How to Set Up a Joint Stock Company in Vietnam

As production in China contracts due to high labor cost, US-China trade war, and Covid -19 pandemic, Vietnam is undergoing continued and unparalleled economic growth relative to other low-cost countries. Foreign investors are progressively doing business in Vietnam as a China plus one destination to tackle rising costs of production in China and different volatile scenarios such as trade shocks. These challenges have both affected manufacturers in China and their supplies to international markets, and it makes sense that investors diversify to manage their risks better.

In this context, foreign investors are looking for a new market-entry solution to help to supplement Chinese operations in alternate markets, such as Vietnam. Vietnam is one of the top-performing countries that witnessed 2.9% economic growth in 2020, better than China’s 2.3% growth. Much of that growth result from foreign investment and the need for companies to diversify their supply chains and relocate their operations away from China to Vietnam. More so, due to Vietnam’s geographic proximity to China, it offers numerous benefits for companies planning to move outside China.

Chinese Manufacturers Are Relocating to Vietnam

Need confirmation Vietnam is the next big thing in Asia? Take a closer look at what homegrown producers in the area are doing. Chinese producers are looking for lower labor costs, and they’re ready to save as much as 2/3rds by moving production to Vietnam. In the event that you’ve dealt with a Chinese producer over the past ten years, there’s a possibility they’ve begun manufacturing in Vietnam, relocating their operations there.

For people with experience in dealing with Chinese suppliers – this experience and knowledge will be most valuable in Vietnam as both countries have similar cultural nuances. Chinese are likewise influencing Vietnamese suppliers and passing down their skills and knowledge to the workers.

Planning a Supply Chain Shift

Manufacturers planning a supply chain shift into the Vietnam market may find the production shift a bit daunting initially as supply chains have to realign. Enterprises often find it hard to decide which supply chain to relocate, how they plan to enter the Vietnamese market and the geographic location where operations will be established within the country.

For manufacturers that comprehend these problems will have the upper hand over others who don’t – they will be able to quickly make more informed decisions that are critical for their operations to stabilize and expand if required. We have outlined three steps to help you plan a supply chain efficiently.

Choose on Production Features to Relocate

You need to approach the Vietnam market with a clear understanding of the production line you intend to carry out. For most businesses, Vietnam is chosen because of its lower labor costs and economic growth, which are well suited for basic manufacturing and assembly.

Suppose your company is targeting more complex manufacturing operations. In that case, you need to conduct a thorough feasibility study of Vietnam’s available human resources, sourcing networks, and infrastructure to ensure that this production shift will be successful.

Choose Your Entry Strategy

There are three main options for choosing your entry strategy into Vietnam’s market. These include engaging homegrown contractors to fulfill production factors, beginning a new manufacturing facility, or conducting a Mergers and Acquisitions (M&A) contract with an existing factory.

Identify the Best Location for Investment

There are three Key Economic Regions (KERS) that host most of the foreign investment and industrial activity in Vietnam. Each zone has its own special production conditions that lend themselves to different investment strategies. Businesses planning to relocate should carry out a feasibility study to develop a clear understanding of each region.

Relocate Your Business Smoothly With Cekindo

Are you looking to relocate your operations from China to Vietnam? Contact us today at Cekindo to get started on how to navigate the Vietnam business terrain. Our consultants are equipped with the latest knowledge and in-depth understanding of what it takes to relocate your business to Vietnam ensuring a smooth, timely, and cost-effective process. Schedule a call today to get started.

To regulate e-commerce activities and platforms, a draft decree with No. 52/2013/ND-CP (Decree 52) was introduced with some amendments by Vietnam’s government. This decree will cover and must be implemented on local as well as foreign businesses in Vietnam. The purpose of amending the decree is to improve the tax collection regulations and management.

This draft regulation will impact foreign investors and foreign traders who are working as e-commerce service providers and suppliers. According to the draft decree, an e-commerce service is any business activity where an individual or company sets up an e-commerce website to provide services. Such services are related to trade, supplies of service activities, sales of goods, and bringing imports in Vietnam.

The following are some terms and conditions that make a website suitable for e-commerce activities as per the draft decree.

• Must have services of goods delivery to provide things to customers.
• Allows e-commerce members to use sale booths for showcasing and promoting products and services.
• Members are allowed to use and open accounts facilitating interaction as well as a transaction with customers.

E-commerce regulations carried by Social Networking Websites

After amendments in the draft decree, the social networking websites also tried to adopt e-commerce regulations. Thus, the social networks must be liable to regulations and conditions and have subscribers who can pay them a fee directly or indirectly for the activities. One of the examples of such regulated social networking websites is the Facebook marketplace.

Requirements For Foreign Businesses in Vietnam

If foreign businesses are looking to set up a representative office in Vietnam, their e-commerce business must comply with Vietnamese laws. Such e-commerce service providers verify the foreign business identities who sell goods and services. The following are some basic requirements for foreign business to be fulfilled in Vietnam.

• Must be compiled with imports and exports laws for bringing up a new business in Vietnam.
• Needs to evaluate and determine all the Vietnam commercial agents.
• Have management for implementing imports relevant to goods and services carried by foreign businesses.

It is evident that the decree draft is unclear because it doesn’t explain what would happen to the foreign business if not meeting the mentioned requirements. Besides this, it has been observed that the new regulation will impact e-commerce merchants, including eBay, Amazon, Netflix, and Facebook. The new law is proposed to impose all the tax obligations on foreign investors and merchants.

You might want to read: Starting E-Commerce Business in Vietnam: Why and How

Impact of E-commerce Draft Decree on Foreign Investors

Foreign businesses, particularly those involved in B2C and cross-border e-commerce, must comply with laws. According to the draft decree, foreign traders and foreign investors in e-commerce business are defined as

“Foreign investors are those who have e-commerce websites set up under domain names of Vietnam, in the Vietnamese language, and avail of above 100,000 transactions from Vietnam every year.”

If you are interested in setting up your foreign business in Vietnam, you need to set up an office or appoint a legal representative in Vietnam to carry out the e-commerce services. It is possible if and only if the number of visits, purchase orders, and transactions exceeds the threshold. In view of this, all the exported and imported goods must be subjected to e-commerce providers to cooperate with authorities to prevent goods and services transactions.

The Vietnam Government stated that this threshold would be regulated for transactions and purchases by the Ministry of Industry and Trade, Ministry of Finance, and Ministry of Information and Communication. Furthermore, every e-commerce service provider has to file and submit a report on business operations to the Ministry of Industry and Trade by 15th January.

Market Accessibility, Logistic Companies, and Payment System

According to the LOI, the draft decree is introduced under the ambiance of Law on Investment, so foreign investors are obliged to carry out business investments. Moreover, foreign investors having investment in e-commerce should be listed in the MoIT announced “Internationally Reputable Technology Companies.” However, it is not mentioned whether these proposed regulations are retroactive or not. So, these regulations don’t affect pre-approved foreign investments.

Besides this, the e-commerce decree draft provides and supports logistic services. Such services are related to logistic companies having liabilities to share for documentation of goods, services, and delivery. It also ensures the guaranteed payment system by keeping payments in an intermediary account for settling all claims, sales, and deliveries between sellers and customers. Such e-commerce activities have been increased so high due to greater growth trajectories.

In short, the new regulations in the draft decree have made visible progress in the e-commerce field. By keeping in view this advancement, it is expected that almost 55% of the population will be involved in online shopping till 2025. Stay vigilant for monitoring all the issues and insights regarding developments and regulations of e-commerce activities.

Hassle-Free E-commerce setting in Vietnam with Cekindo

Cekindo can help you in setting up your E-commerce in Vietnam. Get 100% ownership in foreign E-commerce by contacting us. Our services include the provision of an authentic, valid business license making sure that you are eligible to operate a business in Vietnam.

When you register yourself with us, we will assist you in everything from starting a business to the requirements for keeping your business in compliance with the Vietnam Government. Your success as a foreign business owner in Vietnam is our achievement.

What is the MRA Grant?

Market Readiness Assistance (MRA) is a government grant that supports Singapore’s SMEs (Small and Medium Enterprises) to expand operations into a new international market. It is aimed to act as a catalyst for SMEs to grab opportunities and access the international market.

As announced at the Budget 2021, the maximum support level of up to 80% will be extended for 6 months, until 31 March 2022, thereafter, support level of up to 70% will be extended until 31 Mar 2023. The MRA Grant will also be enhanced to include Trade Credit Insurance (TCI) as a supportable area under the overseas market set-up pillar to encourage firms to protect themselves against buyer defaults in new overseas markets with effect from 1 April 2021.

Eligibility Criteria

A business entity registered/incorporated in Singapore with at least 30% local shareholding, annual sales turnover of not more than S$100 Million and an Employment Size of not more than 200 workers, whose overseas sales does not exceed S$100,000 in each of the preceding three years is eligible to apply for the grant.

Companies that have previously benefited from MRA, but whose overseas sales for that market has not exceeded S$100,000, can continue to be supported during the enhancement period, however, companies that have used up the maximum S$100,000 support are not eligible.

Companies can apply to multiple new markets concurrently provided the new market criteria is met. Since the MRA grant encourages internationalisation, business activities within Singapore will not be eligible for support.

Eligible Business Activities Covered by the Grant

Overseas Marketing Promotion (Capped at S$20,000): This includes activities that include SMEs global marketing strategies. PR activities and marketing events including In-Store Promotions, Roadshows, Pop Up Store and Overseas Physical/Virtual trade Fairs. This aims to educate the new market about the enterprise’s products or services.

Overseas Business Development (Capped at S$50,000): This encapsulates activities that help SMEs define their market position. This includes business matching endeavors or setting up of an Overseas Market Presence. This also covers In-Market Business Development which aids in engaging a third-party outsourced BD provider to facilitate activities such as Product training, implementation of market entry activities, reviewing market entry strategies and developing new business leads.

Overseas Market Set-up (Capped at S$30,000): This includes activities pertaining to establishment of the business in the international scene. Advisory and Legal Documentation Services are largely included in this section. Appointment of such consultants largely helps a company to overcome the legal and technical challenges faced during incorporation of a new business internationally.

Application Procedure

Companies can appoint consultants from Enterprise Singapore’s list of FTA consultants or can approach their preferred consultants to seek quotations. Companies can proceed to sign the contract with the third-party consultants after submitting the application via Business Grants Portal. Project commencement and completion dates must be in accordance to the project support period stipulated in the Business Grants Portal.

MRA Grant Applications should be made 6 months before the start of the project with the maximum support period for an approved activity under the MRA Grant being 12 months. The information required in the proposal from the third-party consultant/vendor includes but is not limited to:

• Testimonials/credentials of the project team
• Track records of past completed projects
• Detailed scope of services
• Cost breakdown by scope of services
• Expected deliverables for the project

Setting up an enterprise overseas can be a daunting task. Cekindo’s consultants help overcome the hurdles faced during international incorporation and eases the process of overseas company registration.

Cekindo provides professional assistance in the application for such grants and mitigates the challenges faced in international company registration. To know more about how Cekindo’s solutions can help you register your company in Vietnam, please fill out the form below or talk to an expert on our chatbot.

Vietnam has seen a remarkable rise in the number of businesses in recent years. A successful business in Vietnam is built on several foundations, including tax reporting and corporate compliances.

The deadlines for 2021 compliance in Vietnam is coming. So is your company ready to meet the deadlines and avoid hefty fines and penalties?

Tax Compliance and Other Corporate Regulations in Vietnam

There are many business and legal challenges that Cekindo’s experienced team can help you handle easily. Here are some of the highlights:

1. Requirements for Report Submission

Below are the compulsory reports that companies need to submit:

Tax Authority:

• Business license report.
• Tax finalisation report (VAT, PIT, CIT).
• Using invoice report.
• Financial statement (FS auditted for FDI companies).

Labor Department

• Employment and labor report
• Registration of internal policy.
• Salary scale system report.

Statistic Department:

• Statistic report
• Annual Financial statement

DPI Department:

• FDI reports

2. Vietnam Taxation Compliance Deadlines

There are four fiscal periods in Vietnam that foreign companies can choose from:

• January 1 – December 31
• April 1 – March 31
• July 1 – June 30
• October 1 – September 30

If foreign businesses don’t opt for a specific fiscal year, the fiscal year period is automatically to be from January 1 – December 31.

Critical compliance deadlines of CIT finalisation and Financial Statement are mostly in the first quarter of a fiscal year.

3. Tax Payment Deadline:

• The due date for tax payment is same the due day of tax reports submission.
• For PIT final payment is no later than 31st March of the following year.
• For CIT final payment, deadline is no later than the last day of the following fiscal year.

According to Point b – Clause 6 – Article 8 – Decree 126/ND-CP/2020 dated 19th Oct 2020 regulate:

“The total amount of provisional corporate income tax paid in the first 03 quarters of the year shall be at least 75% of the terminal tax. Otherwise, late payment interest shall be charged on the arrears over the period from the deadline for paying corporate income tax of the third quarter to the date of payment of the arrears”.

4. Annual Business License Fee and Business License Declaration:

Companies must to pay their annual business license fee before January 30 in yearly.

In case of any change in the ERC, which affects the business license payable amount (such as: opening more branches, opening more representative offices; increasing or reducing capital …) then the company must submit a business license report no later than 30th January of the following Calendar year.

Depending on your company’s registered charter capital, the amount of business license tax can be categorized into the following:

• Registered charter capital of no more than VND 10 billion (US$430,000): VND 2 million (US$85) annual business license tax.
• Registered charter capital of more than VND 10 billion (US$430,000): VND 3 million (US$130) yearly business license tax.
• Representative offices (for Entity in Vietnam), branches, public service providers, business locations, and other business organizations: VND 1 million (US$40) yearly business license tax.

5. Report Submission Deadlines:

Most report submission deadlines fall in the first quarter of the following year – last day of March. And Vietnam authorities may require companies to submit specific reports annually, bi-annually, quarterly or monthly:

a. Annual submission

• Information on Business license (business license declaration (if any) and business license fee)
• Financial report (audited for FDI) that includes profit and loss, balance sheet, and cash flow, financial statement note.
• Corporate income tax finalisation and personal income tax finalisation
• Employment and labor report.
• Registration of internal policy (if any change)
• Salary scale system report (if any change)
• Statistic report.
• Financial report to Statistic Department.
• FDI reports

b. Bi-annual submission

• Employment and labor use report

c. Quarterly submission

• Personal income tax payment and declaration
• Corporate income tax payment
• Value-added tax payment (if any) and declaration
• Using invoice report (in case the company incurs revenue and registerred to use tax invoice)
• Foreign employment and labor use report

d. Monthly submission

• Value-added tax payment (if any) and declaration
• Using invoice report (in case the company incurs revenue and registerred to use tax invoice)

Tax Outsourcing with Cekindo for 100% Compliance

It becomes increasingly vital for businesses to record their accounting and financial transactions accurately on a day-to-day basis. This is to ensure a company has stable financial health with full compliance with Vietnam taxation law. So here, Cekindo comes into the picture to support enterprises with tax outsourcing for 100% compliance.

Financial and taxation experts at Cekindo help companies best utilize their resources to avoid time-consuming clerical tasks and maintain accurate accounting records and submit all necessary tax reports on time.

If you are currently searching for a reliable tax outsourcing provider in Vietnam, your search ends here. Complete the form below to be connected to our tax specialists.

Decree 125/2020/ND-CP dated 19/10/2020 is the newly issued Vietnam Tax Law, which has been effective since December 5, 2020. The new law states several penalties and the resulting fines for the violation of tax and invoice regulations.

Thus, ensuring tax and invoicing compliance is highly important when doing business in Vietnam. Below we will highlight significant penalties, administrative fines, late payment fines in this new decree and what can be done to ensure compliance.

Penalties and Fines For Invoice-related Violations

Fines shall be imposed on entities committing invoice-related violations with maximum amount VND 100,000,000 (US$ 4,310).

Fines ranging from VND 500,000 (US$22) to VND 1,500,000 (US$65) shall be imposed for failing to invoice promotional, advertising or sample goods or services; goods and services used as gifts, donations, presents, swaps or employee’s payment-in-kind wages.

Fines ranging from VND 10,000,000 (US$431) to VND 20,000,000 (US$862) shall be imposed for any act of failing to issue invoices upon sale of goods or provision of services to buyers as required by laws, except the acts prescribed in above.

Penalties for the act of using invoices illegally or using illegal invoices: Fines ranging from VND 20,000,000 (US$862) to VND 50,000,000 (US$2,155) shall be imposed for the act of using illegal invoices or using invoices illegally.

No submission of invoicing report periodic reports to tax authorities:

• Fines ranging from 1 – 3 mil VND for the late lodgement invoice report within 1 – 10 days;
• Fines ranging from 2 – 4 mil VND for the late lodgement invoice report within 11 – 20 days;
• Fines ranging from 4 – 8 mil VND for the late lodgement invoice report within 21 – 90 days;
• Get the penalty from 5 – 15 mil VND for the late lodgement invoice report over 91 days or failing to submit invoice reports to tax authorities as legally required;

Penalties and Fines for Vietnam Tax-relates Violation:

Tax returns lodgement schedule:

• Taxpayers must lodge their tax returns and process payment tax payable according to below schedule:
  For ad-hoc case: Tax declaration and tax payment within 10 days from the date incurs transaction and tax final declaration within 45 days from the termination date of the contract.
• For monthly tax returns: No later than the 20th of following month.
• For quarterly tax returns: No later than the last day of the first month of the following quarter.
• For annual tax returns:
  * Business license fee: Within 30 first days of the following year (Calendar year)
  * PIT finalisation: Due day is the last day of the first quarter of the following Calendar year.
  * CIT finalisation: Due day is the last day of the first quarter of the following financial year.

The penalty for the late tax returns lodgement:

• Get the penalty from 2 – 5 mil VND for the late lodgement within 1 – 30 days;
• Get the penalty from 5 – 8 mil VND for the late lodgement within 31 – 60 days;
• Get the penalty from 8 – 15 mil VND for the late lodgement within 61 – 90 days;
• Get the penalty from 15 – 25 mil VND for the late lodgement over 90 days;

The late payment fine: Late payment fine of tax paybale is 0,03% per day on the overdue amount from the over due date.

However, there will be no penalties for tax-paying businesses if the fault is on tax authorities due to their IT system’s technical errors.

The Fines applicable to commercial banks relating to the tax withholding obligations of commercial banks
Under Article 18, Decree 125 – Commercial banks in Vietnam are subject to fines for their obligation to witholding, deduct tax payable from taxpayer’s account and pay into the state budget’s accounts upon tax authority’s request.

In case commercial banks default on liabilities to withhold, deduct and get money from taxpayer’s accounts to pay into the state budget’s accounts upon tax authority’s request then the commercial banks wil get fines equaling the amounts of tax, the deferred amounts of tax or the fines not paid into the state budget (minus minimum balances of demand accounts subject to regulations of commercial banks providing fiduciary payment services for taxpayers).

* For this point: The guideline is still unclear, and banks do not really know how to implement this. However, Vietnam’s Ministry of Finance will develop an official circular to guide banks on adopting this new regulation.

How Cekindo can assist

Tax compliance is a complicated matter for the business communities in Vietnam. Therefore, complying with Vietnam tax law requires utmost attention.

As the expert on tax compliance in Vietnam, Cekindo can help business owners and enterprises do everything regarding Vietnam’s tax. Our knowledge and expertise in the related fields are from dealing with practical scenarios day today.

Don’t worry about the challenges you face regarding Vietnam tax law, as our consultants will extend their support, guidance, and execution with the desired outcome based on the authorities’ provisions.

Cekindo will help you in addressing any tax non-compliance. Learning the weaknesses of your tax structure enables you to establish a better compliance system.

Ask our team for consultation and support to avoid any unnecessary tax mistakes. Fill in the form below.