THE ASCENDING DRAGON
Learn the most significant aspects about the most charming country in the Southeast Asia
Vietnam is located on the eastern margin of the Indochinese peninsula. It borders the Gulf of Thailand, Gulf of Tonkin, and the Pacific Ocean, along with China, Laos, and Cambodia. The elongated roughly S-shaped country has a north-to-south distance of 1,650 km (1,030 mi) and is about 50 km (31 mi) wide at the narrowest point with a coastline of 3,444 km (2,140 mi), excluding islands.
The country is divided into the highlands and the Red River Delta in the north; the Central mountains, the coastal lowlands; and the Mekong Delta in the south.
Vietnam's climate, being located in the tropics, the climate is monsoonal with four distinct seasons (Spring, Summer, Autumn, and Winter) in the north while in the south (areas south of the Hải Vân Pass), the climate is tropical monsoon with two seasons (rainy and dry). The diverse topography, a wide range of latitudes (Vietnam spans over 15° of latitude), and influences from the South Asian Sea lead to climatic conditions varying significantly between regions.
During summer, On average, eleven storms and tropical low pressures develop in the South Asian Sea of which half are tropical cyclones that originate from the western Pacific. These storms and cyclones then move westwards towards Vietnam. On average, Vietnam is affected by six to eight typhoons or tropical cyclones per year.
Vietnam's current population is 96,915,639 on January 16, 2020, according to the latest figures from the United Nations. Vietnam's population currently accounts for 1.25% of the world's population and it is ranked t14th the population rankings of countries and territories in the world. 35.92% of the population lives in urban areas (34,658,961 in 2018). The average age in Vietnam is 32.5 years old.
The Vietnamese government recognizes 54 ethnic groups, of which the Viet (Kinh) is the largest; according to official Vietnamese figures (2009 census), ethnic Vietnamese account for 85.7% of the nation's population and the non-Vietnamese ethnic groups account for the remaining percent.
Religions: Religion in Vietnam is quite diverse, including Buddhism, Christianity, Cao Dai, and some other religions. At the same time, ancestor worship is a popular form of religious activity practiced by the majority of the population.
Vietnamese is the official language of the country.
Vietnam's recorded history dates back to the mid-to-late 3rd century BC when Nam Viet was established.
Vietnam's peculiar geography made it a difficult country to attack, which is why Vietnam under the Hùng kings was for so long an independent and self-contained state. Once Vietnam did succumb to foreign rule, however, it proved unable to escape from it, and for 1,000 years, Vietnam was successively governed by a series of Chinese dynasties. During these 1,000 years, there were many uprisings against Chinese domination. Ngo Quyen, King of Vietnam, 938–944 restored sovereign power in the country, the next millennium was advanced by the accomplishments of successive dynasties.
The French Empire reduced Vietnam to a French dependency for nearly a century (1858 - 1945), followed by the occupation of the Japanese Empire. Political upheaval and Communist insurrection put an end to the monarchy after World War II, and the country has proclaimed a republic.
The Geneva Accords in 1954 partitioned the country temporarily in two with a promise of democratic elections in 1956 to reunite the country. North and South Vietnam, therefore, remained divided until The Vietnam War ended with the Fall of Saigon in 1975.
After reunification in 1975, the newly reunified Vietnam faced many difficulties. In 1986, the Communist Party of Vietnam changed its economic policy and began a series of reforms to the private sector and to the economy through. Ever since the reforms in the mid-1980s, Vietnam has enjoyed substantial economic growth.
Through a short review, stay abreast of recent economic developments
Vietnam's population is expected to expand to 120 million before moderating around 2050. Today, 70% of the population is under 35 years of age, with a life expectancy of 76 years, the highest among countries in the region at similar income levels.
VIETNAM’S DEVELOPMENT OVER THE PAST 30 YEARS HAS BEEN REMARKABLE
Economic and political reforms under “Đổi Mới”, launched in 1986, have spurred rapid economic growth, transforming what was then one of the world’s poorest nations into a lower-middle-income country.
Between 2002 and 2018, more than 45 million people were lifted out of poverty. Poverty rates declined sharply from over 70% to below 6% (US$3.2/day PPP), and GDP per capita increased by 2.5 times, standing over US$2,500 in 2018. Vietnam now is one of the most dynamic emerging countries in the East Asia region.
In the medium-term, Vietnam’s economic outlook is positive
Despite signs of cyclical moderation in growth. Real GDP growth is projected to remain robust at around 6.5% in 2020 and 2021. Annual headline inflation has been stable for the seven consecutive years – at single digits, trending towards 4% and below in recent years. The external balance remains under control and should continue to be financed by strong FDI inflows which reached almost US$18 billion in 2018 – accounting for almost 24% of total investment in the economy.
Source: World Bank
How to do Business in Vietnam
start your activity in Viet Nam
ESTABLISH A COMPANY IN VIETNAM
Legal entities: The two most common legal entity types to set up in Vietnam are a limited liability company (LLC) and a joint-stock company (JSC).
An LLC can have 1 to 50 members who are also known as founders or owners and do not have any shareholders. The alternative to an LLC is to set up a joint-stock company (JSC), also known as a shareholding company which has 3 to an unlimited number of shareholders.
Here are some requirements for setting up a company in Vietnam:
ALLOWED FOREIGN OWNERSHIP
Vietnam allows 100% foreign ownership in most sectors. For example, trading, IT, manufacturing, education sectors welcome foreign investment. Some business lines such as advertising and tourism, however, require a Vietnamese joint venture partner.
The World Trade Organization (WTO) agreements regulate the allowed foreign ownership in different business lines. However, if there are no WTO agreements or local laws regulating foreign ownership in that business line, you will need Ministry-level approval to set up your company.
MINIMUM CAPITAL REQUIREMENT
In general, there is no minimum capital requirement in Vietnam and the most common amount of minimum capital in Vietnam is USD 10,000. However, there are also some business lines in Vietnam that have a minimum capital requirement such as real estate companies, banks, insurance, audit service, etc.
REGISTERED ADDRESS AND PERSONNEL
Service-based businesses can use a virtual office for registration purposes. Manufacturing companies or companies which require a retail or business space for conducting their activities, on the other hand, need a physical business location in Vietnam.
All companies in Vietnam require at least one resident director.
The appointed director needs a residential address in Vietnam.
If the director is also a founder, he or she will not require a work permit.
If the director is not a founder and is a foreign national, he or she will need a work permit in Vietnam.
PROCESS OF COMPANY REGISTRATION
1. Investment license.
2. Business registration certificate.
3. Tax registration.
4. Capital contribution; and
5. Follow-up activities (ex. product registration)
The tax system in Vietnam consists of the following main taxes:
CORPORATE INCOME TAX (CIT)
Enterprises producing and trading goods and services and earning income shall be liable to pay CIT.
The standard CIT rate shall be 25%. Preferential CIT rates of 10% and 20% are available for enterprises investing in geographical areas with socio-economic difficulties, economic zones, hi-tech parks, or encouraging investment sectors for a certain period of time. When the period for the enjoyment of preferential rates expires, the CIT rate generally reverts back to the standard rate.
The duration for application of tax rate incentives is counted from the first year an enterprise has turnover. The tax exemption or reduction duration is counted from the first year an enterprise has taxable income; in case an enterprise has no taxable income for the first three years from the first year it has turnover, the tax exemption or reduction duration is counted from the fourth year.
IMPORT – EXPORT DUTIES
Export is encouraged and thus, almost all goods and services being exported are exempt from tax. Export duties are only charged on a few items, basically natural resources such as minerals, forest products, and scrap metal. Rates range from 0% - 45%. The price for the computation of export duties is the Free-On-Board (FOB) price of the invoice.
Generally, all goods crossing Vietnamese borders are subject to import duties. There are some goods that are not subject to import duties such as goods transited and transported by mode of border gate transshipment through Vietnam’s border gates or border; humanitarian aid goods, non-refundable aid goods; goods imported from abroad into non-tariff zones and only used therein; goods brought from one non-tariff zone to another.
Consumer goods, especially luxury goods, are subject to high import duties, while machinery, equipment, materials, and supplies needed for production, especially those items which are not produced domestically, enjoy lower rates of import duties, or even a 0% tax rate. Duty rates for imported goods shall include (i) standard rate, (ii) preferential rate, and (iii) special preferential rate depending on the origin of the goods.
VALUE-ADDED TAX (VAT)
VAT applies to goods and services circulated and consumed in Vietnam. VAT is collected through production, trading, and provision of services.
Applicable VAT rates are 0%, 5%, and 10%, respectively. The VAT system of Vietnam is also characterized by two types of VAT payers: deduction method VAT payers and direct method VAT payers. Most companies and business organizations are deduction method VAT payers.
SPECIAL SALES TAX (EXCISE TAX) OR (SCT)
Special sales tax is levied on the following products and services: Cigarettes, cigars; Spirits; Beers; Automobiles of less than 24 seats; Assorted types of petrol, naphtha, reformat components, and other components to be mixed in petrol; Air conditioners with a capacity of 90,000 BTU or less; Playing cards; Votive paper and some special services, including dancing halls, massage lounges, karaoke parlors, casinos, jackpots betting entertainment, golf, and lotteries.
Special sales tax rates range from 10% to 75%. Goods and services subject to the special sales tax are also subject to the VAT with a rate of 10%. Special sales tax on imports is calculated on the basis of the price of taxable import plus import duties plus VAT.
PERSONAL INCOME TAX (PIT)
Residential individuals residing in Vietnam for an aggregate of 183 days or more within a consecutive 12-month period from the first date of arrival, or in subsequent calendar years; or having a permanent accommodation in Vietnam, including having an accommodation registered for permanent residence or having a leasing house to stay in Vietnam in accordance with a fixed-time contract and having an income rising inside and outside Vietnam territory and non-residential individuals have an income rising inside Vietnam territory are subject to PIT.
Personal Income tax rates levied on income from businesses, salaries, wages are applied according to the progressive tax rate schedule.
Expatriates or foreign individuals working in Vietnam are allowed to transfer their income abroad after income tax and other payroll withholdings.
Vietnam’s labor legislation and its implementation in practice are well developed. It covers almost all aspects of labor relations in the workplace from the right to work to the right to organize workers, from labor contracts to collective bargaining agreements, from minimum working ages to minimum wages, etc.
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