Beruflich Dokumente
Kultur Dokumente
2008
Contents
1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction................................................................................................... 2 Businessenvironment .................................................................................. 4 Foreigninvestment..................................................................................... 11 SettingupaBusiness.................................................................................. 13 Labour .......................................................................................................... 17 Taxation........................................................................................................ 20 Accounting&reporting............................................................................. 24 UHYfirmsinVietnam ............................................................................... 27 UHYofficesworldwide ............................................................................. 27
Copyright2009UrbachHackerYoungInternationalLtd
1.
Introduction
UHY is an international organisation providing accountancy, business management and consultancy services through financial business centres in over 70 countries throughout the world. Business partners work together through the network to conduct transnational operations for clientsaswellasofferingspecialistknowledgeandexperiencewithintheir own national borders. Global specialists in various industry and market sectorsarealsoavailableforconsultation. This detailed report providing key issues and information for investors considering business operations in Vietnam has been provided by the officeofUHYrepresentatives: UHYAuditandAdvisoryServicesLimited HanoiHeadOffice Level5and6,No.136HoangQuocVietSt., Hanoi,Vietnam Tel:+8447557446 Fax:+8447557448 Email:info@uhyvietnam.com.vn Website:http://www.uhyvietnam.com.vn YouarewelcometocontactUHYAuditandAdvisoryServicesLimitedfor anyinquiriesyoumayhave. Information in the following pages has been updated so that they are effective at the date shown, but inevitably they are both general and subject to change and should be used for guidance only. For specific matters, investors are strongly advised to obtain further information and take professional advice before making any decisions. This publication is currentatOctober2008. UHYAuditandAdvisoryServicesLimitedisthesolerepresentativeof UHYinVietnam.Thefirmisrebrandedfromacoreofexperienced, dedicatedprofessionalsandconsultantsfromlargestaccountingfirmsin Vietnam.UHYAuditandAdvisoryServicesLimitedisplacedamongthe 10largestfirmsinVietnamintermsofthenumberofCPAholdersand clientserviceexperience. WelookforwardtohelpingyoudobusinessinVietnam. 2
Copyright2009UrbachHackerYoungInternationalLtd
UHYAuditandAdvisoryServicesLimitedisamemberofUHY,aninternational association of independent accounting and consultancy firms, whose organizing body is Urbach Hacker Young International Limited, a UK company. Each memberofUHYisaseparateandindependentfirm.Servicesdescribedhereinare provided by UHY Audit and Advisory Services Limited and not by Urbach Hacker Young International Limited or any other member of UHY. Neither Urbach Hacker Young International Limited nor any member of UHY has any liabilityforservicesprovidedbyothermembers.
Copyright2009UrbachHackerYoungInternationalLtd
2.
Business environment
Background TheSocialistRepublicofVietnamistheeasternmostnationonthe IndochinesePeninsula.Withapopulationofover85million,Vietnamis the13thmostpopulouscountryintheworld.Legendhasitthat VietnamsoriginlayintheharmoniousunionofLacLongQuan,Kingof theSea,andAuCo,PrincessoftheMountains.Inreallife,Vietnams historyischaracterisedbyanearlycontinuousstruggleforautonomy. Reunifiedin1975butforovertwodecadessincethenthecountry experiencedlittleeconomicgrowthbecauseofconservativeleadership policies.Since2001,Vietnameseauthoritieshavecommittedtoeconomic liberalisationandenactedstructuralreformsneededtomodernisethe economyandtoproducemorecompetitive,exportdrivenindustries. Politicalstabilityandencouragingforeigninvestmentpolicieshelp VietnamsFDIgrowsteadily. ForeignInvestmentAgencyfiguresshowthatVietnamsnewlypledged andexpandedFDIcapitalwasUS$12billionin2006andUS$21.3billion in2007.ThenewfundreachedUS$46.3billioninthefirsteightmonthsof 2008.ThecountryislistedamongtheNextEleveneconomies;according togovernmentfiguresGDP,growthwas8.44%in2007,thesecondfastest growthrateamongcountriesinEastAsiaandthefastestinSoutheastAsia. Geography Location:SoutheasternAsia,borderingtheGulfofThailand,Gulfof Tonkin,andSouthChinaSea,alongsideChina,Laos,andCambodia Area:total: 329,560sqkm Land: 325,360sqkm Water: 4,200sqkm Coastline: 3,444km(excludesislands) Climate: Tropicalinsouth;monsoonalinnorthwith hot,rainyseason(midMaytomid September)andwarm,dryseason(mid OctobertomidMarch) Population: 85,154,900 Agestructure: 014years:27.9% 1564years:66.4% 65yearsandover:5.8%
Copyright2009UrbachHackerYoungInternationalLtd
Populationgrowthrate: 1.21% LifeExpectancy: 72 LiteracyPercent: 94 Languages:Vietnamese(official),English(increasinglyfavouredasa secondlanguage),someFrench,Chinese,andKhmer;mountainarea languages(MonKhmerandMalayoPolynesian) Economy Vietnamisadenselypopulated,developingcountrythatinthelast30 yearshashadtorecoverfromtheravagesofwar.Growthaveraged around9%peryearfrom1993to1997.The1997Asianfinancialcrisis highlightedtheproblemsintheVietnameseeconomyandtemporarily allowedopponentsofreformtoslowprogresstowardsamarketoriented economy.GDPgrowthof8.5%in1997fellto6%in1998and5%in1999. Growththenrosetoaround7.5%in200006evenagainstthebackground ofglobalrecession,makingittheworldssecondfastestgrowingeconomy. Simultaneously,investmentgrewthreefoldanddomesticsavings quintupled. AccordingtotheCIAWorldFactBook,theunemploymentrateinVietnam isoneofthelowestintheworldat2%.TheGDPgrowthwas8.44%in 2007,thethirdlargestgrowthinAsia.AccordingtoVietnamsMinisterof PlanningandInvestment,thegovernmenttargetsaGDPgrowthofaround 8.59%for2008.Since2001,Vietnameseauthoritieshavereaffirmedtheir commitmenttoeconomicliberalisationandinternationalintegration.They havemovedtoimplementthestructuralreformsneededtomodernisethe economyandtoproducemorecompetitive,exportdrivenindustries. VietnamsexportstotheUSdoubledin2002andagainin2003.Vietnam hassuccessfullycompletedaccessiontotheWTOin2006. Statistics: GDP(purchasingpowerparity): $178.1billion(2005) GDPrealgrowthrate: 8.44%(2007) GDPpercapital:purchasingpowerparity: $2,142(2005) Industrialsector: 41.7%(2007) Servicesector: 38.30%(2007) Agriculturesector: 20.0%(2007) Labourforce: 44.17million(2007) Unemploymentrate: 4.64%(2007) Giniindex:36.1(1998) Distributionoffamilyincome Inflationrate(consumerprices): 12.63%(2007)
Copyright2009UrbachHackerYoungInternationalLtd
40.4%ofGDP(2007est.) revenues:$10.66billion $13.09billion;including capitalexpendituresof$1.8 billion(2004est.) 65.9%ofGDP(2004est.) 16%(2004est.) $2.061billion(2004est.) USD$48.4billionFOB(2007 est.) USUSD$10billion,EUUSD8.7 billion,(ASEANUSD$8 billion,JapanUSD$5.5billion, ChinaUSD$3.2billion(2007 est))
Imports:
USD$60.8billionf.o.b.(2007 est.) Reservesofforeignexchangeandgold: $6.51billion(2004est.) Debtexternal: $16.55billion(2004est.) Economicaidrecipient: $2.8billionincreditsand grantspledgedbyinternational donorsfor2000(2004) Currency(code): dong(VND) Currencycode: VND Exchangerates:dongperUSdollar16,241(2007)15,994(2006),15,859 (2005),15,746(2004),15,510(2003),15,280(2002),14,725(2001),14,168 (2000) LegalSystem VietnamusestheCivilLawsystemwhichbasedonwrittenlaws.The hierarchyofthelegalSysteminVietnamcanbesimplyclassifiedintothree basiclayersintermofitsgoverningscopeandlevel:(1)TheNational AssemblyissuestheConstitution,laws,codesandresolutions;the NationalStandingCommitteeissuesordinancesandresolutions;(2)Legal instrumentsissuedthecentralexecutiveandjusticebodiesincluding: decisionsandmandatesoftheStatePresident;decreesandresolutionsof theGovernment,decisionsanddirectivesofthePrimeMinister;decisions, directivesandcircularsofMinistersandequivalentlevels;resolutionsof theSupremeCourtsJudgeCouncilandotherlegalinstrumentsofthe SupremeProcuracy;and(3)resolutionsofthePeopleCouncilsand decisionsanddirectivesofthePeoplesCommittees.
Copyright2009UrbachHackerYoungInternationalLtd
AlllawsandregulationsrootfromtheConstitutionandthentheCivil Code.Otherimportantlawsconcerningforeigninvestmentandtrade includetheLawonInvestmentinVietnam;theLawonEnterprise;the LawonCommerce;theLabourCode;theLawonLand;LawonCorporate IncomeTax;theLawonValueAddedTaxtheLawonCompetition,etc. ForexControl Vietnamimposesastrictcontroloverforeigncurrency.Foreigninvestors whowishtotransfercapitalinforeigncurrencyintoVietnammustopena specialisedforeigncurrencybankaccountatalegalbankinVietnam. Duringtheoperation,foreigncurrencyremittedintoVietnambyforeign investorsmustbeconvertedintoVietnamesedongordepositedina foreigncurrencybankaccount.Paymentmadebyenterprisesinforeign currencycanbeimplementedincertaincasesasdescribedbytheState BankofVietnam(SBV),suchaspaymentforimportedgoodsandservices; abroadremittancebyforeigninvestorsofinvestedandreinvestedcapital, earningprofitsfromundertakinginVietnam,principalsandinterestsof offshoreloansandcredits,andotherlegalbenefits;paymentfortravel allowancestoemployeestravellingabroad,paymentsofsalariesandother legalincomesofforeigners;personallycarriedforeigncurrencyarealso allowed(butforalimitedamountdefinedbylawfordifferent circumstancesandincaseofexcess,thewholeamountwillbetaxedlike forextrading).Inallcasesabovetheamountofforeigncurrencyare monitored. Foreigninvestorswhoareinneedofforeigncurrencyforpayingallowed businesstransactionscanbuyforeigncurrencyfrompermittedbanksin Vietnam.Offshoreloansreapedbyenterprisesaresubjecttocertain conditionsasregulatedbySBV.Mediumandlongtermloansarerequired toberegisteredwithSBV. LandUseRightandLandOwnership Acquisitionofrightstouserealproperty Domesticorganisations,householdsandindividuals(includingoverseas Vietnamese)mayselectallocationoflandorleaseoflandforthepurposes ofeithernoncommercialorcommercialInVietnam,landisownedbythe peopleandsubjecttoexclusiveadministrationbythestate.Ownershipof landbyanindividualororganisationisnotpermitted.Individualsand organisationsarehowevertitledtouseland(landuseright).Theland userightmaylegallybeobtainedbywayofallocationbythestateorlease fromthestateorassignmentfromexistinglandusers.Ownershipof buildingsandotherassetsattachedtolandispermitted.Theymay convertfromleasetoallocation.However,100percentforeigninvested
Copyright2009UrbachHackerYoungInternationalLtd
companiesmayonlyleaselandtoimplementtheirinvestmentprojectsin Vietnam(i.e.forcommercialpurposes). Duration Landmaybeallocatedtodomesticorganisations,householdsand individuals(includingoverseasVietnamese)for(i)anindefinitetermfor noncommercialpurposes(includingresidentialpurposes),or(ii)adefinite term(upto50years)fornonagriculturalproductionandbusiness purposes.Meanwhile,leasesareonlyforadefiniteterm,anddependon thedurationoftheproposedinvestmentproject. Thetermmaybefixedupto70yearsincase(i)investmentprojectswith largecapitalbutslowcapitalrecoveryrateandinvestmentprojectsin areaswithdifficultsocioeconomicconditionsorespeciallydifficult socioeconomicconditionswhichrequirealongerperiodoflandallocation orlandlease,or(ii)oneoffpaymentoflandrentismadeforthewhole50 yeartermofthelease. Noticeably,uponexpiryofthedurationofallocationoflandorleaseof land,thestatemaygrantanextensioniftheinvestorsorequests.Inall circumstancestheextendedleasetermforaforeigninvestedcompanymay notexceedthetermofpreviousduration. Conditionsforgrantinganextensioninclude:(i)theextendedduration mustbeconsistentwiththesupplementedprojectasapprovedbythe licensingauthority,(ii)theforeigninvestedcompanyhasstrictlyobserved thelawsonlandduringitsuseofsuchland,and(iii)thecontinueduseof suchlandmustbeinconformitywiththeapprovedlandusezoning. Scopeofrightstouserealproperty Currently,therearetwooptionsforpaymentofrentforleaseofland, namely(i)annualpaymentoflandrentand(ii)oneoffpaymentofland rentforthewholetermofthelease. Scopeofthelanduserightdependsontheformofpaymentofrent.Inthe caseofoneoffpayment,thelandusersareentitledtodealwithsuchland inmuchthesamewayasafreeholdowneroflandwouldinother countries.Thisincludesassigning,subleasing,mortgagingand contributingascapitalthelanduseright.Landusersadoptingannual paymentdonothavetheserights.Inotherwords,suchlandis untouchableintermsoftherightstouserealproperty. OnMay222008,The12thNationalAssemblyadoptedaresolutionthat givesforeignindividualsandorganisationsinVietnamtherighttobuy
Copyright2009UrbachHackerYoungInternationalLtd
andownapartmentsinthecountry.Thenationallegislatorsagreedthe resolutionwillbeimplementedonatrialbasisforfiveyears,asofJanuary 1,2009.Undertheresolution,foreignindividualsandorganisationswho investdirectlyinthecountryandthosehiredasexecutivesbyVietnamese orforeigninvestedenterpriseswillbeentitledtopurchaseandown apartmentsinVietnam. Theresolutionalsobenefitsforeignersthathavemadeaspecial contributiontoVietnamrecognisedbytheStatePresidentandthePrime Minister,collegegraduateswithspecialexpertiseworkinginsocio economicfields,andforeignerswhohavemarriedVietnamesecitizens. Foreignerswhowanttobuyhousesarerequiredtohavearesidency permitformorethanoneyearwithoutdiplomaticprivileges.Theywillbe allowedtobuyandownapartmentsinhousingdevelopmentprojectsin areastheyarenotbannedfromlivingormovingaround. Theyarepermittedtoownapartmentsforamaximumof50yearsfromthe certifieddateofownershipbutareobligedtosellordonatetheir apartmentswithinoneyearoftheirownershipcertificatesexpirydate. Theresolutionalsogivesforeigninvestedbusinessestherighttobuyand ownapartments.However,theymustnotgetinvolvedinrealestate developmentandmusthavearealneedforemployeeaccommodation. Foreigninvestedbusinessesarerequiredtohaveinvestmentlicenses grantedbyanauthorisedVietnameseagencyandareallowedtoown apartmentswhiletheyareinvestinginthecountry,whichisstatedintheir investmentlicenses. StockMarket ThereisaverynewandexcitingwaytoinvestinVietnam.Vietnamhas twostockexchangecentres,oneinHoChiMinhCityandtheotherin Hanoi.Althoughestablishmentofthosestockexchangecentreswas decidedin1998,theHoChiMinhStockExchangeofficiallyoperatedin July2000,earlierthantheHanoicentre,whichwascommencedinMarch 2005. Asofthetimeofthiswriting,thereare148companieslistinginHanoi SecurityTradingCentreand156inHoChiMinhStockExchange. IPO Jointstockcompanies(orshareholdingcompanies)wishingtohaveinitial publicofferingofstockmustsatisfythefollowingconditions:(1)beinga jointstockcompanyhavingaminimumpaidincapitalof10billionVND; (2)havingnoaccumulatelosstilltheyearofapplicationandprofitinthe
Copyright2009UrbachHackerYoungInternationalLtd
yearpriortotheoneapplyingtoIPO;and(3)havingthefeasibilitystudy toutilisetheproceedsfromtheissuanceofsharesapprovedbyGeneral MeetingofShareholders. ThestockgoingtoIPOmustberegisteredwiththeStateSecurities Commission(SSC). TheIPOofadditionalissuanceofshares,issuanceofwarrantsandrights, bonds,andsecuritiesinvestmentfundunitsshallbesubjecttodifferent regulationsandconditions. Overseaslisting Vietnamesejointstockcompaniesmayofferstocksorbondsinoverseas markets.Currentlawsandregulationarebeingcompletedtoprovide betterregimesforoverseaslistings. Foreignparticipation Foreignorganisationsandindividualspurchasingsharesonthesecurities marketofVietnammayholdmaximumof49%ofthetotallistedshareof anyissuingorganisation.Thiscapisexpectedtoberemovedafter5years asofthedateofVietnamsaccessiontoWTO.However,buyingand sellingsecuritiesbyforeigncurrenciesarestillstrictlycontrolledas describedinForexControlsectionabove.
Copyright2009UrbachHackerYoungInternationalLtd
10
3.
Foreign investment
TheFifthCongressoftheVietnameseCommunistPartymadeaturning pointdecisioninthecountrysdevelopmentstrategytobuildamarket orientedeconomyunderthestatecontrol.TheVietnameseCommunist PartyandState,whileattemptingtomobilisealldomesticresources, pursuethepolicyofdeepeninginternationaleconomicrelationstoseek newopportunitiesforthecountryseconomiccooperationand development. Aspartofforeigneconomicrelationsactivities,foreigndirectinvestment (FDI)wasputhighontheagenda.Asdomesticcapitalraisingpossibilities arelimited,FDIconstitutesanimportantparttotheVietnameseeconomy. ThemajorgoalofVietnamsFDIpolicyistoattractcapital,advanced technology,andmanagementskillsinordertoeffectivelydevelopthe countryspotential,increasesavings,improvepeopleslivingstandardand realisethecauseofmodernisationandindustrialisation. ForeigninvestmentsinVietnamarerealisedunderthefollowingforms: BusinessCooperationContract;Jointventure;100%foreignowned enterprises;OtherformssuchasExportProcessingZone,BuildOperate Transfer(BOT),BuildTransferOperate(BTO),andBuildTransfer(BT). FIAfiguresshowthatVietnamsnewlypledgedandexpandedFDIcapital wasUS$12billionin2006andUS$21.3billionin2007.Thenewfund reachedUS$45.3billioninthefirstsevenmonthsofthisyear(thetotal registeredinvestmentcapitalforthenew654projectswas44.49billion USD.Theremaining788.6millionUSDwentto188currentprojects). Togetherwiththese,thedisbursementfundincreaseddrasticallyfrom US$4.6billionin2006toUS$8billionin2007.Thefirstsevenmonthsof 2008sawUS$6billioninimplementationcapital.Thelargestinvestment camefromBruneisNewCitygroupwhichinvested4.3billionUSDina newurbanareaincentralPhuYenprovince,aswellasajointventure amongPetroVietnam,VinaSCGChemicalandThaiPlastictobuilda US$3.77billionLongSonoilrefineryinsouthernBaRiaVungTau province.AUS$3.5billioninauniversityurbanareainHoChiMinhCity withinvestmentbyMalaysianBerjayaLeisureCompanyalsorankedhigh onthelist. TaiwanremainsVietnamslargestinvestorwith82projectstotallyworth US$8.4billion,representing18.9percentofregisteredcapital.Itis
Copyright2009UrbachHackerYoungInternationalLtd
11
followedbyJapanwith65projectsvaluedat7.2billionUSD,Malaysia with28projectsworthUS$5.07billion,Bruneiwith14projectscapitalised atUS$4.3billion,Canadawith4projectsworthUS$4.2billionand Singaporewith48projectsvaluedatUS$4.02billion. FDIattractioninthefirstsevenmonthsdoubledthefigureof2007 (US$21.3billion),demonstratingforeigninvestorstrustinVietnams investmentenvironment,despitetheimpactsofhighinflationandprice fluctuationsonforeigninvestmentactivities,accordingtotheDepartment ofForeignInvestmentoftheMPI. GiventhedecentralisationofFDIactivitiesinaccordancewiththe InvestmentLawpassedin2005,localgovernmentshavedoneagoodjob ofattractingandacceleratingFDIprojectimplementation,resultingin sharprisesoftheinflowssincethen.Theachievementwasalsoattributed bycombinedeffortsmadebyrelevantministries,agenciesandlocalitiesin investmentpromotion.
Copyright2009UrbachHackerYoungInternationalLtd
12
4.
Setting up a Business
RequireddocumentsforregistrationsofabusinessinVietnamare specifiedbyLawonEnterprises2005.Theseregulationscanbe characterisedwithopenness,ease,andflexibility.Theregistrationprocess couldtakeapproximately50daysandVND4,400,000(aboutUS$280)with nominimumcapitalrequirementforanytypeofbusiness. Accordingtothelaw,thefounderofanenterprisehastosubmitallofthe businessregistrationdocumentsasprescribedbytheLawtoanauthorised businessregistrationbody.Thebusinessregistrationbodywillconsider thebusinessregistrationdocumentsandissueabusinessregistration certificatewithinten(10)businessdays.Ifthebusinessregistration certificateisrefused,thefounderoftheenterprisewillbenotifiedin writing.Thenoticemustspecifythereasonsandtheamendmentsor additionsrequired. Thetimelimitforissuanceofabusinessregistrationcertificateattachedto aspecificinvestmentprojectissubjecttothelawoninvestment. Soleproprietorships Thereareseveralrestrictionsuponthecreationofsoleproprietorship(also knownasprivateenterprise).Thefounderhastobeolderthan18yearsof age.Inordertolegallymanageorestablishasoleproprietorship,the founderhastobementallycapable,withoutcriminalrecord(orhasbeen erased)andnotbeingastateofficialsoramemberofthearmy.One personcanonlyestablishasinglesoleproprietorship. Theapprovaloftheprimeministerofstateisrequiredifthesole proprietorshipproposestoconductbusinessinthefollowingareas:(1) manufacturinganddistributionofexplosives,poison,andtoxicchemicals, (2)miningofcertainpreciousminerals,(3)productionandsupplyof electricityandwateronalargescale,(4)manufactureofinformation transmittingfacilities,postalandtelecommunicationservices, broadcasting,television,andpublication,(5)oceanshippingandair transportation.(6)specialistexportandimportbusiness,(7)international tourism. Requiredregistrationdocumentsare:(1)requestforbusinessregistration inthestandardformpublishedbytheauthorisedbusinessregistration body,(2)copyofpeoplesidentitycard,passportorotherlawfulpersonal identification,(3)documentofanauthorisedbodyororganisation certifyingthelegalcapitalinrespectofenterprisesconductinglinesof 13
Copyright2009UrbachHackerYoungInternationalLtd
businessforwhichlegalcapitalisrequiredbylaw,(4)practicing certificatesofthedirectorandotherindividualsinrespectofenterprises conductinglinesofbusinessforwhichapracticingcertificateisrequired bylaw. Theownersofsoleproprietorshipshaveunlimitedliabilityandcannot issueanytypeofsecurity. Partnership Requiredregistrationdocumentsforpartnershiparesimilartoprivate enterpriseexceptfortheadditionofthedraftcharterofthecompany.A partnershipmusthaveatleasttwounlimitedliabilitypartners.Additional limitedliabilitypartnerscouldalsobeinapartnershipbutareonlyliable inprincipletotheextentoftheircapitalcontribution. Partnershipcannotissueanytypeofsecurity.Unlimitedliabilitypartners cannotbeownerofaprivateenterpriseoranunlimitedliabilityofanother partnership.Activitiescarriedoutbyanunlimitedliabilitypartner beyondthescopeofregisteredlinesofbusinessofthecompanyshallnot fallwithinthecompanysliability,unlesssuchactivitiesareapprovedby theotherpartners. Limitedliabilitycompanies Requiredregistrationdocumentsforlimitedliabilitycompaniesaresimilar topartnershipexceptfortheadditionofthelegaldocumentationsfor memberwhichisanorganisation.Alimitedliabilitycompanycannot havemorethanfiftymembers.Allmembersareliabletotheextentof capitalthatitcontributedtothecompany.Membersshareare transferablebuthaslowerliquidityasstock. Limitedliabilitycompaniescannotissueshares.Onememberlimited liabilitycompaniessharesimilartreatmentsexcepttheeventof withdrawingorassigningchartedcapital.Onememberlimitedliability companiesalsocouldnotwithdrawprofitsofthecompanyincaseswhere thecompanyhasnotpaidinfullalldebtsandotherpropertyobligations whichbecomedue.Inordertocarryoutsuchactivities,thelawrequires thecompanyregistertobeconvertedintomultiplememberslimited liabilitycompanieswithin15daysofsuchassignmentorwithdrawal. Jointstockcompanies Requiredregistrationdocumentsforjointstockcompaniesaresimilarto limitedliabilitiesexceptforlegaldocumentationsformemberswhichisan
Copyright2009UrbachHackerYoungInternationalLtd
14
organisationareonlyrequiredforfoundingshareholders.Shareholders maybeorganisationsorindividuals;theremustbeatleastthree shareholdersandthereisnorestrictiononthemaximumnumber.Such lawentailsthattwoorfewermembersmustchooseanothertypeof businessentityforestablishmentthereforerestrictstheabilitytoissue securityofsuchcompanies. Joinstockcompaniescanissueanytypeofsecurity.Thecompanymust havecommonsharesandmayhavepreferredshares.Votingshares,one typeofpreferredshare,canonlybeheldbyfoundingshareholdersor organisationauthorisedbythegovernmentandvalidforthreeyearsfrom thedateofissuanceofbusinessregistrationcertificate.Afterthreeyears, thoseoffoundingshareholderswillbeconvertedintocommonsharesand allrestrictiononcommonshareswillbelifted.Dividends,ifpaidincash mustbepaidinVietnamesedong. Otherthanthosementionedabove,therearesomepopularwaystodo businessinVietnamhavebeenusedbyforeigninvestors. ForeignCompanyBranches Foreigncorporationsandforeigntradersareentitledtosetupatrading branchinVietnamifhavingbusinessregistrationorcertificateof incorporationgrantedintheircountryforatleast5years.Thebusiness scopeofatradingbranchislimitedtothefollowings: Goodslocallyboughtforexport:handicrafts;processed/unprocessed agriculturalproducts(exceptriceandcoffee);processed/unprocessed fruits,consumersindustrialcommodities,animalandpoultrymeats andprocessedfoodstuff. Goodsimportforlocalsale:machineryandequipmentformining, processingofagriculturalproducts;inputmaterialsforproductionof humantreatmentdrugsandanimaldrugs;inputmaterialsfor productionoffertilizersandinsecticides. RepresentativeOffices Foreigncorporationsarealsoentitledtosetuponeorseveral representativeofficesinVietnam.Arepresentativeofficeisallowedtodo thefollowingactivities: Actasliaisonofficetostudybusinessenvironment Lookfortrade,investmentopportunitiesandpartners Actonbehalfoftheirheadofficetonegotiateandsigncontractsforthe supplyandpurchaseofgoodsandservices Superviseandacceleratetheimplementationofcontractsassignedby theirheadoffice Advertiseandpromotetheircompanysgoodsandservices.
Copyright2009UrbachHackerYoungInternationalLtd
15
Copyright2009UrbachHackerYoungInternationalLtd
16
5.
Labour
ThelabourlawofVietnamisgovernedbytheLabourCodeoftheSocialist RepublicofVietnam.TheLabourCodeprotectstherighttowork,the interestsandotherrightsofthelabourer.Atthesametimeitprotectsthe rightsandlawfulinterestsofthelabouruser.Thereforecreating conditionsfortheestablishmentofharmoniousandstablelabourrelations, helpingtodevelopthecreativenessandtalentoftheintellectualand manualworkers,ofthelabourmanagersinordertoachieveproductivity, qualityandsocialprogressinlabour,production,service,efficiencyinthe useandmanagementoflabour,thuscontributingtotheindustrialisation andmodernisationofthecountryinthecauseofbringingprosperitytothe peopleandstrengthtothenationandbuildingajustandcivilisedsociety. Someofthemoreimportantpointsarementionedandexplainedbelow. LabourContract Alabourcontractmustbeinwritingandsignedbetweentheemployee andtheEmployersrepresentative,unlesstheemploymentwilllastless thanthreemonths.Thecontractshouldprovideforeitheradefiniteterm, anindefinitetermorforworkonseasonalorlimitedbasis.Itisforbidden tosignlabourcontractforaseasonjoboraspecificjobwithdurationof lessthanoneyeartodojobsofapermanentcharacterlastingmorethan oneyear. AlabourcontractmustbeinconformitywiththeVietnameselawsand collectiveagreements(ifany).Itmusthaveclausesrelatingto:thework involved,workinghours,restbreaks,recreationtime,wages,placeof works,termofcontract,occupationalsafetyandhygiene,socialand medicalinsurance. Probationaryagreementsareoftenincludedinthecontracts.The probationarylengthvaries,andsubjecttothenatureandcomplexityof assignedjobs. WorkingTime Asperthecodetheworkingtimeshallnotexceed8hoursinadayand48 hoursinaweek.Thelabouruserandthelabourermayagreeonextra hoursworkbutthetimeofsuchworkshallnotexceedfourhoursinaday and200hoursinayear. Rest
Copyright2009UrbachHackerYoungInternationalLtd
17
Vietnamhassomespecificregulationsaboutrestingtime,suchthateach weekthelabourerisentitledatleastonedayofrest(24straighthours);the employermustensurethatthelabourercanhaveanaverageoffourdays ofrestatleastinamonth,etc. Thereare8mandatorypaidholidays.Employeeswhoserveforatleast oneyearshallbeentitledto12dayspaidannualleaves,whosedateand timearearrangedbybothemployerandemployee.Asthelawrequires, thenumbercouldbe14to16ifdifficultworkingconditionspresent. Annualleaveincreasesasseniorityofonegrows. StatutoryMinimums Salaryratesmustconformtothecollectivelabouragreement(ifapplicable) andmustnotbelessthanthelegallyregulatedminimumrates.The monthlyminimumwagefordomesticenterpriseisVND540,000(about US$33).Therearecurrentlythreelevelsapplicabletoemployeesworking forforeigncapitalenterprises,whichcomedownfromVND1,000,000 VND(aboutUS$60)intheinnerofHanoiandHCMC,VND900,000(about US$54)inthesuburbofHanoi,HCMC,andtheinnerofHaLong,Hai Phong,BienHoa,VungTau,ThuDauMot,toVND800,000(aboutUS$48) intherestofthecountry.Inanearfuture,therewillbenodifferencesin requiredminimumwagebetweenforeignownedanddomestic companies. MandatoryInsurance Anenterprisethatemploysanemployeeformorethan3monthsmustpay socialinsurance.Theemployeeisresponsiblefor6%ofsalaryand employer15%oftheenterprisestotalsalaryfundtobepaidtothesocial insuranceagency. Healthinsurancewillbepaidatthesametimeofsocialinsurance payment.Theemployerwillpay2%ofthetotalsalaryfundandthe employeewillberesponsiblefor1%ofhis/hersalaryforhealthinsurance. Theemployershallwithholdthesocialinsuranceamountsfromthe employeeswhenmakingsalarypaymentandremitthoseamountstothe insuranceagency. EstablishmentofLabourUnion Foreigninvestedenterprisesarenotpermittedtobartheestablishmentof alabourunionintheenterprise.Thelabourunioninanenterpriseisa representativeunitofallemployeesinthatenterpriseandwillbe establishedtoprotecttheemployeeslegitimaterightsandtorepresentall theemployeesinsettlementofdisputesasarisen.Theemployerisalso
Copyright2009UrbachHackerYoungInternationalLtd
18
requiredtoenterintoacollectivelabouragreementwithallemployees representedbythelabourunion. CollectiveLabourAgreement Representativesofbothemployersandemployeesinanenterpriseare requiredtonegotiateandsignacollectiveagreement.Normally,the employeesrepresentativeisthechairmanoftheenterprisestradeunion. Acollectivelabouragreementmustcoverallmaterssuchaswages,and workingconditionsforeachcategoryofjobs.Acollectivelabour agreementshallhavethevaliditydependingontheagreementbetween theemployerandenterprisestradeunionexecutivecommittee.Acopyof thecollectivelabouragreementmustbesubmittedtotheprovinciallabour departmentforregistration. Thetermofthecollectivelabouragreementmaybeextendedfromoneto threeyears.Thisisthemainlegalframeworkstatingrightsand obligationsoftheemployerandemployeestobecarriedoutinthecourse ofbusiness. LabourSafety&LabourSanitation Labourinspectorsplayanimportantroleinmaintaininganadequate workingenvironmentinVietnam.Theyinspectregularlyandfine companieswhichdonotfollowthelabourcodeonsafetyandsanitation. Thelabourermustbegivenahealthcheckduringtherecruitmentand periodicalhealthchecksaccordingtotheprescribedregime.Thecostof healthchecksforthelabourerisbornebythelabouruser. LabourDispute ItshouldbefirstnotedthatVietnameselawsallowemployeestostrike worksagainstemployers.Attemptsmustbemadetosettlelabour disputesthroughamicablenegotiationbetweentheemployerand employees.Ifthedisputecannotbesettledthroughnegotiation,the partiesmayreferthedisputetoaconciliationcouncilcomprisinganequal numberofrepresentativesfromeachside,oranarbitratorfromlocal labouragency. Ifallfails,thedisputecanbereferredtothelocalcourtforfinalsettlement.
Copyright2009UrbachHackerYoungInternationalLtd
19
6.
Taxation
Legislation Thebackboneofthetaxationsystemisallthetaxlawswhichforinstance, includetheLawonCorporateIncomeTax(passedonJune03,2003),the amendedLawonValueAddedTax(passedon03June2008),the amendedLawonSpecialSalesTax(passedonMay20,1998).Thereare alsohundredsofdecrees,circularsandotherregulationsbeingissuedby theGovernment,variousministriesandagencies,fromtimetotime,witha viewtoguidingfortheimplementationofthoselaws. TypesofTaxes Accordingtotheprevailingtaxlawsystemandinpractice,thefollowing taxesinVietnamare:Corporateincometax;Valueaddedtax;Specialsales taxes;Withholdingtax;Import/exporttax;Technologytransfertax;Foreign contractortax;andPersonalincometax. Landusetaxandfeesaretrivial. CorporateIncomeTax(CIT) CIT,whichwillbeadjustedto25%fromcurrent28%from2009,may reducetheStatebudgetaboutVND5trillionayear,butitwilloffsetthe cofferwiththeincreasinginvestmentinlongterm.Thenewamendedlaw allowsbusinessesnottopayforadvertisement,marketing,promotionand someotherspendingmorethan10%oftotalexpendituresreasonablefor taxation.Lawmakerssaidthatthereductionofcorporateincometaxwill createfavourablebusinessandinvestmentenvironment,helpcompanies improvefinancialaccumulationandcapabilityandcompetitiveness. VietnamhaslastcuttheCITfrom32%to28%in2003.Theincentivetax ratesvaryaccordingtothelevelofsocioeconomicdifficultiesofthe locationwheretheprojectstookplace.Thehighestandlowestofthe incentivetaxratesarebelow: (a)Thetaxrateof20%shallbegrantedtoprojects,foraperiodof10years fromtheirproductionstarting,whichbelongtothesectorswhere investmentareencouraged(includingserviceprojectsinIndustrialZones IZ),orinvestinthelocationswithsocioeconomicdifficulties. (b)Thetaxrateof10%shallbegrantedtoprojects,foraperiodof15years fromtheirproductionstarting,whichbelongtothesectorswhere investmentareencouraged(includingprojectsfordevelopmentofIZsand EPZs)andinvestinthelocationswithspecialsocioeconomicdifficulties.
Copyright2009UrbachHackerYoungInternationalLtd
20
Inadditiontothementionedincentivetaxrates,theprojectsmayenjoythe taxholidaysandreductionsvaryfrom(a)2yearstaxfreefromthefirst profitmakingyearand50%reductionforthefollowing2yearsto(b)4 yearstaxfreefromthefirstprofitmakingyearand50%reductionforthe following9years,withrespecttoBOT,BTOandBTprojects. ValueAddedTax ValueAddedTax(VAT)isleviedontheaddedvalueofmostgoodsand servicesgeneratedduringtheprocessfromtheproduction,circulationto consumption(Withrespecttosomecategories,theyaresubjecttoSpecial SalesTax,asdescribedinSection16.5hereunder). TherearefourVATratesasfollows:(i)Thetaxrateof0%isapplicableto goodsforexport,abroadreinsurance,abroadcreditservices,abroad financialinvestment,abroadstockinvestment;(ii)Thetaxrateof5%is applicabletoessentialgoodsandservicessuchaswater,fertilizer, insecticides,medicine,educationalandtrainingequipmentandtools,baby toys,scientificandartbooks,naturalagroforestryproducts,animalfeeds, servicesforscientificandagriculturalapplications,etc;(iii)Thestandard taxrateof10%isapplicabletomostgoodsandservicessuchaspetroleum, coals,oresandotherexploitedproducts;commercialelectricity;electronic, electricalandmechanicalproducts;chemicalsandcosmetics;textiles, fabrics,yarns;sugar,confectioneries,andsoftdrinks;glass,plastic,rubber, constructionmaterials;constructionandinstallationworks,transportation andloading/unloading;postalandtelecommunicationservices;leasingof premise,equipmentandtransportmeans;legalconsultingservices;and luxurygoodsandservicessuchasgold,silverandpreciousstonetrading, hotel,tourism,catering,allkindsoflottery,shippingagents,whichinthe pastweresubjecttothetaxrateof20%. SpecialSalesTax OtherthanthosesubjecttoVAT,thefollowingarebeingsubjecttothe SpecialSalestaxwiththeratesrangingfrom10%to75%(lowerthaninthe pastratesof15%to100%),whicharecigarettes,beer(notincludingdraft beer),alcohol,cars(lessthan24seats),gasoline,airconditioners(lessthan 90000BTU),playingcards,josspapers,jossarticles;tradingindancing clubs,massage,karaoke,casinos,jackpotgamemachinebasedservices, lotterytrading,andgolfcoursetrading.Bettinginhorseraceandmotor raceshallbeexcludedfromthelistoftaxableservices. ThegoodsandservicessubjecttoVATarenotsubjecttospecialsalestax, andviceversa.
Copyright2009UrbachHackerYoungInternationalLtd
21
WithholdingTax Sincethecorporateincometaxrateincreasedto28%from25%asabove mentioned,foreigncapitalprojectsandinvestorsshallbefreefrompaying thewithholdingtaxfrom1January2004whentherecentlyamendedLaw onCorporateIncomeTaxcomesintofulleffect. Import/ExportDuties Theimporttariffandexporttariffarebeingamendedfrequentlyfromtime totimetosatisfytheStaterequirementimportandexportmanagement. Importtariffincludes(1)preferentialtariffapplicabletothecountry applyingtheMostFavouredNation(MFN)treatmentwithVietnam,(2) specialpreferentialtariffapplicabletocountriesapplyingspecialtreatment ofimporttariffwithVietnam,and(3)normaltariffwhichisequalupto 70%ofpreferentialtariff.Althoughtherearethreelevelsofimporttariff, thepreferentialtariffsareapplyingtoalmostcountrieshavingtrade relationwithVietnam.Dutiablepricesaredeterminedinaccordancewith therulesoftheGeneralAgreementonTradeandTariff(GATT)adopted bythegovernment. Importationofcommoditiesforfixedassetsofnewlyestablishedforeign investedenterprises,afterbeingapprovedbycompetentauthorityin Vietnam,isexemptedfromimportduties. Importationofmaterialsandcomponentsforproductionbyforeign investedenterpriseswhicharelocatedinareashavingspecialdifficult socioeconomicconditionsandlyingisspecialpreferentialinvestment sectorshallbeexemptedfromimportdutyfor5yearsfrom commencementofproduction. TechnologyTransferTax Alltechnologytransferorsaresubjecttothetechnologytransfertaxwhich imposeduponthetaxablerevenuesasagreedinthecontract.Insteadof threeratespreviously,thereexistsonlyarateof10%applicablerecentlyto allcases. ForeignContractorTax Foreigncontractorswhoconductproductionandbusinessactivitiesin Vietnam,notundertheFIL,onthebasisofsigningcontractswith Vietnameselegalentities,andsubcontractorswhoprovideservicesto contractorsinVietnam,shallbeliableforpayingthesametaxesandtax ratesasapplicabletothelocalenterprises.ThesetaxesincludeVAT, corporateincometax,importexportduty,personalincometax,andothers ifsorequiredbythelawsofVietnam.
Copyright2009UrbachHackerYoungInternationalLtd
22
Foreigncontractorsandsubcontractorsmaychooseonebetweenthetwo followingwaystopayVATandcorporateincometax: (i)OrdinaryMethod ThisisapplicabletowhomfollowingtheVietnameseaccountingsystem. Thetaxpaymentwillbedoneinthesamewayoflocalentities,attheVAT andcorporateincometaxratesasdescribedabove. (ii)CombinedMethod Thismethodisapplicablewhenforeigncontractorsorsubcontractorsdo notusetheVietnameseaccountingsystem.Inordertofacilitatethe assessmentandpaymentofVATandcorporateincometax,thesetwo typesoftaxesareconsolidatedintoonebasewhichisthetaxablerevenues. Addedvaluesvaryfrom10%,25%,30%to50%ofthetaxablerevenues, subjecttowhetheritistrading,production,constructionwithorwithout supplies.VATwillbecalculatedbymultiplyingthesaidaddedvalues withtherespectiveratesasdescribedinSection16.4above.Payable corporateincometaxvariesfrom1%,2%,5%to10%ofthetaxable revenues,subjecttowhetheritistrading;production,transport, construction;services;lending;andtechnologytransfer. PersonalIncomeTax Allforeignershavingincomesin/fromVietnam,regardlessthelengthof timetheyliveinVietnamarethepayersofpersonalincometax. ThoselivinginVietnamlessthan183days,theywillbeliableforpaying taxatafixedrateof25%(formerly10%)oftheaggregateincome.Those livinginVietnamover183days(socalledlocallyresidentforeigners),will besubjecttotheprogressivetaxtariff,withthemaximumrateofupto 40%oftheirmonthlyincome. Thethresholdoftaxableincomeapplicabletoalocallyresidentforeigneris VND8million.
Copyright2009UrbachHackerYoungInternationalLtd
23
7.
OverviewofAccountingPracticeandEnvironment Determinedtobeanexportdriveneconomy,Vietnamhasrapidlychanged itsregulationsandlaws,aswellasaccountingstandardstoadaptwithan internationalbusinessenvironment.In2000,theMinistryofFinanceof Vietnaminitiatedaprogramtocreateasuitableandadequatesystemof accountingforVietnam(VietnameseAccountingStandard,akaVAS) basedonInternationalAccountingStandard(IAS). Todate,26accountingstandardsandtheircompliantguideshavebeen issued.Thesestandardsandthefutureonesareexpectedtoundergosome changesastheInternationalFederationAccountants(IFAC)isalso perfectingInternationalFinancialReportingStandards(IFRS),whichwere createdbyadoptingallofIASandaddingimprovements.Thechanges andadditionstoVASaimtocreatereliableandaccuratefinancialreports, thereforehelpingdomesticandinternationalinvestorshaveawell informeddecision,creatingaharmonisationinmanagingandreporting formultinationalcorporations. Therearealargenumberofgovernmentaldecreesanddecisionsinplace toregulatefinancialreportinginVietnam.OfthosetheAccountingLaw issuedbythe11thNationalAssemblyofVietnamandDecreesNo.128 and129arethehighestauthoritiesforaccountingpractices. Vietnameseaccountantsarebecomingmoredynamicandbetterorganised astheeconomyquicklyevolves.VietnameseAssociationofCertified PublicAccountants(VACPA)wasformedin2006tooverseeauditors practices.Anotheraccountancybody,VietnamAssociationof AccountantsandAuditors(VAA)isalsoinplacetounifyaccounting professionals,promotethefieldandimprovetechnicalskillstomeetthe demandofarapidlychangingmarket. PresentationofFinancialStatements AllbusinessentitiesinVietnamhavetofollowVietnamAccounting StandardsandVietnameseAccountingSystemforbusinessentitiesand otherrelevantlegaldocumentsinpreparingfinancialstatements.Reports arerequiredtobetruthful,reasonable,consistentandcomparable;further detailswillbediscussedbelow.Thefollowingaremandatory: BalanceSheet IncomeStatement StatementofCashflow Disclosurenotes
Copyright2009UrbachHackerYoungInternationalLtd
24
Therearetwomainstandardsforpreparingandpresentingfinancial reports:VAS21andVAS24.Detailsabouttreatmentforspecificaccounts arecoveredinotherstandards. Fiscalyear:Itisusuallythecalendaryearor12monthperiodbutcan beshorterdependsonthenatureofbusiness. AlltransactionsmustberecordedinVietnamDongoranother currencyapprovedbytheMinistryofFinancebasedonthespecific practicalneedofthebusiness.However,financialstatementsusedin VietnammustconvertintoVietnamDongaccordingtocompliance guideforVAS10. VAS18statesthatfinancialstatementsmustusetheaccrualbasis, historicalcostsandreflectgoingconcern.Informationmustbe truthful,relevant,objective,recordedusingconservatismonevery significantaspect.Thestandardalsorequiredpreparersbeprudent whilepresentingpayablesandcontingencies.Allowancesand provisionsmustbeappropriatelyrecordedaccordingtocompliance guideofVAS18. Alltransactions,economiceventsmustberecordedusingappropriate accountingpolicieswhichshouldbeappliedconsistently.Changesin accountingestimatesorpoliciesmustbedisclosedaccordingtoVAS 29. Banksandcreditunionsmustprepareandpresentfinancialstatement accordingtoVAS22 VietnamAccountingStandardsalsoprovideaguidanceforbusinesses howtorecordandpresenttransactionsinvolveconsumergoods,real estate,selfbuiltasset,capitallease,realestateinvestment,interest expense,constructioncontract,insurancecontractandcorporate incometax. TheStandardsalsoprovideguidanceforpresentingconsolidated financialreports,mergers,jointventure,andpartnershipinVAS25,11, 08,and07respectively. Auditfirmsandindependentauditorshavetofollowaccounting standardsandauditingstandardstoprovideanopinionabouttruthfulness andreliabilityofthefinancialstatements.Businessessubjecttosuch statutoryauditsincludestateownedenterprises,statefunded organisations,foreigninvestedbusinesses,banksandfinancialinstitutions andpubliclytradedcompanies.Otherbusinessesmayopttoaudittheir financialstatementstoincreasetransparency,productivity,investing attractivenessandcompetitiveness. Separatefromindependentauditfirms,aNationalAssemblycontrolled bodyofauditingknownasStateAuditisalsointhefield.Itsexistenceis
Copyright2009UrbachHackerYoungInternationalLtd
25
Copyright2009UrbachHackerYoungInternationalLtd
26
8.
9.
For contact details of UHY offices worldwide, or for details on how to contacttheUHYexecutiveoffice,pleasevisitwww.uhy.com
Copyright2009UrbachHackerYoungInternationalLtd
27