Business Environment in Vietnam (cont.3)

5. Labor
 
Foreigners are allowed to be employed working in Vietnam; Most of cases they are required to obtain work permits granted by a local labor authority. All employees of a company (both local and foreigner) must be registered at the insurance and tax authorities.
 
Wages
Employees working in enterprises located in Vietnam including foreign invested capital enterprises as well as representative office may be paid salary only in VND for work performed in Vietnam. The minimum monthly wage applied from 1^st January 2016 depends on the location of the enterprise as follows:

 

While the area I includes districts of big cities, the area IV is regulated as remote and difficulty areas.
The above minimum wage shall be used as basic for negotiation between employee and employer.
Labour legislation (industrial relations/ trade unions)
The Labour Code of Vietnam includes the following provisions:

Social security and health insurance
The amount of social insurance contribution, to be paid by employers and employees, equals a specified percentage of the monthly basic salary of the employee as follows:

Labour Contracts
All types of labour contracts must be in writing in Vietnamese or Vietnamese and a foreign language and the subject of work must be described.
The contract of work must include:

 
Types of work contract

 
6. Taxation
 
The Vietnam tax system applied to enterprises comprises the following taxes:
- Corporate income tax: 20% of profit, (excluding oil exploitation: 32-50%; mine exploitation: 50-70%)

 
Corporate income tax prepayments (CIT)
Corporate income tax prepayments are payable quarterly (if any). Within first 20 days of first month of next quarter, enterprise has to submit quarterly tax report of last quarter to tax body describing the estimation operation result in the quarter. The corporate income tax of 20% of profit shall be paid in the same time with the report submission.
 
Tax payer: Pursuant to the regulations of Law on Corporate Income Tax, organizations producing and trading goods and services and earning income shall be liable to pay CIT.
 
CIT rates: The standard CIT rate is 20%. CIT rate applicable to activities of prospecting, exploring and exploiting oil and gas and other rare natural resources is between 32% and 50%, depending on each project or business establishment. Preferential CIT rates of 10% and 20% are applicable for enterprises investing in geographical areas with socio-economic difficulties, economic zones or hi-tech parks or in encouraged investment sectors for a certain period of time. Upon the expiry of the period for enjoyment of preferential rates, the standard CIT rate will be applied. 
 

 
The duration for application of preferential CIT rates shall be counted from the first year when an enterprise has income.
 
The tax exemption or reduction duration shall be counted from the first year when an enterprise has taxable income; in case an enterprise has no taxable income for the first three years from the first year when it has income, the tax exemption or reduction duration shall be counted from the fourth year.
 
Personal taxes
Resident/non resident status
Individuals with a permanent residency in Vietnam are considered tax residents of Vietnam. In addition, any individuals residing or physically present in Vietnam for at least 183 days in a calendar year are considered Vietnam tax residents too.
Individuals who spend less than 183 days in a calendar year in Vietnam and who do not have permanent residence in Vietnam, those are treated as tax for non-residents.
Tax payers: The following individuals are subject to personal income tax:

+ Residing in Vietnam for an aggregate of 183 days or more within a calendar year or within a consecutive 12-month period from the first date of arrival;
+ Having a permanent accommodation in Vietnam, including an accommodation registered for permanent residence or a leasing house to stay in Vietnam in accordance with a fixed-time contract.
 
Taxable income includes income from production and business activities, salaries, wages, investment capital, capital transfer, real estate transfer, royalties, commercial concession, remunerations, bonuses and allowances.
 
An amount would be deducted from income before applying to calculate taxable amount. That is: personal living expenses of VND 9.0 million/month; living expenses for each of dependant (children, parents) of VND 3.6 million/month.
 
Tax rates: Personal Income tax rates levied on income from business, salaries, wage are applied according to the progressive tax rate schedule as follows:
 

 

Note: exchange rate as at December 2016 is US$ 1.00 = VND 22,300
 
Expatriates or foreign individuals working in Vietnam are allowed to transfer their income abroad after fulfillment of tax obligations to the Sate of Vietnam.  
 
Employment income includes salaries, wages, bonuses, and other compensation of a similar nature and benefits in kind.
 
While personal income received by non-residents, for work performed in Vietnam territory suffer personal income tax of 20%, those of residents is calculated by progressive tax tariff.
 
A person stays in Vietnam territory more than 183 days per year, depended on his/her visa, is considered as resident.
 
Obligatory registration
Each individual and legal entity has to register to get tax code at the competent tax office within 30 days as of obtaining licence in Vietnam.
 
Value added tax (VAT)
 
VAT applies to goods and services used for production, trading and consumption in Vietnam (including goods and services purchased by organizations and individuals from abroad). 
 
When supplying goods and/or services subject to VAT, enterprises must charge VAT on the value of supplied goods or services. In addition, VAT applies to the duty paid value of imported goods.  The importer must pay VAT to Customs at the same time of paying import duties. 
 
Applicable VAT rates are 0%, 5%, and 10%, respectively.  The 0% rate is applied to exported goods and services, VAT is calculated by adding the taxable price (net of tax) to the applicable VAT rate.  With respect to imported goods, VAT is calculated by adding the import price to the import duty and the special sales tax (if applicable).
 
The VAT system of Vietnam is also characterized by two types of VAT payers: deduction method VAT payers and direct method VAT payers.  Most of companies and business organizations are deduction method VAT payers, i.e. the businesses will have to pay the output tax after deducting the input tax. Businesses must report VAT returns monthly to the tax authorities.  The tax authorities, in turn, will check the tax return and issue a tax assessment notice to the tax payer.  The payable VAT must be paid monthly to the State budget.
 
The direct method of VAT payment is generally applied to small business households without proper accounting records. For these businesses, VAT is calculated at a deemed rate on gross turnover.
 
Import and export duties
 
Dutiable Objects:

 
Non-dutiable Objects:

 
Duty rates:

 
+ Preferential duty rates are applied to imports originating from countries, groups of countries or territories which offer the most favored nation treatment in their trade relations with Vietnam. Preferential duty rates are specified for each item of goods in the Preferential Import Tariff;
 
+ Special preferential duty rates are applied  to imports originating from countries, groups of countries or territories which offer the most favored nation treatment in their trade relations with Vietnam under the free-trade-area or tariff-alliance regime in order to facilitate border trade, and other cases of special preferential treatment;
 
+ Standard  duty rates are applied to imports originating from countries, groups of countries or territories which do not offer the most favored nation treatment or special import duty preferences to Vietnam;
 
+ Standard duty rates are equal to 150% of preferential duty rates applicable to the same item of goods specified in the Preferential Import Tariff.
 
Duty exemption:
Imports or exports are exempted from import duty or export duty in the following cases:
 
+ Goods temporarily imported for re-export or temporarily exported for re-import for participation in trade fairs, exhibitions or display; machinery, equipment and professional instruments temporarily imported for re-export or temporarily exported for re-import to perform work within a certain period of time;
 
+ After the end of trade fairs, exhibitions or displays or after the completion of work according to law, temporarily exported goods must be re-imported into Vietnam and temporarily imported goods must be re-exported;
 
+ Movable assets brought into or out of Vietnam by Vietnamese or foreign organizations or individuals within the allowable quotas;
 
+ Imported goods and exported goods of foreign organizations or individuals entitled to diplomatic privileges or immunities in Vietnam;
 
+ Goods imported for processing for foreign parties are exempted from import duty (including those allowed to be destroyed in Vietnam under laws after liquidation of processing contracts) and processed products exported back to foreign parties are exempt from export duty. Goods exported to foreign countries for processing for Vietnamese parties are exempt from export duty and when processed products are re-imported, they are exempt from import duty on the value of goods exported to foreign countries for processing under contracts;
 
+ Imported goods and exported goods within the duty-free luggage quotas of persons on entry or exit; postal matters and parcels sent by express delivery services which have the minimum dutiable value prescribed by the Prime Minister;
 
+ Goods imported to create fixed assets of investment projects in domains entitled to import duty preferences or in geographical areas entitled to import duty incentives, and investment projects funded with official development assistance (ODA) which are exempted from import duty;
 
+ Plant varieties and animal breeds permitted to be imported for the execution of investment projects in the sectors of agriculture, forestry and fishery;
 
+ Equipment and devices which are imported for the first time to create fixed assets of projects, investment projects funded with official development assistance (ODA) capital on hotels, office buildings, apartments for lease, housing, trade and technical service centers, department stores, golf courses, tourist resorts, sport facilities, recreation and entertainment centers, medical examination and treatment, training, cultural, financial, banking, insurance, audit, and consultancy service establishments shall be entitled to import duty incentives;
 
+ Goods imported in service of petroleum activities;
 
+ Shipbuilding establishments are exempt from export duty on exported seagoing vessels, and from import duty on machinery and equipment imported to create their fixed assets; means of transport included in technological lines imported to create fixed assets; and raw material, supplies and semi-finished products to serve shipbuilding activities, which cannot be domestically produced yet;
 
+ Raw materials and supplies imported to directly serve the production of software products, which cannot be domestically produced yet, are exempt from import duty;
 
+ Goods imported for direct use in scientific research and technological development, including machinery, equipment, spare parts, supplies and means of transport which cannot be domestically produced yet; scientific documents, books and newspapers and journals and electronic scientific and technological information sources are exempt from import duty;
 
+ Raw materials, supplies and accessories which cannot be domestically produced yet and are imported for production activities of investment projects in domains in which investment is specially encouraged under the laws or in geographical areas with extremely difficult socio-economic conditions (excluding projects on  manufacture and assembly of  automobiles, motorcycles, air conditions, electric heaters, refrigerators, washing machine, electric fans, dish washers, disc players, audio system, electric irons, water kettles, hair dryers, hand dryers and other articles as decided by the Prime Minister) are exempt from import duty for 5 years after the date of commencement of manufacture;
 
+ Goods produced, processed, re-processed or assembled in non-tariff zones without the use of raw materials and accessories imported from abroad, are exempt from import duty upon their import into the domestic market; in case of using raw materials and accessories imported from abroad, only imported raw materials and supplies constituting these goods are liable to import duty upon their import into the domestic market;
 
+ Machinery, equipment, and means of transport (excluding under 24-seat cars and cars designed for passenger-cum-cargo transport equivalent to under 24-seat cars) temporarily imported for re-export by foreign contractors for the execution of ODA-funded projects in Vietnam are exempt from import duty upon their temporary import and exempt from export duty upon their re-export;
 
+ Goods imported for sale at duty-free shops under decisions of the Prime Minister.
 
Consideration for duty exemption:
Imported or exported goods in the following cases may be considered for duty exemption:
 
+ Special-used goods imported to directly serve national defense, security, education and training, or scientific research may be considered for import duty exemption;
 
+ Gifts, presents or sample products given by foreign organizations or individuals to Vietnamese organizations or individuals or vice versa may be considered for duty exemption within allowable quotas.
 
Consideration for duty reduction:
Imported goods or exported goods which are damaged or lost in the course of customs supervision, which is certified by competent assessment agencies or organizations, may be considered for duty reduction in proportion to their actual loss or damage. Customs offices shall consider duty reduction on the basis of the assessed and certified quantity of lost goods and the actual damage rate of goods.