Correspondent Firm of RSM International

iAdvisory Seminar Series

Business and Trade Opportunities in Vietnam
Singapore, 12 September 2007

Getting Started in Vietnam

A presentation by Le Quang Phi

 Correspondent Firm of RSM International

Agenda

ƒ Market Entry Strategies/Options

ƒ Licensing Issues
ƒ Employment of Foreigners
 Correspondent Firm of RSM International

Market Entry – Strategies/Options

ƒ Representative Office
ƒ Branch
ƒ Joint Venture Company
ƒ 100% Foreign Owned Company
ƒ BCC/BOT/BTO/BT
 Correspondent Firm of RSM International

Market Entry – Representative Office

ƒ Initial stage of market penetration, presence or
research
ƒ A cost centre (no income generating activities)
ƒ Term of 5 years, renewable
ƒ No corporate taxes, only staff/personal income tax
ƒ Straightforward procedures to get the licence
ƒ To be duly “upgraded” to other forms of entity in
Vietnam
 Correspondent Firm of RSM International

Market Entry – Branch

ƒ Permissible, but for very limited business (banking,
law, tobacco, computer, MC services etc.)
ƒ Commercial presence/Permanent Establishment (PE)
in Vietnam
ƒ Corporate taxes (i.e. VAT and CIT with no incentives)
ƒ Duration term of 5 years, renewable
ƒ Complex to get the license, subject to WTO
commitments (e.g. 3 years from date of accession)
 Correspondent Firm of RSM International

Market Entry – Joint Venture Company

ƒ Joint-venture with local individual(s)/entity(ies) (as a
restriction measure for conditional investments)
ƒ Commercial presence/Corporate taxes
ƒ Duration: Company – indefinite, Project – up to 50/70 yrs
ƒ Not complex to get the license for manufacturing sector
and certain services, subject to WTO commitments
ƒ Complex to get the license, if related to conditional
business such as import and trading, and distribution
ƒ Convertible to 100% foreign owned company
 Correspondent Firm of RSM International

Market Entry – 100% Foreign Owned Company

ƒ Joint-venture with local individual(s)/entity(ies)
ƒ Commercial presence/Corporate taxes
ƒ Duration: Company – indefinite, Project – up to 50/70 yrs
ƒ Not complex to get the license for manufacturing/
encouraged sectors
ƒ Complex to get the license, if related to conditional
business such as import and trading of certain goods,
subject to WTO commitments (discuss in the next slides)
 Correspondent Firm of RSM International

Market Entry – BCC/BOT/BTO/BT

ƒ BCC: Business Cooperation Contracts; BOT: Build-
Operate-Transfer; BTO: Build-Transfer-Operate
ƒ Common for telecommunication and infrastructure
projects
ƒ Corporate taxes
ƒ Term up 50 years, transfer to Vietnam without
compensation (BOT, BTO, BT)
ƒ Complex to get the license, subject to the Prime
Minister’s approval
 Correspondent Firm of RSM International

Licensing Procedures Mind Map

Investment Evaluation versus Investment Registration
Yes
Is the invested capital more than VND300billion?

No
Yes
Is it in a conditional investment sector?

No

Investment Evaluation What is the investment source?

Domestic only Partly or 100% foreign owned

Is the investment capital under VND15billion? Investment Registration

Yes
No
Business Registration only
 Correspondent Firm of RSM International

Licensing Application Dossier

– Letter of application for investment certificate;
– Draft charter of the company;
– Joint Venture contract (if a joint venture with a local partner is to be set up);
– Documents stating the legal status and the financial capabilities of the
investor(s);
– Economic-technical explanatory statement comprising the following main
items: business objectives, scale, location of investment, invested capital,
schedule for implementation of the project, land use requirements, and
technological and environmental solutions, etc. (required for investment
evaluation project only);
– Documents relating to the transfer of technology and report on
environmental impact (if any/applicable);
– Legal documents concerning office lease/housing and/or land
rental/ownership (MOU may be acceptable).
 Correspondent Firm of RSM International

Licensing Issues
Trading and Distribution
Hot issues by foreign investors – Below are the key legal
instruments governing trading and distributions sectors:
9 Decree 23 dated 12 February 2007 of the Government:
Setting forth the licensing process for FIE to conduct trading and
distribution activities in Vietnam implemented in in accordance
with Vietnam’s agreed WTO accession timetable
9 Decree 90 dated 31 May 2007 of the Government
Permitting foreign business entities without a presence in Vietnam
to import into and export from Vietnam, goods which are allowed
for import/export in accordance with Vietnam’s WTO
commitments
 Correspondent Firm of RSM International

Licensing Issues
Trading and Distribution
(cont’d)
9 Decision 10 dated 21 May 2007 of the Ministry of Trade (MOT)
Providing detailed “roadmap” for the implementation of WTO
commitments on trading and distribution (Appendices listing
goods permitted/not permitted for export, import, distribution)
9 Circular 59 dated 14 June 2007 of the Ministry of Finance
Setting forth new import and export regulations and tariff, duties
9 Circular 9 dated 17 July 2007 of the MOT
Guiding the implementation of Decree 23
 Correspondent Firm of RSM International

Licensing Issues
Trading and Distribution
Decree 23 Circular 9
Import rights Import rights
“the right to import goods in to Vietnam for “sell each group of imported goods to ONE
sale to business entities which have the right business entity with business registration to
to distribute such goods in Vietnam” trade or with the right to distribute such group
of goods. An FIE shall have the right to make
its own selection of this business entity and to
register it with the competent licensing body.
Each group of goods comprises the lines of
goods in one chapter of the Import Tariff List”
Export rights Export rights
“the right to purchase goods in Vietnam for “directly purchase goods from business
export” entities which have business registration for
the purchase and sale of, or which have the
right to distribute, such goods in order to
export them”
 Correspondent Firm of RSM International

Post-licensing Procedures
Administrative issues:
ƒ Formulation and convention of the meeting of the Members’ Council
(for multiple-members LLC) or the Board of Management (for
shareholding companies)
ƒ Announcement of the company’s incorporation on the local
newspapers
ƒ Application for company’s seal
ƒ Opening of current and capital bank accounts
ƒ Registration of the importation plans
ƒ Completing all land-related procedures (if applicable)
 Correspondent Firm of RSM International

Post-licensing Procedures
Labour issues:
ƒ Obtaining of work permits for expatriate staff
ƒ Registration for compulsory insurances for local employees
Tax issues:
ƒ Application for company tax code with the local tax office
ƒ Purchase of VAT invoices or application for pre-printed VAT invoices
from the tax office
ƒ Personal income tax filing for all employees
 Correspondent Firm of RSM International

Licensing and Post-licensing Issues

ƒ Decentralized licensing authority/transitional
process
ƒ Troublesome and sophisticated post-licensing
requirements
ƒ VAS and set-up accounting/tax compliance practice
 Correspondent Firm of RSM International

Employment of Foreigners
ƒ Tax burden/exposures in Vietnam
ƒ Work Permit getting more complex and focused
ƒ 3% cap rule on expats – likely to be abolished
ƒ Resident rule for foreign Director or General Director
ƒ Employment of foreign Chief Accountant
ƒ Relocation of family and school options
ƒ Minimal cultural barriers (i.e. language and legislation
environment)
ƒ Foreign ownership of houses in Vietnam – Finally?
 Correspondent Firm of RSM International

Questions & Answers

 Correspondent Firm of RSM International

For further contact or discussion

Mr Le Quang Phi (based in Ho Chi Minh City)
Partner, Tax & Business Advisory
Phone: +848 8669 479
Mobile: +84 903 78 9911
Email: phi.le@sttvietnam.com

Mr Le Viet Tho (based in Hanoi)

Partner, Tax & Business Advisory
Phone: +844 9350 990
Mobile: +84 903 222 003
Email: tho.le@sttvietnam.com
 Correspondent Firm of RSM International

Thank you for your kind attention