With its rising costs, China is no longer the go-to destination for many businesses, and Vietnam has arisen as a potential competitor. Recent trends show that the number of orders shifting from China to Vietnam has seen a significant increase.
For example, China’s Pearl River Delta, long known as one of the key factory centers for the world’s manufacturers (particularly those from Hong Kong) has now become too costly for many companies to stay in the region.
In the past three years alone, a growing number of businesses have relocated their operations from China to Vietnam in an attempt to escape rising costs and an increasingly complex regulatory environment.
Located in a strategic position for foreign companies with operations throughout Southeast Asia, Vietnam is an ideal export hub to reach other ASEAN markets.
Here in the second edition of the Southeast Asia analyzing series, we take a look at Vietnam and why you should consider this vibrant market for e-Commerce exports and sourcing products.
Vietnam has reformed its domestic legislation as a result of entering into international free trade agreements. However there are still inconsistencies to a certain degree.
Standards and technical regulations
Vietnam has its own sets of standards and technical regulations (including labelling), which are in line with international ones. However, exemption/simplification only applies where there is a mutual agreement with the other country.
You must make sure that you have obtained necessary technical licenses (if any) before exporting. The licensing process could take you some time.
The Information Centre of the Directorate for Standards and Quality (ISMQ) has responsibility for Vietnam’s standards system.
Intellectual property (IP)
Vietnam has the regulations in place to protect IPR. However, the enforcement is not strong.
You must take active measures to protect your IP before exporting. If faced with infringement, work with the relevant inspectorates in various ministries.
The National Office of Intellectual Property of Vietnam (NoIP) has responsibility for IPR registration.
Tax and customs considerations
Vietnam’s General Department of Taxation holds responsibility for tax matters.
Corporate Income Tax (CIT)
Enterprises are subject to tax rates under the CIT Law. Standard CIT rate used to be 22% and had been reduced to 20% since 2016. Businesses operating in certain sectors are subject to higher CIT rates.
Tax incentives are granted to businesses investing in some:
- Priority sectors
- Specific locations
- Large projects
Value Added Tax (VAT)
VAT applies on the duty paid value of imported goods. The importer must pay VAT to customs authorities at the same time they pay import duties.
Different rates of VAT are applied to different goods and services. Generally, the rate is up to 10%.
Other taxes and fees
Special Sales Tax (SST) is applied to the production and import of certain commodities. The commodities include:
- Liquor and beer
- Most vehicles
- Services such as casinos, gambling, lotteries, golf clubs, etc
Other taxes and fees include:
- Foreign contractor tax
- Natural resources tax
- Environment protection tax
Vietnam’s General Department of Customs holds responsibility for customs matters and provides information on tariffs.
Import duties are subject to frequent changes. Rates are applied according to different trade agreements.
Vietnam maintains a price reference database to avoid under-invoicing. This can impact customs valuation.
More information on the reference price list can be found in Decision No.1114/QĐ-TCHQ dated 10 April 2014. There is no free English version available.
Companies can look up their products by the 4 initial numbers of their Harmonised System (HS) codes
Find a local representative who can assist with the process of getting the documentation needed to import your goods into Vietnam.
Vietnam’s General Department of Customs provides a comprehensive list of documents.
The State Bank of Vietnam (SBV) imposes strict controls on foreign exchange transactions. You must get foreign currency convertibility rights from SBV as early as possible.
Convertibility rights are normally part of the investment licence, so they are given to companies operating in specific import substitute and other ‘important’ industries. Convertibility rights don’t guarantee availability of foreign exchange.
Foreign currency is allowed out of Vietnam only when:
- Needed for payment for goods and services by an importer with an import license and other supporting import documents (i.e. purchase contract, invoice, customs declaration form, etc.)
- Remittance of dividends has been cleared by Vietnamese tax authorities
- Repaying foreign loans and interest
- Paying salaries, bonuses and allowances to expatriate employees
Some cultural differences when doing business in Vietnam include:
- Smiles and nods do not necessarily mean ‘yes’ to your proposal
- Present business cards – and pretty much anything else happens in business context – with both hands
- Use correct form of address, e.g. Mr. Nguyen Nam Thuy would be Mr. Thuy
Business visas are required. You can find information on getting a visa on from the Vietnamese embassy. A 30 day business visa will generally be issued.
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