Investing in Vietnam 2021

Investing in Vietnam
Redrawing
the horizon
2021 and beyond
kpmg.com.vn
KPMG was established in Vietnam in 1994,
at a time when Vietnam was reopening its
doors to investment.
KPMG is the largest professional services firms in Vietnam with offices in Hanoi, Ho Chi
Minh City, and Danang. KPMG also has an office in Phnom Penh, the capital of Cambodia.
With more than 1,700 staff, KPMG is proud of its ability to deliver international standard
professional services encompassing:
– Audit – Consulting – Deals, Tax and Legal
KPMG is recognised by the Ministry of Finance (MOF) and Vietnam Association of

Certified Public Accountants (VACPA) as Vietnam’s largest Audit and Advisory firm in
terms of revenue, partner numbers, and overall human resources. KPMG has also received
awards and accolades from the Vietnamese government for its contribution to the nation’s
audit, tax, legal and advisory professions.
As a leader in the professional services industry, KPMG regularly advises the Government
of Vietnam and international organisations in support of Vietnam’s reform and integration
programmes.
1 Investing in Vietnam 2021

Introduction to Vietnam
7
Table of contents
Vietnam economy
9
Integration to global economy
11
Investment climate for FDI
13
Taxation
19
Banking and foreign exchange control
23
Accounting and Reporting
25
Employment
27
Land
29
Intellectual property
31
Investing in Vietnam 2021 2

Vietnam in numbers
Vietnam in numbers
Land area
Approximately 331,000km2
Capital City Hanoi
Provinces & Cities 63
Avg annual 56.0%

Income is working age
Over US$2,838 Average age 32
Population Total FDI capital

97.6 million (2020) US$28.5 billion (2020)
98.2 million (2021(f)) New FDI projects 2,523 (2020)
Inflation GDP Growth%

3.2% (2020) 2.9% (2020)
2.1% (2021(f)) 5.5% (2021(f))

GDP
US$343 billion (2020)
US$373 billion (2021(f))
GDP/capita GDP by sector (2020)

US$3,498 (2020) 41.6% Service
33.7% Industry
US$3,759 (2021(f)) 14.9% Agriculture
Source: GSO, EIU, IMF, MPI

Landscape
Mainly mountainous country,
with mountains and forests covering
Import ($billion) 2020
Total $262.7 billion USD
75% of the land area

Computers,
Electronics
Main cultivated areas
Red River Delta (North) Mekong River Delta (South) 64.0 24.6%
15,000 km2 40,000 km2
Machinery,
Climate Instruments
Vietnam is located in the tropical monsoon zone
37.3 1.4%
South
tropical climate with only two major Textiles,
seasons: a rainy season from May Leather and
to October and a dry season from Footwear
November to April
21.5 10.7%
North
temperate climate with four distinct seasons: spring
(from February to April); a hot and humid summer (from Telephones
May to July); autumn (from August to October) and a and parts
cold and humid winter (from November to January) thereof
16.7 13.9%
Plastics
and related
products
15.7 0.7%
(year to year growth)

2020
Export ($billion) 2020
Total $282.7 billion USD
Telephones
and parts
thereof
51.2 0.4%
Computers,
Electronics
44.6 24.1%
Machinery,
Instruments
27.2 48.6%
Textiles,
Garments
29.8 9.2%
Footwear
16.8 8.3%
(year to year growth)
Investing in Vietnam 2021

2020 6
Introduction to Vietnam
The Socialist Republic of Vietnam is a
Southeast Asian country with a rich history
and a long track record of political, civil and
commercial achievements.
Warrick Cleine
Chairman & CEO
KPMG in Vietnam and Cambodia
A key turning point was Vietnam’s population structure”, which means Vietnam is a multi-nationality country
accession to the World Trade for every two people or more working, with 54 ethnic groups, of which 86%
Organization (“WTO”) in 2007, followed there is only one dependent person. are Viet (Kinh) and the remaining 14%
by its participation in the ASEAN This demographic bonus provides are ethnic minorities, for instance the
Economic Community (“AEC”) in 2015. Vietnam with a unique socio-economic Tay, Thai, Hoa (Chinese), Khmer, Hmong
development opportunity to take and others.
In addition, Vietnam successfully held
advantage of the young labour force and
APEC in November 2017 has positioned 1.3 Language and Religion
push its economic growth.
the country to more investment
The national language is Vietnamese,
opportunities. The average population density is
which is widely spoken throughout the
about 290 people per square kilometer
1.1 Key Factors country by all ethnic groups. More than
in 2019. Approximately 65.6% of the
96% of the Vietnamese population
Located in the heart of South East Asia population resides in rural areas, while
aged 15 and older is literate, as a result
and along the coastline of the Pacific 1/3 of the remaining urban resides in Ho
of the Government’s continued efforts
Ocean, Vietnam offers numerous Chi Minh City and Hanoi.
advantages in providing access to the
world’s major trade routes. Population age pyramid 2020
Natural resources and conditions allow
Vietnam to develop the fundamental 100+ 0.0% 0.0%
and seasonal structure of agricultural 95-99 0.0% 0.1%
products and application of different 90-94 0.1% 0.2%
cultivation in regions. 85-89 0.2% 0.4%
With its rapid economic growth 80-84 Male 0.3% 0.6% Female
and development, the workforce is 75-79 0.4% 0.7%
gradually shifting towards industry 70-74 0.7% 1.0%
in manufacturing and services from
65-69 1.4% 1.7%
agricultural in terms of % of the total
employment. 60-64 2.1% 2.4%
55-59 2.6% 2.8%
The south has been the traditional
50-54 3.0% 3.0%
centre of manufacturing and trade,
and a major logistics hub. However, 45-49 3.4% 3.4%
the northern region has become 40-44 3.6% 3.6%
an increasingly popular destination 35-39 4.0% 4.0%
for foreign manufacturers looking 30-34 4.4% 4.3%
to diversify their production bases, 25-29 4.5% 4.3%
notably for South Korean and Japanese
20-24 3.6% 3.4%
companies.
15-19 3.5% 3.2%
1.2 Population 10-14 3.8% 3.5%
Vietnam’s total population reached 5-9 4.1% 3.7%
97.6 million in 2020, increasing 0-4 4.3% 3.8%
1.14% compared to 2019's. Vietnam
enjoys what is known as the “golden 10% 8% 6% 4% 2% 0% 2% 4% 6% 8% 10%
Source: Population Pyramid

to prioritise development of a quality national defense, security and foreign This 3,167 km long road will run parallel
training and educational system. affairs of the country. to the existing national road No. 1A to
connect the North with the South. Other
English is the most popular foreign Ministries are responsible for the
notable highways linking key economic
language and is commonly used in major execution of state power in a certain
regions have also been upgraded.
urban areas. English study is obligatory industry or sector. The People’s
in most schools. Other common foreign Committee (province, district and City are expected to alleviate pressure
languages are French, Chinese, and commune) governs management affairs on existing road transportation and
Japanese. within its administrative location. boost economic growth. The first
metro lines are expected to commence
Vietnam’s population practices a The People’s Committee manages,
operation in Ha Noi by 2018 and in Ho
variety of religions. These include directs and operates daily activities of
Chi Minh City by 2021.
religions based on popular beliefs, local state bodies, and executes policies
religions brought to Vietnam from issued by the relevant People’s Council Airport Infrastructure
other countries, and several indigenous and higher state bodies.
In recent years, the country has also
religious groups. Buddhism is the largest
Political Stability witnessed a significant increase in air
of the major world religions in Vietnam,
transportation. As the economy expands
followed by Catholicism, Cao Dai, Hoa Vietnam, as a single-party country,
both domestically and internationally,
Hao and others. enjoys political stability and certainty
the volume of freight and passengers
that supports economic growth and
1.4 Government carried by air transport has been
development and is a major attraction
increasing sharply. The government
Vietnam is a one party state. The for foreign investments. According to
is expanding and modernising the
Politburo and Central Committee of the the Country Watch report, Vietnam
airport infrastructure, most notably the
Communist Party of Vietnam decide exhibits a high level of political stability
construction of Long Thanh airport in
on major policy issues, which are then with an average political stability index of
the southern province of Dong Nai. Long
implemented by the Government 4.5 in 2019.
Thanh Airport will become the largest
Constitutional and legislative powers are
1.5 Infrastructure airport in Vietnam accommodating up
vested in the National Assembly, which
to 25 million passengers and 1.2 million
is “the highest organ of state power”. The Vietnamese Government
tons of cargo a year.
recognises the importance of an
The National Assembly has the power
efficient infrastructure for economic Seaport Infrastructure
to approve and revise the Constitution
development. Recent years witnessed
and Laws, make important decisions Sea transportation remains a significant
ambitious plans from the Government
on national matters (policies on internal component of the Vietnamese
to expand and upgrade the existing
and foreign affairs, socio-economic infrastructure system. There are over
transportation infrastructure system.
factors, political factors, security 100 ports throughout the country, of
factors, operations of state bodies) and Road Infrastructure which the major ones are located in Hai
supervise all operations of state bodies. Phong, Da Nang and Ho Chi Minh City.
In addition to the major national road,
In an effort to address the increasing
The President, as Head of State, Highway No. 1A, stretching from the
demand of exporters, plans to upgrade
represents the Socialist Republic border with China in the north to the
and expand the existing capacity are
of Vietnam in internal and foreign Mekong Delta Provinces in the south
underway, most notably the plan to
affairs. The Government is the via Ho Chi Minh City and the Trans-Asia
develop the mega-port Hon Khoai in Ca
highest administrative state body, and highway, the country is also progressing
Mau province. Once completed, the port
responsible for executing and managing with the completion of Ho Chi Minh
will accommodate ships with a capacity
political, economic, cultural, social, Road (known as Ho Chi Minh Trail during
of up to 250,000DWT.
war time).

Vietnam economy
2.1 Overview 2.2 Economic growth coupled with a drop in the world’s food
and fuel prices after the crisis resulted
Vietnam is considered to be one of the Despite the global trade recession
in a slower growth rate of CPI of 6.7%
fastest and relatively stable-growing and China’s economic growth slowing
in 2009. The economy was once again
economies in Asia over the past down, which impacted most parts of
under great inflation pressure in 2011
years. The country was seen to have Southeast Asia, Vietnam proved to be
with an inflation rate at 18.7% before
weathered the global financial crisis resilient to the turbulences and still
reducing down to 9.1% in 2012, and
well with encouraging macro-economic scored a growth rate of 7.1% in 2018,
6.6% in 2013 as various inflation control
indicators observed in 2009 and 2010. highest rate in nearly 10 years.
measures from the Government came
Recent years observed the effort of the 2020 is a year of great difficulties and into effect. The rate further fell to 0.6%
Vietnamese Government in boosting challenges for the world economy in in 2015 and 2.7% in 2016 on the back of
international economic integration general, including Vietnam. The world the drop in the oil price.
through the participation into many free economy is forecasted to be in the
The average CPI in 2020 increases by
trade agreements/ communities such most serious recession in history, the
3.23% over the previous year, achieving
as the World Trade Organization (WTO), growth of major economies is deeply
the inflation control target, keeping the
Comprehensive and Progressive declined due to the negative influence
average CPI in 2020 below 4% set by
Agreement for Trans-Pacific Partnership of the Covid-19 epidemic. However,
the National Assembly in the context
(CPTPP), EU-Vietnam FTA, and UK- the Vietnamese economy maintained
of a year with many fluctuations and
Vietnam FTA. This led to a significantly its growth rate with an estimated GDP
uncertainty.
increasing FDI year on year. growth rate of 2.91%.
2.4 Economic structure
With a stable political environment, 2.3 Inflation
low labour and operating costs, as well Over the years, Vietnam has seen a
The consumer price index (CPI)
as promising economic prospects, boom in the number businesses in - and
increased to a record 23.1% in 2008.
Vietnam presents a dynamic market and an increase in the role of - the private
The Vietnamese Government had
an attractive destination for both foreign sector in the economy, especially since
implemented various monetary and
and private investors to participate in the promulgation of the Enterprise Law
credit tightening measures. This
the economy.
GDP, GDP Growth, Inflation
6.8% 7.1% 7.0% 6.7%

6.2%
5.5%
2.9%
4.1% 4.0% 3.7%
3.2%
2.7% 2.8%
2.1%
201 221 241 262 343 373 408
2016 2017 2018 2019 2020 2021f 2022f

Nominal GDP (billion USD) Real GDP Growth (%) Inflation (%)
Source: Economist Intelligence Unit ; World Bank

and Investment Law in 2005. There The average population of Vietnam in
are more than 700,000 businesses 2020 is 97.6 million people. The quality
operating in accordance with the of the population has improved, fertility
Enterprise Law, 99% of them are has declined sharply over the past three
privately run mostly in trade, services, decades and the replacement fertility
construction, industry and craft rate has basically been maintained
production. Private business sector since 2005. The labor and employment
contributes approximately 77% of the situation in the fourth quarter of 2020
country’s GDP. showed many signs of prosperity
compared to the previous quarter,
The economic structure has seen
but due to the impact of the Covid-19
a gradual shift from agriculture to
epidemic, the unemployment and
industry-services. This transition has
underemployment rate for the whole
resulted in wealth creation growth
year 2020 were higher than in 2019. The
and rising consumption which is
number of people employed and the
a fundamental indicator to attract
income of salaried workers is also lower
foreign investors to expand business
than the previous year.
in Vietnam, particularly in the domestic
retail market.
2.5 Labour force
Labour force remains a key competitive
advantage of Vietnam to attract foreign
investment as well as sustaining future
growth. Vietnam is famous for its
young, hard- working, highly a literate
and easy- to-train labour force.

Integration to global economy
Vietnam officially became the 3.1 Goods schedule, services a market of 2.2 billion people with a
WTO’s 150th member on 11 schedule and Vietnam’s further combined size of US$26.2 trillion or
liberalised market 30% of the world’s GDP.
January 2007. WTO accession
has created both opportunities Under the EU-Vietnam Free Trade 3.2 Moving up the value chain
Agreement (EVFTA), both the EU
and challenges for Vietnam FTAs also play an important role
and Vietnam have pledged to abolish
to become an attractive in helping Vietnam move up the
over 99% of import duties on a wide
value chain in a number of sectors
investment destination. In range of goods. Depending on the
and supporting high-skilled jobs
addition, Vietnam’s participation goods, Vietnam will have 10 years to
and knowledge transfer. Vietnam is
liberalise its tariff regime, while the EU
in the ASEAN Economic expected to have a more significant
will liberalise over a 7-year period. The
Community (AEC), as well contribution to the global and regional
EVFTA will open up Vietnamese markets
as the Comprehensive and manufacturing landscape with regards
to EU companies and it also could boost
to textiles, garments and apparel, as
Progressive agreement for Trans- Vietnam’s booming economy.
well as hi-tech sectors like electronics.
Pacific Partnership (CPTPP) and After 8 years of negotiation, ASEAN Yet, moving up the value chain will
the conclusion of several free- Member States, Australia, China, Japan, further increase the sophistication of
trade agreements (FTAs) such Republic of Korea and New Zealand production processes, require additional
signed the Regional Comprehensive capital investment, cause a growing
as the EU-Vietnam FTA (EVFTA) Economic Partnership (RCEP) in demand for high-skilled labour, and an
and the UK - Vietnam FTA has November 2020, marking ASEAN’s array of other considerations to take into
shown the nation’s efforts to biggest free trade pact to date, covering account such as sourcing.
further integrate into the world
economy.
FTAs
VN MY TH PH ID KH CN
AFTA √ √ √ √ √ √ X
AFTA-China √ √ √ √ √ √ √
India √ √ √ √ √ √ X
Korea √ √ √ √ √ √ √
Japan √ √ √ √ √ √ X
CPTPP √ O X X X X X
EU √ O O O O X O
US X O O X X X O
UK √ X X X X X X
RCEP √ √ √ √ X √ √
Legend O In negotiations
Source: WTO (2020)

European Union will abolish Vietnam will abolish import duties
import duties for about 85.6% for about 48.5% of tariff lines,
of tariff lines, equivalent to equivalent to 64.5% of the
70.3% of the export turnover import turnover of Vietnam from
of Vietnam to European Union European Union
3.3 Regulatory reform through major reform to open up

Policy development will be focused on
for foreign investment. Under the “
new regulations, foreigners are now EVFTA is a new free trade
further economic liberalisation. During
preparations for accession to the WTO
allowed to purchase, apartments and agreement with high standards,
houses and hold a 100% stake in public comprehensive and different
and other FTAs, Vietnam revamped
companies in most industries.
much of its legal system, making from the 12 free trade
revisions to major legal frameworks, The new laws on investment and agreements (FTAs) that Vietnam
specifically the Labour Code, Land enterprises provide a more business
Law, Competition Law, Enterprise Law, friendly regulatory framework for
signed previously. More than
Investment Law and Tax Laws in order both domestic and foreign players. 99% of Vietnam’s tariff lines of
to make the investment environment Although some restrictions remain, export goods will be eliminated
more transparent. Indeed, - further the regulatory changes illustrate a after 7 years of validity.”
integration into the global economy with progressive approach, which is typical
associated challenges relating to MNC’s for developing countries.
Tran Tuan Anh
market entries has helped revise the
Policy is also built around strengthening Minister of Industry and Trade
Vietnamese legal framework toward
the banking sector, with focus on
more transparency to conform with
restructuring non-performing loans
international standards.
(NPLs), transparency in reporting, and
Recently, the residential property consolidation of the lenders towards
market and the stock market went international standards.

Newly registered FDI by sector (2020)
Industrial Manufacturing
$7,191 million of total capital, 800 new projects 49%
US$14.65 billion
Energy & Natural resources
$5,081 million of total capital, 20 new projects 35%
Real Estate
$987 million of total capital, 70 new projects 7%
Retail & Automotive
Building & Construction
Others 5%

Newly registered FDI by nationality (2020)
42%
Singapore
11%
China
10%
Taiwan
9%
Hong Kong
8%
South Korea
20%
Others
Japanese Desk Chinese Desk

Taninaka Yasuhisa (Ho Chi Minh City) Chang Hung Chun (Hanoi - Ho Chi Minh City)
E: yasuhisataninaka@kpmg.com.vn E: chchun@kpmg.com.vn
Ryosuke Okado (Hanoi) Brian Chen (Hanoi - Ho Chi Minh City)
E: ryosukeokado@kpmg.com.vn E: briancchen@kpmg.com.vn
Toboku Takanori (Danang)
E: takanoritoboku@kpmg.com.vn Thai Desk
Kaewsrion Punnika (Hanoi - Ho Chi Minh City)
Korean Desk E: pkaewsrion@kpmg.com.vn
Lee Jun Seok (Ho Chi Minh City) Phakkhanit Ua-Amornwanit (Ho Chi Minh City)
E: junseoklee2@kpmg.com.vn E: dphakkhanit@kpmg.com.vn
Lee Chi Hyun (Hanoi)
E: chihyunlee1@kpmg.com.vn

Investment climate for foreign
direct investment
4.1 Investment climate adjusted registered capital and value of to investment incentives. Investment
capital contribution and share purchase incentives on industrial parks have
Vietnam is one of the leading investment
of foreign investors reached 28.5 billion been restored. The adjusted tax rate of
destinations in Southeast Asia. With
USD, down 25% compared to 2019. In Corporate Income Tax has been reduced
the advantages of geography, natural
which, there are 2,523 newly licensed to 20%, effective 1st January 2016.
resources, and an affordable labour
projects with the registered capital
force, Vietnam attracts a large amount of The role of the private sector and
of 14.6 billion USD, down 35% in the
capital each year. Vietnam has a number foreign investors in the Vietnamese
number of projects and 12.5% in the
of unexplored sectors and a growing economy has increasingly been
registered capital compared to the last
consumer market. emphasized. “Business forum”
year.
meetings and dialogues between the
Similar to all countries around the world,
Vietnam’s success in attracting FDI Government and the private sector and
Vietnam is significantly impacted by
should be measured not only by the foreign investors are frequently held,
the Covid-19 epidemic, which limits the
amount of registered capital or and provide great opportunities for
movement of investors, and reduces the
disbursements but also by the efforts to businesses - especially in the foreign
attraction of new foreign investment.
improve the investment climate. sector - to make themselves heard on
However, in the last 12 months, there
important legislative issues.
are some highlights in attracting foreign Vietnam’s Government has issued
investment in a number of industries as many resolution as well as action plans
well as in some localities in Bac Lieu, Ho in order to realise the commitment to
Chi Minh City, Hanoi, etc. improve the investment climate and
business community for investors. A
Total foreign direct investment (FDI)
revised Law on Corporate Income Tax
in Vietnam as of 20 December 2020,
has been included in the terms of the
including newly registered capital,
expansion project that are also entitled
Foreign Direct Investment in Vietnam

38.0
35.9 106%
28.5
71% 24.4 70%
22.1 22.0 23.0
61% 63% 65%
20.0 55% 20.4 20.0
19.1
17.1 51% 17.5 18.0
55% 15.7 15.8
14.5 54%
12.1 49%
11.0 11.1 10.5 11.3
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Registered capital (USD billion) Disbursement capital (USD billion) % Disbursement
Source: Economist Intelligence Unit ; World Bank

4.2 Forms of investment
Foreign investors may carry out the following forms of investment in Vietnam:
Direct investment Indirect investment

– Establishment of a new legal entity; – Purchase of shares, share certificates, bonds and other valuable
– Capital contribution/acquisition in existing legal entities: and papers traded on the stock exchanges;
– Business Cooperation Contracts (BCC) signed with other local or – By way of securities investment funds; and
foreign investors. – Investment through other intermediary financial institutions.
4.3 Forms of commercial presence

The forms of commercial presence that foreign investors are allowed to take in Vietnam are the following:
Representative Office (RO)
RO is a common form of early or initial establishment for foreign organisations looking to invest or to do business in Vietnam.
From legal perspective, the RO is a dependent unit of a foreign business entity, and allowed to survey the market and
undertake a number of commercial promotion activities permitted by the laws of Vietnam. The key limitation of the scope of
activities of the RO is that it’s not allowed to engage in any “direct profit-making” activities.
Branch
Technically speaking, a branch of a foreign business entity in Vietnam is a dependent unit of the foreign business entity,
established and conducting commercial activities in Vietnam in accordance with the law of Vietnam or an international treaty
to which Vietnam is a member. However, in practice a branch is not a common form of presence in Vietnam because it is only
open for foreign investors in certain sectors like banking, financial and construction services.
Legal entity
Depending on the business industry, the number of investors, and whether there is any intention to list the entity, a foreign
entity may establish its presence in Vietnam as a limited-liability company, a joint-stock company, or a partnership.
Feature Limited liability company (LLC) Joint stock company (JSC) Part
Required number One (for single member LLC); At least three shareholders; – Unlimited liability partners: At least two
of members/ Two or more members, but not no restriction on maximum general partners (individuals)
shareholders exceeding fifty members (for multi- number of shareholders – Limited liability partners (optional):
member LLC) (organizations or individuals)
Liability of Limited to the extent of the Limited to the extent of the – Unlimited liability partners: Unlimited
members/ registered capital contributions into registered capital contributions – Limited liability partners: Limited to the
shareholders the company into the company extent of the registered capital contributions
into the company
Issuing bonds Allowed Allowed Not allowed
Issuing shares Not allowed Allowed Not allowed
Listing on stock Not allowed Allowed Not allowed
exchange

4.4 Conditional business lines the penalties imposed by the state in the manufacture of support industry
bodies and unfavorable tax treatment products.
The new Law on Investment, which
to expenses incurred from these
came into effect on 1 January 2021, Investment incentives granted to
businesses.
provides a consolidated and unified qualified investment projects include:
list of 227 conditional business 4.5 Investment incentives
Corporate income tax (CIT) incentives:
lines, amongst which there are ones
Investment incentives are granted Preferential CIT rate (i.e. lower CIT rate
especially conditional for foreign
to investment projects based on the in comparison with the standard CIT
investors such as trading/distribution,
following criteria: rate of 20%) for a definite period or for
logistics services. This list, together
the entire duration of the investment
with the business conditions thereof Location: investment projects located in
project; exemption from CIT and
are publicly posted in the National Portal areas with difficult or especially difficult
reduction of CIT for a definite period
on Business Registration at https:// socio-economic conditions or special
(see table below);
dangkykinhdoanh.gov.vn/ and https:// purpose zones;
dautunuocngoai.gov.vn/ Import duty incentives: Exemption
Business industry: investment projects
from import duty in respect of goods
Companies doing business in engaged in encouraged business
imported to form fixed assets,
conditional business industries are activities such as high- tech businesses,
raw materials and components for
required to fully satisfy the applicable socialised businesses (e.g. education,
implementation of an investment
conditions (i.e. minimum capital, foreign medical), infrastructure development
project; and
ownership limitation, requirement businesses, etc.;
on facilities and personnel, operation Incentive relating to land rental and land
Others: investment projects with
license, etc.). Failure to comply with use tax: Exemption or reduction of land
large investment capital or engaging
these requirements will result in rental and land use tax.
No. Condition CIT incentive

1 – Projects in specially difficult locations specified by Government; – Tax rate of 10% for 15 years or for whole
– Hi-tech; biotech, specific supporting industries; life for special projects
– Important infrastructure projects, socialized projects in education,sporting, health care. – CIT Exemption: 4 years
– Large manufacturing projects (e.g. investmnt capital of VND6,000 billion and number – 50% CIT Reduction: 5 to 9 years
of labor 3000, capital of VND12,000 billion).
– Projects of manufacturing or processing agricultural products in difficult locations.
– Software production, environment protection
2 Projects in difficult locations, manufacturing of agricultural machinery and equipment, – Tax rate of 17% for 10 years
high quality steel – Exemption: 2 years
– Reduction: 4 years
3 Projects of manufacturing or processing agricultural products in normal locations – Tax rate of 15% for whole life
4 Investment projects located in industrial zones (except for those located in areas having – Exemption: 2 years
favorable socio economy conditions) – Reduction: 4 years
– No preferential tax rate is given

4.6 Investment procedures
The investment procedures vary, depending on each investment form:
No. Investment Investment Licensing Statutory Note

form procedure authority timeframe(*)
1 Establishment (i) Application for an – Investment Registration 15 days The In-principle approval of the National
of a legal Investment Registration Division of provincial Assembly, Prime Minister, or provincial
entity Certificate (IRC) Department of Planning People’s Committee before the issuance of
and Investment (DPI); or IRC shall be required in case of investment
– Management Board of projects which make significant economic-
special purpose zones social impacts as stipulated at law.
(ii) Application for an Business Registration 3 working
Enterprise Registration Division of provincial DPI days
Certificate (“ERC”)
2 Capital (i) Application for Investment Registration 15 working This step is required if the share/capital
contribution/ approval for capital Division of provincial DPI days acquisition results in the increase of foreign
acquisition in contribution/ acquisition ownership ratio in the target company, and
existing legal
(i) the target company operates in conditional
entities
business industries applied to foreign
investors; OR
(ii) the foreign ownership ratio after the
share/capital acquisition is 50% or more.
(ii) Application for Investment Registration 3 working
updating the new Division of provincial DPI; days
shareholding members or
Management Board of
special purpose zones
(iii) Application for Investment Registration 3 working
updating the new Division of provincial DPI; days
investor or
Management Board of
3 BCC signed (i) Application for an IRC Investment Registration 15 days The In-principle approval of the National
with other Division of provincial DPI; Assembly, Prime Minister, or provincial
local or or People’s Committee before the issuance of
foreign IRC shall be required in case of investment
Management Board of
investors projects which make significant economic-
social impacts as stipulated at law.
(ii) Application for a Business Registration 15 days
Certificate of Operation Division of provincial DPI
Registration (“COR”)
for the project offices
(*)Where the investment projects are subject to the In-principle approval of the National Assembly, Prime Minister or provincial
People’s Committee; and/or subject to evaluation by various competent authorities, the above timeline will be longer

Taxation
Investors should consider conducting a
comprehensive risk assessment and readiness
analysis for the regulatory change related to
domestic and international tax treaties.
Ta Hong Thai
Partner, Head of Energy & Natural Resources
KPMG in Vietnam
5.1 Overview of whether they have a permanent five years to taxable income of those
establishment in Vietnam or not. activities in the following years.
The Vietnamese taxation system has
undergone (and is expected to continue 5.2.1 Tax Year Losses of prior years may be rolled over
undergoing) many major transformations and offset against provisional quarterly
A Corporate Tax-payer can elect to
that include major changes in Corporate taxable income of the subsequent year,
adopt a calendar year, or a fiscal year
Income Tax, Value Added Tax, Foreign subject to year-end reconciliation.
ending on a quarter of a calendar year,
Contractor Tax and Personal Income
as the basis for the tax year. Carry-back of losses is not permitted
Tax. The changes generally occur
and there is no provision for transfer of
frequently, however, the enforcement 5.2.2 Taxable Income
losses within the group.
mechanism as well as the ruling process
Taxable income is defined as income
is often limited in capacity. 5.2.5 Tax Rates
derived from production, operation, trade
The main categories of tax imposed in of goods and services and other sources The corporate tax rates are classified
Vietnam are as follows: from all business sectors and industries. into the following three categories:
– Corporate Income Tax (CIT) 5.2.3 Deductions From 1 January 2016
– Value Added Tax (VAT)
In general, deductible expenses for Standard tax rate 20%
– Personal Income Tax (PIT) corporate income tax purposes are
Preferential tax 17%, 15% or 10%
– Foreign Contractor Tax (FCT) reasonable expenses actually incurred rates
– Special Sales Tax (SST) and that relate to the activities of production
and business of the enterprise and are Other tax rates
– Import and Export Duties (IED). (e.g. oil & gas
accompanied by legal and complete
operations, 32% - 50%
Furthermore, other taxes may apply to invoices and vouchers as required by law.
natural resources
certain businesses:
5.2.4 Losses Carried Forward industry)
– Natural Resources Tax
Tax losses may be carried forward for
– Property Tax and 5.2.6 Tax Incentives
a maximum of five (5) consecutive
– Environmental Protection Tax. years. Ordinary losses may be offset Preferential tax treatments such as
All taxes are national taxes and against income that does not enjoy tax exemption, tax reduction, and
administered locally. There are no local, tax incentives and vice versa. Losses preferential rates (17%, 15% or 10%)
municipal or provincial taxes in Vietnam. from transfer of real estate, transfer are limited to:
of investment projects and transfer of – Encouraged sectors such as:
5.2 Corporate Income Tax the right to participate in investment healthcare, education, training,
The Law on CIT applies to all domestic projects can be offset against profits sports, art activities, environment,
and foreign entities that invest in from the main business activities. scientific research, high-tech,
Vietnam. The Law expands the taxpayer After offsetting, any losses from such infrastructure development and
pool to include all foreign enterprises that activities will be consecutively carried software.
have income from Vietnam, regardless forward for a maximum period of

– Economic zones, industrial zones – Income of an enterprise from 5.4 Special Sales Tax (SST)
without favourable conditions performing a new investment
Special Sales Tax is imposed on a
or locations with difficult socio- projects in the areas with difficult
selected number of goods and services,
economic conditions. socio-economic conditions.
either at the stage of production,
In particular, CIT rate of 10% for 15 – Income of an enterprise from provision of services or import. Export
years will be applied to: performing a new investment project products are exempted from SST.
in production of equipment, high- The tax is calculated based on the
– Income of enterprise from
quality steel and other products. selling price at the place of production
performance of new investment
project in the area with extremely Tax exemption for 2 years and a 50% excluding this tax and VAT.
difficult socio-economic conditions. reduction of tax payable for the 4 Imported goods liable to SST shall also
– Income of enterprise from performing subsequent years will be applied in be subject to SST upon importation
new investment project in the high such cases. from overseas and sales to the
technology field. 5.3 Value Added Tax (VAT) domestic market, accordingly:
– Income of enterprises from – SST taxable price at the import
The VAT system in Vietnam applies to
performing new investment stage = taxable price for import duty
goods and services used for production,
projects in the field of environmental calculation + import duty
business and consumption in Vietnam.
protection.
Two methods can be used to calculate – SST Selling
– High-tech enterprises and agricultural VAT payable. Taxpayers meeting the Environmental
taxable price
enterprises applying high-tech. requirements can apply the credit _ protection tax
price exclusive (if any) %
The income of an enterprise from the method. VAT payable under the credit at the of VAT
implementation of a new investment method is calculated on the difference trading =
project in production if the conditions on between output VAT (VAT collected stage 1+ SST rate
scale of investment, disbursement time for sales) and input VAT (VAT paid on
purchases). Taxpayers that do not Taxpayers producing SST goods from
and total annual revenue or labour usage
qualify for the credit method can apply SST inputs are entitled to claim a credit
are satisfied.
the direct method. Under the direct for the amount of SST paid on the
Enterprises currently applying a CIT method, the taxpayer will pay VAT by materials imported or purchased from
rate of 20% as mentioned above will applying a deemed rate on the added local suppliers.
apply a CIT rate of 17% from 1 January value of the transaction. A Corporate 5.5 Personal Income Tax (PIT)
2016. Tax exemption for 4 years and Tax-payer is required to file and pay VAT
a 50% reduction of tax payable for 9 Both foreigners working in Vietnam
on a monthly basis, or on a quarterly
subsequent years will also be applied in and Vietnamese citizens are subject
basis if relevant conditions are met. The
such cases. to PIT. For tax residents, a progressive
standard VAT rate is 10%, but the rates
taxing system, where the marginal rate
And, a CIT rate of 20% for 10 years will are classified into four groups: exempt,
ranges from 5% to 35%, is applied to
be applied to: 0%, 5% and 10%.
worldwide income.

For tax non-residents, a flat rate of 20% from import duty in respect of certain of houses and apartments are required
is applied to the income derived from imported goods which form part of their to pay land tax charged on a square
Vietnam. In general, a tax resident is a fixed assets. metre basis at progressive rates from
person: Most exports are duty-free, except for a 0.03% to 0.15%.
– Present in Vietnam for at least 183 certain natural resources such as sand, 5.10 Environment Protection Tax
days in a tax year; or chalk, marble, granite, ore, crude oil,
Effective from 1 January 2012, Vietnam
– Having a regular place of abode in forest products and scrap metal.
introduced Environment Protection Tax
Vietnam, i.e. an individual rents 5.7 Foreign Contractor Tax (“EPT”) which is aimed to impose tax
– A house in Vietnam according Foreign organisations and individuals on goods that may cause damage to the
to legislation on housing under a carrying out permitted businesses environment.
contract that lasts 183 days or longer in Vietnam without a legal entity are EPT is in effect an indirect tax applicable
in the tax year; or subject to Foreign Contractors Tax to the production and importation of
– Not a tax resident of another country (“FCT”) comprising VAT and CIT. certain goods such as petroleum, coal,
(subject to applicable double tax Applicable tax rates vary depending on plastic bags and restricted chemicals.
agreement). whether a foreign contractor registers to 5.11 Relief from tax
If an individual has a regular place of use the Vietnamese Accounting System
Vietnam has now signed DTAs with 80
abode in Vietnam, but is actually only (“VAS”) or not.
countries, out of which 75 DTAs are
present in Vietnam for less than 183
5.8 Natural Resources Tax currently in force. Generally, these DTAs
days in the tax year and fails to prove
Natural Resources Tax (also known follow the basic principles contained in
their residence in any other country, that
as royalty tax) is imposed on the the OECD Model Convention.
individual will be considered to be a tax
resident of Vietnam. exploitation of Vietnam’s natural For a country which has a DTA with
resources including petroleum, mineral Vietnam, a foreign tax credit is also
5.6 Import and Export Duties resources, forest products, seafood and available to resident taxpayers in
All goods entering Vietnam are generally natural water. Tax rates vary depending respect of foreign taxes paid.
subject to import duty. Import duty on the specific classification of natural Under current regulations, if a taxpayer
rates vary depending on the nature of resource and are applied to the fails to submit the DTA notification
goods involved and origin of the goods. production output at a specified taxable dossier within 3 years from the tax
There are three import duty rates value per unit. payment deadline, the DTA entitlements
applicable (ordinary, preferential and will be forfeited.
5.9 Property Tax
especially preferential), based on the
Property Tax in Vietnam is levied in Generally, provisions of DTAs prevail
trading relationship between Vietnam
the form of a “land use fee” or “land over the domestic tax laws. The amount
and the exporting country.
rental”. A foreign investor requiring land of credit given is the lower of the tax
A partial or full exemption from import suffered in the foreign country and
for an investment project may apply
duty may be granted on application. Vietnamese CIT attributable to the
to the land management authority by
Raw materials and components foreign income. There is no provision
way of an allotment and paying the
imported into Vietnam for the in Vietnamese tax law allowing excess
land use fee or by way of lease and
manufacture of goods for export are foreign tax credits to be carried forward.
paying the land rental. The land rental
usually exempt from import duty.
rates vary depending on the location, The application of a DTA clause is not
Enterprises with foreign-invested infrastructure and industrial sector automatic. An official approval for tax
capital and parties to a BCC in especially where the business operates. relief must be obtained from the tax
encouraged projects are exempt authorities.
Effective from 1 January 2012, owners

We set the standard
in industry
1 st International Tax Review,
2020
Tier 1 Tax Firm of the year
1 st Global M&A Professionals,

2018
Global M&A Professionals in 2018
1 st Asia Risk, 2020
Consulting Firm of the Year
1 st Vietnam Ministry of Planning

and Investment, 2019-2020
M&A Advisory firm of the Year
1 st International Tax Review,

2018
Tier 1 Transfer Pricing firm

Banking and foreign
exchange control
Foreign banks can immediately take
advantage of the local bank’s network,
operating systems, and existing customer
portfolio.
Tran Dinh Vinh
Partner, Head of Financial Services
KPMG in Vietnam
6.1 Bank accounts foreign currency bank accounts subject All monetary transactions in Vietnam
to approval by the State Bank of must be made in Vietnamese Dong,
6.1.1 Direct investment
Vietnam (SBV). except for a limited number of
Foreign invested enterprises and transactions allowed by law to be made
6.1.2 Indirect investment
foreign parties to business co-operation in foreign currencies (i.e. salary payment
contract must open a direct investment Non-resident foreign investor must to foreign employees).
capital account (DICA) at an authorised open an Indirect Investment Capital
Foreign invested enterprises may,
credit institution to undertake the Account (IICA) in Vietnamese Dong
subject to certain conditions, buy
following transactions: at an authorised credit institution
foreign currency from banks to carry
– Receipt of capital contributions, to conduct indirect investment in
out a number of obligations in foreign
funds from assignment of capital Vietnam. Investment capital in a
currencies from their transactions.
contribution, and receipt of foreign foreign currency must be converted to
loan; Vietnamese Dong before the indirect Generally speaking, the flow of
investment is carried out. foreign currencies into Vietnam is less
– Disbursement outside Vietnam
constrained by the SBV compared to
of principal, interest and fees on a An IICA will be used to implement carry
the outflow, which has been restricted
foreign medium or long-term loan; out the following transactions:
to certain transactions such as payment
– Disbursement outside Vietnam of – Receipt of funds from the assignment for imports of goods and services,
capital, profit and other legal revenue of capital contribution, from the sale repayment of loans contracted abroad
of a foreign investor; and of securities, dividends and other and payment of interest accrued thereon.
– Other revenue and disbursement items of revenue arising from indirect
investment activities; Only banks, non-bank credit institutions
transactions relating to foreign direct
and other authorised institutions are
investment activities. – Disbursement of, for purchase of
eligible to provide foreign exchange
capital contribution of securities or
Of note, capital transfer transactions services.
payment of other expenses relating to
between resident (local) and non-
indirect investment activities; 6.3 Foreign currencies and exchange
resident (foreign/offshore) investors
– Other revenue and disbursement rate
must be routed via DICAs, whereas
those amongst non-resident investors transactions relating to indirect The VND is the country’s official
or amongst resident investors shall not investment in Vietnam. currency; foreign currencies may
be routed via DICAs. 6.2 Foreign exchange control be chosen as a means of payment
and remittance in the following
Foreign invested enterprises may The Vietnamese Dong is not freely circumstances.
open current accounts and transaction convertible and the market is still heavily
accounts in foreign currency and – Payment and remittance of money
dependent on foreign currencies,
Vietnamese Dong at authorised banks relating to import and export of goods
especially the U.S. dollar.
in Vietnam for their daily business and services;
transactions. The Government has implemented – Income generated from direct and
measures to gradually reduce its indirect investments;
In addition, foreign invested enterprises reliance on the dollar.
may be permitted to open offshore

– Money transfers when the decrease All foreign loan transactions that a
of direct investment capital is foreign invested firm undertakes
permitted; must be conducted via the DICAs or
– Payments of interest on and a bank account for taking and paying
installment repayments of principal of foreign loans if the foreign loans are in
foreign loans; currencies other than that of DICAs.
– One-way payments for consumption 6.5 Profit Remittance Regulations
purposes; and
Lawful revenue in VND derived from
– Other similar transactions. foreign direct investment as well as
Residents and non-residents who foreign indirect investment will be
would like to transact in foreign permitted to be converted into foreign
currencies in Vietnam will be currency for the remittance abroad via
responsible for presenting supporting authorised credit institutions. There is
documents to the authorized credit no tax imposed on profit remittance.
institutions. Individuals are allowed to Under the current regulations, profit
buy foreign currencies from banks to remittances can be made as follows:
settle current transactions and other
– Annual remittance of all profits at the
permitted transactions only if relevant
end of financial year provided that the
documents proving their demand for
foreign invested enterprises do not
foreign currencies are fully submitted.
have any accumulated losses and are
From early 2016 onwards, the SBV has able to pay the due debts after profit
announced a central exchange rate remittance; and
every day for the VND/USD, which – Profit remittance upon termination
would be used by financial institutions of business activities and investment
authorised to trade in foreign currencies projects in Vietnam.
with margin limit at +/-3%.
A foreign investor is required to submit
This regime has facilitated stronger a notification of profit remittance abroad
performance in the foreign currency to tax authority at least 7 working days
derivatives market, meeting the prior to the date of profit remittance.
requirements for risk prevention in
exchange rates and increase liquidity Accordingly, the foreign investor may go
in the market. to its banks in Vietnam and buy foreign
currency to repatriate the profits. Please
6.4 Capital transactions of foreign note that although it has a right to buy
investors in Vietnam foreign currency, the bank does not
Foreign investors are now permitted to have an obligation to sell. The availability
open non-resident payment accounts of foreign currency would depend on
in a foreign currency at an authorised the market liquidity from time to time.
bank in Vietnam. Through this account, Having a good relationship with a bank
foreign investors will transfer money is therefore important and this is an
to Vietnam in order to conduct pre- issue that should be negotiated when
investment activities before the selecting which bank to use in Vietnam.
issuance of an investment certificate.
Offshore borrowings may now be used
to finance the investment project in
Vietnam and only offshore medium
or long term loans are required to be
registered with the SBV.

Accounting and Reporting
Enterprises need to establish an effective
internal control system to ensure its assets
are safeguarded and protected.
Chong Kwang Puay

Managing Partner
KPMG in Vietnam
7.1 Accounting requirements – VND is the default currency unit parent companies or use the same
in accounting. An FIE is permitted management software with the
7.1.1 Vietnamese accounting
to use a “foreign currency” as the parent companies, are allowed to use
standards & system and the Law on
currency unit in their accounting the comma (,) as the digit grouping
Accounting 2015 (the Law)
records if certain criteria are met. symbol and the dot mark (.) as the
Enterprises with foreign-owned capital, However, in such cases the financial decimal symbol. However, for those
foreign parties to business co-operation statements submitted to local financial statements to be submitted
contracts and foreign contractors authorities must be converted into to the tax authority, statistical
that have a resident base in Vietnam VND and must be audited. authority and government agency,
(collectively “FIE”) are required to adopt – Electronic vouchers and accounting the dot mark (.) must be used as the
Vietnamese Accounting Standards, books are not required to be digit grouping symbol and the comma
the Vietnamese Accounting System printed out for retention. However, (,) must be used as the decimal
for enterprises and their interpretive enterprises must ensure information symbol.
guidance (VAS). security and ensure data is accessible – The prescribed VAS chart of accounts
The Vietnamese Accounting System during the retention period; The and forms of financial statements
for enterprises is issued by the Ministry enterprises shall print the electronic must be complied with.
of Finance (MOF) in the form of a accounting documents and
There are some industry-specific VAS
bookkeeping manual that provides a have them signed and stamped
besides the general one for enterprises
standard chart of accounts, financial by the legal representative or
such as those for credit institutions,
statements template, accounting chief accountant (or acting chief
insurance companies, securities
books and voucher templates as well accountant) whenever a competent
companies, fund managers and
as detailed guidance on accounting authority requests them for
investment funds.
double entries for each specific inspection or audit purposes.
account. The requirements of VAS – Accounting documents and 7.1.2 Fiscal year
and the Law include: accounting books of an FIE must The fiscal year applicable to FIEs
– If a foreign language is used on be stored at the enterprise‘s in Vietnam is normally 12 months,
an accounting voucher, both premises in Vietnam or in an external commencing on 1 January and ending
the Vietnamese language and archive facilities in Vietnam over its on 31 December. FIEs with specific
foreign language should be used operating period specified in its IRC operation characteristics may adopt
simultaneously in the preparation registration, etc. When the enterprise their own 12-month fiscal year,
of accounting records and financial ceases its operation in Vietnam, commencing from the first day of a
statements. its legal representative will decide solar calendar quarter and ending on the
the place where the accounting last day of the previous solar calendar
– And minimum content of accounting
documents are stored, unless quarter in the following year and have
voucher should be translated into
otherwise prescribed by law. to inform the local tax authority of the
Vietnamese, but not mandatory to
translate all supporting documents – Companies, and branches of foreign adoption of such a fiscal year.
except for specific request from a companies that are required to
Where the first fiscal year is of
competent authority; submit financial statements to
shorter duration than 90 days, it will

be permitted to add this period to the by a qualified independent auditor.
following fiscal year in order to make up operating in export processing zones
one fiscal year. (EPZs) or industrial zones (IZs), Annual
Financial Statements may be required to
7.1.3 Appointment of Chief
be filed with the management board of
Accountant or person in charge of
the respective EPZs or IZs.
accounting
7.1.5 Retention of accounting
The enterprise is required to appoint
records and supporting documents
a Chief Accountant who must satisfy
the criteria and conditions stipulated Types of accounting documents are
by the Law on Accounting and guiding accounting vouchers, sub-ledgers,
regulation (or if not ready, a person general ledgers, financial statements.
in charge of accounting, but only for a Accounting documents archived should
period not exceeding 12 months). be original except for copied accounting
documents specified in the Law.
A very small enterprise may appoint a
person in charge of accounting instead Retention duration depends on the type
of a Chief Accountant. of documents with minimum periods
of five and ten years. And certain
Foreigners may be appointed to act as
types of documents must be retained
the Chief Accountant of the enterprise,
perpetually.
provided that they have a certificate of
accounting expertise or an accounting/ 7.1.6 Internal control system
auditing certificate issued by a foreign
The enterprise must establish an
professional body recognised by
internal control system to ensure its
the MOF; or an accounting/auditing
assets are safeguarded and protected
professional practicing certificate issued
from inappropriate and inefficient
by the MOF; or a Chief Accountant
use; and transactions are approved by
certificate obtained after having
authorised persons and completely
passed the chief accountant’s training
recorded to serve as the basis for
course as prescribed in regulations
preparation and presentation of the
of the MOF; and they must have at
financial statements that give a true and
least 2 years’ working experience in
fair view.
practicing accounting with at least 1
year experience in practicing accounting
in Vietnam.
The Law prohibits any individual
responsible for direction and
management of the entity to assume
the role as accountant, storekeeper,
cashier or the responsibility for
purchasing and sales.
7.1.4 Annual Financial Statements
Within 90 days following the close of
the fiscal year, enterprises operating
in Vietnam are required to prepare
and file Annual Financial Statements
to relevant local authorities. FIEs and
certain types of entities (such as credit
institutions) are required to have the
Annual Financial Statements audited

Employment
Andrea Goffrey
Partner, Head of Global Mobility Services
KPMG in Vietnam
8.1 Recruitment or other force majeure reasons as For heavy, noxious or dangerous jobs,
prescribed by law; working hours will be 6 hours per day.
Under the Labour Code, an FIE may
either directly recruit Vietnamese – The employee failed to attend the Overtime hours will not exceed 50% of
employees or recruit via an authorised workplace within 15 days from expiry the normal working hours or 40 hours
labour agency. The FIE is then of temporary suspension of the per month or 200 hours per year. In
required to register the list of recruited labour contract; case a company wishes to extend the
employees with the local labour – The employee reaches the retirement amount of overtime to more than 200
department and submit reports on the age; hours (but not exceeding 300 hours) a
utilisation of and changes to staff to the – The employee fails to go to work year, it must notify the local Department
labour department on a periodic basis. without acceptable reasons 05 of Labour, Invalids and Social Affairs
consecutive working days or more; (“DOLISA”).
8.2 Labour contract
– The employee fails to provide truthful 8.2.3 Wage Rates
According to the Vietnamese Labour
information during the conclusion of
Code, labour contracts signed by and The wage costs in Vietnam are
the employment contract in a manner
between employer and employee must generally low. However, the cost of
that affects the recruitment.
be made in one of the following forms: Personal Income Tax (PIT) and other
– Labour contract with an indefinite When unilaterally terminating the. mandatory contributions such as
term; labour contracts, employers must Social Insurance, Health Insurance and
inform the employees in advance: Unemployment Insurance as mentioned
– Labour contract with a definite term
– At least 45 days in the case of an below may significantly increase total
(of no more than 36 months); and
indefinite term labour contract; labour costs.
An employer will be entitled to sign
– At least 30 days in the case of a In respect of expatriates, these costs
maximum two definite-term labour
definite term contract with term from depend on the residency status
contracts with an employee. After that,
12 to 36 months;
if that employee continues to work and the remuneration structure of
for the employer, an indefinite labour – At least 3 working days in case the the expatriates. There are other
contract must be signed. employee is ill or injured and remains administrative costs associated with
unable to work for a long time, or the employment of expatriate staff such
8.2.1 Notice for termination in the case of a labour contract with as work permits, residency registration
Employers will be entitled to unilaterally term of less than 12 months; and and insurance.
terminate labour contracts in the – For employees holding managerial
The minimum wage of Vietnamese
following cases: positions as prescribed by law and
employees working for FIEs or
– The employee repeatedly failed to the company charter, the advance
other foreign organisations will
perform the work in accordance with notice period shall be at least 120
vary depending on different zone
the terms of the labour contract and days or a quarter of the contract
classifications set forth by the
the performance management policy duration, depending on the type and
Government.
issued by the employer; term of the labour contract.
8.2.4 Annual Leave
– The employee is ill or injured and 8.2.2 Working Hours
remains unable to work after having In addition to having time off on public
Normal working hours are eight hours
received treatment for a certain holidays with full pay, an employee
per day (or 40 hours per week based on
period as prescribed by law; working for a full 12 months under
a five-day working week). Employers
– The employer has to narrow normal conditions is entitled to 12 days
are entitled to schedule working hours
production and reduce the number of annual leave with full pay, with one
on an hourly or daily or weekly basis.
of jobs due to natural disasters, fire additional day for every five years of
service. Employees working in certain
areas, of a certain age or who have been to make statutory HI contribution. Vietnamese entry visa for stays of
with an enterprise for a certain time, Expatriates having work permits specified periods in accordance with
may be eligible for longer periods. or practising licences-issued by the bilateral treaties signed between
a Vietnamese State authority and Vietnam and such countries.
8.2.5 Severance Allowance
employed under labour contract with
Foreigners who temporarily reside
From 1 January 2009, the Law on term of 01 year or more will be required
in Vietnam for employment with a
Social Insurance has introduced the to make SI contribution.
valid work permit are able to apply
unemployment insurance scheme to
Contribution rates: for temporary residence cards (TRC)
replace severance payments.
which will be issued by the Immigration
Contributed by SI HI UI
The company is required to make a Division of the Department of Public
severance payment to an employee at For local employees Security (“DOPS”). The duration of
the time of termination of employment Employee 8% 1.5% 1% each temporary residence card will
if an employee has worked for the follow validity of the work permit
Employer 17.5% 3% 1%
company for twelve (12) months (maximum 2 years). A foreigner who
or more and is not covered by the For expatriates has a temporary residence card will be
unemployment insurance scheme From 01 Dec 2018 exempted from applying for a visa when
(including working periods before 31 Employee 0% 1.5% 0% entering and leaving Vietnam during
December 2008). the period of validity of the temporary
Employer 3.5% 3% 0% residence card.
Severance allowance paid by the
From 01 Jan 2022
employer will not be less than 50% of 8.3.4 Work Permits
the average monthly salary during the Employee 8% 1.5% 0%
Foreigners working for business
6 months prior to termination for each Employer 17.5% 3% 0%
entities and organisations in
year of employment.
Vietnam must have a work permit
Salary basis for SHUI contribution:
8.3 Other issues either under the classification of
– The basis for calculating statutory “expert”, “management/executive”
8.3.1 Trade Unions UI contribution is contractual salary or “technician”, except for limited
Employees have the right to establish and is capped at 20 times of the exempted cases specific cases
and participate in Trade Unions or regional statutory minimum monthly stipulated by the law.
other organisations which represent salary which is adjusted from time to
time (currently the highest cap being Enterprises which will recruit foreigners
and protect their legitimate rights. All
VND83,600,000 applied in big cities must explain their need to recruit
acts of obstructing the establishment
like Hanoi, Ho Chi Minh City). an expatriate for each job position
and operation of trade unions or other
before applying for work permit for the
employee representing organisations at – Statutory SI, HI and UI contributions
foreigners at least 30 days before the
enterprises are strictly forbidden. shall be deducted, withheld and paid
foreigners commence work in Vietnam.
to the local social insurance authority
All enterprises, regardless if they are
on a monthly basis by the employer. After obtaining the approval on the
domestic or foreign invested and have
recruitment of foreigners, enterprises
Trade Unions established or not, have 8.3.3 Visa/Temporary Residence
can apply for work permit for the
to submit a remittance of 2% of their Card
foreigners at least 15 working days
salary fund, the one is used as the
To visit Vietnam, foreigners, except for before the foreigners commence work
basis for social insurance payment
those from exempted countries like in Vietnam. The application for work
for employees. Enterprises can keep
ASEAN, require visas which must be permit must include amongst other
or claim back 70% of the fund for the
obtained in advance from an overseas documents, qualifications, experience
activities of the trade unions or for the
Vietnamese embassy or consulate. certificate, criminal record, health
employees’ benefits.
check. The work permit remains
Visas are only issued at the border gate
8.3.2 Statutory Insurance
on entry to the country in exceptional valid for up to 2 years and may be
Regulations state that both employers circumstances, such as for funerals renewed once for a another 2-year term.
in Vietnam and Vietnamese employees of relatives, for visits to seriously ill Thereafter, foreigners may be required
with a labour contract of one month relatives, urgent technical support to start a fresh work permit application
for specific programmes, projects or to continue working in Vietnam.
or more are required to make statutory
departure from a country that does not
Social Insurance (“SI”), Health Also, in case an expatriate is exempt
have a Vietnamese Consulate or any
Insurance (“HI”) and Unemployment from having to apply for a work permit,
diplomatic representatives.
Insurance (“UI”) contributions. the employer is still required to notify
There are certain countries whose the local DOLISA for administrative
Expatriates contractually employed for
citizens are not required to obtain a management purposes.
3 (three) months or more are required

Land
Ninh Van Hien
Partner, Head of KPMG Vietnam M&A Tax
and Real Estate Practice
KPMG in Vietnam
The Vietnamese Constitution stipulates an administrative body of the State for 9.1.1 Allocation from the State for
that land in Vietnam belongs to the land management, and the Ministry investment purpose
people with the State acting as the of Construction, an administrative
Under current prevailing regulations
representative owner and exerting its body of the State for construction
the allocation of land by the State
control over the land in practice on the activities; and, at local level by the
to an FIE is limited. An FIE can be
people’s behalf. People’s Committees, supported by
allocated land for the construction of
their administrative bodies such as the
Although private ownership of land residential housing for sale or lease
Department of Natural Resources and
is technically not permitted, legal according with its granted investment
Environment and the Department of
ownership can in essence be derived registration certificate. In this case, the
Construction.
through the right to use land (i.e. the maximum term of the allocated land is
land use right (“LUR”)). The State may 9.1 Foreign investor ownership of 50 years, but limited by the duration of
allocate or lease LURs to individuals, Land and Assets attached to land corresponding investment project. The
households and organizations to use FIE has the right to assign, lease, donate
In order to be a “land user” and be
land for a defined or undefined term. and mortgage the allocated land as well
allocated, leased or recognized to hold
as contribute its rights as capital into a
Vietnam’s legal framework for the LUR, the foreign investor must establish
JVC.
management and administration of a “foreign invested enterprise” or “FIE”
LURs is composed of: various key in Vietnam, which may be granted 9.1.2 Lease from the State
laws and in particular the Land Law ownership and quasi-ownership
Both Vietnamese local company’s and
which was amended in 2014 for interests in respect of land and assets
FIE’s can lease land from the State for
some important reforms relevant to attached to land. An FIE can be a wholly
agriculture, production and business
Foreign Invested Enterprises (FIE’s); owned subsidiary, a joint venture
purposes, which includes infrastructure
supplementing laws including the Civil company (JVC) or a majority stake
construction, manufacturing facilities,
Code which provide clarity on areas not acquired in a Vietnamese company.
hotels and resorts, mining and
specifically addressed in the key laws
The choice of FIE will depend on the residential housing for lease. The land
and including areas relating to foreign
investment being considered. is leased for a definite period up to a
investment; and, auxiliary rules and
maximum of 50 years (70 years for
regulation. An FIE may obtain LUR’s as follows:
projects of national importance), but
The ownership of LUR and other assets – Allocation of land from the State for limited to the duration of the relevant
attached to land is evidenced by the investment purposes investment project. The lessees
Certificate of Land Use Right, – Lease of land from the State can seek extensions on the term of
– Lease of land from specified lessors the lease. However, the term of the
Ownership of House and Other Assets
(including local or FIE developers extension will be capped at the original
Attached to Land (the “LURC”). This
licensed to engage in infrastructure term.
LURC sets out fundamental information
on the land use, including the term and development for sub-lease) The lessee is required to pay rental fee
purpose of the land use, and the assets – Assignment of the LUR by way of for the leased land. The rental fee will be
attached to the land (if any). capital contribution to a JVC by the structured either as an annual payment
local Vietnam partner or a lump sum payment determined
The State’s power over land
– Acquisition of the LUR as part of the from the lease commencement date.
construction activities is exercised by
the following government bodies: at purchase of an entire Real estate project A lump sum payment gives much more
the national level, by the Ministry of or project encompassing an LUR. flexibility to the lessee of the LUR. The
Natural Resources and Environment,

lessee who has paid the rental fee as 9.1.5. As part of the purchase of an
a lump sum payment has the right to Real estate project or an investment
assign, lease, donate and mortgage the project with an LUR encompassed
LUR as well as contribute the LUR as as part of the project
capital into a JVC. By contrast, a lessee
An FIE who receives an LUR by way
who makes an annual payment for
of acquisition of a Real Estate project
the rental fee does not have the same
or an investment project with an LUR
rights other than to potentially assign,
encompassed within the project will
lease, mortgage and contribute assets
reserve the same rights as those held
attached to the land, not the LUR itself.
by the person/ organisation initiating
9.1.3 Lease from the specified lessors the transfer. Of note, the land use form
of the LUR must be “land leased by
An FIE is also able to sub-lease from
the State with collection of one-off rent
licensed local or FIE developers of
payment for the entire lease term”.
specific zones for development, i.e.
industrial, export-processing or high- 9.2. Purchase of residential property
tech zones. As above, the sub-lessees by foreigners
can pay the land rental fee in either
Since the effective date of Law on
annual payment or one-off lump sum
Housing 2014, 1 July 2015, the new
payment to the developers that pay land
regulations have eased the restrictions
rental fee on a lump sum basis.
on the purchase of residential houses by
For the developers making land rental the foreigners.
payment annually, the same payment
A foreign individual may now purchase
method, i.e. annually, is required
and own a house in Vietnam, provided
to apply to the sub-lessees. The
that he is allowed entry into Vietnam.
sub-lessees may be also subject to
other fees including management or Foreigners should be aware the
infrastructure fees in accordance with regulatory limit on housing purchase as
their lease contract. They are entitled to follows:
be issued with an LURC.
30% of the total units within one
9.1.4. Assignment by way of capital condominium complex;
contribution
10% of the total separate landed homes
Vietnamese laws allow a Vietnamese within one residential compound; or
entity, which is established and
250 homes within an administrative unit
incorporated under Vietnam Law
equivalent to a ward.
on Enterprise, to make a capital
contribution in the form of the value of Generally, the foreign owners have
the LUR in the following circumstances: the same rights as the owners who
directly allocated land from the State,
It has obtained the land under the
including the rights to sell, mortgage,
allocation regime and the land use fee is
lease, donate, or contribute as capital.
fully paid; or
Foreign individuals are limited to own
It has obtained the land under the lease their house for a maximum duration of
regime including the LUR transfer from 50 years unless they are married to a
another organisation and fully paid the Vietnamese citizen.
land rental for the entire lease term.
Three months prior to the expiry
Once contributed, the JVC has the of ownership duration, foreign
same rights as the land users who homeowners can apply for tenure
were allocated or leased directly from renewal which must not exceed fifty
that State with full payment of land use (50) years. They can also sell or bequest
fee or rental fee. The JVC may assign, their property. If the foreign homeowner
lease, donate, mortgage or contribute fails to do so before the expiry date, his
as capital the LUR to a JVC. property will be converted into State
property.

Intellectual property
To become integrated into the world economy,
Vietnam has taken many steps to modernize
legal systems with the help of international
donors.
Richard Arthur Mark Stapley-Oh
Partner, Head of Legal Services
KPMG in Vietnam
10.1 Protection of intellectual – Accordingly, each member country Copyrights to cinematographic works,
property shall ensure that criminal liability for photographic works, applied art works
aiding and abetting is available under and anonymous works will have a term
10.1.1 Types of intellectual Property
its law. of protection of 75 years from the date it
Right to be protected in Vietnam
– Geographical indications may be was first published. If a cinematographic
Under the Law on Intellectual Property, protected through a trademark or Sui work, photographic work or applied art
“Intellectual Property Rights” (“IPRs”) generis system or other legal means. work has not been published within 25
means the rights of an organisation years from the date of its formulation,
– Member nations must establish
or individual (either a Vietnamese or the term of protection will be 100
policies on monitoring Internet
foreign organisation/ individual who years calculated from the date of its
service providers to prevent IPRs
satisfies the conditions stipulated by formulation.
infringement transmitted through
the laws) to possess intellectual assets
network Copyright to any works not subject
comprising copyright and copyright
– Reduction/simplification of to the above mentioned list will be
related rights, industrial property rights
administrative procedures and protected during its author’s life plus
and rights to plant varieties. Intellectual
conditions for registration of IPRs. 50 years after their death. In case
property that is protected under the
the works have been created by joint
prevailing Vietnamese laws include: 10.1.2 Term of protection on a authors, the term of protection will
– Copyright in literary, artistic and number of typical IPRs expire in the 50 years after the death of
scientific works, and derivative the last surviving co-author.
(I) Patent
works; copyright-related rights in
performances, audio and visual Patent means a technical solution in Works whose term of protection has
recordings, broadcasting programs, the form of a product or process which expired shall belong to the public.
satellite signals carrying encrypted is intended to solve a problem by All organisations and individuals shall
programs. application of natural laws. The patent have the right to use such works with
– Industrial property including will be protected for 20 years respect to moral rights of the author.
inventions, industrial designs, commencing from the date of (III) Trade name
layout-designs of semi-conductor submitting application but such
integrated circuits, business secrets, protection period will not be extended. Trade name means the designation
trademarks, trade names and of an organisation or individual used
geographical indications. (II) Copyright in business activities in order to
– Rights to plant varieties including Copyright means rights to the works distinguish the business entity bearing
reproductive and harvested materials. created or owned by an organisation or the trade name from other business
an individual. “Works” means a creation entities in the same business sector and
The protection of IPRs is further geographical area. Industrial property
of the mind in the literary, artistic or
reinforced under the CPTPP Agreement right to trade name is established on
scientific sector, expressed in any mode
including the following obligations: the practice usage responding to the
or form.
– In addition to civil and administrative business territory and area without
remedies, the CPTPP insists the Copyright will comprise moral rights registration procedures. The trade name
application of criminal procedures and and economic rights. The copyright will protection is for the duration of use of
penalties to protect IPRs. enjoy the following terms of protection: said trade name.

(IV) Mark For other IPRs, the holders are only
protected on their IPRs by law upon
Mark means any sign used to
having been granted the protection
distinguish goods or services of
certificate for the same, as a result
different organisations or individuals.
of regulatory formal and substantial
A certificate of registered mark will be
examination on their proper filing to
valid from the grant date until 10 years
respective licensing authorities. In
after the filing date and may be renewed
Vietnam, the Ministry of Science and
for an unlimited number of consecutive
Technology, via the National Office of
terms, each of 10 years. For well-
Intellectual Property, will be responsible
known marks, the industrial property
before the Government to carry out
right is established based on the actual
State administration of Industrial
widespread use of such a mark without
Property, the Ministry of Culture and
having gone through.
Sports and Tourism will - within the
(V) Industrial design scope of its duties and powers - carry
out State administration of copyright
Industrial design means the outward
and related rights and the Ministry of
appearance of a product embodied
Agriculture and Rural Development will
in three dimensional configurations,
be responsible for plant varieties.
lines, colours or a combination of such
elements. An industrial design patent
will be valid for 5 years from the date
of filling the application dossier for
registration of such a design and may
be renewed for two consecutive terms,
each of 5 years. Under the prevailing
laws, each type of intellectual property
protected under the laws of Vietnam,
must satisfy the appropriate conditions
provided by the laws.
10.2 Registration of IPRs in Vietnam
To be protected against IPRs
infringement, it is mandatory for the IPR
holders to register their IPRs, except
for copyright, with the competent
authorities.
Copyright will be protected under the
principle of automatic protection. This
means that copyright will arise the
moment a piece of work is created and
presented in a particular material form
regardless of its content, quality or
format, and whether or not it has been
published or registered. However, to
protect a piece of work effectively, it is
highly recommended that authors or
copyright owners register the works at
the relevant Department of Copyright
under the Ministry of Culture Sports
and Tourism, or Department of Culture,
Sports and Tourism.

Meet our experts
Consumer & Retail Infrastructure &
State-owned enterprise
Chong Kwang Puay Do Thi Thu Ha
Managing Partner
E: cpuay@kpmg.com.vn Office Senior Partner
E: htdo@kpmg.com.vn
Real Estate National Corporates
Ninh Van Hien Lam Thi Ngoc Hao

Partner Partner
E: ninhvanhien@kpmg.com.vn E: hnlam@kpmg.com.vn
Financial Services Energy & Natural resources
Tran Dinh Vinh Ta Hong Thai

Partner Partner
E: vdtran@kpmg.com.vn E: thta@kpmg.com.vn
Automotive International Corporates
Hoang Thuy Duong Auvarin Phor

Partner Partner
E: dthoang@kpmg.com.vn E: auvarinphor@kpmg.com.vn
Healthcare
Treloar Luke
Director
E: luketreloar@kpmg.com.vn

Contact us
Warrick Cleine
Chairman & CEO
KPMG in Vietnam and Cambodia
Dr. Nguyen Cong Ai

Office Senior Partner
Head of Ho Chi Minh City
Do Thi Thu Ha
Office Senior Partner
Head of Hanoi
Hoang Thuy Duong

Partner
Head of Danang

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Investing in Vietnam 2021

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Investing in Vietnam

– Audit – Consulting – Deals, Tax and Legal

KPMG is recognised by the Ministry of Finance (MOF) and Vietnam Association of

1 Investing in Vietnam 2021

Investing in Vietnam 2021 2

Avg annual 56.0%

Population Total FDI capital

Inflation GDP Growth%

3 Investing in Vietnam 2021

GDP/capita GDP by sector (2020)

Source: GSO, EIU, IMF, MPI

Investing in Vietnam 2021 4

75% of the land area

5 Investing in Vietnam 2021

Investing in Vietnam 2021

7 Investing in Vietnam 2021

Investing in Vietnam 2021 8

GDP, GDP Growth, Inflation

6.8% 7.1% 7.0% 6.7%

2016 2017 2018 2019 2020 2021f 2022f

Source: Economist Intelligence Unit ; World Bank

9 Investing in Vietnam 2021

Investing in Vietnam 2021 10

11 Investing in Vietnam 2021

3.3 Regulatory reform through major reform to open up

Investing in Vietnam 2021 12

13 Investing in Vietnam 2021

Japanese Desk Chinese Desk

Investing in Vietnam 2021 14

Foreign Direct Investment in Vietnam

Source: Economist Intelligence Unit ; World Bank

15 Investing in Vietnam 2021

Direct investment Indirect investment

4.3 Forms of commercial presence

Investing in Vietnam 2021 16

No. Condition CIT incentive

17 Investing in Vietnam 2021

No. Investment Investment Licensing Statutory Note

Investing in Vietnam 2021 18

19 Investing in Vietnam 2021

Investing in Vietnam 2021 20

21 Investing in Vietnam 2021

1 st Global M&A Professionals,

1 st Asia Risk, 2020

Consulting Firm of the Year

1 st Vietnam Ministry of Planning

1 st International Tax Review,

Investing in Vietnam 2021 22

23 Investing in Vietnam 2021

Investing in Vietnam 2021 24

Chong Kwang Puay

25 Investing in Vietnam 2021

Investing in Vietnam 2021 26

Investing in Vietnam 2021 28

29 Investing in Vietnam 2021

Investing in Vietnam 2021 30

31 Investing in Vietnam 2021

Investing in Vietnam 2021 32

Real Estate National Corporates

Ninh Van Hien Lam Thi Ngoc Hao

Financial Services Energy & Natural resources

Tran Dinh Vinh Ta Hong Thai