I. VIETNAM'S TAXATION SYSTEM

Vietnam's Corporate Income Tax (CIT) is a central component of its tax system, levied on the profits of enterprises. The standard CIT rate is 20%, applicable to most businesses across various sectors, including both local and foreign enterprises operating in Vietnam. However, specific industries such as oil, gas, and mineral extraction are subject to higher rates, ranging from 25% to 50% depending on the nature and profitability of the activity​.

VAT is a consumption tax levied on the sale of goods and services in Vietnam, with standard rates of 0%, 5%, and 10%. The standard rate of 10% applies to most goods and services, while the 5% rate is for essential goods and services such as healthcare and education. Goods exported from Vietnam are typically subject to a 0% VAT rate, incentivizing international trade​.

Value-Added Tax (VAT) in Vietnam has undergone significant changes aimed at supporting economic recovery and stimulating consumption.

As of January 1, 2024, the standard VAT rate was reduced from 10% to 8% for most goods and services. This reduction is part of a broader strategy to bolster economic activity amid ongoing global uncertainties and challenges posed by the post-COVID-19 economic environment. Initially, the reduced VAT rate of 8% was applicable until June 30, 2024. However, recent resolutions have extended this reduced rate until the end of 2024.

Foreign investors in Vietnam are subject to several taxes, including CIT, VAT, and Foreign Contractor Tax (FCT). FCT applies to foreign entities earning income in Vietnam without a permanent establishment in the country. It combines CIT and VAT components and is typically withheld by the Vietnamese contracting party at rates varying between 5% and 10% depending on the nature of the service provided​.

Vietnam has stringent transfer pricing regulations to prevent base erosion and profit shifting (BEPS). These regulations require related-party transactions to be conducted at arm's length, and enterprises must submit annual transfer pricing documentation to demonstrate compliance. Vietnam also follows the OECD’s guidelines on transfer pricing and has adopted the global minimum tax regime under BEPS 2.0, imposing a minimum effective tax rate of 15% on large multinational enterprises​.

Vietnam offers several tax incentives to attract foreign investment, particularly in high-tech sectors, agriculture and renewable energy sectors, economic zones, or regions with difficult socio-economic conditions. These incentives include tax holidays, reduced tax rates, and exemptions.

For example, enterprises investing in high-tech zones or in economically disadvantaged areas may enjoy a CIT rate as low as 10% for up to 15 years, a four-year tax exemption, and a 50% tax reduction for the subsequent nine years​.

Businesses must adhere to rigorous tax compliance requirements in Vietnam, including monthly, quarterly, and annual tax filings. The deadlines for tax submissions vary based on the type of tax and the fiscal year of the enterprise. It is essential for businesses to stay updated with the latest tax regulations and seek professional advice to ensure compliance and optimize tax liabilities.

II. INTELLECTUAL PROPERTY LAW IN VIETNAM:

Intellectual Property in Vietnam encompasses various forms of creations and inventions. The law recognizes and protects the following key categories:

Vietnam is a member of several international IP conventions, including:

These memberships ensure that Vietnam’s IP laws are consistent with global standards.

 a) Copyrights

Copyrights in Vietnam are governed by the Berne Convention, which provides automatic protection without the need for registration. However, it is advisable to register your works with the National Copyright Office to strengthen your legal position in enforcement actions.

 b) Patents

Vietnam operates under a "first to file" system. Patents are categorized into:

Applications must be filed with the National Office of Intellectual Property (NOIP). The PCT can facilitate patent applications that extend beyond Vietnam.

 c) Trademarks

Trademarks in Vietnam cover symbols, three-dimensional objects, colors, and other visual devices identifying goods or services. Trademarks are valid for 10 years and can be renewed indefinitely. Registration is handled by NOIP and can take up to 15 months to complete. The Madrid Protocol can be used for international trademark registration.

IP rights in Vietnam can be enforced through three primary avenues:

Most IP disputes in Vietnam are resolved through administrative actions due to their relative speed and efficiency.

Defensive Measures

III.         VIETNAM'S LABOR LAW

Vietnamese labor law mandates written employment contracts for all employment relationships. These contracts can be of two types:

The standard workweek in Vietnam is capped at 48 hours, with a maximum of eight hours per day. Overtime is permissible but regulated, not to exceed 200 hours per year generally, and 300 hours for specific industries. Employers and employees can mutually agree on overtime, but it must comply with legal limitations.

The minimum wage in Vietnam varies by region, reflecting the cost of living disparities. As of 2023, it ranges from VND 3,070,000 to VND 4,420,000 per month. Employers are required to contribute to social insurance, health insurance, and unemployment insurance, totaling approximately 17.5% of the employee’s salary, while Employees will have to pay approximately an eight percent rate,.

Hiring foreign workers in Vietnam is subject to a stringent set of regulations. Key points include:

Vietnam’s labor law is rooted in a philosophy aimed at protecting the labor class, reflecting the country’s socio-political framework. This protective stance significantly influences various aspects of labor regulations, particularly in terms of employee termination. In contrast, labor laws in other countries often balance between protecting employee rights and providing flexibility to employers. This article delves into the unique features of Vietnam’s labor law compared to those of other countries, highlighting the protective nature of its regulations and the challenges it poses for employers.

The key aspects include:

 IV. FOREIGN INVESTMENT IN VIETNAM'S REAL ESTATE SECTOR

In Vietnam, land is collectively owned by the state, and individuals or entities, including foreign investors, can only acquire land use rights (LURs). These rights are typically granted through leases rather than outright purchases. The primary laws governing land use and real estate transactions for foreign investors include the Land Law, the Law on Real Estate Business, and the Housing Law.

 a) Industrial Parks

Vietnam's industrial parks are strategically located in economic zones, offering significant opportunities for manufacturing and logistics investments. The Northern Economic Zone, including Hanoi and Hai Phong, is a key hub for manufacturing and infrastructure development, while the Southern Economic Zone, encompassing Ho Chi Minh City, is a major commercial center attracting substantial foreign investment.

Key Considerations:

 b) Hotels and Tourism

The tourism sector in Vietnam is booming, with cities like Da Nang, Nha Trang, and Phu Quoc becoming popular tourist destinations. Foreign investors can invest in hotel projects either by leasing land or acquiring properties with LURs.

Key Considerations:

c) Office Buildings

Ho Chi Minh City and Hanoi are the primary locations for office buildings, catering to the growing demand from multinational corporations and local businesses. Foreign investors can purchase office spaces within these buildings or lease land to develop commercial properties.

Key Considerations:

d) Condominiums

The condominium market in Vietnam is attractive due to the country's rapid urbanization and increasing middle-class population. Foreign investors can purchase condominium units within permitted limits.

Key Considerations:

V. HOW FOREIGN INVESTORS CAN PROFIT FROM BUSINESSES IN VIETNAM

Eligibility and Declaration: Foreign investors can receive dividends from their investments in Vietnamese companies, provided the company has positive retained earnings and is not in a loss position. The financial statements must be audited and submitted to the relevant authorities. All taxes and financial obligations to the Vietnamese government must be fully settled before dividends can be declared and paid.

Payment Process: Once dividends are declared, the local tax authority must be notified. They have seven days to object to the payment. If no objection is raised, the payment can proceed. Dividends must be paid through a Direct Investment Capital Account (DICA) for companies or an Indirect Investment Capital Account (IICA) for individuals. It's crucial to liaise with the bank to ensure all required documents are prepared, including those necessary for currency conversion from Vietnamese Dong (VND) to foreign currency.

Capital Gains: Foreign investors can also profit by selling their stakes in Vietnamese businesses.  A new draft CIT law was released proposing to tax the transfer of capital at 2% on gross sales proceeds (not dependent on gain/loss position) applied for both direct and indirect share transfers.

Transfer of Capital: Upon selling their business, investors can transfer the proceeds abroad after fulfilling all financial obligations, including paying any applicable taxes. The process involves submitting audited financial statements and tax declarations, and notifying the tax authority of the intended transfer.

Transferring money abroad from Vietnam is a complex and tightly regulated process, reflecting the government's stringent foreign exchange control policies. While the laws theoretically allow for certain types of remittances, in practice, navigating these regulations can be daunting.

a) The Process of Profit Transfer

(i)Financial Review and Documentation:

(ii)Notification and Approval:

(iii) Banking Procedures:

b) Practical Challenges

 Despite the clear legal guidelines, transferring money out of Vietnam remains a significant challenge. The primary hurdles include bureaucratic procedures, stringent documentation requirements, and the discretionary power of banks to approve or deny transactions.