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Tax Incentives for Foreign Investors in Vietnam

14 April 2020

24 March 2020

Nguyen Thu Phuong and Nguyen Hung Du, of Grant Thornton Vietnam, discuss the impact of an intra-group agreement and the tax risks involved.

As customs and tax authorities in Vietnam coordinate their efforts to ensure tax compliance, Tran Nguyen Mong Van and Nguyen Hung Du, of Grant Thornton Vietnam, discuss what companies should be aware of when doing business in Vietnam.

The article is about the key transfer pricing issues for multinational enterprises to consider when structuring intellectual property assets in Vietnam.

Technology Transfer Transactions to Vietnam—Potential Tax Risks

Value-added tax (VAT) refund plays a crucial role in cash flow and tax budget of companies and the government. Despite the fact that companies understand the importance of VAT refund, are they fully aware of the issues of workload, the time-consuming assessment process as well as potential tax risks to be successful in obtaining tax refund and maximizing the refund amount?

Failure to manage permanent establishment risks when doing cross-border business activities may result in an unexpected negative impact on a multinational corporation’s tax position.

With the increasing number of mergers and acquisitions (“M&A”), transfer of contributed capital and securities is becoming more common and is widely used by both domestic and foreign investors. How to comply with the regulations and have efficiency tax efficient approach is one of the key concerns of most shareholders, who would like to invest or divest their ownership in a Vietnamese company. In general, share transfer in Vietnam includes the sale of capital contributed in a limited liability company (“LLC”) and securities of a joint stock company (“JSC”), and in certain circumstances, the taxes imposed on each transaction are different.

The majority of Vietnamese taxpayers end their financial years on December 31 and thus will be subject to the deadline for 2017 corporate income tax (“CIT”) returns on March 31, 2018.

Whilst corporate tax avoidance continues to grab headlines, some of the biggest reforms are in fact occurring within indirect tax.

In recent years, Vietnam has experienced favorable growth in the nation’s construction industry and the construction sector shows no sign of stagnation. For foreign contractors, it is a legal prerequisite to obtain a proper license (‘‘construction permit’’), in order to operate in Vietnam. The legal requirements are applicable to an extensive group of foreign contractors, including general contractors, main contractors, joint venture contractors and subcontractors.

During business operations enterprises can take loans granted locally and/or from offshore to finance their current or long-term investments. For cross-border loans, they are classified into two types, i.e. government debts and non-government debts. This article focusses on non-government debts administration compliance, domestic tax and tax treaty protection.

Through the long process of formation and development, the bond market in Vietnam has been growing in both depth and scale, proving its role as a medium for long-term capital mobilization, in the economy, as well as addressing the shortfall of the State budget.

On February 24, 2017, the Vietnam Government issued a new transfer pricing decree—Decree No.20/2017/ND-CP (the ‘‘decree’’)—which is effective from May 1, 2017. The decree replaces the existing transfer pricing regulations and provides new compliance requirements aligned with the concepts and principles from the Organization for Economic Cooperation and Development (‘‘OECD’’) guidelines and Base Erosion and Profit Shifting (‘‘BEPS’’) framework.