The Ministry of Finance said that during the implementation of the Law on Value Added Tax, many obstacles to non-taxable objects such as fertilizer, machinery and agriculture equipment and offshore fishing, land use rights make it difficult for enterprises and tax administration.

"The normal tax rate of 10% is relatively low, inconsistent with international practices and difficult to ensure national financial security," the Ministry of Finance said.

Some goods and services such as clean water; cultural activities, exhibitions, physical training and sports; art performance ; film production; importing, distributing and screening films ... have been strongly socialized but still subject to VAT at the rate of 5%. It is not equal to other industries and sectors which are subject to VAT at the rate of 10%.

The regulation on the application of 5% tax rate for multi-purpose commodities, such as: nets, ropes and fibers for fishing nets; specialized equipment and tools for teaching, researching, scientific experiments ... lead to inconsistency in implementation.

For remission of VAT, not only the non-refundable tax regulations for "export products are goods made from natural resources and minerals with the total value of resource, minerals and energy costs accounted for  51% or more" complex in the implementation but the non-refundable tax regulations for the case of continuous negative VAT invoices over many periods also  makes enterprises more difficult due to increased tax costs.

Therefore, the Ministry of Finance proposed to raise the VAT rate in two options.

• Option 1, Ministry of Finance proposes to increase from 10% to 12% as from January 1 ^st, 2019.
• Option 2, the Ministry proposed to increase according to the roadmap to 12% from January 1^st, 2019 and 14% from January 1^st, 2021. Of which, the Ministry of Finance proposed to consider option 1.

"High indebted countries often increase indirect taxes"

International experience has shown that in the context of rising public debt in countries including in developed countries,  they tend to restructure state revenues in the direction of increasing revenues from indirect taxes, "the Ministry of Finance said.

In order to increase revenues to compensate for decreased revenues due to reduced income taxes, countries are turning to higher consumption taxes called VAT and excise taxes.

"The number of countries applying VAT / excise tax on goods and services has gone up and up,  about from 140 in 2004 to 160 in 2014 and 166 in 2016," the report said.

Because of increasing the number of countries using VAT to regulate consumption as well as increasing revenues, the tendency to increase VAT rates is common.

The report of the Ministry of Finance also cited the evidence from 2009 to 2016.  All countries increased the common tax rate. The average tax rate in EU countries in 2000 was 19%, and by 2014 the average tax rate was approximately 21.5%. OECD countries also tend to increase the VAT rate from an average of 18% in 2000 to about 19% in 2014 and over 19% in 2016.

Asian countries such as the Philippines, India and Japan also tend to restructure their revenues in the direction of increasing the share of consumption tax  in total revenue from increasing VAT rates.

"The tax rate’ statistics of 112 countries, 88 countries have a tax rate form 12% to 25%, of which 56 countries have a tax rate form 17 to25%, the remains are more than 10%. Neighboring countries such as Laos, Indonesia and Cambodia also have a common tax rate of 17% and a preferential rate of 13% while the Philippines has a tax rate of 15%. " The data from the World Bank cited by The Ministry of Finance.

Recently, the Ministry of Finance has also proposed to increase the excise tax of the consumption including soft drinks, cigarettes, tea, bottled coffee, etc.

Small and Medium Enterprises (SMEs) are going to enjoy lower corporate income tax rates and other incentives. This content comes into effect from January  1^st, 2018.

SMEs Criteria:

According to Law 04/2017/QH14, passed on June 12, 2017

SMEs  are enterprises  which comprise super small enterprises, small enterprises, Medium Enterprises having no more than 200 employees registered in the state social insurance scheme in a year and which meet one of the following conditions:

• Total “capital” (not defined) not exceeding VND100 billion.
• Total revenue of the preceding financial year not exceeding VND 300 billion.

SMEs are dentified in the fields of Agriculture, Forestry and Fishery; Industry and Construction; Trade and Services.

The Government regulates this Article in a detail way.

The key incentives for SMEs:

SMEs will be entitled to a CIT rate lower than the standard rate for a finite period. The rate and period will thus be provided in a guiding regulation due to the Law does not specify the rate or the period, but its previous draft in May proposed a rate lower by 5% for a maximum 5 years.

SMEs can apply a simplified accounting system as stipulated in the accounting regulations.

SMEs can receive credit guarantees by a fund set up by provincial People’s Committees.

Domestic SMEs located in industrial zones or high-tech zones can enjoy land lease support by provincial People’s Committees.

SMEs can also receive support in human resource development and legal consultancy.

Additional incentives can be granted to start-up SMEs and SMEs participating in value chains. We would be pleased to discuss with you the implications of these changes for your businesses.

CIT exemption and reduction are available to enterprises investing in distribution chains in which at least 80% SMEs supply goods produced in Vietnam. 

Ministries and provincial People’s Committees must support and/or cooperate with SMEs in technology research and development, technology transfer/training/consulting, intellectual protection, or in establishment of common technology working units.

Intercountry adoption means the adoption between a Vietnamese citizen and a foreigner, between foreigners permanently residing in Vietnam, and between Vietnamese citizens either of whom settles abroad.

1. Principles of intercountry adoption

Under the provisions of the Law on adoption, the intercountry adoption must comply with the following principles:

- When settling adoptions, the right of children to live in the family of origin must be respected.

- Adoption must ensure the legitimate rights and interests of adopted and adopting persons, free consent, equality, non-discrimination between male and female and non-violation of law and social ethics.

- Adoption by a person living abroad is allowed only when no domestic substitute family can be found.

2. Cases of intercountry adoption

Cases of intercountry adoption include:

- Overseas Vietnamese, foreigners permanently residing in the countries being contracting parties to an adoption treaty along with Vietnam adopt a Vietnamese child.

- Overseas Vietnamese, foreigners permanently residing abroad may adopt a specific child in the following cases:

+ He/she is the step father or step mother of the to-be-adopted child;

+ He/she is the natural aunt or uncle of the to-be-adopted child;

+ He/she has adopted a child who is a sibling of the to-be-adopted child;

+ He/she adopts a child who is disabled or infected with HIV/AIDS or another dangerous disease;

+ He/she is a foreigner currently working or studying in Vietnam for at least 1 year;

- Vietnamese citizens permanently residing in the country adopt a foreign child.

- Foreigners permanently residing in Vietnam adopt a child in Vietnam.

3. Conditions of intercountry adoption

The conditions on adoptors and adopted children are provided by law as follows:

- Conditions on adopting person:

Overseas Vietnamese or foreigners permanently residing abroad who seek to adopt a Vietnamese must meet all conditions required by the law of the country in which they permanently reside. Vietnamese citizens who seek to adopt a foreigner must meet all conditions required by the law of the country in which the to-be-adopted person permanently resides. In addition, the adopting person must also meet the following conditions:

+ Having full civil act capacity;

+ Being 20 years or more older than the adopted person;

+ Having health, financial and accommodation conditions for assuring the care for and nurture and education of the adopted child.

+ Having good ethical qualities.

Thus, Vietnamese law combines between law of permanent residence place and law of Vietnam to control the intercountry adoption. This is necessary to ensure that the adopted child is cared for, and nurtured in the best possible environment

- Conditions on adopted children:

+ Children under 16 years.

+ Persons aged between full 16 years and under 18 years falling into either of the following cases:

- To be adopted by the step father or step mother;

- To be adopted by a natural aunt or uncle.

+ A person may be adopted by only one single person or two persons being husband and wife.

According to the provisions of Vietnamese law on requirements for taking foreign loans applied to companies not guaranteed by the Government issued by the Governor of the State Bank of Vietnam, company established in Vietnam can borrow foreign capital under the following conditions:

General requirements

Borrower is allowed to borrow from abroad for the following purposes:

-       Implementing the business plans or investment projects funded by foreign loans of the borrower or any company to which the borrower makes a direct capital contribution (only applied to mid-term and long-term foreign loans).

In the second case, the ratio of the loan serving the business plan or investment project to the total loan taken by the borrower must not exceed the proportion of contribution to the aforesaid company by the borrower.

The business plan or investment project funded by foreign plan mentioned in above must be approved by a competent authority in accordance with law and the license for establishment, Certificate of Business registration, Certificate of Investment registration of the borrower or the company to which the borrower makes a direct capital contribution.

-        Restructuring the foreign debts incurred by the borrower without increasing the loan expense.

A foreign loan agreement must be made in writing before the loan is released in accordance with Vietnam’s law.

In addition, currencies of foreign loans are foreign currencies. Enterprises can only borrow in VND in the following cases:

-      The borrower is a microfinance institution;

-     The borrower is a foreign-invested company that takes the loan from the distributed profit in Vietnamese currency from the direct investment by the creditor being a foreign investor that contributes capital to the borrower;

-       Other cases approved by the Governor of the State bank considering the situation and necessity of the loans.

The pledge of shares, capital contributions of Vietnamese companies, or convertible bonds issued by Vietnamese companies as security for the foreign loans granted by non-resident creditors or relevant must comply with the regulations on securities and holdings of foreign investors in Vietnamese companies and/or relevant laws.

Foreign loan expense is agreed by the borrower, the creditor and relevant parties. If necessary, the Governor of the State bank shall decide the application of foreign loan expense requirements, decide and announce the ceiling level of foreign loan expense in order to regulate the limits on foreign loans without guarantor.

Additional requirements:

-        Requirements for taking short-term foreign loans: Creditors must not take short-term loans to serve mid-term and long-term purposes;

-        Requirements for taking mid-term and long-term foreign loans:

+       If the creditor has a project of investment funded by foreign capital that has a certificate of investment, the total midterm or long-term loan (including the domestic loans) taken by the creditor to serve the project must not exceed the difference between the total capital and the contributed capital in the certificate of investment;

+       If the creditor takes the foreign loan to execute a business plan or project of investment that does not have a certificate of investment, the total midterm or long-term loan (including the domestic loans) taken by the creditor must not exceed the need for loan serving business plan or project of investment, which has been approved by a competent authority.

In addition, enterprises should pay attention to the loan required to register with the state bank, includes:

-         Mid-term and long-term foreign loans;

-         Renewed short-term loans which have more than 01 (one) year of maturity term;

-      Short-term loans which are not covered by any loan renewal contract but remain the outstanding principal owed on the anniversary of the date of first fund withdrawal in a full 01 (one) calendar year, except to the extent that borrowers have already fulfilled their debt obligations within a permitted duration of 10 (ten) days after the anniversary of the date of first fund withdrawal in a full 01 (one) year.

Borrowers must send their dossiers within a maximum duration of 30 (thirty) days starting after:

-        The date on which the mid-term or long-term agreement is concluded, or the written guarantee is signed in respect of secured loans, or the date on which written fund withdrawal arrangements are concluded in the event that contracting parties have agreed upon such fund withdrawal under signed framework agreements and before such fund withdrawal takes place;

-        The date on which the agreement on renewal of a short-term foreign loan into a mid-term or long-term loan is effected in respect of conventional loans;

-         The anniversary of the date of first fund withdrawal in full 01 (one) year in respect of conventional loan, Short-term loans which are not covered by any loan renewal contract but remain the outstanding principal owed on the anniversary of the date of first fund withdrawal in a full 01 (one) calendar year

If violating regulations on registration of loans, enterprises may be subject to a fine of 40 million VND to 80 million VND.

NEW REGULATION ON THE SOCIAL INSURANCE CONTRIBUTION

From 1/6/2017, Decree No. 44/2017/NĐ-CP which stipulates for compulsory social insurance contribution to the occupational accident and disease insurance fund will be effective.

Accordingly, the employer’s contribution to the occupation accident and disease insurance fund will be reduced from 1% to 0.5% of the salary fund used to pay the social insurance in the following cases (except for domestic helper):

-        Persons working under labor contracts with indefinite terms or definite terms or seasonal jobs or for certain jobs with a term of from 3 months to under 12 months, including the labor contract signed between the employer and the legal representative of the person under 15 in accordance with the Labor law;

-        Persons working under labor contracts with a term ranging from 1 month to less than 3 months;

-        Officials and civil servants;

-        National defense workers, police workers, other working persons in cipher organizations;

-        Officers, professional soldiers of the people's army; Professional officers, non-commissioned officers, officers and non-commissioned officers of the People's Public Security Forces; Cipher workers earned wages as for military personnel;

-        The manager of the enterprise, the executive manager of the cooperative who is salaried.

For non-commissioned officers, soldiers of the people's army; Non-commissioned officers and soldiers of the People's Police for a definite term; Military cadres, police officers, custodians enrolled for living expenses, the level of payment reduced to 0.5% of base salary.

Employers are enterprises, cooperatives, individual business households and cooperative groups operating in the fields of agriculture, forestry, fishery and salt industry, which pay wages according to products, the monthly contribution is 0.5% (instead of 1% before) base on the salary fund as the basis for social insurance; the contribution is paid every month, every 3 months or every 6 months.

Therefore, the employer’s contribution is decreased while that of employees is unchanged, as follows:

PROCEDURES FOR GRANTING VISAS FOR FOREIGN ENTRIES IN VIETNAM

Visas are documents issued by a competent Vietnamese authority for each person, except for children under 14 years of age who are issued joint passports with their parents or guardians, allowing foreigners to enter the Vietnam. Vietnamese law specifies the subject matter and duration of each type of passport depending on the purpose of entry as follows:

Types of passport:

The conditions and procedure for granting visas:

The conditions for granting visas is having a passport or an international travel document and not be one of cases of suspension from entry prescribed in law. In addition, foreigners must be invited or guaranteed by agencies, organizations or individuals (except in case of SQ visa) according to the following procedures:

For foreigners who are the subject of NG1, NG2, NG3 and NG4 visas, through the inviting and guaranteeing agencies or organizations shall send written requests for visa issuance and pay charges at competent agencies of the Ministry of Foreign Affairs. In case of application for issuing visa at an international border gate, the border-gate, the time of entry and the reason for the application for a visa at the border gate should be clearly stated. After receiving a written reply from the competent bodies of the Foreign Ministry, agencies or organizations that invite or guarantee the foreigners into Vietnam shall notify the foreigners thereof for carrying out the procedures for receiving visas at overseas Vietnamese agencies competent to grant visas. After receiving the direction from the competent agency of the Ministry of Foreign Affairs, the passport and the visa application stuck with a photo of the applicant, the overseas Vietnamese agency competent to grant visas shall grant a visa within 1 working day.

In other cases, before carrying out procedures for inviting or guaranteeing a foreigner to enter Vietnam, agencies, organizations or individuals inviting foreigners shall send to the immigration management agency a written notice, together with a dossier comprising:
- A certified copy of the organization’s establishment license or decision issued by a competent agency;
- A document introducing the seal and signature of the organization’s competent person.

Agencies or organizations that invite or guarantee the foreigners directly send the application for granting visas at at the immigration management agency. Notice that when applying for a visa in the following cases, papers proving the purposes of entry are requires:

- Foreigners who come to make investment must have papers proving their investment in Vietnam in accordance with the Law on Investment;
- Foreigners practicing law in Vietnam must have a practice license in accordance with the Law on Lawyers;
- Foreigners who come to work in Vietnam must have work permits in accordance with the Labor Code;
- Foreigners who come to study in Vietnam must have admission documents of Vietnamese schools or educational institutions.

Within 5 working days after receiving the visa application, the immigration management agency shall consider and process the dossier and send a reply to the inviting or guaranteeing agency, organization or individual and notify such to the overseas Vietnamese agency competent to grant visas. After receiving the written reply from the immigration management agency, the inviting or guaranteeing agency, organization or individual shall notify such to the foreigner for the latter to carry out procedures for receiving the visa at the overseas Vietnamese agency competent to grant visas.

After receiving the notice from the inviting or guaranteeing agency, organization or individual, the foreigner shall submit his/her passport, the application and his/her photo to an overseas Vietnamese agency competent to grant visas, if visas are required. Under-14 children who share passports with their parents or guardians are not required to make visa applications.

Within 3 working days after receiving a notice from the immigration management agency or the competent agency of the Ministry of Foreign Affairs, the overseas Vietnamese agency competent to grant visas shall grant a visa.

A foreigner may be granted a visa at an international border gate in the following cases:

- He/she departs from a country without a Vietnamese agency competent to grant visas;
- He/she has to travel through many countries before arriving in Vietnam;-

- He/she enters Vietnam on a tour organized by an international travel agent in Vietnam;
- He/she is a crewmember on board a foreign ship anchoring at a Vietnamese seaport and wishes to leave Vietnam through another border gate;
- He/she enters Vietnam to attend the funeral of a relative, or to visit a seriously ill relative;
- He/she enters Vietnam to join in the handling of urgent incidents, search and rescue, prevention and control of natural disasters or epidemics or for other special purposes at the request of a competent Vietnamese agency.

Foreigners who are eligible for visa grant at international border gates shall submit their passports or international travel documents and filled visa applications stuck with their photos, to immigration control units. Information on under-14 children who share passports with their parents or guardians shall be declared on visa applications of their parents or guardians.

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Asia Business Consulting is a boutique consulting firm specializing in corporate establishment, legal and business advisory, tax and payroll compliance, HR administration, market research to multinationals investing in Vietnam.
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The Vietnam economy is now growing fast, so as the need of using high quality labor. When Vietnamese labor don’t meet this urgent need, many companies dicide to use foreign workers. However, in order to be able to work in Vietnam, the foreign worker must be issued a work permit in accordance with the law.

To be issued a work permit, in addition to conditions which are capability of civil acts, suitable health for job and not a criminal or liable to criminal prosecution, the foreign worker must be a manager, executive officer, expert, or technician and the employment of the foreign worker is approved in writing by a competent authority.

The current labour law regulations that the employer, not the foreign employee, has responsible to file an application for issuance of work permit. But before filing the application, the employer has to send a report about the needs of using foreign workers for positions which Vietnamese worker can not afford to the Chairman of provincial People’s Committee where the worker attends to work. The Chairman of provincial People’s Committee has a written acceptance for using foreign worker for each position.

The applications for issuance of work permit must be submitted to the Department Labor, War Invalids and Social Affairs at least 15 working days before the foreign worker starts to work, including these documents:

1. The written request for the work permit made by the employer in accordance with regulations of the Ministry of Labor, War Invalids and Social Affairs.

 2. The health certificate issued by a competent foreign or Vietnam health organization (valid for 12 months).

 3. Judicial record in accordance with the law (issued within 6 month from the issuance date to the application date).

 4. Proof showing he/she as a manager, executive, expert or technician.

5. The written approval for employment of foreign workers given by the President of the People’s Committee of the province.

6. 02 color pictures (4 x 6 cm, no glasses, white background) (taken within the previous 06 months).

7. The copy of the passport or an equivalent paper (unexpired).

8. Other papers related to the foreign workers.

These papers mentioned above are 01 original or 01 copy; Foreign documents must be consular legalization, translated into Vietnamese and authenticated in accordance with Vietnam’s law.

The Department Labor, War Invalids and Social Affairs must issues a work permit for the foreign worker within 07 working days from the date of receipt of the application. In case it can not issue the work permit, a clear answer in writting will be send.

The duration of a work permit is equal to the duration of each curriculums in accordance with the law but it shall not exceed 02 years.

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Please contact us for any further concerns related to the topic of this article.       

About Us

Asia Business Consulting is a boutique consulting firm specializing in corporate establishment, legal and business advisory, tax and payroll compliance, HR administration, market research to multinationals investing in Vietnam.
For further information or to contact the firm, please email This email address is being protected from spambots. You need JavaScript enabled to view it. or download the company brochure.
You can stay up to date with the latest business and investment news in Vietnam by subscribing for our newsletters.

All organizations and individuals are not allowed to invest in certain business sectors in Vietnam due to some reasons such as public health, societal morality, or under conventions Vietnam signed. The Investment Law 2014 has specified 06 prohibited business lines which have been added one more under the Amended Law on Investment that has come into effect from January 01st, 2017.

Foreign investors are welcome to do business in almost sectors in Vietnam without restriction and limitations. However, there are several sectors with some conditions that foreign investors need to be aware before making decision about whether they should enter the market or not.