Most Frequent Questions and Answers

In case an enterprise provides cleaning services to customers in an export processing zone or other non-tariff zone, the enterprise needs to determine as follows:

If the service is consumed in a non-tariff zone and meets the following conditions: having a service supply contract, having a document of payment via a bank for the service fee and other documents as prescribed. In this case the VAT rate is 0%;

In case there is a basis to believe that the machine repair service is used outside the export processing zone, the corresponding VAT rate is 10%.

Currently, the issue of as the qualification of consumption inside or outside the non-tariff zone has not been specified, so businesses need to base on the nature of service activities to make an appropriate determination.

Currently, on-the-spot export of goods is still considered one of the cases where input VAT is deducted and refunded, but to achieve this, businesses need to meet the following cumulative conditions:

Having a goods purchase and sale contract or a processing contract specifying delivery to Vietnam;

      On-spot export and import customs declarations, customs procedures have been completed;

Having a value-added invoice or an export invoice clearly stating the name of the foreign buyer, the name of the receiving enterprise and the delivery location in Vietnam;

      In case goods are sold to foreign traders but delivered in Vietnam, payment must be made via banks in freely convertible foreign currencies. If the on-spot importer is authorized by the foreign party to make payment to the on-spot exporter, the payment currency shall comply with the provisions of the law on foreign exchange;

In accordance with the provisions of the investment license in the case of on-spot exports of foreign-invested enterprises.

Currently, to attract investment capital from abroad, the Government has issued many preferential policies for investment projects, especially tax incentives, including:

• Incentives for corporate income tax, with the application of a lower corporate income tax rate than the normal tax rate for a definite term or for the entire duration of the investment project; tax exemption, tax reduction and other incentives in accordance with the law on corporate income tax;
• Exemption from import tax on goods imported to create fixed assets; raw materials, supplies and components imported for production in accordance with the law on import tax and export tax;
• Exemption and reduction of land use levy, land rent, and land use tax;
• Fast depreciation, increasing the deductible expenses when calculating taxable income.

The following investment projects will enjoy tax incentives:

• Investment projects in industries or trades with investment incentives, for example: high-tech activities; production of new materials, new energy, clean energy; manufacturing electronic products, automobiles, auto parts; shipbuilding; farming and processing agricultural, forestry and aquatic products; preschool education, general education;
• Investment projects in areas with investment incentives;
• Investment projects with capital scale of VND 6,000 billion or more, disbursed at least VND 6,000 billion within 3 years from the date of issuance of the Investment Registration Certificate; or approve the investment policy, and concurrently have one of the following criteria: a total turnover of at least VND 10,000 billion per year within 03 years at the latest from the year of turnover or more than 3,000 employees’ motion;
• Investment projects on construction of social housing; investment projects in rural areas employing 500 or more employees; investment projects employing disabled people according to the provisions of the law on disabled people;
• Innovative start-up investment projects, innovation centres, research and development centres;
• Investment projects in the business of product distribution chains of small and medium-sized enterprises; small and medium-sized business incubators.

A business license is a mandatory license for a foreign-invested company in some specific cases such as:

• Retail;
• Wholesale of specialized goods (such as lubricants, rice, sugar, video products, books, newspapers and magazines);
• Ecommerce;
• Logistics services (except for some specific cases);
• Leasing of goods (excluding financial leasing and leasing of construction equipment with operators);
• Commercial intermediaries;
• Organizing tenders for goods and services;
• Providing trade promotion services (not including advertising services).

Business license will be issued by the Department of Industry and Trade and in some special cases will need approval from the Ministry of Industry and Trade. Enterprises must satisfy the Business License conditions when they actually want to carry out the respective activities, which means that the business sectors listed above can still be recorded in their operations at the time of establishment or addition business sectors.

Only e-commerce websites that sell goods with online ordering function must carry out this notification procedure. Online ordering function is understood as a function that allows customers to initiate the process of entering into a contract according to the terms published on the website, including entering into a contract with an automatic system. Accordingly, when websites are designed to serve the purpose of providing information and marketing products to customers without the function of online ordering, the owner does not have to make a notice as prescribed.

Depending on the loan term, businesses must carry out loan registration procedures at the State Bank for:

• Medium or long-term loans;
• Extended short term loan with a total term of more than 01 (one) year;
• Short-term loans without extension contracts but with outstanding principal balance at round 01 (one) year from the date of first capital withdrawal, unless the Borrower completes loan repayment within 10 (ten) days from the round of 01 (one) year from the date of first capital withdrawal.

For foreign loans, it is required to be registered with the State Bank. The borrower may only withdraw capital and repay the principal and interest of the foreign loan through the account registered with the State Bank.

Before importing, enterprises shall determine whether the goods to be imported fall into the following circumstances:

• The goods are on the list of goods banned from import;
• The goods are subject to a license from a specialized agency;
• The goods are subject to an import license under certain conditions.

Depending on the type of goods, the import conditions as well as the sub-licenses from specialized agencies will be different, so enterprises need to compare the expected type of goods to be imported with general and specific regulations from different management agencies. Typically, if such goods are food, pharmaceuticals, or cosmetics, an inspection or opinion is required from the Ministry of Health, or the Ministry of Agriculture and Rural Development for the case of importing animals, plants, aquatic animals, etc.

Not all of foreign investors being individuals or organizations are allowed to establish 100% foreign-owned company in Vietnam. According to Vietnam’s commitments in WTO and specialized laws, currently, Vietnam does not allow foreign investors to invest 100% of their capital in some business sectors.

These are conditional business sectors, and foreign investors are required to enter joint venture with Vietnamese investors and are limited in the ratio of capital contribution. In case, foreign-owned company has many business sectors, the lowest limit of the capital contribution ratio of one of all business sectors shall be applied to foreign investors.  

According to provisions of Vietnamese law, when investing in Vietnam through the company establishment, it is necessary to meet market access conditions applied for foreign investors, including:

• Ratio of charter capital owned by foreign investors in economic organizations;
• Form of investment;
• Scope of investment activities;
• Capacity of investors; partners participating in investment activities;
• Other condition as prescribed by laws and resolutions of the National Assembly, ordinances and resolutions of the National Assembly Standing Committee, decrees of the Government and international treaties to which the Socialist Republic of Vietnam is a member.

As foreign investors would like to purchase shares or contributed capital in a company in Vietnam, it is necessary to keep in mind the specific conditions under provisions of investment law:

• Market access conditions for foreign investors;
• Ensuring national defense and security according to regulations;
• Regulations of land law on conditions for receiving land use rights, conditions for using land in islands, coastal communes, wards, border towns, communes, wards and townships.

In which, the market access conditions are understood as the conditions that Vietnam has committed under the WTO as well as recognized in specialized law, according to which a number of regulated business sectors have not been committed for foreign investors to access or foreign investors are required to enter into joint ventures with Vietnamese investors and are limited in the ratio of capital contribution. In this case, the company in Vietnam to which the investors intend to contribute capital or purchase shares needs to review the existing business sectors to adjust to suit the conditions of market access before carrying out the procedures for purchase of shares or contributed capital.

Under Vietnamese law, foreign investors can choose to establish any type of business such as a private enterprise, limited liability company, joint stock company, or partnership. However, foreign investors often choose two types of limited liability companies and joint stock companies because these types help investors to limit liability to shareholders/members corresponding to their shares or contributed capital in the company, as well as having flexibility in business management structure.

According to Law on Enterprise, assets for capital contribution shall include:

• Vietnam Dong;
• Convertible foreign currency;
• Gold;
• Value of land use rights, value of intellectual property rights (including copyright, copyright-related rights, industrial property rights, rights to plant varieties and other intellectual property rights) in accordance with the law on intellectual property);
• Technology, technical know-how and other assets that can be valued in Vietnam Dong.

According to labour law, foreign employees working in Vietnam must fully satisfy the following conditions:

• Being 18 years or older and having full civil act capacity.
• Having professional qualifications, techniques, skills and working experience.
• Be in good health condition as prescribed by the Minister of Health.
• Not being a person who is currently serving a penalty or has not yet had his/her criminal record cleared or is being examined for penal liability in accordance with foreign or Vietnamese laws.
• Having a work permit issued by a competent Vietnamese authority, except for cases exempt from work permits.

A foreign employee working in Vietnam is subject to participate in compulsory social insurance when having a work permit or a practicing license issued by Vietnamese competent authorities and having indefinite-term labour contract or a definite-term labour contract of 01 year or more with an employer in Vietnam.

A foreign employee working in Vietnam is not subject to participate in compulsory social insurance when under one of following cases:

• Internal reassignment under labour law on foreign employees working in Vietnam
• The employee has reached the state pension age.

After being granted Enterprise Registration Certificate, in spite of not having conducted any business activities, the enterprise still has to perform tax reporting obligations. Types of tax reporting to be done include:

• Periodic tax reports: value added tax reports (performed on a quarterly basis); report on the use of invoices; personal income tax reports; extension of corporate income tax (if any).
• Year-end tax reports: annual financial statements; personal income tax finalization declaration; corporate income tax finalization declaration.
• Specific tax reports: special consumption tax; natural resource consumption tax; import and export tax…

E-commerce activities have 3 main subjects: Government (G – Government), Business (B – Business) and Customer (C – Customer or Consumer). Accordingly, in Vietnam, there are mainly B2B (Business to Business), B2C (Business to Customer) and C2C (Customer to Customer) models, specifically:

• B2B (Business to Business): is understood as E-commerce between businesses through e-commerce platforms, websites or e-commerce channels of each business.
• B2C (Business to Consumer) is understood as E-commerce between businesses and final consumers through the internet. Different from the B2B model, the B2C sales model is a traditional retail model but implemented on an e-commerce website or through other transaction channels via the internet.
• C2C (Customer to Customer) is a model of purchasing and selling transactions between individuals and individuals in the online environment and through a third party. This third party could be an auction or sales intermediary. Examples of this business model are eBay and Amazon. In which, eBay is a leading auction site, allowing individuals to list goods for customers to choose for auction, and Amazon is the world’s largest online retailer. Both of these websites operate both B2C and C2C models at the same time, allowing businesses to market goods directly to customers and allowing users to sell goods to each other.

According to the Law on Investment, real estate trading is on the list of conditional business sectors, so foreign investors are only allowed to operate within certain scope; accordingly, real estate trading activities that investors are allowed to conduct shall include:

• Rent houses, construction works for sublease;
• Build houses on land which is allocated by the State for sale, for lease, or for lease purchase;
• Build houses on the land which is leased by the State for lease; build houses or constructions other than houses on such land for sale, for lease, or for lease purchase;
• Receive total or a part of real estate project from investors to build buildings on it for sale, for lease, or for lease purchase;
• Build buildings on land which is leased out or transferred in industrial parks, industrial complexes, export-processing zones, hi-tech zones, or economic zone for trading for the proper land use.

Currently, each industrial park will allow certain business sectors to be conducted, so when choosing an industrial park, forein investors need to keep in mind the business sectors that are allowed to operate in the industrial park.

In case foreign investor would like to lease directly from the industrial park, legal documents of the industrial park needed shall include documents on legal status,  documents recording the legitimate land use rights from competent state agencies, environmental permits (noise, waste, water…). In case foreign investor subleases from another enterprise in the industrial park, the foreign investor needs to check to ensure that the lessor has full legal status to lease to ensure the validity of the lease agreement.

Environmental issues include wastewater treatment system and compare with the expected production capacity of the proposed investment project to ensure that the environmental system of the industrial park is satisfactory as required by law.

Tax incentives include exemption and reduction of corporate income tax rates for a certain period of time, whereby the tax legislation sets out a number of tax incentives for enterprises with investment projects in industrial parks. The level of incentives will depend on the area of ​​the business sectors operating in the industrial park.

Based on the characteristics and advantages of the type of industrial park, foreign investor can consider and choose a suitable location to invest in Vietnam.

An industrial park is an area with a defined geographical boundary, specialized in manufacturing industrial goods and providing services for industrial manufacturing, approved by the Prime Minister, established according to the conditions, order and procedures as prescribed by law. Industrial parks shall include:

• Export processing zone:

An exporting processing area is an industrial park specializing in manufacturing export goods, provision of services for manufacturing exports and export activities, and is established according to the conditions, order and procedures applicable to the specified industrial park in Decree No. 82/2018/ND-CP.

The export processing zone is separated from the outside area according to the regulations applicable to the non-tariff zone specified in the law on export tax and import tax; The EPZ has a geographical boundary defined in the Decision on the establishment of an EPZ, but is isolated from the territories outside the EPZ by a fence system.

• Auxiliary industrial area

Auxiliary industrial area means an industrial park specializing in manufacturing auxiliary industrial products and rendering services satisfying the needs of this business line. The maximum area of land leased or re-let to develop projects on investment in auxiliary industries shall account for 60% of the area of rentable industrial land within the boundaries of an industrial park.

The auxiliary industrial area has an important meaning in the production of auxiliary products, providing auxiliary services for industrial products, thereby linking the system of industrial parks, facilitating production concentration, diversifying, meeting the needs of using or assembling products; increasing the competitiveness of industrial products as well as the level of the initiative of an economy.

• Eco-industrial park

Eco-industrial park means an industrial park in which enterprises get involved in cleaner production, make effective use of natural resources and enter into manufacturing cooperation and affiliation in order to tighten industrial symbiosis and promote economic, environmental and social efficiency in these enterprises.

This industrial park model is aimed at long-term, sustainable development, balance between immediate/local interests and common/long-term interests on the basis of ensuring that production activities must be with measures to minimize adverse impacts on the environment, limit waste discharge, rational use goes hand in hand with the conservation and preservation of energy and natural resources.

Vietnamese law has not completely allowed foreign investors in real estate tradingin Vietnam, therefore, before making capital contribution transactions to companies with real estate trading, foreign investors should pay attention to a number of issues such as:

• The target company’s scope of activities in the real estate trading. For business sectors that Vietnam has not committed, foreign investors may take more time to receive approval from specialized ministries or have to remove these uncommitted industries.
• The international treaty shall apply to enjoy the conditions of market access restriction.
• Quantity, form, origin and location of real estate owned by the target company.

To assess Seller’s compliance in M&A transaction, foreign investors need to check the following issues:

• Establishment process: the buyer can check the seller’s compliance via following documents: enterprise registration certificate, investment registration certificate, certificate of operation registration of branch/representative office/business location, licenses regarding right to operate some specifiec business sectors.
• Capital and capital structure: including registerd amount of capital contribution, capital contribution status, method of contribution, documents proving the capital contribution of members and shareholders in the buyer’s company;
• Organizational structure of management and key personnel, investors need to consider the list of key personnel, contracts and accompanying documents related to personnel, commitments that such personnel signed with the company, etc;
• Material contracts and group of customers, investors need to check important and valuable contracts that the company has signed, especially investors need to carefully consider the regulations on monopoly, anti-competitive agreements, termination conditions, price fluctuations;
• Assets, including tangible and intangible assets, documents proving the company’s legal rights to assets, whether the process of transferring or owning assets is in accordance with the law, and in case the investor purchases or contributed capital, whether the investor’s ownership rights will be changed.
• Litigation, including reviewing disputes, claims in which the company is involved or forecasting disputes that may arise after the closing of the transaction.

According to provisions of Circular No. 103/2014/TT-BTC, foreign organizations will be considered as foreign contractors and are subject to foreign contractor withholding tax if:

• Carrying out business in Vietnam dna earning income in Vietnam under a contract;
• Supply of goods for export and import on the spot in Vietnam, except for processing and re-exporting goods for foreign organizations and individuals;
• Delivering the goods under Incoterms at the seller’s risk to the territory of Vietnam;
• Entering into contracts in your name through authorized parties in Vietnam;
• Distributing part or all of goods/services in Vietnam and meeting one of the conditions (i) retaining ownership of the goods; (ii) responsible for the cost of distribution, advertising, marketing and quality of goods/services; or (iii) retain the right to adjust the selling price;
• Exercising import-export and distribution rights in Vietnam, trading goods for export or selling to Vietnamese traders.

Enterprises providing software services is not subject to VAT as prescribed in Clause 21, Article 4, Circular 219/2013/TT-BTC.

However, please also note that if enterprises are providing software service for foreign organizations, individuals, or consumers outside Vietnam; supplies to organizations and individuals in non-tariff zones and for consumption in non-tariff zones as prescribed by law, they are eligible for the VAT rate of 0% if they satisfy the conditions specified in Article 9, Circular 219/2013 / TT-BTC.

Therefore, enterprises should also pay attention to service providers and  location of service provision like in foreign countries and non-tariff zones to be able to apply tax rates and declare accurately in accordance with laws.

For overseas investment, enterprises should pay attention to the following reports:

• Written notice of the implementation of overseas investment activities
  Receiving agencies: MPI, SBV, Vietnamese representative agency in the country receiving investment.

Duration of implementation: Within 60 days from the date of approval or licensing of overseas investment project in accordance with the law of the country receiving the investment.

• Investment reports

Four (04) quarterly reports on the operation of the investment project:

• Submission time: Before the 20th day of the last month of the reporting quarter.
• Receiving agencies: MPI, SBV, and Vietnamese representative agency in the country receiving investment.

One (01) annual periodic report:

• Submission time: Before December 20th of the reporting year.
• Receiving agencies: MPI, SBV, and Vietnamese representative agency in the country receiving investment.

Unscheduled reports at the request of competent state agencies:
This report shall be submitted at the request of a competent state agency addressing issues related to investment projects or state management.

One (01) report on the operation of financial statements the overseas investment project:

• Receiving agencies: MPI, SBV, Ministry of Finance, and Vietnamese representative agency in the country receiving investment.
• Time of submission: Within 06 months from the date of submission of tax settlement report or a document of equivalent legal value as prescribed by the law of the country receiving the investment.

As precribed by law, the head office of Vietnamese enterprise must be located in Vietnamese territory and be the contact address of the enterprise, determined according to the geographical boundaries of the administrative unit; have a phone number, tax number and email address (if any) and must meet the following conditions:

• The enterprise must have a legitimate use right to the location of its head office.

The enterprise’s legitimate ownership or use right to the head office is shown through specific documents and documents such as house/office/real estate lease contracts or through certificate of land use right and ownership of properties attached to land. In many cases, the competent authority may require the investor to provide the above documents in the application for registration of company establishment.

• The head office must have a clear, stable and long-term address.

In order to facilitate the enterprise management by the competent authority as well as the ease of the enterprises in the process of communicating with their partners. The law stipulates that the address of the head office must be clear, stable, long-term and specifically identified: number, niche, alley, alley, street; or hamlets, communes, wards, townships, districts, urban districts, towns, provincial cities, provinces or central cities.

• The head office of the enterprise must not be located in a condominium/collective house

According to the provisions of Law on Residential Housing 2014, condominiums/collective houses are only allowed to be used for residential purposes. Therefore, the company cannot choose to register its head office address at such locations.

In addition, it should be noted that in the case of an officetel apartment – a multi-purpose apartment used for living and as an office. According to the guidance of the competent authority, the business can still choose to put the company address at this location, however, it is necessary to provide more documents about the use of the location with the confirmation of the investor in the application for company establishment.

• Chooese the address of the head office that is suitable for the business sectors of the enterprise.

One of the important factors for choosing a location for head office is its suitability of the business sectors that the enterprise which shall be registered with the local authorities and compliance with specialized law.

For the project, the parties need to determine whether the transfer has met the mandatory conditions to be conducted, specifically:

• The project has been approved by the competent authority, has a detailed planning of 1/500 or the approved master plan of the premises;
• The compensation and clearance have been completed. The investment project in infrastructure construction which is the subject of the transfer – must complete the construction of technical infrastructure works according to the schedule stated in the approval or equivalent documents;
• There are no disputes related to land use rights, no distrained judgment enforcement;
• There is no decision to revoke the project or recover the land; if there are any violations in the implementation process, it must be completely solved.

For the transferor, it is necessary in order to comply with the provisions of the land law, to determine whether the investor has legal documents recognizing their legal rights for all or part of the project,.

For transferee, the investor must be a real estate business enterprise, have sufficient financial capacity and commit to continue the implementation of construction and business investment in accordance with the provisions of law, ensuring the progress and content of the project.

If the Law on Real Estate Business 2006 requests investors to transfer the entire project, the Law on Real Estate Business 2014 gives the investor the right to transfer all of part of the project. This is considered more feasible than the previous regulations since it meets the intention of the project investor. It is also considered more suitable since in practice the value of projects to build commercial centers, apartments, adjacent apartments, and resorts is quite large, and finding an investor to receive the transfer of the whole project can be very challenging.

In both cases of transfer – a whole or part of project, the parties involved in the transfer transaction need to ensure that the transfer will:

• Not change the objectives of the project;
• Not change the content of the operation of the project;
• Guarantee the interests of customers and relevant parties.

The transfer of a partial or whole real estate project must be approved by the competent authority in written document. Besides, since this is a real estate project, the rights of the transferee should be recognized by the issuance of the new Certificate of Land Use Right, ownership of houses and other properties attached to land or registered for change in the issued certificates in accordance with the law on land.

On the administrative side, the transferee of the real estate project does not have to resubmit the whole project dossier, construction planning and construction permit of the project if there is no change in the content of the Approval for the investment policy, Investment Decision of the project.

According to Article 29.2 of the Law on Investment, the selection of investors to implement the project as prescribed in Point a and Point b Clause 1 of this Article shall be carried out after approving the investment policy, unless the investment project is not subject to approval of the investment policy.

In accordance with Article 29.2 of Decree No. 31/2021/ND-CP dated 26 March 2021 detailing and guiding the implementation of the Law on Investment, for investment projects subject to approval of investment policies specified in Articles 30, 31 and 32 of the Law on Investment, the competent authority shall consider approving the investment policy and decide on the method to select the investor, such as through auction of land use rights, bidding.

Based on Article 32.1.a of the Law on Investment, the Provincial-level People’s Committees shall approve investment policies for investment projects that requests the State to assign land, lease land not through auction, bidding or receiving transfer and investment projects with proposals to allow the transfer of land use purposes.

Based on the above provisions, investment projects that request the State to assign land, lease land through auction of land use rights, bidding for selection of investors not in the cases specified in Articles 30, 31 and Points b, c, d of Article 32.1 of the Law on Investment shall not have to carry out procedures for approving the investment policies before auctioning land use rights or bidding for investor selection.