Viet Nam - A Guide for Business and Investment - asean-korea centre

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PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENT- Build factories, offices and warehouses in the EZfor sale or rent;- Determine the rental applicable to the leased orsub-leased land on which infrastructure facilitieshave been constructed.- Build houses for sale or rent, construct infrastructuresystem for lease or sub-lease, or transfer LURsof the land on which infrastructure facilities havebeen constructed;Overseas Vietnamese are allowed to buy a house attachedwith LUR;Foreign individuals investing or working in the EZ arepermitted to rent houses attached with LURs;EZ Developers and EZ Enterprises have the same rightsas IZ Developers and IZ Enterprises in relation to saleof assets attached to LURS, mortgage, lease, subleaseand assignment of LURs as mentioned above.There are currently nine EZs operating in Vietnam. Thefirst key EZs should be named is Chu Lai in Quang NamProvince with 116 registered projects with the totalinvestment capital of US$1.4 billion, of which 33 areforeign-invested projects. Other big EZs include DungQuat in Quang Ngai Province, Chan May in Hue City andNhon Hoi in Binh Dinh Province.8. Tax and tax incentives applicableto foreign direct investmentThe tax system in Viet Nam consists of the followingmain taxes:• Business Income Tax• Capital Assignment Profits Tax• Value Added Tax• Special Sales Tax (Excise tax)• Land Rentals• Personal Income Tax• Social insurance and health insurance• Other TaxesCorporate Income Tax (“CIT”)Effective from 1 January 2004, Viet Nam has one CITregime applicable to both domestic and foreign investedenterprises, with a standard CIT rate of 28%.Preferential rates of 10% for a period of 15 years, 15%for a period of 12 years and 20% for a period of 10years are available where certain criteria are met (e.g.investment in industries or locations whereby investmentis encouraged, high number of employees, businessexpansion, etc). When the period for preferentialrates expires, the rate generally reverts to the standardrate. There are also tax relief whereby an entityis entitled to CIT exemption for up to 4 years after thefirst profit making year and 50% CIT reduction up to 9years subsequently.In particular, tax rates applicable to exploitation ofoil and gas and other precious resources companiesrange from 28% to 50% depending on each project.Taxpayers may carry forward their losses for five yearswhilst carrying back is not permitted. Tax loss carry forwardplan must be registered with the tax authoritiesin the tax finalisation declaration for the year the lossincurred. Loss from transfer of land use rights/landlease rights is only allowed to set-off with income fromtransfer of land use rights/land lease rights.There are 45 Double Tax Agreements (DTAs), of which44 are in effect and 1 is not effective yet. DTAs can beused to protect a foreign entity from being subject toCIT in Vietnam if certain criteria are met.• Foreign Contractor Withholding Tax (withholdingtax)• Import-export tariffs• Natural Resources TaxCapital Assignment Profits TaxCIT of 28% applies on the gains derived from capitaltransfer. The taxable income is the difference betweenthe transfer value and the original value of the transferredcapital less any reasonable transfer expenses.36 Viet Nam - A Guide for Business and Investment
A tax reduction of 50% is available when a foreign investor’scapital is transferred to an enterprise which isestablished under Vietnamese laws.refund are: input VAT is larger than output VAT in 3consecutive months; exporters; input VAT on fixed assetsacquired, etc.Value Added Tax (“VAT”)Import DutyVAT applies to goods and services consumed in VietNam (including goods and services purchased fromabroad) and are collected during production, trading,provision of services and import stages. When supplyinggoods and/or services subject to VAT, the businessmust charge VAT on the value of goods or servicessupplied. The importer must pay import VAT to the customsoffice at the same time they pay import duties.The Viet Nam VAT system has three rate categories:0%, 5%, and 10% (the standard rate). The 0% rate appliesto exported goods and exported services (withsome exceptions). Exported goods are goods sold tooverseas or to export processing zones/export processingenterprises. Exported services are servicesprovided to and being consumed overseas. The 5%rate applies to areas of the economy concerned withthe provision of essential goods and services. The standardcommon 10% rate applies to other activities andgoods not specified as subject to the 5% rate. Additionally,there are 29 categories of goods and services thatare VAT exempt.The Vietnamese VAT system is also characterised bytwo types of VAT payers: deduction method VAT payersand direct method VAT payers. All companies andbusiness organisations are deduction method VAT payers.They will issue VAT invoices, charge output VAT tocustomers and claim input VAT through conventionalVAT returns.The direct method generally applies to small businesshouseholds which do not keep proper accounting recordsand foreign contractors (foreign companiesperforming business in Vietnam/having contracts withVietnamese customers without establishing alegal entity in Viet Nam) who do not want to maintainVietnamese accounting records. For these businesses,VAT is calculated at a deemed rate on gross turnover.VAT refund is eligible. Some of the examples for VATGenerally, all goods crossing Vietnamese borders aresubject to import/export duties. Import duty rates areclassified into three categories: ordinary rates, preferentialrates and special preferential rates.Preferential rates are applicable to imported goodsfrom countries that enjoy most-favoured-nation status(“MFN”) with Viet Nam. Currently, 89 countries enjoyMFN with Viet Nam. Special preferential rates are applicableto imported goods from countries that havespecial agreement with Viet Nam (such as ASEAN countries).Viet Nam joined ASEAN Free Trade Area (AFTA)in 1996. Under the AFTA Common Effective PreferentialTariff (CEPT) Scheme, Viet Nam has committed togradually eliminate all import tariffs in its Inclusion List.The ordinary rates are generally imposed at 150% ofthe preferential rates.Export DutyThe export of goods is encouraged by the Governmentof Viet Nam. Thus, export duties are only charged on afew items, basically natural resources such as mineralsand forest products but also on rice, seafood and scrapmetal. Export rates range from 0% - 45%.Customs PostViet Nam - A Guide for Business and Investment 37PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENT
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Page 6 and 7: PART V. INVESTMENT COSTS IN VIET NA
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Page 18 and 19: PART II. THE ECONOMYThe industrial
Page 20 and 21: PART II. THE ECONOMYExport, Import
Page 22 and 23: PART II. THE ECONOMY4. Official Dev
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Page 26 and 27: The center of Hanoi CapitalPART III
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Page 46 and 47: Ground Breaking Ceremony of Saigon
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Page 54 and 55: PART V. INVESTMENT COSTS IN VIETNAM
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Page 60 and 61: Labour11 Labour Code dated 23/6/199
Page 62 and 63: Real Estate Business34Law No. 63/20
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Page 66 and 67: APPENDIX IIIstruction of private an
Page 68 and 69: 14 Yen Bai Luc Yen, Mu Cang Chai an
Page 70 and 71: 52 Bac Lieu All districts Bac Lieu
Page 72 and 73: APPENDIX VIUseful contacts and addr
Page 74 and 75: APPENDIX VIHoa Binh DPINo. 3 Tran H
Page 76 and 77: Dak Lak DPINo. 17 Le Duan str, Buon
Page 78 and 79: Bac Giang IZs MBNo 48 Ngo Gia Tu st
Page 80 and 81: Vietnam - Singapore IZs MBNo. 8 Huy
Page 82 and 83: Germany, 29 Tran Phu St., HanoiTel:
Page 84 and 85: KPMG in VietnamHanoiHo Chi Minh Cit

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