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POLITICAL ANALYSIS

1. Government stability:
- One party state where the Communist Party decide major policy issues, which are then
implemented by the Government.
- The country has very high level of stability due to the one party model
2. Investing in Vietnam:
2.1 Investing in Vietnam
a. Direct investing:
- Establishing a new enterprise: must be approved by the relevant authorities, requires:
investment project, investment certificate. In case of joint venture between foreign and
Vietnamese investors, the Joint Venture contract also will be required.
- Investing in an existing enterprise: by acquiring a stake in an existing Vietnamese enterprise.
- Branches and representative offices: to seek and expedite opportunities for the commercial
activities of a foreign business entity. But it is not an independent legal entity and foreign
entity does not own equity in the representative office and must not directly conduct profit-
making activities.
- Business Cooperation Contract: written agreement between a foreign investor and a
Vietnamese partner in which the parties agree to cooperate to undertake certain business
activities and to share revenue or profits arising from such activities.
b. Indirect investing:
- Most common way is via stock market.
2.2 Types of enterprise in Vietnam
- Single member limited liability company
- Multiple-member limited liability company
- Shareholding company (joint stock company)
3. License issuing process:
Foreign investors who invest in Vietnam for the first time must apply for an investment
certificate with the licensing authorities. It could be granted by either of the following processes:
- Registration of an investment certificate application
- Appraisal of an investment certificate application
Generally, the registration process only applies to project with investment capital less than 16
million dollar and doesnt belong to the list of business sectors in which investment is
conditional or prohibited. This process is simpler and the issuing time is shorter (within 15
working days upon receipt of complete application)
In other cases, the appraisal process will apply. The application documents will be more
sophisticated and the time could be up to 30 working days for processing.
Unless the project has investment capital of more than USD75 million (which would need to be
approved by the Prime Minister), the normal project will be granted the license by Peoples
committee of the province/city where it supposed to be located.
There will be no government frees for the assessment of the application documents. The new
Law of investment states that the time frame for approval must not exceed 45 days however,
delays should be expected in practice.
4. Tax policy:
The main categories of tax imposed in Vietnam are:
- Corporate Income Tax (CIT)
- Value Added Tax (VAT)
- Personal Income Tax (PIT)
- Foreign Contractor Tax
- Special Sales Tax
- Import and Export Duties
4.1 CIT
- Applies to all domestic and foreign entities that invest in Vietnam
- Include all foreign enterprises having income from Vietnam regardless they have a
permanent establishment in Vietnam or not
- Tax rate: Standard: 25%. Preferential: 20% or 10% and other rates: 32 50%
- Preferential tax treatment applies to encouraged sectors such as: healthcare, education,
high-tech, infrastructure development and software.
- Tax losses are allowed to carry forward for a period of 5 consecutive years
4.2 Value Added Tax:
- Applies to goods and services used for production, business and consumption in Vietnam
- Two methods can be used to calculate VAT payable/refund: Credit method and Direct
method. VAT under credit method is the difference between VAT Output (collected for
sales) and VAT input (paid for purchases). Direct method uses a deem rate on the added
value of the transaction. The standard VAT rate is 10%, but the rates are classified into 4
groups: exempt, 0%, 5% and 10%.
4.3 Special Sales Tax:
- Imposed on a selected number of goods and services
4.4 PIT:
- For tax resident (present in Vietnam for at least 183 days or having a regular resident
location in Vietnam or cannot be tax resident of another country), a progressive taxing
system, where the marginal rate range from 5 to 35% is applied on the worldwide income.
For non-tax resident, a flat rate of 20% is applied on the income derived from Vietnam.
4.5 Import Duties:
- All goods entering Vietnam are generally subject to import duty, and the rates may vary
depending on the nature of goods and the origin.
4.6 Foreign contractor tax:
- Applies for whom doing permitted businesses in Vietnam without a legal entity. The
standard FCT rate is 10% but different rates can be applied.

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