Benefits of doing business in Vietnam

Vietnam is one of the best destinations to develop and expand your business abroad.

Vietnam business environment overview

In recent years, Vietnam has become one of the most attractive investment destinations in Asia, especially for foreigners.

In particular, some key features of Vietnam's business environment include:

• GDP growth was 8.02% in 2022.
• Strong purchasing power with a population of around 100 million.
• The world's top companies in the supply of electronic goods, mobile phones, textiles and other industries.
• More than 36,278 foreign direct investment (FDI) projects with a total authorized capital of approximately US$438.7 billion.
• Duty-free trade between the EU and Vietnam in several sectors.
• An open business environment that attracts foreign investment.
• Strong position in information technology and manufacturing due to competitive labor costs.

Benefits of doing business in Vietnam

Tax incentives

The state encourages doing business in the country. New investment projects may enjoy tax incentives depending on the sector, location and scale.

Moreover, if you undertake expansion projects, you will be granted CIT benefits subject to certain conditions.

Fast growing economy plus potential market

Vietnam — it is a dynamic market with endless potential. Despite the effects of the Covid-19 pandemic, the country has continued to enjoy impressive economic and industrial growth, making Vietnam one of the fastest growing economies in Asia.

Vietnam's annual inflation rate increased to 4.55% as of December 2022. But FocusEconomics Consensus Forecast experts predict that inflation will average 3.9% in 2023.

The country is also in the top 15 countries with the largest population in the world

Vietnam is one of the leading countries in terms of growth and development.

In particular, the announcement of the EVFTA (EU-Vietnam Free Trade Agreement) and EVIPA (European Union-Vietnam Investment Protection Agreement) in June 2019 brought positive results for the Vietnamese market, as well as for foreign investment in the near future .

Competitive labor costs

If you are a foreigner who wants to do business in other countries, the cost of labor can significantly affect the expectation of profit. Opening a business in Vietnam will relieve you of this concern because it is quite low and competitive here.

Vietnam has a large young population and as a result — potential workforce. In addition, the average cost of wages in the country is more competitive than in neighboring countries such as China.

According to statistics, the cost of manufacturing labor in China was 6.5 US dollars per hour, while in Vietnam the cost is only about 3 US dollars.

Regulatory framework

The Vietnamese authorities have made significant efforts to improve their legal and institutional framework. The regulatory system in the country is supported by an open business environment, transparent investment policies and favorable incentives for businesses based on profit.

The Entrepreneurship Law and the Investment Law of 2015 are fundamental laws governing the registration and operation of companies in Vietnam. These laws standardized carte blanche for individuals to conduct business in permitted areas of activity and reduced a lot of administrative problems for businesses. Moreover, the private sector and the FDI sector have also received preferential terms under these laws.

Vietnam's improved legal and regulatory environment has helped boost its international rankings.

In January 2021, the National Assembly of Vietnam passed the Investment Law and the Entrepreneurship Law.

Such further updates and changes have made doing business in the country less burdensome and more profitable for foreign businesses.

Strategic Location

Vietnam is strategically located in the heart of ASEAN. The country borders the Pacific Ocean, Thailand, Laos, Cambodia and China. This provides her with favorable conditions for international shipping and trade.

The Vietnamese market is also benefiting from changes in China's supply chains. The state is located near the manufacturing center of southern China — one of the world's largest economies and trading centers. This proximity has made Vietnam an attractive destination for investors looking to access supply chains from China.

Vietnam Free Trade Agreements (FTAs)

In the global economy, Vietnam is actively negotiating free trade agreements. The country has signed 15 free trade agreements with several key trading partners.

Vietnam has also established diplomatic relations with 190 countries around the world.

In particular, some of Vietnam's trade agreements include:

• Japan-Vietnam Economic Partnership Agreement (EPA) (2008)
• Chile — Vietnam FTA (2011)
• Eurasian-Vietnamese Economic Union (2015)
• South Korea — Vietnam (2015)
• EFTA (European Free Trade Association) — Vietnam (negotiations ongoing)
• Comprehensive and Progressive Trans-Pacific Partnership Agreement (2018)
• Vietnam — European Union FTA (2019)
• Comprehensive and Progressive Trans-Pacific Partnership Agreement
• Vietnam's other free trade agreements signed as an ASEAN member with Japan, China, India, Australia, New Zealand, South Korea, Hong Kong.

Problems of starting a business in Vietnam

Doing business in Vietnam may face some potential challenges, such as:

High corporate tax rates on certain investments

Vietnam has a standard income tax rate of 20% for most legal entities. However, in some specific categories of business, the tax rate is quite high.

For example, if you are involved in the exploration and production of oil, gas and other natural resources, you will be taxed at rates of 32% and 50%, depending on the location and circumstances of the projects.

Foreign currency restrictions

You will need to exchange foreign currency for Vietnamese dong for indirect investment in Vietnam. In general, transactions, payments, quotes, advertising and other forms must also be carried out in Vietnamese currency.

If you plan to reside in Vietnam for employment purposes, you can transfer your income abroad if you meet all financial obligations to the Vietnamese government.

Requirements for organizing a business

In order to set up a company in Vietnam, you need to meet a few requirements. For example, paid-in capital requirements.

Usually, the standard capital for your investment in Vietnam should be at least $10,000.

In addition, depending on the type of business, the amount of capital may be less or more.

The licensing process can be quite complicated. Especially if you are engaged in any conditional activity in a sector that is regulated by Schedule 4 of the Investment Law No. 67/2014/QH13.

In particular, you will need to provide more additional documents, such as a business qualification certificate, professional liability insurance, etc.

Conclusions

Despite minor difficulties, Vietnam is now one of the most promising markets among the ASEAN countries. The country has made great strides in GDP growth, regulation and tax policies to attract foreign investment.

Vietnam opens up new opportunities for foreign business in various sectors of the country's economy, especially after the huge impact of the trade war between the US and China, which led to new waves of investment. Thus, the option of buying a business in Vietnam is very promising and profitable. This is often the easiest way to enter the international arena. However, before making such a purchase, it is necessary to conduct a thorough analysis and evaluate all the risks and opportunities, and this work should be entrusted to the appropriate specialists. One of such professional teams operating in the international market, — this is Russian-Eurasian Business Broker (REAB).