A Market Overview of Vietnam

Country Indexing and Entity Structure

Economic Overview

economic stats

fdi inflow

  • Vietnam has been ranked 8th amongst the 29 best economies to invest in, as per World Bank
  • Strong economic growth is being led by the services sector and industrial activities contributing 75% to the GDP
  • The percentage of trained workers was 77.5% in Ho Chi Minh City, growing at 2.5% Y-o-Y, in 2017
  • The country is one of the most dynamic emerging markets in East Asia
  • The government is prioritizing ‘high value’ FDI sectors such as manufacturing, tourism and high-tech farming
  • The country is expected to maintain robust FDI investments. Hanoi is the top FDI destination closely followed by Ho Chi Minh City

Establishing an Entity in Vietnam

Under the new law of investment, a foreign investor needs to have an international registration certificate and an enterprise registration certificate.

Limited Liability Company (LLC)

An LLC can be established in two forms – a 100% foreign-owned enterprise or a JV between the foreign investor(s) and at least one domestic investor

Joint-Stock Company

A Joint Stock Company can be either established as 100% foreign-owned or JV between both foreign and domestic investors
Under Vietnamese law, only a joint-stock company can issue shares

Representative Office

A Representative Office can be opened by foreign investors, particularly those who are in the first stage of a market entry strategy
These entities are only permitted to carry out activities such as liaison, market research and promotion of business and/or investment opportunities for the head office

Public & Private Partnership Contract

A PPP contract is an agreement between the government and companies for infrastructure projects and public services
It can be a build-operate-transfer, build-transfer, build-transfer-operate, build-own-operate, build-transfer-lease, build-lease-transfer or operate-manage contract

Business Cooperation Contract

A Business Cooperation Contract is an agreement between foreign investors and at least one Vietnamese partner to carry out specific business activities
It does not constitute the creation of a new legal entity. Investors generally share revenues and/or products and have unlimited liability for debts

Government Regulations and Compliance


government regulations

ForEx Regulations

  • Vietnam maintains a managed floating exchange rate regime
  • FDI enterprises are required to open a Direct Investment Capital Account (DICA), which needs to be closed if foreign ownership goes below 51%
  • Foreign investors are free to remit profits abroad after paying corporate income tax and dividend tax
  • Publishing or quoting price in foreign currencies is not permitted by Vietnamese enterprises, even for the ones established by foreign investors
  • A foreign exchange control policy is administered primarily by the State Bank of Vietnam

Accounting Standards

  • Currently, there are 26 Vietnamese Accounting Standards (VAS)
  • There are key differences between IFRS and VAS in terminology, accounting treatment and presentation, and disclosure requirements
  • The accounting framework is mainly rule-based rather than being principle-based
  • Vietnam has issued 47 external auditing standards primarily based on international standards with certain customizations to fit circumstances
  • Accounting records are required to be maintained in Vietnamese language and Dong, but this can be combined with a commonly-used foreign language and currency

Immigration, Secondment, Secretarial Compliance

  • There are 20 types of visa, divided into 13 groups which apply to foreign individuals
  • Foreigners working in Vietnam must secure work permits
  • A temporary residence card can be granted to foreigners with a legal work permit for one year or more, and is valid from one to five years subject to the visa type.

operational challenges

Taxation System

Overview of Taxes

  • Ease of paying taxes in Vietnam is similar to that in China and India, but more complex than in Malaysia and Indonesia. In this respect, Vietnam is ranked at 109 while Indonesia, Malaysia, China, and India are ranked at 81, 80, 105, and 115, respectively
  • Transfer pricing rules are based on OECD guidelines and BEPS actions
  • There is no separate tax system for capital gains. Instead, they are taxed at the corporate rate


Vietnam Corporate Tax

  • Education and healthcare: 10% (entire life of the project)
  • Companies in oil and gas: 32% – 50% (depending on location and specific project conditions)
  • Companies in prospecting, exploration and exploitation of certain mineral resources: 40% or 50% (depending on location)

Other Taxes

  • Foreign contractor tax
  • Special sales tax
    Environment protection tax
  • Natural resources tax
  • Business license tax
  • Property tax
  • Custom duties
  • Social, unemployment and health insurance contributions

PESTEL Analysis

Overview of Macro-Economic Environment


  • Regulatory environment and ease of doing business has improved over the years.
  • The government is framing policies around Industry.
  • Also, the focus is on restructuring the state-owned enterprises to support economic growth and investment opportunities.
  • The country has a more comprehensive anti-corruption legal framework in comparison with other Asian countries.
  • Basic rights including freedom of speech, opinion/blogging, press, association and religion are restricted.


  • After peaking at 7.1% in 2018, GDP reached at 7% in 2019 and is projected to remain at 6.5% in 2020 and 2021.
  • Public debt to GDP is expected to decline from 56.1% in 2019 to 53.3% in 2021 and 52.7% in 2022.
  • Vietnam’s exports (% of GDP) was 105.8% in 2018.
  • The country is expected to become the wealthiest Southeast Asian country in trade.
  • Despite economic slowdown and unfavorable external factors on key economic sectors, Vietnam’s outlook remain positive.


  • Integration of databases of taxation, anti-money laundering, customs and land transactions by 2019 would strengthen the governance against corruption, according to IMF.
  • Labor market has become more flexible and dynamic.
  • Private property rights are not strongly respected.
  • Employers with more than 10 employees need to register internal labor regulations with the labor office.


  • Vietnam has experienced rapid socio-economic development in the last few decades.
  • Emerging middle-class is expected to reach 26% of the population by 2026, up from 13% in 2018.
  • Minimum wage will be increased by 5.7% from 2020, higher than the rise of 5.3% in 2019.
  • Around 65% of the population is still living in countryside and rural areas with limited technological facilities.


  • Pollution and food safety are the biggest and the most common concerns.
  • Compliance with environmental standards is often considered to be expensive and overlooked.
  • Development of renewable energy is far behind the other Southeast Asian countries.#
  • Air pollution has reached an alarming level, and is attributes around 60,000 deaths each year, as per WHO.


  • Development of tech firms is a top priority for the government, however, structural changes towards technology adoption are occurring slow.
  • Electronics market of Vietnam is continually growing.
  • Key focus areas are AI, fintech, e-commerce, software outsourcing and edtech.
  • Overall, IT industry is growing at a faster rate, competing with IT firms in China and India.

Industry Overview

Non-profit Organizations

As Vietnam continues its economic growth, it is seeking foreign NGOs’ assistance in various sectors such as healthcare, education, social affairs, economic development and environmental protection.

legal forms


  • 500 foreign NGOs (out of 1,000) are the most active, with over 3,000 programs and projects in Vietnam
  • Over US$4.3 billion of aid has been provided by foreign NGOs over the last two decades
  • Foreign non-governmental aid reached US$29.28 million in the first half of 2019


  • A foreign NGO needs to apply for foreign NGO status in Vietnam to register its presence. Stringent regulations pose a challenge in obtaining this status
  • Three forms are issued by the government to grant NGO participation — project certificate of registration, representative office certificate of registration and operations certificate of registration
  • No VAT or other indirect taxes are imposed on goods imported as humanitarian aid and non-refundable aid from foreign donors
  • Income from government or local/foreign grants used for social activities is exempted from tax
  • Organizations are prohibited from engaging in political and religious activities for national interest, security, defense and unity of the country


The manufacturing industry continues to grow and strengthen primarily due to an abundance of highly skilled workforce.



  • Manufacturing contributed 16% to the country’s GDP in 2018
  • The sector accounted for 65% (US$ 24.56 billion) of total FDI from January-December 2019
  • Wages are lower than in China and other Asian countries, and therefore a huge advantage for companies
  • Companies are moving to Vietnam from China due to rising labor costs in the latter and the US-China trade war
  • Shipping is a key benefit to the sector due to availability of major ports, international airports and reliable power, etc


government initiatives

  • Goods produced in Vietnam must have a localization ratio of at least 30% to be labeled as locally made
  • 100% foreign ownership is allowed in the sector
  • Various tax incentives depending on project and location
  • A list of 267 sub-sectors are open to foreign investments, provided the investors to satisfy certain conditions


Focus on privatization and new regulation allowing enrollment of 50% local students, brings great opportunities to foreign investors who plan to build international schools in Vietnam.


legal forms education

20% of the national budget or US$10 billion is spent on education
The government is more focused on privatisation of education
The sector attracted 455 foreign-invested projects with total capital of around US$4 billion in 2018
Due to high demand for international standard education, the government is encouraging international integration, especially in foreign language teaching and vocational training to improve its human resources


  • Obtaining licenses such as investment registration certificate, business registration certificate and license for educational activities is difficult due to specific procedures
  • Prohibition on enrollment of Vietnamese children below the age of 5 in a foreign educational program has been abolished.
  • Only 10% of corporate tax is levied for the entire project#
  • The new announcement allows international schools to accept 50% of local students (effective August 2018), creating more opportunities for foreign investors
  • The steps in the approval process of establishing a short-term foreign-invested training institution have been reduced from 4 to 3, saving 40 working days

Consulting Services


key service areas consulting

  • Demand for consulting services into IT, HR and business development has gone up by 40% in the last few years
  • Several companies in the sector are startups, other than existing big firms


  • No special license is required to start operations in consulting services
  • Foreign entrepreneurs must register as fully foreign-owned LLCs unless they want to have a local partner

Technology Services

Driven by low costs and an abundance of highly skilled workers, the IT sector is experiencing high growth in the country. Vietnam is also well-positioned in software outsourcing services.


focus areas technology

  • IT is a growing sector and companies are expanding into other areas such as AI and fintech
  • Fintech sector is expected to reach US$7.8 billion by 2020 in Vietnam
  • Over 66% of fintech companies are involved in digital payment services
  • Vietnam-based fintech companies raised US$410 million during Jan-Aug 2019, 150 times more than in 2018
  • Due to automation, roughly 2.6 million jobs are at risk by 2020 in the garment, textile and footwear industries
  • The sector enjoys income tax exemption for 4 years, incentives in personal income tax for software developers, and exemption on VAT for software products.

Government Initiatives

  • Government regulations are expected to shift to a cashless payment economy, where the cash to total liquidity ratio will be less than 10% by 2020
  • The Government also aims to turn AI into a driving force for development and make it a top priority in growth policies
  • Increased focus is on setting up high-tech parks and allowed additional incentives such as land rent exemption for IT businesses


Vietnam has one of the fastest-growing middle-class regionally, fueling significant growth in the retail and wholesale sectors.


entry channels retail

  • Revenues of retail trade and services reached US$137.4 billion during January-August 2019
  • Investors are expanding their operations through M&As, franchising and partnership models
  • e-Commerce and digital payment trends are expected to become more prominent, with a growth rate of 14% from 2021 to 2025


  • 100% foreign ownership is allowed in the sector
  • Several regulations have been passed since 2014, relaxing certain restrictions on foreign investors such as direct participation in distribution systems
  • An investment registration certificate and enterprise registration certificate must be obtained by investors for direct investment in retail
  • A financial plan is required to establish the first retail outlet and the location should comply with local planning schemes. There are no overdue tax debts if they have been established in Vietnam for one or more years
  • The first outlet is exempted from economic needs testing, although the same is applicable in the case of second and subsequent outlets

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