Vietnam’s government is aiming to create a favourable environment for foreign investors doing business in the country. Below are the six key regulatory changes every business should know when considering to expand in Vietnam.
Following the establishment of the ASEAN Economic Community, the signing of a number of free trade agreements in 2015 and the Trans Pacific Partnership on 4 February 2016, Vietnam has undergone internal reforms such as Decree No. 60/2015/ND-CP and the new laws on investment and enterprise. The new laws have significantly reduced administrative procedures and shortened the time required to set up foreign-owned companies in the country, providing a favourable investment environment for foreign investors.
Here are the six key regulatory changes in Vietnam:
1. Freedom on doing business
Before 1 July 2015, the enterprises were only allowed to conduct business according to the specified business scope provided in the investment certificate. From that date on, the enterprises can conduct business freely and they are not prohibited by the law.
2. Shorten licensing timeline for foreign investors
According to the previous regulation requirements, the licensing time for green field projects took approximately 45 days. Now the licensing process only takes 18 days - 15 days for the Investment Registration Certificate and three working days to obtain the Enterprise Registration Certificate.
3. Number of legal representatives
A Limited Liability Company can now appoint two or more legal representatives. This new requirement has a clear intention, direct involvement of management level - such as General Director or legal representative - on daily business activities of the enterprise in Vietnam is strictly required. As a result, the personal income tax imposing on the legal representative and the availability of investors’ human resources will be impacted.
4. Charter capital requirement
Charter capital (paid-off capital) must be contributed within three months of the Enterprise Registration Certificate issuance date. This new requirement seems to be new assessment criteria that the Government wonders to evaluate the financial capability of investors. In other words, the Government aims to welcome serious investors who can be able to commit to disburse or fund the capitals to their subsidiaries in Vietnam under timely manner.
5. Option of company seal quantity
Businesses can freely determine the number of company seals. Upon determination, the company seal must show the company’s name and code. The licensing authority must then be notified for posting this information onto the national business registration online portal.
6. Tax incentives
New and expanding investment projects in supporting industry can now enjoy tax incentives. The preferential tax rates are 10% or 17%, compared to standard rate of 20% in certain period of time, or whole project life together with tax exemption in several years followed by 50% tax reduction subsequently.