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Doing Business Guide

Vietnam is a unique country providing extensive opportunities for those willing to spend time to understand the market and assess business opportunities with Vietnam. Vietnam’s economy continues to expand and modernise, and with the opening up of previously restricted industries and sectors, to meet their WTO commitments, more opportunities continue to develop.


Starting a new business

Over the past couple of years, the overall process for starting a business in Vietnam has been improved by creating a one-stop shop that combines the processes for obtaining a business licence and tax licence and by eliminating the need for a seal for company licensing. Companies are now allowed to use self-printed value added tax invoices.

Steps involved in starting a business are:

  • Registering for a tax certificate
  • Making a company seal
  • Registering the seal sample with the police department
  • Opening a bank account
  • Publishing an announcement in a daily newspaper
  • Payment of business licence tax
  • Buying pre-printed Value Added Tax (VAT) invoices from the Municipal Taxation Department or obtaining and printing self-printed VAT invoices
  • Registering with the local labour office to declare use of labour (Municipal Department for Labor, Invalids and Social Affairs)
  • Registering employees with the Social Insurance Fund for the payment of health insurance and social insurance
  • Registering for trade union with the Vietnam General Confederation of Labour

Construction permits

The time required to receive a construction permit is 110 days. There are 11 procedures that a company must follow to receive the construction permit in Vietnam. The number of procedures that a company must follow to receive the construction permit in Vietnamhas not changed over last 8 years; however, the number of days has decreased from 120 days to 110 days. In 2011, Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment.


Getting electricity

The time required to receive an electricity connection is 115 days. There are 6 procedures for a company to receive electricity. The number of procedures for a company to receive electricity has not changed over the last 2 years. In the last 2 years, no reforms have been made to improve the ease of obtaining an electricity connection in Vietnam.


Registering a property

The time required to register a business property is 57 days. There are 4 procedures for registering a property for business in Vietnam. The number of procedures registering a property for business in Vietnam has not changed over the last 9 years; however, the number of days has decreased from 67 days to 57 days. In the last 6 years, no reforms have been made to improve the ease in registering a business property in Vietnam.


Getting credit/overdraft

In 2008, Vietnam expanded the range of assets that can be used as collateral and allowed them to be generically described. In 2009, the public credit registry in Vietnam extended the historical credit information ranging from 2 to 5 years, partially explaining a 32% increase in coverage to more than 8 million individuals and firms. In 2011, Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. All the 3 reforms carried out in the last 6 years have improved the ease of getting a credit line in Vietnam for a new business.


Trading across borders

The total number of documents required for exporting goods in Vietnam is 6while to import goods, the number of documents required is 8. The time required to import or export goods in Vietnam are 21 days. The cost of importing a container is similar to the cost for exporting a container. In 2010, increasing competition in the logistics industry along with the application of new customs administration procedures as a part of the WTO membership reform programme reduced the delays to trade in Vietnam. This reform ensured that the cost and time required to import or export goods were reduced for the benefit of the businesses in Vietnam.


Taxes

The time required to pay taxes is 872 hours. There are 32 procedures for a company to pay their taxes. The number of procedures for a company to pay their taxes has not changed over the last 8 years; however, the number of hours has decreased from 1,050 hours to 872 hours. In 2010, Vietnam relieved the tax burden on business by reducing both the corporate income tax and the value added tax and eliminating the surcharge on income from the transfer of land use. This reform ensured improved profitability for businesses in Vietnam.

The generally applicable Corporate Income Tax (CIT) in Vietnam is 25%. However, preferential tax treatment including tax exemption, tax reduction and preferential tax rates (10% and 20%) is available for investments in encouraged sectors including health, education, high-tech, infrastructure development and software and encouraged special economic zones or areas with difficult socio-economic conditions. As a part of the preferential tax treatment, investments in encouraged sectors projects attract a corporate income tax exemption for first 4 years of operations, income tax at 50% of the preferential rate of income tax rate for the 9 subsequent years, income tax at preferential tax rate for the subsequent two years and the corporate income tax at the usual rate of 25% thereafter. Also, as a part of the preferential corporate income tax regime, losses are allowed to be carried forward for a period of 5 years.


Investment incentives

The current laws of Vietnam provide the following incentives to investors who have invested in selected sectors on the Vietnamese economy:

  • Import duty exemption on importing of equipment, materials and means of transportation, and other goods for implementation of investment projects in Vietnam
  • Land rental exemption or reduction
  • Accelerated depreciation of fixed assets
  • Losses carried forward for 5 years

Labour laws

Employment in Vietnam is under the labour code. A foreign invested enterprise (FIE) can directly recruit employees under an authorized labour agency. After recruitment the FIE is required to register the employees with the local labour department and submit utilization report and changes in employee reports to the labour department.

Labour contracts can be of three types:

  • Labour contract with indefinite term
  • Labour contract with definite term
  • Labour contract for seasonal jobs with a term less than 12 months.

The normal working hours in Vietnam is 8 hours, and overtime is allowed only up to 4 hours a day or 200 hours a year. Leave allowed is 12 days of paid leave. Minimum wage rates are around $64.5 per month; however, mandatory contributions such as social security and health insurance may increase the total labour costs. Employers are also allowed to terminate employees in certain cases.