Vietnam's food trade industry is one of the most dynamic sectors in the country. Fueled by an expanding middle class, rising disposable incomes, and shifting consumer preferences, the increasing demand for high-quality food products is undeniable. From bustling markets in Ho Chi Minh City to modern supermarkets in other major cities, the opportunity for both […]
Vietnam's food trade industry is one of the most dynamic sectors in the country. Fueled by an expanding middle class, rising disposable incomes, and shifting consumer preferences, the increasing demand for high-quality food products is undeniable. From bustling markets in Ho Chi Minh City to modern supermarkets in other major cities, the opportunity for both […]
Billions of US dollars in revenue, but tax evasion in Vietnam
Said the General Department of Taxation, there are 15 global big corporations and technology companies operating across borders earning money "full of pots, full of bowls" in Vietnam. In which, Vietnam's sole online advertising revenue is about USD 1 billion, Google and Facebook duo accounts for more than 80%, or more than USD 800 million, according to the report of Vietnam Digital Marketing Trends 2021.
Despite billions of USD dollars in annual revenue, Vietnam tax amount is collected from the 15 corporations is very meager, it is VND 1,000 billion/year only. Particularly, this amount is not paid by such corporations, but it is forced to be paid by contractors and agents by declaration and payment of contractor tax through a paying organization in Vietnam. “The figures from statistics show that, from 2018 to the end of October 2021, these entities have declared and paid taxes with a total amount of more than VND 4,263 billion, of which more than VND 1,641 billion from Facebook; more than VND 1,573 billion from Google; more than VND 560 billion from Microsoft … In 2020, tax revenue from cross-border e-commerce activities gained over VND 1,143 billion”, said Ms. Nguyen Thi Lan Anh, Tax Administration Department of Small and Medium Enterprises, Business Households, individuals (General Department of Taxation).
For 2021, the tax collected from Vietnamese entities signing online advertising contracts with foreign entities that do not have legal entities in Vietnam such as Google, Youtube, Facebook with VND 1,314 billion, in which, VND 521 billion from Facebook, VND 490 billion from Google, VND 164 billion from Microsoft...
Said Assoc. Dinh Trong Thinh, an economist, "the tax revenue is not commensurate with the revenue and potential of e-commerce". With a cross-border operation model, there is no managing legal entity in Vietnam, it is very difficult to manage, monitor and collect information and data, conduct tax declaration, tax calculation and payment are not accurate and this is actually a tax evasion act…
Said Mr. Nguyen Thanh Lam, Director of the Press Department (Ministry of Information and Communications), the data on information reader and shopper behavior is in the hands of cross-border technology platforms, resulting in the most of the advertising costs flows into foreign technology companies.
Accordingly, the domination on advertising economy of foreign social networks or cross-border advertising networks not only loses the great resources to improve the advertising industry, but also make Vietnamese enterprises’ ads sometimes appear next to crappy, low-quality content, not to mention that illegal advertising content may appear on official websites.
What to do to collect properly and sufficiently?
Said Mr. Nguyen Thanh Lam, it is necessary to master technology so that user data is not controlled by foreign enterprises, thereby regulating advertising resources on good and healthy content to serve users. In 2022, the Ministry of Information and Communications will continue to coordinate with the relevant ministries and branches to synchronously deploy the economic solutions, techniques to request the cross-border social networks to comply with Vietnamese laws on handling information violations, tax payment in Vietnam.
Said the General Department of Taxation (Ministry of Finance), one of the 2022 key tasks of the tax industry is to synchronously implement the solutions in tax management for e-commerce activities, business based on digital platforms of foreign suppliers who do not have their business establishment in Vietnam.
Accordingly, the General Department of Taxation will continue to request the local tax departments to actively review data on organizations and individuals earning income from such social networking sites as Google, Facebook, Youtube…, for notice of tax declaration and payment requirements. In case organizations and individuals intentionally fail to declare and pay taxes, the tax authorities shall coordinate with commercial banks in retrieving cash flows, paying, inspecting and strictly handling the cases in accordance with law.
“The Ministry of Finance has signed a cooperation agreement with the Ministry of Industry and Trade, including the content of coordination in formulating and perfecting the law in the e-commerce field. On the basis of the cooperation agreement, the Ministry of Finance (General Department of Taxation) and the Ministry of Industry and Trade will conduct connection database sharing to exploit information to serve the state management of domestic e-commerce business activities," said Ms. Lan Anh.
The General Department of Taxation also proposed the Ministry of Finance to develop the cooperation and coordination programs with the Ministry of Public Security and the State Bank of Vietnam on the connection and sharing mechanism of databases for tax administration. Tax authorities will continue to upgrade and develop the connection and integration database system between the banking system and digital platform providers to capture tax management objects, number of transactions, sales and payable taxes, especially for cross-border transactions, commercial transactions on digital platforms, and online business.
A leader of the ministerial and branch level used to reveal that the across-border "giants" are constantly putting the pressure through diplomatic and economic routes so as not to have to open offices and set up servers in Vietnam. Vietnam applied flexible solutions, in line with international practices and laws, but there will also be more tough "sticks" to force the across-border “giants” to comply with the game rules.
The explosion of electric vehicles has created a rare opportunity for Vietnam to strengthen its position in the global automotive value chain.
Recently, the United Nations Development Programme (UNDP) in Vietnam has conducted a report on the supply chain of the automobile - electric vehicle industry to re-evaluate the impact of the COVID-19 epidemic on it, and recommend policies for Vietnam to increase its participation in the global supply chain.
Exhausting automotive industry
According to the Ministry of Industry and Trade, there are more than 40 automobile manufacturing and assembly enterprises in the country, with a total design assembly capacity of about 680,000 vehicles per year. In which, there are a number of domestic enterprises that have been deeply involved in the global automobile production chain.
However, the Ministry of Industry and Trade has pointed out that Vietnam's automotive industry is currently only participating in the low segment of the automotive value chain such as tubes, tires, seats, mirrors, glasses, wiring harnesses, batteries, plastic products, etc., heavily dependent on the production assignment of global automobile corporations, and has not yet mastered core technologies such as engines, control systems, and powertrains. Therefore, it has not yet met the criteria of a true automobile manufacturing industry.
The selling price is high, but the quality is still inferior to imported cars. The localization rate for personal cars with up to 9 seats only reaches about 7 - 10% on average, of which Thaco reaches 15 - 18%, Toyota Vietnam reaches 37% for Innova cars alone, much lower than the set target.
80 - 90% of the main raw materials for the production of components such as alloy steel, aluminum alloy, plastic beads, high-tech rubber are currently imported. Mold materials are mainly imported. Every year, enterprises have to import about 2-3.5 billion USD of components and spare parts for vehicle production, assembly and repair.
The localization rate of countries in the region has reached 65-70% on average, Thailand has reached 80%. Thus, if domestic car manufacturers do not soon have effective solutions to improve the localization rate, it will certainly be difficult to compete in the domestic and regional markets.
The opportunity of electric vehicles
The International Energy Agency (IEA) said there will be about 3 million new registered electric cars in 2020, a record increase of more than 41% compared to 2019. They also forecast that by 2030, the number of electric cars, buses, trucks and heavy trucks in traffic will reach 145 million.
More than 3 million electric vehicles sold make up only 5% of total car sales, but according to UBS's forecast, by 2025, 20% of new cars sold globally will be electric. This number will soar to 40% by 2030; and by 2040, almost every new car sold globally will be electric. In countries with high living standards like Norway, sales of electric vehicles in 2020 have accounted for 54%, outstripped those powered by petrol and diesel.
The automotive industry is showing signs of transitioning into an electric vehicle era.
Different from the traditional automotive industry that has formed for hundreds of years with the domination of superpowers such as the US, Europe, and Japan. The starting point of enterprises in the electric vehicle industry is now almost the same.
It is an opportunity for new entrants to the industry and countries like Vietnam to strengthen position in the global automotive value chain by attracting investment from multinationals and participation of domestic small and medium enterprises in the electric vehicle ecosystem.
To create opportunities, according to UNDP, Vietnam needs to develop a national roadmap for electric vehicle deployment and application with a balance between supply and demand factors. The roadmap identifies incentive policies to promote the participation of domestic enterprises in the parts of the global electric vehicle supply chain that Vietnam has the potential.
The main goal of the roadmap is to replace imports, even to engage in export activities. Specifically, this includes setting up an agency at the central level to take responsibility for and coordinate relevant ministries and sectors in developing and implementing the roadmap, developing a set of standards and requiring manufacturers to comply with the standards to encourage domestic production, developing specialized emission standards for vehicles on the market.
At the same time, the Ministry of Transport conducts a comprehensive analysis of usage, vehicle density, traffic patterns and congestion, coordinates with the Ministry of Industry and Trade to develop a plan to develop charging infrastructure, and determines the location to ensure the charging stations are located in convenient locations, in accordance with the electrical infrastructure and electricity network.
The explosion of electric vehicles really creates a rare opportunity for Vietnam to strengthen its position in the global automotive value chain.
It is necessary to soon have policies to consider reducing import tax on components for electric vehicles, supporting related infrastructure such as land allocation, land use tax exemption and reduction for automobile factories, etc. Many countries support the development of electric vehicles.
Currently, the strong socio-economic development is leading to an increase in the number of vehicles, especially cars using combustion engines, which is contributing to several problems related to environmental pollution as well as energy demand. However, the trend of electrification is being applied more and more on vehicles, leading to the creation of Hybrid and electric vehicles, which is considered as the "savior" of humanity in the future.
Encouraging people to switch to low-emission vehicles such as electric cars, electric motorbikes, electric buses, trams, etc. is one of the effective solutions to reduce environmental risks. Some countries already have a roadmap to stop the circulation of petrol cars in the next decade and replace them with electric cars.
Therefore, many countries around the world have issued a series of special support policies to encourage car manufacturers to strongly develop electric vehicles to gradually replace petrol cars.
For example, Thailand has issued incentives to promote electric vehicle production and the supply chain such as three-year tax exemptions for plug-in hybrid vehicle manufacturers, eight-year corporate income tax exemption for battery electric vehicle manufacturers.
China has invested at least 60 billion dollars to support the electric car industry. The country is also pushing an ambitious plan to transition to all-electric or hybrid cars by 2035.
In particular, electric car buyers in Europe and the US are supported by the government with 5,000-12,000 euros/car for the purpose of protecting the environment.
South Korea provides a one-time subsidy of 14 million Won, reduces taxes, insurance fees, highway usage fees and parking fees for electric vehicle owners. China subsidizes the price of 20,000-40,000 Yuan depending on the type of electric vehicle, while planning and investing in a nationwide power supply infrastructure network. In addition, each locality has its own incentives, for example, the city of Shanghai is free to issue license plates for electric cars, etc.
Developing electric cars in Vietnam needs many supportive policies
Vietnamese car company VinFast got off to a strong start when launching the first electric car and quickly attracted customers’ attention. Looking at the moves of countries and major car manufacturers in the world, it is easy to see that the young Vietnamese electric car company will face many competitive pressures.
In Vietnam, the electric vehicle market in general and VinFast in particular have many opportunities for development when the demand for buying cars is increasing. However, in order for the electric vehicle market in Vietnam to develop sustainably, besides technology issues, many other issues need to be taken care of such as infrastructure for power supply system, charging station, battery waste disposal, etc.
It is even necessary to apply policies to encourage the electric car market such as reducing or freeing tolls and roads, or supporting taxes and fees. The reason is that using electric vehicles will be beneficial to the environment, helping to improve air quality, especially in big cities.
For users, specific support policies make it easy for them to own, use and gradually create the habit of riding electric cars. Countries that develop electric vehicles must have very specific and strong market-making strategies and policies.
For manufacturers and businesses, the Government can consider reducing import tax on components for electric vehicles, supporting related infrastructure such as land allocation, exemption and reduction of land use tax for factories producing automobiles or ancillary products as well as charging station systems.
Next, it is difficult to ask the Vietnamese Government to directly subsidize electric car buyers like the above countries because of limited budgets, but to support part of costs for vehicle owners such as reducing part or all of the registration fee, excise tax, reducing part or all of the road use fee, etc. is completely feasible.
In the near future, the auto market may be more active with the participation of foreign electric car models. But regardless of the brand, what manufacturers and users are all waiting for is a system of appropriate support policies to gradually form and develop a stable and sustainable market for electric cars in Vietnam.
Therefore, the orientation of the Party and the State to encourage the development of electric cars in particular and environmentally friendly vehicles in general needs to be concretized by clear and transparent policies and legal regulations, so that people can use electric vehicles with peace of mind, and electric car manufacturing and trading businesses can feel secure to develop.
Doing cross-border businesses in Indonesia may be a challenge for foreign investors as they are unfamiliar with Indonesian jurisdiction. Yet, if there is any business dispute, the investors should bear in mind cross-border litigation in Indonesia. Therefore, in this article, Viettonkin will help you to understand more on the topic.
Contractual Choice of Law
Indonesian courts respect the choice of governing law in a contract. A foreign law must be proven as a fact. However, in practice, the application of foreign laws in domestic court proceedings remains uncommon.
No Choice of Law and Non-contractual Claims
In the absence of choice of law and in non-contractual claims, the following rules apply:
The law applied to property/goods is the law where the property/goods are located (lex rei sitae).
The law applied to contracts is the law of the place where the contract was concluded (lex loci contractus).
The law applied to persons is the law of the person's domicile (lex domicilii).
(Articles 16, 17 and 18, General Regulations regarding Laws for Indonesia (Algemen Bepalingen van Wetgeving voor Indonesie) (AB)).
Indonesian courts respect the choice of jurisdiction in a contract. Indonesian courts cannot claim jurisdiction when it is explicitly excluded by the contract (including under an arbitration agreement).
Indonesia is not a party to any international conventions on the service of foreign proceedings. Parties wishing to serve foreign proceedings on an Indonesian party must comply with the Memorandum of Understanding (MoU) between the Indonesian Supreme Court (SC) and the Ministry of Foreign Affairs (MFA) regarding the Handling of Requests for Technical Assistance in Civil Matters.
The MFA in Indonesua
The MoU provides guidelines for the service of documents by foreign courts on Indonesian parties (and vice versa), including civil claim documents, court summons for civil proceedings, court summons for witnesses, court decisions or decrees, letters, deeds, and other documents relating to civil matters.
Documents for the service of foreign proceedings must be sent to the relevant country's diplomatic representative in Indonesia, who then sends them to the MFA. The MFA passes them on to the SC for action to assist with the service of documents. Once service is completed, the SC sends a receipt of service to the MFA, which then sends the receipt back to the diplomatic representative.
As Indonesia is not a party to any international convention on this issue, foreign courts must rely on the MoU. The MoU provides a mechanism of rogatory letters through which a foreign court can request the assistance of Indonesian courts in obtaining witness testimony, documents, and other evidence.
The procedure for sending rogatory letters is almost identical to that of service of foreign proceedings. The only difference is that the SC will send the minutes of witness examination directly to the diplomatic representative (without sending them first to the MFA).
The legal process in cross-border litigation is not simple, yet it is much less of a burden for foreign investors if they have a leading expert in the industry to help them. As one of the prestiged professional service firms with over 10-year experience, Viettonkin is confident to deliver the best outcomes to our clients. Our professionals are insightful of Indonesian legal systems, thus they can assist you through the litigation process if commercial disputes occur. Let us be your right-hand man!
According to government official statistics from 2019 the line ministries, agencies and provinces have signed and implemented 336 PPP projects, with a total investment capital of VND 1,609,335 billion (about US$ 70 billion). The dominant share of PPPs is in the field of transportation (220 projects); resettlement housing, dormitories, etc. (32 projects); office buildings (20 projects); energy (18 projects); as well as water supply, sewerage, environment (18 projects).
On June 18, 2020, the National Assembly of Vietnam passed the long-awaited Law on Public-Private Partnership (PPP Law), and aims to attract more private investment to the development of Vietnam’s infrastructure. The PPP Law took effect from January 1, 2021, and replace the previously issued PPP regulations under Decree 63/2018/ND-CP of May 4, 2018 (Decree 63). Some of the key changes under the Law, some positive and some less so, with respect to making the PPP framework more appealing to private sector developers, investors, and lenders.
Sector eligible for PPP projects
The PPP Law has narrowed the sectors eligible for PPP projects (Permitted Sectors). The regulated sectors are now as follows:
(i) transportation;
(ii) power plants and power transmission lines, except hydropower plants and monopoly cases of the State under the Law on Electricity;
(iii) irrigation works, clean water supply, water drainage and wastewater treatment, and waste treatment;
(iv) healthcare, education and training; and,
(v) information technology infrastructure.
Investment models
In line with international practice, the PPP Law no longer recognizes the Build-Transfer model (BT) of PPP investment under which investors could recover their investment by exchanging BT projects for land use rights to be used for other projects. All BT projects that have not been approved and issued with an approval in-principle of the investment plan (the AIP) must be stopped from August 15, 2020, and no new BT project will be considered going forward. This removal would have an impact on several property projects linked with a BT project.
As a result, there are now seven types of permitted PPP investment models: Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO), Build-Own-Operate (BOO), Operations and Maintenance (O&M), Build-Transfer-Lease (BTL), Build-Lease-Transfer (BLT), and mixed contracts combining (a) BOT, BTO, BOO or O&M and (b) BTL or BLT.
In terms of primary contract types, BOT and BT forms are dominant, comprising over 95 percent of PPPs. BOO and BLT are far less common. In discussing PPP contract types with a large domestic commercial bank, it was noted that they were only interested in financing BT projects, where there was land as collateral.
Investment Capital
The PPP Law imposes the following minimum investment capital requirements for PPP projects, with the Ministry of Planning and Investment noting in forums the preference for larger-scale projects:
(i) VND 100 billion (approximately USD 4.35 million) for PPP projects in healthcare, education, and training;
(ii) VND 200 billion (approximately USD 8.7 million) in other Permitted Sectors, but VND 100 billion if the projects are located in areas with difficult socio-economic conditions or extremely difficult socio-economic conditions (as defined in the Investment Law); and,
(iii) no minimum investment capital is required for PPP projects implemented under Operations and Maintenance (O&M) contracts.
Capital Participation in PPP project
As with Decree 63, Government support can come in many forms and the PPP Law sets out the following permitted uses for state capital contribution to a PPP project: (there are 6 in total) with the first two:
(i) support for the construction of works and infrastructure systems for a PPP project;
(ii) payment for land clearance, compensation and resettlement, and support of the construction of temporary works;
State capital contribution is limited to no more than 50 percent of the total investment capital for permitted uses (i) and (ii) above. For projects with multiple component projects, including PPP component projects, the state capital contribution ratio will be determined on the total investment of such components.
Under the PPP Law, the equity capital contribution of the private investors in a PPP project must be at least 15 percent of total investment capital. Any capital contribution from the State is not counted toward investment capital for the purpose of determining the equity capital to be contributed by private investors. These requirements are more relaxed than those under Decree 63 which required an equity capital contribution of at least 20 percent of total investment capital for PPP projects with investment capital of up to VND 1.5 trillion (USD 64.7 million equivalent) plus at least 10 percent of the portion of any investment capital exceeding VND 1.5 trillion.
Unlike its predecessor, the PPP Law provides a timeframe for capital contribution to a project company. The investor(s) and the project company will be responsible for contributing equity and raising loans and other capital sources to implement the PPP project within 12 months from the signing of the PPP contract. This period can be extended to a maximum of 18 months for projects with an AIP issued by the National Assembly or Prime Minister. However, the PPP Law is still silent on whether the required equity capital can be contributed in stages or in an agreed debt to equity ratio with loans over the construction period. This aspect is expected to be addressed in the forthcoming implementation and guiding regulations on the PPP Law.
The four prevalent methods of business dispute resolution in Vietnam include Negotiation, Mediation, Arbitration, and Court, in which the former three are commonly referred to as Alternative Dispute Resolution (ADR). According to the Ministry of Justice, Negotiation and Court are the most selected practices to resolve business conflict with 57.8% and 46.8% respectively, followed by Mediation (22.8%) and Arbitration (16.9%). In fact, businesses have not familiarized themselves with Mediation, and also have little trust in this method. As a result, they tend to opt for more certain and reassured ways, notably Court and Arbitration.
Negotiation
Negotiation should be the first consideration to settle any commercial dispute between the parties before involving the jurisdiction, due to its resource effectiveness. However, the negotiation method is not often used by Vietnamese businesses because no binding mechanism is enforced after reaching an agreement among the parties. Consequently, the negotiation is hard to achieve. Thus, the dispute is filed up to the court or the arbitrator for resolution.
Commercial Mediation
According to the Ministry of Justice, Vietnam has 10 Commercial Mediation Centers. Commercial mediation is implemented in one of the following ways:
1. The parties submit a request for mediation to a mediation center namely the Vietnam Mediation Center (VMC)
2. The parties submit a petition to the arbitration center, during the arbitration proceedings, the parties have the right to request the arbitration council to conduct conciliation.
Reality proves that the success or failure of the mediation depends greatly on the industry expertise, experience, mediation skills as well as the mediator's ability to persuade the parties. Therefore, from the first steps in mediation, the parties should carefully choose the right mediator with established expertise and seasoned experience.
Arbitration
According to its dispute settlement principles, Arbitration presents a number of outstanding advantages to the parties when there is a dispute in business and commercial activities. Specifically, the Arbitration method has
(i) simple procedures,
(ii) transparency and fairness as the parties can select their own arbitrator,
(iii) confidentiality (trade secret),
(iv) voluntary-based regardless of state power,
(v) finality judgment as the parties are obliged to perform.
Court
In Vietnam, the litigants often choose economic dispute settlement by the Court as a last resort to effectively protect their rights and interests when they fail to negotiate or reconcile.
The most considerable benefit of this method lies in state power. The court is a judicial body that has the right to act in the will and power of the state when adjudicating disputes. The final judgments and decisions of the People's Court must be respected and complied with by state agencies, economic and social organizations, armed forces, and all citizens. In case the judgment is not voluntarily enforced, it will be coerced by state power.
The Supreme People's Court
However, commercial dispute resolution by the Court has several downsides. One of the principles in court adjudication is a public hearing, which is of the most concern to businesses as their trade secrets will be exposed. In addition, court procedures are complicated and cumbersome, and the division of trial procedures is time-consuming and ineffective, prolonging the time for dispute settlement. This leads to economic losses for businesses in commercial conflicts.
For foreigners who are involved in business disputes in Vietnam, the unfamiliarity with the Vietnam legal system will cause them certain disadvantages. Therefore, to avoid unfavorable situations and significant economic losses, foreign companies should consult domestic experts in the field and seek out the most beneficial solutions. Viettonkin - one of the leading consulting firms with a deep insight into the Vietnam market and legislation - can help you and your business navigate through the legal process in Vietnam. Please do not hesitate to contact our Vietonkin consultant team via email or contact page.
With an aim to meet the rising demand of digital financial services, at the same time, to develop digital banking, the Vietnamese government has approved and issued several supporting policies.
Policies of 5G development
Mr. Huynh Quang Liem, General Director of VNPT Group assessed that Vietnam has a high position in the connectivity rankings as the mobile network covers 99.8% of the population. Additionally, the Vietnam government has identified digital infrastructure as one of the pillars of the digital economy, and the 5G network deployment will play an important role in promoting digital transformation.
On December 31, 2020, the Prime Minister issued Decision No. 2289/QD-TTg approving the National Strategy on the Fourth Industrial Revolution to 2030. Specific objectives by 2025 are as follows:
Fiber-optic broadband network infrastructure covers over 80% of households and 100% of communes
Universalize 4G/5G mobile network services and smart mobile phones;
80% of the population use the Internet
80% of online public services reach level 4 which were provided on various means of access, including mobile devices
The percentage of the population with an electronic payment account is over 50%;
There are at least 3 smart cities in 3 key economic regions (North, Central, South) with 5G network coverage in these urban areas.
By 2030, fiber-optic broadband Internet services and 5G mobile network services will be universalized
Following the vision, Vietnam is in the early stages of the 5G network. In addition, Vietnamese electronics and telecommunications enterprises have actively produced many information pieces of equipment and telecommunications infrastructure, while in the past they had to purchase and depend on foreign manufacturers. However, there exist common problems regarding capital cost (CAPEX), licensed spectrum, and lack of subscribers to use 5G. In particular, the issue of CAPEX for 5G is of the top concern. The average revenue per mobile subscriber (APRU) in the Vietnam market is low (about 3 USD), therefore, increasing 5G revenue in the initial stage of deployment is not enough to compensate for CAPEX. Yet, actively sharing infrastructure construction is considered an effective solution for network carriers around the world to deploy 5G.
On the other hand, the 5G infrastructure is underdeveloped. When beginning the construction of 5G networks, most of the current operations are fully installed with 2G, 3G, and 4G equipment. As a result, there is inadequate space to build in 5G and other supporting infrastructure. Therefore, upgrading to 5G will incur a large cost for the telecom enterprises, so it is necessary for the firms to be well prepared in terms of both capital and capacity. Without being said, Vietnam has a well-developed telecommunications infrastructure with the 4G network covering the whole country, and 95% of the population using it. Moreover, frequency band resources and terminals are ready for 5G network construction.
According to the assessment of Vietnamese telecommunication enterprises, it is not until 2023 - 2025 that 5G will be as popular as 4G, due to the limited coverage of 5G. Hence, more broadcasting stations are being constructed to ensure connectivity. In this way, 5G will initially be deployed in developed areas, with high population density such as large cities, or in high-tech industrial parks. When switching to 5G networks, users demand high speed with low cost, which is a challenge for carriers to provide the best user experience and increase competitiveness.
Mr. Nguyen Phong Nha, Deputy Director of the Department of Telecommunication (Ministry of Information and Communications) said after enterprises complete commercial trial, network operators will have to send evaluation reports on technical features, commercial capabilities, market demand, and business possibilities to state management agencies, specifically the Ministry of Information and Communications, to complete the legal basis. Thus, a legal framework regulating the establishment and management of 5G carriers is still in the process of construction and completion.
Policies of non-cash payment development.
Regarding non-cash payment, many important policies and regulations to promote non-cash payment and digital transformation in the banking industry have been researched, developed, by SBV since the beginning of the year 2021. On March 9, 2021, the Prime Minister signed Decision No. 316/QD-TTg approving the pilot implementation of using telecommunications accounts to pay for goods and services of small value (mobile-money). Similarly, on October 28, 2021, the Deputy Prime Minister signed Decision 1813 approving the project of developing non-cash payment for the period of 2021-2025. The scheme sets out a series of goals, namely, the value of non-cash payments being 25 times higher than GDP, growth in the use of non-cash payment services reaching 20-25% annually, the average growth rate in the quantity and value of transactions via Internet channels reaching 35-40% per year.
Besides, the Vietnamese government has guidelines and policies to develop non-cash payment methods.
Decision No. 316/QĐ-TTg on approval of the pilot application of using telecommunications accounts to pay for small-value goods and services.
Decision No. 1813/QĐ-TTg on approving the scheme for development of non-cash payment in Vietnam for the period 2021 - 2025
Decision No. 2545/QD-TTg, on approval of the project to develop non-cash payment in Vietnam for the period 2016 - 2020
Decision No. 241/QD-TTg on approval of the Scheme to promote payment through banks with public services: Tax, electricity, water, tuition fees, hospital fees and payment of social security programs…
Directive No. 22/CT-TTg on accelerating the implementation of solutions to develop non-cash payment in Vietnam
Thanks to the policies, the technology platform for online payments is being improved, which is expected to increase the rate of cashless payments. Furthermore, a network of banks and electronic payment gateways has significantly developed recently. In detail, the current network and branches of credit institutions in Hanoi include 112 branches of State-owned commercial banks, 175 branches of joint-stock commercial banks, 5 branches of joint venture banks, 16 bank branches with 100% foreign capital, and 7 branches of finance leasing companies. In other respects, commercial banks are now also deploying many other electronic payment systems, for example, via the internet and mobile phones. These two methods are experiencing relatively rapid growth as there have been 78 organizations providing payment services via the internet and 45 firms providing via phone, with the quantity of transactions up to several hundred quadrillion VND. With the trend of digital transformation, many domestic banks are also applying new advanced technologies in e-payment, face recognition, fingerprints, biometrics to name a few.
Nevertheless, when it comes to mobile money, Mr. Duong Trong Chu, Director of Digital Banking Division of Lien Viet Post Bank pointed out challenges faced by digital banks which are due to the habit of using cash by Vietnamese, the trust of the users in physical rather than digital banks, and loose policies in implementing digital transformation in banking. Thus, it is necessary to have new integrated payment methods that are more convenient for people and businesses.
In addition, communication and commercial marketing has not been paid attention along with the strategic goals, orientations, and major policies for the development of payment activities have not been fully and properly recognized by the public. Therefore, not only people but also businesses have little or vague understanding of payment services and electronic payment facilities.
Recommendations from Viettonkin:
The challenges in the process of digital transformation still remain to be solved by credit institutions. Nonetheless, Viettonkin has some recommendations for foreign investors in the digital banking sector of Vietnam.
It is the right time to invest in Vietnam!
Over the past decade, Vietnam has experienced the fastest growth in the number of middle-income people in the world (World Data Lab, 2021). Specifically, Vietnam will have an additional 23.2 million people join the middle class by 2030. In 2000, less than 10% of the Vietnamese population belonged to this category, but this figure has increased to 40% in 2021. The President of Vietnam - Mr. Nguyen Xuan Phuc - assessed that the middle class can account for 50% of the whole population by the end of 2045. In addition, as Vietnam is in the golden population structure, in which nearly 56% of people are under the age of 35, the highest rate compared to countries with similar income levels in the region, meaning that Gen X and Gen Y are forming most of the labor force and Vietnam's consumer market. The rapid growth of the young middle-income class in Vietnam will create the basis for domestic consumption of services and higher value-added products. This will likely bring new investment opportunities in financial services and sustainable products.
The change of mindset towards digital transformation has accelerated the digital economy. In particular, the political system of Vietnam, from the government, the National Assembly to all the Ministries, is determined to go digital through initiative policies, and a sandbox mechanism recently. Thus, digital banking and financial institutions are indispensable parts and have a positive impact on the stakeholders of the digital economy, and reversely can benefit from those stakeholders.
The digital banking market in Vietnam is still in the premature stage. Digital transformation activities of Vietnamese banks mainly focus on retail distribution channels, the rest such as lending are only semi-automatic. The ecosystem is established but still underdeveloped. Up to now, no bank has been able to allow entire lending in the digital environment. This means that the market is not saturated and spares plenty of room in the market space for foreign investors.
Vietnam offers a great opportunity for investors in the corporate customer segment!
As Vietnam participates in different dynamic free trade agreements, the country wants to leverage the resources of all members. Hence, financial institutions play a significant role in executing the FTAs, which increase demand for the Vietnam market, directing the trade flows towards this country. Therefore, digital banks must be one step ahead to service this customer segmentation. In addition, in the context of the Covid-19 pandemic, mobility is restricted, so business customers prefer digital banking to ensure secure and optimal transactions.
The improved legal framework has created better ease of access for investors
With active participation in the FTA, the Vietnamese government is tenacious to implement institutional and administrative reform, especially developing a legal system to enforce the effect of FTAs. Therefore, the government and the SBV have built, deployed, and learned from the sandbox for digital banks. In the upcoming years, Vietnam is trying to gradually build a clear legal framework for digital banking operations and management. This can motivate further investment into Vietnam.
There are many modes of market entry to the digital banking market in Vietnam!
Banks and investors can choose digital banking as an alternative way to venture into Vietnam and penetrate financial services. This can be realized through the establishment of digital banks, cooperation with VN bank and stakeholders.
Digital transformation is a strong movement in Vietnam!
The government has kicked off the trend through several resolutions on Industrial Revolution 4.0. Along with this, the Prime Minister has issued plans and strategies for the whole nation to transform digitally. The atmosphere has generated good resources and an ecosystem for digital banks to develop
Conclusion
Despite challenges, ample opportunities are waiting for those who take risks. As an FDI consultant, Viettonkin is working with stakeholders from different countries to leverage resources from developed countries including the US, Western EU. And, Viettonkin is willing to support and provide technical and professional assistance for the development of digital banking services, and the digital transformation of the financial service sectors in Vietnam. This is an initiative that we have joined and hope to cooperate with relevant stakeholders.
If you are interested in investing in the Vietnam Fintech sector, don't hesitate to contact our Vietonkin consultant team via email or contact page. Our professionals, who are insightful of the Vietnam market and legislation, can provide detailed advice on penetrating this potential market.
According to Vietnamese Law on Accounting, Audit and Compliance is the examination and confirmation of the compliance of your company. To make sure your company stays compliant in the market, this aspect must be focused. Therefore, in this article, we will share a condensed guideline about Audit and Compliance for Foreign Investors doing business in Vietnam.
READ MORE: Audit & Assurance to find how we can help your business to stay compliant in Vietnam.
Overview of Audit and Compliance in Vietnam
According to Article 15 of Decree No. 17/2012 / ND-CP dated March 13, 2012, the Law on Independent Audit, the following subjects are required annual financial report auditing:
Foreign-invested enterprises;
Credit institutions established and operated under the Law on Credit Institutions, including foreign bank branches in Vietnam;
Financial institutions, insurance enterprises;
Public companies, issuers and trading organizations;
Other enterprises and organizations are required to be audited according to relevant law provisions.
Fiscal year
The Vietnamese Law on Accounting set the principles for accounting, audits, and enterprise structure, for businesses to comply in Vietnam. The tax in Vietnam is determined according to the solar calendar year, and a Vietnamese - based auditing company must be in charge of the audit.
The financial statements are sent to the Vietnam Ministry of Finance and the Statistics Office 90 days before the end of the Fiscal Year.
For the fiscal period, you can choose either the solar calendar fiscal year starting from Jan 01, or the 12-month fiscal period beginning on the first day of any quarter.
*Note: The audit and compliance requirements are different between foreign-invested companies (FIC) and representative offices (ROs).
According to the Enterprise Law, all foreign-owned companies are required to have annual financial statements audited by an independent audit firm. The legal audits in Vietnam were performed in accordance with the Vietnamese Standards on Auditing.
Audited financial statements and tax finalization records must be made within 90 days of the end of the Fiscal year.
After fulfilling these obligations and notifying the local tax authority at least 07 working days in advance, you are entitled to remit profits abroad. There will be no tax on repatriation profits.
Once performing the audit, you must maintain accounting records based on the Vietnamese Accounting Standards (VAS), in short - the requirements for accounting include:
- Use Vietnamese language (besides a foreign language, if any)
- Use VND as the currency
- Comply with Vietnamese chart of account (COA)
- Include reports according to VAS regulations, monthly printed, and signed by the General Director with the company seal.
In case you want to use a foreign currency other than VND for your financial records, you need to submit to the local tax authority. This currency unit must be the one used for banking transactions, services and quotations. This currency can also be used to account for revenues, pay staff’s salaries and raw materials.
You can choose to manage two accounting records; one based on VAS and the other compiled exclusively for its abroad headquarters. In fact, many foreign investors maintain the accounting system under VAS and only convert to IFRS, for the purpose of corporate consolidation, quarterly or even annually - this could be supported by the audit firm after completing the statutory audit.
Compliance For foreign-invested companies (FOCs)
For FDI enterprises, according to the Law on Independent Audit passed by the Vietnamese Government in 201, you must provide an audit report, the corporate finalization and personal income taxation annually. The audit and compliance requirements cludes:
Income Statements;
Financial position Statements (profit and loss);
Changes in equity Statements, if any;
Balance sheets.
Then, you need to submit the audited reports to three government agencies no later than 90 days after the end of the fiscal year. The three government agencies includes:
Provincial Department of Planning and Investment (DPI) or the Provincial Level Export Processing and Industrial Zone Department in the case of your business based in industrial zones (IZs) or export processing zones (EPZs);
Provincial-level tax departments;
Provincial-level statistical offices.
Audit and Compliance for representative offices (ROs)
Setting up a Representative office (ROs) is one of the simplest and fastest ways to establish a legal entity in Vietnam. Their report requirements are also more simple compared to FOCs.
READ MORE: Legal Service to find out more about how we can help tackling your problems and protecting your rights
Because ROs are forbidden from directly conducting profit-generating activities and are limited to market research, developing trade contacts, and gathering information on regulations and laws, their compliance requirements are also more simple than FOCs.
Procedure requirements check - list (2021 update)
Tax and accounting procedures
Mandatory:
PIT finalization
PIT finalization for individuals with multiple sources of income or have direct income from abroad
Tasks to note:
Complete cash book and petty card with appropriate invoices and vouchers for tax inspection
Re-audit the tax return - payment and tax receipts
Cross-check the balance - tax status with the tax agency
Annual activity Report
Prepare and submit the Report on the operation of the office during the year to the Department of Industry and Trade
Procedures for wage labor
Mandatory:
Signing a labor contract, an employment contract appendix for the new salary and income for the year for each employee in the country.
Provide appointment letter, confirmation letter of annual income for foreign workers.
Registering and adjusting the salary scale system, labor regulations, labor agreements ... to update regulations and welfare policies.
Complete information about the employee management book with content that needs updating such as days off, overtime hours, discipline, salary increases, …
Tasks to note:
Performing income verification procedures, issuing PIT withholding vouchers for seasonal employees, employees earning direct income from abroad.
Determine a list of personnel subject to PIT self-finalization with the tax office.
Non-compliance penalties (2021 update)
According to the Government’s latest Penal Code, enterprises that do not comply with compliance law can be considered as criminal and must take responsibility before the law.
If the tax authorities find false in the financial report, after the audit, 20% tax will be applied to the under-declared amount.
In addition, the enterprise is also fined 0.03% of the daily interest rate for late tax payment. To sum up, Audit and Compliance is no longer complicated and confusing once you understand it. If you want to start laying the groundwork for your business in Vietnam, please always remember that you can always find a loyal and reliable partner. Us Viettonkin are always ready to accompany you at any time ! Please contact us on the website for more information !
One of the major steps when incorporating a company in Vietnam is choosing an individual to act as a legal representative of your company. This person represents the company before the laws and is often recognized by other individuals in transactions with the company. The importance of choosing a legal representative therefore cannot be overlooked. This article will provide a crash course on Vietnamese jurisdiction concerning legal representatives and the various roles and responsibilities such an individual will assume.
Who is a legal representative?
Every company legally registered in Vietnam is required to have at least one legal representative (đại diện pháp luật). The legal representative is, by definition, an individual representing an enterprise, exercising rights and obligations arising from transactions, representing the enterprise as a plaintiff, defendant, or authorized person before the jurisdiction and other rights and obligations as provided for by law.
To put it simply, only the legal reps. can bind the company, act on behalf of the company in legal matters as well as perform other rights and obligations of the company. The legal rep. must be involved in business activities such as application of business licenses, registered capital adjustments, and corporate bank account opening. Details of the legal representative are recorded in the business registration certificate of such company, and government authorities tend to recognize the individual whose details are recorded in the business registration certificate. Thus, the legal representative is usually an individual of a management role or higher.
First of all, the legal representative is required to have labor contracts. There are some cases that foreigners can have Work permit exemption like the owner of a company. If you wish to register one legal rep. that needs to have a work permit, he/she needs to reside in Vietnam for a total of at least 183 days per year and cannot leave the country for more than 30 consecutive days.
For foreign investors who are not able to reside in Vietnam permanently to be the legal representatives of the company, engaging a nominee director provides a solution. A Nominee Director is a dedicated and chosen representative of the company. This person can be of any nationality but is required to reside in Vietnam full time.
Companies incorporated in Vietnam must at all time have at least one legal representative residing in Vietnam. When such individual is absent, he/she must authorize in writing another person (agent) to exercise the rights and perform legal obligations. Upon expiration of the authorization period, if the legal rep. has yet to return to Vietnam, the authorized agent continues to represent the company within the scope of authorized rights and obligations until the legal rep. returns.
Responsibilities and Roles of the legal representative
Under the Civil Code only the legal representative of a company or a person authorized by the legal rep. can act on behalf of and make decisions that bind the company. However, since there is no apparent authority doctrine under Vietnamese law, more often than not the court does hold a contract signed by a person who is not properly authorized by the legal representative enforceable against such company.
A limited company or a joint stock company may have one or more legal representatives. The company's charter specifies the number, managerial position, rights, and obligations of the legal rep. (Clause 2, Article 13 of the Law on Enterprises 2014). Enterprises can decide for themselves the number of their legal representatives in the exercise of rights and obligations arising from business transactions.
Article 14 of the Law on Enterprises 2014 stipulates that the legal representative of an enterprise assumes the following responsibilities:
Implement the assigned rights and obligations in an honest, careful and best manner to ensure the legitimate interests of the enterprise;
Loyal to the interests of the business; not using information, know-how or business opportunities of the enterprise; not to abuse the position, position or assets of the company for self-interest or for the benefit of other organizations or individuals;
Promptly, fully and accurately notify the company of the ownership of such representatives and their related persons, with dominant shares and contributed capital in the enterprises.
The legal representative of the enterprise is personally responsible for any damage caused to the enterprise by the breach of the above obligations.
In this article, you will be given information about copyright law in Singapore. It starts from the definition itself, copyright protection in Singapore, and lastly, the requirements to get one. You might ask yourself why we need to know about copyright because it is something that we encounter every day in our daily lives. For instance, the songs we listen to, the movies we watch, even this article that we are reading right now are protected by copyright. Let’s have a read until it ends!
What is Copyright?
You may be often hearing about something that has a copyright, but may not know what exactly it is. Well, copyright is an Intellectual Property (IP) right that will protect the expression of ideas, but not the idea itself. It protects original literary, musical, dramatic and artistic works that have been expressed and recorded in a tangible form.
Generally, the author of a copyrighted work has the right to reproduce, publish, perform, communicate and adapt his/her work. These rights enable a copyright owner to control the commercial exploitation of his/her work. However, copyright does not protect inventions or a company’s brand. Those are protected by patents and trademarks respectively. In this country, copyright is governed by the Copyright Act (CA).
Copyright Protection Law in Singapore
The author usually enjoys copyright protection as soon as he/she creates his/her work in an actual form. Moreover, a work that is to be protected by copyright in Singapore needs to be original and expressed in a tangible form, such as in a recording or in writing.
It simply means that there is a degree of independent effort in the creation of work and not a question of whether work has creative merit or not.
Hence, it protects expressions of ideas by granting the copyright owner of the work a bundle of rights. This bundle of rights also grants the copyright owner to exclusively reproduce, publish, perform, communicate, and adapt his/her work.
The copyright owner normally is the author of the work, but this is not always the case. For example, the author may have sold his/her copyright to another party and more situations where the author does not hold the copyright to the work.
However, copyright is territorial, and that means copyright which arises in Singapore is valid only within the borders. In addition, Singapore is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), an international treaty that controls intellectual property rights globally. As a result, any copyright that is created in Singapore is also protected in countries that are signatories to TRIPS.
Copyright in Singapore automatically comes into existence for work that qualifies for protection. In other words, there is no need to worry about registration or the paperwork associated with it. It somehow will save authors time, effort, and registration fees.
How To Get Copyright Protection in Singapore?
The authors who intend to commercialize their work do not need to acquire a copyright license or register it as there is no copyright registry in Singapore. Copyright is automatically granted as soon as you create and express your original work in a tangible form, such as in a recording or writing.
There is a qualification for copyright protection in Singapore for your works, and keep it in mind that your works must be followed the requirements below!
1. It must be a literary, dramatic, musical or artistic work.
A literary work is one that is written and contains information that can be read.
A dramatic work is a work capable of being performed and conveys a plot.
A musical work is an arrangement of musical notes.
Artistic works refer to a painting, sculpture, drawing, photograph, a building, or any work of artistic craftsmanship.
2. Connected to Singapore.
The CA requires the author to be a Singapore citizen or residing in Singapore, or the work is first published in Singapore.
3. Expressed in a tangible form.
The CA requires that the work be reduced to writing or some other material form.
4. Be original and maintain your proof of originality.
A work is considered original if it originated from the author. It even happens if someone else produces a similar work independently. For instance, two photographers can have a similar photograph of the Singapore skyline on their own, but they have knowledge of one another’s photograph. However, both works can be granted copyright protection and neither would be infringing upon the other’s copyright.
Deposit a copy of your work with your lawyers or in a depositor
Send a copy of your work to yourself by post, leaving the envelope unopened, so that the date stamp and the unopened work could establish the date of the work’s existence.
Make a declaration before a Commissioner of Oath stating the fact of ownership and the date of creation.
You may be wondering if the copyright symbol is necessary or not, anyhow the use of its symbol is not required. It would automatically exist for your original work with or without the symbol.
Other than that, the copyright symbol may be useful in a court proceeding, and its use may prevent an alleged copyright infringer from claiming someone’s work because the copyright symbol would have notified them that the work is under the protection.
After following the requirements above, the next thing you need to know is the duration of copyright protection. If you have published literary, dramatic, musical or artistic works, copyright in the country will last for 70 years after the author’s death.
If the works have been published only after the author’s death, copyright will last for 70 years after the work was first published. This allows for copyright protection to last indefinitely if the work remains unpublished.
Nevertheless, the CA will be amended so that protection lasts no longer than 70 years after the author’s death, even if the work was published or unpublished.
After the copyright expires, the work goes into public domain. It means that everyone would be free to use, adapt, or build on the work. The CA does not allow for copyright protection to be revived once it has expired.
Getting to know about copyright protection law in Singapore is important, it’s especially when you are gonna have your work published in the future. Thus, you must follow the requirements mentioned above to have the protection soon after your work is published!
About Us
Founded in 2009, Viettonkin Consulting is a multi-disciplinary group of consulting firms headquartered in Hanoi, Vietnam with offices in Ho Chi Minh City, Jakarta, Bangkok, Singapore, and Hong Kong and a strong presence through strategic alliances throughout Southeast Asia. Our firm’s guiding mission is aimed towards facilitating intra-ASEAN investments and connecting investors in Southeast Asia with the rest of the world, thus promoting international business relationships and strengthening inter-nation connections.
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