Small and medium-sized enterprises (SMEs) comprise a huge part of Vietnam’s economy – accounting for 50% of all employment and 98% of all enterprises.
The 2018 Law on Support for Small and Medium Enterprises No 04/2017/QH14 did well to increase support for SMEs through government, organisation, and private-funded programs.
However, until recently, concerns remained as to how the Vietnamese government aimed to support SMEs – especially international SMEs looking to expand their global footprint. This is due to local authorities interpreting laws differently due to vague guidelines, and support policies being generic in scope.
Decree 80 came into effect on 15th October 2021 and replaces Decree 39. It aims to outline the criterion for SMEs and includes information on how to gain access to government incentives. This is especially important when considering the economic downturn faced by many businesses after the Covid-19 pandemic.
Here is some important information outlined in Vietnam’s Decree 80:
SME criterion in Vietnam
The new Decree defines what constitutes a micro-enterprise, small business, and medium enterprise in Vietnam.
The criterion is based on how many employees work for the business, total annual revenue, and the type of industry. That is, it categorises trade and service enterprises as distinct from other industries.
The following is a breakdown of the categories based on this criterion:
Micro-enterprises
Agriculture, industrial, fishery, forestry, and construction industries:
– An average of 10 or fewer employees participate in annual social insurance.
– Generate a revenue less than VND 3 billion or total capital for the year is VND 3 billion or less.
Trades and services:
– An average of 10 or fewer employees participate in annual social insurance.
– Generate a revenue less than VND 10 billion or total capital for the year is VND 3 billion or less.
Small businesses
Agriculture, industrial, fishery, forestry, and construction industries:
– An average of 100 or fewer employees participate in annual social insurance.
– Generate a revenue less than VND 50 billion or total capital for the year is less than VND 20 billion and not a micro-enterprise
Trade and services:
– An average of 50 or fewer employees participate in annual social insurance.
– Generate a revenue less than VND 100 billion or total capital for the year is equal to or less than VND 50 billion and not a micro-enterprise
Medium enterprises
Agriculture, industrial, fishery, forestry, and construction industries:
- An average of 200 or fewer employees participate in annual social insurance.
- Generate a revenue is VND 200 billion or total capital for the year is equal to or less than VND 100 billion and not a micro-enterprise
Trade and services:
- An average of 100 or fewer employees participate in annual social insurance.
- Generate a revenue is VND 300 billion or less, or total capital for the year is equal to or less than VND 100 billion and not a micro-enterprise
Government support for SMEs
Decree 80 also includes several government support incentives for international SMEs. The most prominent is that SMEs converted from household businesses will be exempt from the standard license fee for three years once the enterprise registration certificate (ERC) is issued.
Government support also extends to the support of consulting contracts with:
- Micro-enterprises eligible for 100% of the consulting contract being supported up to VND 50 million per year.
- Small businesses eligible for 50% of the consulting contract being supported up to VND 100 million per year.
- Medium enterprises eligible for 30% of the consulting contract being supported up to VND 150 million per year.
These incentives differ when it comes to women, demonstrating the Vietnamese government’s aim to boost the representation of women in its workforce. For example:
- Social micro-enterprises that employ female workers will have 100% of the consulting contract supported up to VND 70 million (US$3,000) per year.
- Women-owned SMEs will have up to 50% of the contract value supported, with a maximum of VND 150 million (US$6,500) per year
- Women-owned medium enterprises are eligible for 50% of the contract value, with a maximum of VND 200 million a year being offered.
Industrial clusters can help support regional economies, and so Decree 80 also guarantees 100% government support for SMEs in value chains and industrial clusters up to an amount of VND 30 million per year.
Government support also takes into account potential business prospects too. The government aims to support the advancement of training courses for those looking to start a business in Vietnam, with up to 70% support of the total cost of business for SMEs being covered.