Ho Chi Minh City Real Estate
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Doing Business in Vietnam |
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The Essential...
Workforce in Vietnam
Common employment hours
Monday-Saturday, 8 hours per day, 48h per week, this may be extended or reduced by mutual agreement: Overtime rate is 150% on weekdays and 200% on week end and public holidays if your employee works more than 12 hours/day.
Trade unions
All companies must permit their staff to form trade unions. Dispute between employers and employees should be resolved trough negotiations. If a resolution is not reached then the Ministry of Labour, War Invalids and Social Affairs or Labour Tribunal may be asked to intervene to settle the dispute.
Minimum Wage
USD 55 per month for unskilled workers in Hanoi and Ho Chi Minh City
USD 50 for smaller cities such as Hai Phong, Da Nang, Vung Tau, Can Tho
USD 45 for other provinces and agricultural projects
Work Permits
From 2 September 1997, every foreigner working in Vietnam must issued a work permit according to the new legislation, Decree No.58/CP in October 1996. This does not apply to representative office staff and members of the Board of Management of a foreign invested enterprise. Employers can only employ a foreign employee for a maximum of three years. A work permit may be extended only once.
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Forms of doing business in Vietnam
Establishing a joint Venture Company (JVC)
The most common model adopted by foreign investors so far is the joint venture company (JVC). A JVC is set up by one or more foreign investors with one or more Vietnamese investors. It operates in much the same way as a "company" operates in other countries, having a separate legal identity, limited liability and its own Board of Management.
You can contribute your share of the JVC’s capital in cash or in kind , including cash, machinery, equipment, intellectual property rights, know how, etc. Note that there is a general requirement that foreign investors in a JVC contribute at least 30% of the legal capital (equity) of the JVC.
JVCs are also attractive because your equity in JVCs is transferable. The only restriction is that you have to give a pre-emptive right to purchase your share to your other joint venture partners before you can sell it to a third party.
Establishing a company with 100% foreign capital (EFOC)
An enterprise with 100% foreign capital (EFOC) is the second alternative available to you. With this model you retain complete control over the management of your investment, there being no requirement for a Vietnamese partner to be involved. In most other respects an EFOC is exactly the same as a JVC in its structure, rights and obligations.
You should note that there are some restrictions on the sectors in which investors may establish an EFOC. Under Decree 24/2000/ND-CP dated 31 July 2000, and Decree 27/2003/ND-CP dated 19 March 2003, the following sectors are subject to certain conditions:
1- Investment only permitted in the form of a business co-operation contract in which the Vietnamese Party shall be a specialized entity licensed to conduct business in the sector:
a- Establishment of public telecommunications networks, provision of telecommunications services; business of domestic or international courier services;
b- Press, radio and television activities.
2- Investment only permitted in the form of a business co-operation contract or joint-venture enterprise:
a. a- Exploitation and processing of oil and gas and precious and rare minerals;
b. b- Air, railway and sea transportation; public passenger transportation; construction (except for BOT, BTO and BT projects);
c. c- Maritime and aviation business services;
d. d- Culture (except for projects for printing of technical material, printing on packaging, printing of labels of goods, and printing on textiles and garments, leather and footwear; printing of computer graphics onto animated films; entertainment and sports areas);
e. e- Afforestation (except for indirect afforestation via Vietnamese organizations, family households and individuals to which or whom the State assigns or leases land which is located in productive or protective forests and to which investors grant assistance with funding, seedlings, technical assistance, fertilizer or in procurement of products pursuant to contract);
f. f- Travel tours;
g. g- Production of industrial explosives;
h. h- Consultancy services (except for technical consultancy).
3- Sectors in which investment will not be licensed include:
a- Projects which are prejudicial to national security, defence and public interests;
b- Projects which are detrimental to historical and cultural relics, fine customs and traditions
of Vietnam;
c- Projects which may adversely affect the ecological environment; projects for treatment of toxic
wastes brought into Vietnam from abroad;
d- Projects for production of toxic chemicals or utilizing toxic agents prohibited under an
international treaty.
In addition, from the effective date of the new Commercial Law (1 January 2006), investment in distribution services in the forms under the Law on Foreign Investment is also permitted in Vietnam.
Business cooperation contract (BCC)
The business co-operation contract (BCC) is the most flexible model that you can adopt to do business in Vietnam and they are particularly popular in the oil, telecommunications and advertising sectors. There is more flexibility in respect of the "Coordination Committee" (as opposed to a Board of Management for a JVC) for the project is established, its role, and profit sharing arrangements, with these matters generally being left up to the parties.
A BCC is a bit like a partnership under the common law. It does not create a separate legal entity, but it does create a contractual relationship with respect to a specific investment project undertaken in Vietnam.
BOT/BTO/BT projects
The Government is very keen to encourage foreign investors to get involved in developing infrastructure, including roads, ports, water, and power projects. To this end it has created an investment vehicle called the build - operate - transfer project (and its variants). Collectively these are often called BOT projects.
Establishing a rep. office
A "Representative Office" needs not to be registered at the legal affairs bureau nor is it subject to corporate income tax under Vietnamese tax laws. A representative office is not allowed to engage in any commercial transactions.
Establishing a branch office
A branch office is subject to taxation for any income from sources within Vietnam in the same manner as any Vietnamese corporation. In general, transfer of operational funds between the branch and its head office can be made without restrictions, and is not subject to withholding tax.
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Accounting and Audit in Vietnam
Accounting Requirements
A firm may use only the accounting system and accounting books approved by and registered with the Ministry of finance (MoF). Accounting principles in Vietnam comply for the most part to International Accounting Standards.
It is obligatory for foreign-invested enterprises to use the Vietnamese Accounting System (VAS) unless the approval of the MoF is obtained for the adoption of a foreign accounting system. As a result, foreign investors now have to either convert their system to the VAS or use two systems at the same time.
Main requirements of VAS are:
- Companies have to maintain charts of accounts, accounting vouchers and ledgers, financial reports and filing systems following prescribed requirement
- The account are normally maintained in Vietnam Dong. However, foreign invested entities can maintain their account and issue their financial statements in a foreign currency with the prior registration with, approval by, the MoF.
- The financial year of foreign-invested entities must be the same as the tax year
- The financial year-end may be the end of the solar calendar year (December 31) or another date that is approved by the MoF. The first fiscal year begins on the date of issue of the Investment Certificate.
- Foreign-invested entities can maintain their accounting system internally or by using the services of an independent accounting firm.
Audit Requirements
All foreign-invested entities in Vietnam are required to have their financial statements audited by a qualified firm of auditor. Audit firm are licensed and their activities regulated by the MoF. Audit firms currently active in Vietnam comprise both international and local firm.
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Land Law in Vietnam
Land according to Socialist doctrine, belongs to the people but is administered by the State. As such, an individual cannot own land. The Land Law of 1987 acknowledges the rights of land users, including the ability to assign and transfer property. The State may grant land use rights for business or residential purposes. Foreign investors must be aware that land use rights, granted to foreign invested projects are different from those granted to a local Vietnamese.
The Land Law was further amended in 1993, to include:
- Compensation for expropriation
- Ability to inherit land
- Long term use of land
- The right to mortgage land to Vietnamese banks and individuals.
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Corporate Income Tax in Vietnam
Tax year
The Standard year for financial reporting and tax purposes is from the 1st of January to the 31st of December.
Financial Reporting
The submission of financial statements and the statutory report thereon to various Ministries and Departments of the Government is required within three months of the end of the final year-end.
Payment
Provisional quarterly payments are made not later than the last day of each quarter.
Corporate Income Tax (CIT)
All entities shall pay CIT at the standard rate of 28% on taxable income.
Employer Taxes
Employers are required to contribute an amount equal to 17% of salaries and wages in respect of government Health Insurance and Social Insurance Plans.
Employees contributes 6% of their salaries and wages to the plans by way of payroll deduction.
Value Added Tax
0% for exported products and services and transport services which the Government wishes to encourage;
5% for essential goods and services for agricultural and forestry industries, medicine, teaching aids, paper, foodstuffs
10% for goods and services serving for mineral products, power generation, natural oils, electrical products, processed food, assembly, leasing, chemicals, construction, transport, law consultancy.
20% for goods and services serving for gold, broker, shipping agency, lottery.
Relief for losses
Entities recording tax losses can carry them forward for up to 5 years for offset against taxable income.
Tax incentive
Preferential tax rates are applicable to investment projects meeting a variety of specific criteria. The criteria relate to the geographic location (difficult conditions), in Industrial Zones, Export Processing Zones, High Technology Zones, and investment that have a significant socio-economic impact. |
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