection of 75 years from the date it
works; copyright-related rights in network was first published. If a cinematographic
performances, audio and visual – Reduction/simplification of work, photographic work or applied art
recordings, broadcasting programs, administrative procedures and work has not been published within 25
satellite signals carrying encrypted conditions for registration of IPRs. years from the date of its formulation,
programs. the term of protection will be 100
10.1.2 Term of protection on a years calculated from the date of its
– Industrial property including number of typical IPRs formulation.
inventions, industrial designs,
layout-designs of semi-conductor (I) Patent Copyright to any works not subject
integrated circuits, business secrets, Patent means a technical solution in to the above mentioned list will be
trademarks, trade names and the form of a product or process which protected during its author’s life plus
geographical indications. is intended to solve a problem by 50 years after their death. In case
– Rights to plant varieties including application of natural laws. The patent the works have been created by joint
reproductive and harvested materials. will be protected for 20 years authors, the term of protection will

expire in the 50 years after the death of known marks, the industrial property regardless of its content, quality or
the last surviving co-author. right is established based on the actual format, and whether or not it has been
widespread use of such a mark without published or registered. However, to
Works whose term of protection has
having gone through. protect a piece of work effectively, it is
expired shall belong to the public.
highly recommended that authors or
(V) Industrial design
All organisations and individuals shall copyright owners register the works at
have the right to use such works with Industrial design means the outward the relevant Department of Copyright
respect to moral rights of the author. appearance of a product embodied under the Ministry of Culture Sports
in three dimensional configurations, and Tourism, or Department of Culture,
(III) Trade name
lines, colours or a combination of such Sports and Tourism.
Trade name means the designation elements. An industrial design patent
For other IPRs, the holders are only
of an organisation or individual used will be valid for 5 years from the date
protected on their IPRs by law upon
in business activities in order to of filling the application dossier for
having been granted the protection
distinguish the business entity bearing registration of such a design and may
certificate for the same, as a result
the trade name from other business be renewed for two consecutive terms,
of regulatory formal and substantial
entities in the same business sector and each of 5 years. Under the prevailing
examination on their proper filing to
geographical area. Industrial property laws, each type of intellectual property
respective licensing authorities. In
right to trade name is established on protected under the laws of Vietnam,
Vietnam, the Ministry of Science and
the practice usage responding to the must satisfy the appropriate conditions
Technology, via the National Office of
business territory and area without provided by the laws.
Intellectual Property, will be responsible
registration procedures. The trade name
10.2 Registration of IPRs in Vietnam before the Government to carry out
protection is for the duration of use of
State administration of Industrial
said trade name. To be protected against IPRs
Property, the Ministry of Culture and
infringement, it is mandatory for the IPR
(IV) Mark Sports and Tourism will - within the
holders to register their IPRs, except
scope of its duties and powers - carry
Mark means any sign used to for copyright, with the competent
out State administration of copyright
distinguish goods or services of authorities.
and related rights and the Ministry of
different organisations or individuals.
Copyright will be protected under the Agriculture and Rural Development will
A certificate of registered mark will be
principle of automatic protection. This be responsible for plant varieties.
valid from the grant date until 10 years
means that copyright will arise the
after the filing date and may be renewed
moment a piece of work is created and
for an unlimited number of consecutive
presented in a particular material form
terms, each of 10 years. For well-

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Partner Partner
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Partner Partner
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Treloar Luke
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Investing in Vietnam

– Audit – Consulting – Deals - Tax & Legal

KPMG is recognised by the Ministry of Finance (MOF) and Vietnam Association

2 Investing in Vietnam 2021

10 Integration to global economy

12 Investment climate for FDI

16 Banking and foreign exchange control

18 Accounting and reporting

Investing in Vietnam 2021 3

Avg annual 58.0%

Population Total FDI capital

Inflation GDP Growth%

4 Investing in Vietnam 2021

GDP/capita GDP by sector (2019)

Source: GSO, EIU, Worldbank

Investing in Vietnam 2021 5

75% of the land area

Import ($billion) 2019

51.4 19.0% 36.8 11.8% 15.5 3.5%

Export ($billion) 2019

51.4 4.4% 35.9 21.5% 32.9 7.8%

6 Investing in Vietnam 2021

10.6 3.4% 4.2 16.0%

18.3 12.8% 18.3 11.9%

Investing in Vietnam 2021

Source: Population Pyramid

8 Investing in Vietnam 2021

Investing in Vietnam 2021 9

GDP, GDP Growth, Inflation

2015 2016 2017 2018 2019 2020 2021

Source: Economist Intelligence Unit ; World Bank

10 Investing in Vietnam 2021

Investing in Vietnam 2021 11

12 12 Investing in Vietnam 2021

3.3 Regulatory reform foreign investment. Under the new

Investing in Vietnam 2021 13

14 Investing in Vietnam 2021

Japanese Desk Chinese Desk

Investing in Vietnam 2021 15

Foreign Direct Investment in Vietnam

Source: Economist Intelligence Unit ; World Bank

16 Investing in Vietnam 2021

Direct investment Indirect investment

4.3 Forms of commercial presence

Investing in Vietnam 2021 17

No. Condition CIT incentive

18 Investing in Vietnam 2021

No. Investment Investment Licensing Statutory Note

Investing in Vietnam 2021 19

20 Investing in Vietnam 2021

Investing in Vietnam 2021 21

22 Investing in Vietnam 2021

1 st Vietnam Ministry of Planning

Investing in Vietnam 2021 23

24 Investing in Vietnam 2021

Investing in Vietnam 2021 25

Chong Kwang Puay

26 Investing in Vietnam 2021

Investing in Vietnam 2021 27

Investing in Vietnam 2021 29