In!Vietnam! - Viva Business Consulting

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! Guide!To!Set!Up!A!Business!In!Vietnam!5!2017! Viva!Business!Consulting! !

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Viva!Business!Consulting!

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CONTENT ! ! ! !

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INVESTMENT&TYPES

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HOW&TO&SET&UP

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CORPORATE&TAXES

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LAND&LEASE

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MACHINERY&&&EQUIPMENT&

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FOREIGN&CURRENCY

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1. INVESTMENT TYPE There are four different types of investment:! 1. 100% Foreign-owned entity: The minimum shareholder is one, but no more than 50. Foreign-owned entity can export and conduct domestic sales. 2. Joint Venture entity: With majority foreign-owned capital (51%), it requires at least 2 shareholders. The foreign investor could hold up to 99% shares. 3. Contractual Arrangement: This form of investment does not set up a new legal entity. The investors in a Business CooperationContract (BCC) share the revenues and/or products arising from a BCC. It is a cooperation agreement between foreign investors and at least one Vietnamese partner in order to carry out specific business activities. 4. Representative Office (RO): It is not a separate legal entity under the laws of Vietnam. The activities of a RO are limited to business promotion; identification and accelerating the trade opportunities; and supervising the implementation of contracts signed between its parent/ represented company(ies) and local partners. !

Company

Representative Office

Advantages - Able to perform full business activities directly - Operating period has no limit - Able to directly recruit local employees. - Enjoy the tax incentives – VAT refund, CIT exemptions. - Transfer profits to home country. - Possess full legal status and enjoy all rights of a business unit in civil administrative and business regulations.

Advantages - Full accounting system is not required - Declarations of CIT, VAT and other taxes are not required to submit monthly and quarterly - Financial statement audit is not required. - Preparation step to research and examine the market, finding customer & provider before setting up an official company - Compliance procedures are simple- PIT declaration only


Disadvantages - More complicated set up procedures - Financial ability will be assessed strictly at the beginning - Must establish full accouting system - Must strictly comply the regulations about legal invoice - Must submit an audited finacial statement yearly - Must declare and pay Corperate Income Tax, VAT monthly and quarterly - Other limitations of foreign investors

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Disadvantages - Not allowed to perform any profitable activities (No trading, sales, import – export, inventory, manufacturing,...) - Limited operating period from 1 to 5 years - Not able to transfer ownership - Not able to recruit directly, limited number of allowed recruitment. - Limit in receipt and payment: only receive from Headquarter and pay for limited activities of the office - Can not expand office, branch - Possess no legal status - Not able to deduct or refund VAT

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2. HOW TO SET UP Vietnam government passed the new law on Investment No. 67/2014/QH13 (New LOI) in 2014, and the new law on Enterprises No. 68/2014/QH13 (New LOE), which replace the previous laws as from July 1, 2015. Certain notable provisions of the new laws are asbelow. ● Requirements 1. Minimum Registered Capital: There is no requirements on foreign investment amount and registered capital in Vietnam. But registered capital can not less than 30% of total investment amount. The registered capital of encouraged / large investment project can be reduced to 20%. It is suggested that the minimum registered capital should be no less than USD100,000. 2. Paid-up Time and Methods: The new LOE provides the timeline for capital contribution is 90 days from the date of issuance of the enterprise registration certificate (ERC). After such 90 day timeline, the entity will have 60 days to amend the registered capital and/or the ration of capital contribution if a member fails to contribute in full his portion as committed. The capital can be contributed by cash, machine, patent..etc.


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● Structure Foreign investors (company / individual) can adopt one among following three structures when setting up company / factory in Vietnam: 1. Direct investment by foreign company / individual; 2. Indirect Investment through one holding company (single holding ); 3. Indirect investment through two holding companies (double holding ). The 2nd and/or 3rd structure is widely used. There are some advantages through holding company: 1. Unlimited deferred offshore profits which can be used for re-investment; 2. Limited liability on overseas lawsuits (civil and criminal ), and financial liabilities against parent company. The disadvantages of the single holding structure will occur when selling foreign assets, the parent company will be taxed for the profits. The parent company/individual will be exposed to unpredictable foreign risks and faces double-taxation problems. Therefore, the third structure - double holding is recommended. ● Procedures 1. Setting up offshore holding company; 2. Collecting holding company documents; 3. Documents translation/ embassy notarization; 4. Checking proposed Vietnam company name; 5. Prepare the M&A and application form; 6. Evaluation of investment project by related authorities; 7. Issuance of the enterprise registration certificate; 8. Publish in newspaper gazette; 9. Seal registration, open bank account; 10. Tax, customs, and environmental protection registration. !


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3. CORPORATE TAX The new Corporate Income Tax law-CIT (32-2013-QH13) passed on 19 June 2013 and was implemented on 1 January 2014. The new law reduce CIT form 22% to 20% from 2016. A 17% preferential Tax Rates applies for enterprises with revenue of less than VND20 billion in the preceding year.

Tax

Items

Rate(%)

CIT

standard

20 0

VAT

/

5 10

PIT

Tax Resident (183 days)

5-35

Special Sales Tax

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0-75

Social Security

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10.5 / 22

Import

0-50

Export

0-45

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3-35

Customs Duty Natural Resources Tax Land Tax Business License Tax (VND)

/ Year ≦2 billion 2-5 billion 5-10 billion ≧10 billion

0.030.15 1 million 1.5 million 2 million 3 million

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Preferential CIT rate is available for the followings:

Remarks Jan 1, 2016 Export goods / service Essential goods / service All other goods / service 50% discount in economic zone Cigarettes/beer/ karaoke/casinos.. etc. Employee / Employer 0% for export except: crude oil, forest products..etc. Petrol / natural gas / wood / aquatic product Pay by leaser Based on registered capital / year


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1. Business location in high-tech zones, certain industrial zones and difficult socio economic areas – 10% for 15year; 2. Encouraged business sectors include high technology, environmental protection, software production and renewable energy..etc.10% for 15year; 3. Newly established business enjoys tax exemption for 2 years and 50% reduction for the following 4 years. Business locates in difficult socio-economic areas could further extend to 4 years exempt, and 9 years 50% reduction. 4. Taxpayers may carry forward tax losses fully and consecutively for a maximum of five years. 5. Dividends paid by Vietnam business from after tax profits are not subjected to withholding tax.

4. LAND LEASE Wholly foreign owned enterprise in Vietnam can't buy land, yet is allowed to rent land / factory not exceed 50 years. The rental fee is about US$2-4.5/m2. Investors can mortgage its equipments & land to Vietnam banks. The major land use incentives are as below: 1. The duration of land use shall not exceed 50 years, but projects with large amount of invested capital and a slow rate of capital recovery projects, in difficult socio-economic conditions can extend to 70 years. 2. Projects in incentive sectors and geographical areas shall be entitled to an exemption from payment of or a reduction of land rent and land use fees in accordance with the law on land and tax.

5. MACHINERY AND EQUIPMENT Pursuant to the Government's Circular No. 23/2015/TT-BKHCN dated November 13, 2015 of the Ministry of Science and Technology on import of used machinery, equipment and technological lines. ● General Requirements Imported used equipment must satisfy safety, energy saving, and environmental protection requirements prescribed by applicable law. A piece of used equipment may be imported if it satisfies the following criteria: 1. Its age does not exceed 10 years;


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2. It is manufactured in accordance with a National Technical Regulation (QCVN) or Vietnam’s Standard (TCVN) or Standards of G7 countries with regard to safety, energy saving, and environmental protection. ● Inspecting Bodies Inspecting bodies that issue inspection certificates mentioned in Clause 1 of this Article include: 1. Vietnamese inspecting bodies that are registered under the Law on Commerce and licensed to inspect machinery and equipment. 2. Foreign inspecting bodies that are registered under regulations of law of their home countries and licensed to inspect machinery and equipment.

6. FOREIGN CURRENCIES Oridinance No 06/2013/UBTVQH13 on foreign exchange controls was passed on March 18, 2013. The new Ordinance takes effect from Jan. 1,2014. Pursuant to the new Ordinance, and consistent with the Law on Investment, foreign investment into Vietnam is divided into direct investment and indirect investment. Foreign direct investment (FDI) refers to foreign investor investing capital and participating in the management of investment activities in Vietnam. A FDI must open a foreign direct investment capital account for: capital contributions. 1. receiving capital contributions from investors; 2. receiving drawdown, and making repayment, of foreign loans; 3. remitting profits, and other lawful income, to foreign investors; 4. receiving, and then remitting, money in payment of the value of an assignment of investment capital and of an investment project. A non-residents being a foreign investor must open a bank in VND, and all indirect investment capital being foreign currency must be converted into VND though this account. Indirect investment activities includes: buying, selling bonds and other securities on the stock market of Vietnam. ! ! !

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CONTACT Hotline: 18001243 Fax: (84-8) 3925 9560 3rd floor, Central Park Building, 208 Nguyen Trai St, District 1, HCM E-mail: [email protected]! www.vivabcs.com.vn