INVESTMENT IN VIETNAM

ONE STOP SOLUTION FOR INDIAN INVESTORS

Thanks to augmented relations and reform policies Vietnam has been developing since Joining the WTO in 2007 and has already signed 12 bilateral and multilateral Free Trade Agreements. Vietnam is seen as an attractive destination for investors from worldwide.

India and Vietnam established extensive economic ties, including oil exploration, agriculture and manufacturing since 1992. Bilateral relations were upgraded to a “Strategic Partnership” since July 2007 and upgraded to a “Comprehensive Strategic Partnership” since September 2016.

Accordingly, more and more Indian investors have been coming to Vietnam and archive successful business. It is very important that if the investors having a local expertise who has comprehensive knowledges and experiences for local business compliance procedures can help to avoid most of the risks in advance, keep their good standing and create business advantage first time.

The under here article is from VIVA Business consulting may bring the foreseen – the one stop solution for any investor from India for doing business in Vietnam.

MARKET ENTRY IN VIETNAM

What you need to know

 

FORMS OF ENTERPRISES

The three most common forms of legal entities in Vietnam are:

1. Limited liability company
2. Joint-stock company
3. Incorporated partnership

Other forms of businesses in Vietnam are:

1. Foreign representative office
2. Foreign branch office
3. Business Cooperation Contract
4. Representative office

The list of required business licenses that a foreign-invested company shall be granted:

1. Investment registration certificate (for foreign investors to invest in Vietnam directly).
2. Enterprise registration certificate (for doing business in line with local business laws).
3. Business license (for trading activities).
4. Registration website for providing e-commerce service
5. Other permits depend on the actual operation (Regarding environmental, fire protection, conditional industries).

TAXES AND INCENTIVES

Typical taxes

1. Value-added tax
2. Corporate income tax
3. Personal income tax
4. Foreign Contractor Tax
5. Capital Assignment Profits Tax
6. Natural Resources Tax
7. Property Taxes
8. Environment Protection Tax
9. Import and Export Duties
10. Social, Health and Unemployment Insurance Contributions
11. Tax Audits and Penalties
12. Other Taxes

Typical rates

TAX	ITEMS	RATES	REMARK
CIT	standard	20%	Tax incentives for some special industries: exempt in 04 first years and 5% in next 9 years
VAT	/	0%	Export goods / services / Software businesses
	/	5%	Essential goods / services
	/	10%	All other goods / services
PIT	Tax Resident (183 days)	5 - 35%	50% discount in economic zone
Compulsory insurances	On Employer	21,5%	On the actual or standard salary
Compulsory insurances	On Employee	10,5%	On the actual or standard salary
Special Sales Tax	/	0 - 75 %	Cigarettes/beer/karaoke/casinos.. etc.
Social Security	/	10.5 / 22%	Employee / Employer
Incomes from capital investment	/	5%	Profits from capital contributions to limited liability companies (including single member limited liability companies)
Incomes from Transferring contributed capital	/	20%	According to the whole income tax table.
Capital transfer earned by a non resident	/	0.10%	On the total amount of money, the non resident receives from the transfer of capital invested in organizations and individuals in Vietnam, whether the transfer is made in Vietnam or overseas.
Business License Tax (VND)	≦ 2 billion	1 million	Based on registered capital / year
	2-5 billion	1.5 million
	5-10 billion	2 million
	≧ 10 billion	3 million

REQUIRED PAPERS FOR COMPANY REGISTRATION

List of legal requirements

1. List of members, ID Cards/ Passports of the members who are individuals, incorporation certificate of members who are entities
2. Bank balance certificate/ confirmation for financial ability
3. Name of company in Vietnam (English, Vietnamese, Abbreviations)
4. Lawful leasing contract of the office in Vietnam
5. Business segment, forms of enterprises
6. Passports of the chairman, experience profiles of the Investors or Board of Directors in regard to the business segment
7. The general process of business operation in Vietnam, including key activities, market, labor, asset, revenue,…
8. Investment capital, percentage of shares of the members, certificates of the bank account balance of the members

TIPs

• Choose a suitable form of company, register your expected brand name.
• Allowed business scopes, HS codes, Tax incentives.
• Lawful headquarters location and rental agreements.
• Required papers and info for business establishment.
• Expenses prior to establishment.
• Total budget and estimated timelines.

COMPANY REGISTRATION PROCEDURES

1. Register for investment project at Department of Planning and Investment
2. Register for the establishment of enterprise at the Department of Planning and Investment
3. Register for a business license in Ecommerce at the Department of Industry and Trade

INITIAL SETTING UP PROCEDURES

1. Taxation: Conduct procedures for the initial tax registration – Registering and conducting procedures for VAT Invoice
2. Customs: Conduct procedures for the initial customs registration.
3. Registering and conducting procedures for electronic declaration.
4. Publishing the announcement of enterprise establishment in central or local newspapers
5. Registering to carve seal at the Public Security Service
6. Opening capital account, payment bank account and registration for tax procedures. Supporting for paying up capital procedures
7. Capital contribution according to the ERC and IRC

 

REQUIRED COMPLIANCES DURING BUSINESS OPERATION

What you need to know

MANAGE REQUIRED BUSINESS RECORDS

Business records management is a mandatory requirement to manage and comply with the business’s compliance procedures required by the competent state agency as well as facilitating effective and stable business administration.

Why should you keep good business records?

• Maximize all the expenses you claim and reduce your tax obligations
• Will help out, should you be investigated by local competent state agencies
• Makes it quicker to prepare your accounts at year-end
• Gives you the information you need to run your business and help it grow
• Helps you plan for tax payments
• Helps identify the strengths and weaknesses in your business
• Helps manage changes and improvements in your business
• Will help you plan to meet financial commitments such as paying creditors or employees
• Makes it easier to get a loan or sell your business
• Avoids over/under tax payments
• Helps identify if your business is liable for paying VAT to the tax department
• Makes it easier to distribute profits to shareholders as dividends or for partnerships where both profits and losses have to be shared

How does VIVA help you in keeping good business records?

• VIVA creates a business records system in form of standard folders
• VIVA knows how to transfer, guide you to collect and store daily documents
• Based on these documents, the parties coordinate to prepare and submit compliance reports to tax authorities, insurance agencies, banks and partners
• You collect and store the compliance reports submitted to government agencies
• VIVA coordinates with you to review, evaluate, complete each type of document and scans into e-files monthly, quarterly and annually to save on computers

MANAGE EMPLOYMENT RELATIONS

Relations between company and Insurances and Labor agencies in reporting and payments

• Make and submit monthly SHUI increase/decrease reports
• Get employees’ SI booklet finalized/closed
• Register for new/adjusted SI documents, HI cards for employees
• Make and submit SHUI benefit reports sick, maternity, labor accidents, occupational diseases, death
• Make payment of SHUI benefits to employees
• Reconcile SHUI data with the social insurance agency
• Make payment of SHUI to the social insurance agency
• Register and follow up the status on SHUI declaring software/electronic signature.

Relations between company and Tax Department in reporting, payments and annual settlement

• Register PIT codes for new employees and their dependents (if any)
• Declare and submit monthly PIT reports
• Explain employees’ questions related to PIT
• Make payment of PIT amount to the tax authorities
• Register and follow up the status of PIT declaring software/electronic signature

ACCOUNTING – AUDITING

• Under Article 15 of Decree No. 17/2012/ND- CP dated March 13, 2012, guiding the implementation of the Independent Auditing Law, the following entities are required to have their annual financial statements audited:
• Foreign-invested businesses;
• Credit institutions incorporated and operating under the Law on Credit Institutions, including foreign bank branches in Vietnam;
• Financial institutions and insurance businesses;
• Public companies, issuers and securities traders;
• Other businesses and organizations subjected to audits in accordance with relevant laws;
• Audits are also conducted at the request of customers, partners in bidding and business cooperation, etc.

What are the benefits of the audit of financial statements?

• Satisfying and complying with requirements of state authorities;
• Assisting in identifying risks and ineffectiveness in operation and usage of resources.
• Creating confidence for information users, including tax authorities, banks, partners, investors, etc. For example, with audited financial statements with an unqualified opinion, a business can be categorized as a highly credited customer and entitled to more preferential credit services and significantly reduced interest.
• Completing the business valuation documents and the business credit documents.

BUSINESS CONTRACTS AND IMPORTANT TRANSACTIONS

• Knowing your customer and due diligence
• Preparing and implementing of business contracts
• Managing deals

 

INVESTMENT VISAS AND EXPATS IN VIETNAM

What you need to know

INVESTMENT VISAS FOR INVESTORS

Investment visas are issued to foreign investors to reside in Vietnam for a certain period of time. An investor may be allowed to get investment visas, temporary residence cards without a work permit.

According to the Law on entry, exit, transit and residence of foreigners in Vietnam has come into force since July 10th 2020, depending on the investment capital, there are 04 types of investment visas, time limits of the card can be from 1 to 10 years.

1. VISA ĐT 1 has time limits of visa up to 10 years – Issued to foreign investors investing in Vietnam and contributing capital of VND 100 billion or more or investing in business lines benefiting from investment incentives
2. VISA ĐT 2 has time limits of visa up to 5 years – Issued to foreign investors investing in Vietnam and contributing capital of VND 50 billion to less than VND 100 billion or investing in business lines benefiting from investment incentives treatment decided by the Government
3. VISA ĐT 3 has time limits of visa up to 3 years – Issued to foreign investors investing in Vietnam and contributing capital of VND 3 billion to less than VND 50 billion
4. VISA ĐT 4 has time limits of visa do not exceed 12 months – Issued to foreign investors investing in Vietnam and contributing capital of less than VND 3 billion

THE REQUIRED COMPLIANCE PROCEDURES FOR EXPATS IN VIETNAM

Who are the foreign employees in Vietnam?

• Executing the labor contracts
• Working as managers, chief executive officers, experts, technicians
• Internal reassignments
• Enforcing contracts or agreements
• Working for foreign non-governmental or international organizations in Vietnam

What are the required procedures that foreign employees in Vietnam shall keep in mind

• Visa for experts and investors
• Work permit
• Temporary residence card
• Personal income tax
• Compulsory insurances
• Labor contracts, Employment records and relations
• Direct investment in Vietnam
• Rights and obligation of Chief of representative offices and Legal representatives of a business entity
• Legalized and notarized translations of overseas papers. Local banks accounts and remittances. Manage contracts. Buy, rent and purchase housing. Other procedures at the local competent state agencies

Foreigners shall be complied with the local laws and regulations to avoid and prevent violations in advance, keep their good standing in optimal manners whenever they are working and doing business in Vietnam.

 

DISSOLUTION OF A COMPANY

What you need to know

There are 03 key steps in the dissolution of a business entity in Vietnam:

STEP 1 – Dissolution decision and registration

Preparing for the official dissolution decision and applications, submit to the competent state agencies for closing any further obligation.  This step aims to suspend, terminate any new obligation, especially for the tax reports and other compliance procedures. From the date of proper notice to the local competent state agencies, the business entity is in closure standby status.

STEP 2 – Debts and obligations completion certificates

To collect, complete the compliance business records and arrange for any certificate of obligations completion. Especially in the liquidation and completion of employment, taxes, compulsory insurances. This is legal requirement to guarantee that the business entity has no more pending obligation before being allowed to close under legal procedures.

STEP 3 – Final paperwork

Upon the certificates of obligations completion, the business entity will close the bank accounts, return the IRC, ERC, legal stamp as final step dissolution. This is the final paperwork as completed.

In which, Step 2 is most complicated because of tax inspection procedures and employment liquidation. The tax inspectors will review all the business records, tax reports, accounting books, financial statements, invoices, tax payments… before issuing the tax completion certificate. The employees and Labor agency may request you to pay more allowances and compensation before signing a liquidation agreement… We can support you to manage and settle step by step in the  proper and optimal manner, until the dissolution is completed.

Our TIPS:

Other options: You can temporarily suspend business operation in 1 or 2 years. During the suspension period, there is not any required compliance obligations at all. You are allow to resume the operation at any time you wish to.

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Read more investment in Vietnam:

• Investment in Vietnam: Managing the required compliances for a company
• Investment in Vietnam: Managing the required compliances for an foreign employee
• Investment in Vietnam: New laws and regulations
• Doing business in Vietnam: Investment visa in Vietnam – Type & limits
• Doing business in Vietnam: Manage employment relations
• Doing business in Vietnam: Corporate Financial Management
• Doing business in Vietnam: Manage the mandatory compliance procedures