bamboo foreign investment procedure in vn
TRANSCRIPT
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Foreign Investment
Procedure in Vietnam
(Initial focus on Thanh Hoa and Hoa Binh provinces)
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Contents
1 General Information ............................................................................................................ 3
1.1 National general information ...................................................................................... 3
1.2 Bamboo production information ................................................................................. 3
2 Foreign Investment Information.......................................................................................... 42.1 Investment regulations for foreign investors .............................................................. 4
2.1.1 Foreign Investment Law....................................................................................... 4
2.1.2 Licensing............................................................................................................... 4
2.1.3 Investment Activities and Investment Forms ...................................................... 4
2.1.4 1.4 Investment approval procedures................................................................... 5
2.1.5 Investors’ rights.................................................................................................... 5
2.2 Investment incentives and tax breaks in these two Province ..................................... 6
2.2.1 Hoa Binh Province ................................................................................................ 6
2.2.2 Thanh Hoa Province ............................................................................................. 6
3 Tax regulations, dividends and capital transfers- relevant regulations and tax rates ........ 73.1 Types of Taxes.............................................................................................................. 7
3.2 Corporate Income Tax.................................................................................................. 7
3.3 Incentive tax rates........................................................................................................ 7
3.4 Value-Added Tax .......................................................................................................... 8
3.5 Import/Export Duties ................................................................................................... 8
3.6 Personal Income Tax .................................................................................................... 8
3.7 Transfer of foreign investors’ profits ........................................................................... 9
4 Employment regulations /social security obligations.......................................................... 9
4.1 Labor code.................................................................................................................... 9
4.2
Minimum Wage Regulation in Enterprises.................................................................. 9
5 Accounting and auditing ...................................................................................................... 9
5.1 Accounting ................................................................................................................... 9
5.2 Auditing ...................................................................................................................... 10
6 Dispute resolution and governing law ............................................................................... 10
6.1 Dispute resolution...................................................................................................... 10
6.2 Governing law ............................................................................................................ 10
7 Land access/allocation/costs ............................................................................................. 10
7.1 Land allocation for foreign investment enterprise.................................................... 10
7.2 Lessors permitted to lease land to FICs ..................................................................... 10
7.2.1 Lease term.......................................................................................................... 10
7.2.2 Rights of foreign investors to the land leased ................................................... 11
7.3 Lease of Commercial Property................................................................................... 11
7.4 Land use right certificate (LURC) ............................................................................... 11
8 Energy costs (electricity, diesel)......................................................................................... 11
8.1 Electricity cost ............................................................................................................ 11
8.2 Fuel cost ..................................................................................................................... 12
9 Domestic road haulage costs ............................................................................................. 12
10 Labor costs (unskilled, semi-skilled, skilled) .................................................................. 12
11 Customs cost for 20’ container of bamboo flooring...................................................... 12
12 Trade tariffs when exporting to USA, Japan, EU............................................................ 13
13 Typical shipping costs for a container to USA (port?), Japan (port?) ............................ 13
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Foreign Investment Procedure in Vietnam
(Initial focus on Thanh Hoa and Hoa Binh provinces)
The report is summarized from various information resources of law firms, government
agencies and local enterprises.
1 General Information
1.1 National general information
Key national information
Capital city: Hanoi
Surface area: 332,000 sq km
Population: 86.3 million
Official language(s): Vietnamese
Currency: Dong (VND)
Government: Communist state
Vietnam's principal export destinations: USA, Japan, China
Vietnam's principal import sources: China, Singapore, Taiwan
Key economic indicators and statistics for 2008
GDP: US$89.8 billion
GDP per capita: US$1,040
Real GDP growth: 6.2%
International Seaports
Province International ports
Quang Ninh Hon Gai / Cam Pha
Hai Phong Hai Phong
Nghe An Cua Lo / Ben Thuy
International Airports
Hanoi Noi Bai
Da Nang Da Nang
Hochiminh City Tan Son Nhat
1.2 Bamboo production information
Currently, there is about 1.4 million ha of natural bamboo in Vietnam, accounting for 15% of
total area of natural forest. Out of this area, 800,000 ha is pure bamboo and 600,000 is
bamboo mixed with other wooden trees. The total number of bamboo culms is about 8.4
billion. In addition to this, the area of planted bamboo has also been increasing quickly and is
now about 100,000 ha. Further more, out of 6 million ha of unused land, a big part can be
used to grow bamboo.
The bamboo area and number of bamboo culms in some provinces are summarised below:
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Area: ha; Stock: 1000 culms
Total Bamboo mixed
with wooden trees
Natural pure
bamboo
Planted pure
bambooProvince
Area Stock Area Stock Area Stock Area Stock
Hoa Binh 27,219 311,617 7,462 119,392 12,784 178,976 6,973 13,248
Thanh Hoa
194,679
1,830,33
9 52,473 577,203 80,727 1,130,178 61,479 122,958
Nghe An 134,307 1,500,82
9
48,708 467,597 81,73
0
1,021,625 3,869 11,607
Quang Nam 8,969 224,225 8,969 224,225
Quang Ngai 3,374 57,358 3,374 57,358
Kon Tum 107,537 1,140,54
8
38,368 498,784 69,16
9
64,1764
Dak Lak 30,331 401,206 11,687 140,244 18,64
4
261,016
Thanh Hoa has the largest bamboo area in 7 provinces mentioned above. The Luong bamboo
(Dendrocalamus Barbatus )were widely planted for decades because of suitable soil and
weather condition. Total bamboo area is about 195,000 ha, mainly distributed at the western
part of the province. The planted Luong bamboo are is 65,000 ha, distrusted at Quan Hoa,
Lang Chanh, Ba Thuoc, Ngoc Lac and Quan Son provinces. Luong bamboo is being used by
flooring and laminated furnitures producers in Vietnam.
2 Foreign Investment Information
2.1 Investment regulations for foreign investors
2.1.1 Foreign Investment Law
Under the new Investment Law, investors may invest in all sectors not prohibited by law.
2.1.2 Licensing
Investors must follow different licensing and registration steps depending on the size and the
sector of investment.
Level 1 (Business Registration): Small domestic enterprises with invested capital below VND15
billion (approx. US$940,000) are only subject to business registrationLevel 2 (Investment Registration): Foreign projects with invested capital under VND300 billion
(approx. US$19 million require registration of investment and the issuance of an investment
certificate.
Level 3 (Investment Evaluation): Any project with invested capital over VND300 billion (US$19
million) or projects in conditional sectors must undergo an investment evaluation.
2.1.3 Investment Activities and Investment Forms
The UEL provides four main forms of business including a LLC, a joint stock company, a
partnership company, and a private enterprise. Foreign investors choosing to set up a
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business in the form of a JVC will find that either a LLC or joint stock company would be the
most appropriate structures.
Shareholding limit for foreigners
The UEL does not set restrictions on the percentage of a company a foreigner may own,
although this is subject to further regulation. Foreigners currently wishing to purchase shares
in a domestic company may only purchase up to 30% of a non-listed company which operatein certain sectors approved by the Government, and 49% of a listed company.
Choosing between an LLC and a joint stock company
The distinct advantage of a joint stock company is that a foreign partner may always sell
shares to raise capital.
The joint stock company structure may be preferable for a minority foreign partner interested
in testing the. The LLC structure is likely to be the optimum structure for a fully foreign owned
enterprise. The single owner has complete control of the company and is not subject to rules
governing business relationships with partners, quorums, and majority voting. The LLCstructure may also be preferable for foreign investors entering into joint ventures with
Vietnamese parties. In an LLC, the foreign investor may choose his partners, rather than in a
joint stock company where the public has the rights to purchase shares. The foreign partner
may also enter an agreement within an LLC that, in the event the local partner wants to sell
his share in the company, the foreign partner has pre-emptive rights of purchase.
2.1.4 1.4 Investment approval procedures
Please refer details to Hanoi DPI website below:
http://www.hapi.gov.vn/portals/default.aspx?portalid=5&tabid=86
In theory, required time for verifying and issuing the Certificate of Investment is normally 15
working days, upon receipt of full set of valid documentations. However, it would take much
more time for investor to arrange the “valid” documents.
2.1.5 Investors’ rights
Investors in Vietnam are entitled to the following rights, among others.
• Right to autonomy in investment/business is to select the sector in which to make an
investment, form of the investment, method of raising capital, geographical location
and scale of the investment, and to decide on and select an investment partner and
the term of operation of the project (though the restrictions on term of operationdescribed above will apply to foreign-invested projects).
• Equality in access to and use of sources of credit and aid funds, and in use of land and
natural resources, although this is qualified by what must be the favorite words in the
Vietnamese draftsmen’s lexicon: ‘in accordance with law’.
• To lease or purchase equipment and machinery either domestically or overseas to
carry out an investment project.
• To recruit foreign employees to fulfill management tasks, provide technical labour and
provide expertise in accordance with production and business requirements, unless
otherwise provided in an international treaty of which Vietnam is a member.
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• To import directly or indirectly equipment, machinery, raw materials, supplies and
goods for investment activities, and to export directly or indirectly and to sell its
products.
• To process or reprocess products (apparently for third parties), to place orders for
processing or reprocessing of goods domestically or to place orders for processing of
goods overseas, although again this must be ‘in accordance with the commercial law’.
• To purchase foreign currency from credit institutions. The government will provideguarantees for important projects in energy, construction of traffic infrastructure
facilities and waste treatment.
• To assign or adjust investment capital or the investment project itself, although any
profits from such assignment will be subject to income tax.
• To mortgage land use rights to credit institutions operating in Vietnam
2.2 Investment incentives and tax breaks in these two Province
Thanh Hoa Province and Hoa Binh Province are in similar level of development.
2.2.1 Hoa Binh Province
Investment incentive of Hoa Binh provinces are stated in Decision No 31 of Hoa Binh PPC,
dated November 25, 2002. The summary is below:
( http://www.dpihoabinh.gov.vn/DocumentFiles/2006091916195894625490.pdf )
About land:
The investment holders have right to select location, area to rent or to hand over following
the regulation of the Land Law and conformable to the master plan and the using land plan of
the province
Support on infrastructure:
Hoa Binh government will support the investor to build electricity line, water supply, water
drainage, road to the wall of factory or Support on other infrastructure with a maximum
measure of 3 billion VND each project if the project meets one of the conditions as follows:
Financial support for training labor
Once support expense for local training labor with an amount of 300,000 VND each labor (the
labor mush have certificate of training)
Tax incentivesTax incentives are followed with Government regulation (as stated in Tax regulation below).
List of encouraged investment sector
Production of pressed wooden fiber plank, fabric shoes, and different kinds of construction
material
Breeding, rearing, growing and processing agricultural, forestry and aquaculture product
2.2.2 Thanh Hoa Province
In general, Thanh Hoa offers investors with highest level of incentives and lowest level of obligation in the range regulated by Government.
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Land site clearance
Other incentives:
• Support on labor recruiting and training.
• Support on infrastructure for project implementation.
• Special support for projects which have large impact on the economic development of province
3 Tax regulations, dividends and capital transfers- relevant regulations and
tax rates
3.1 Types of Taxes
According to the prevailing tax law system, at least, the following taxes should be aware of by
foreign investors when doing business in Vietnam.
• Corporate income tax;• Value-added tax;
• Special sales taxes;
• Withholding tax;
• Import/export tax;
• Technology transfer tax;
• Foreign contractor tax; and
• Personal income tax.
3.2 Corporate Income Tax The standard tax rate is now 28%.
The rate of 10% will be applied in the first 15 years for cooperatives and newly-established
enterprises in areas in the List of especially difficult areas.
After 15 years enjoying preferential tax rate, the standard tax rate of 25% will be applied.
Newly-established enterprise can get following tax exemption and holidays as follows: Tax
exemption up to 4 years after first profit-making year and reduction of 50% up to 9 years
subsequently will be applied for enterprises producing some special products or set up in
especially difficult areas.
3.3 Incentive tax rates
Different incentive tax rates applied. In addition to the mentioned incentive tax rates, the
projects may enjoy the following tax holidays and reductions.
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3.4 Value-Added Tax
Value-Added Tax (VAT) is levied on the added value of most goods and services generated
during the process from the production, circulation to consumption (With respect to some
categories, they are subject to Special Sales Tax, as described in Section hereunder). There are
four VAT rates as follows:
(i) The tax rate of 0% is applicable to goods for export
(ii) The tax rate of 5% is applicable to essential goods and services such as water,fertilizer, insecticides, medicine, educational and training equipment and tools, baby
toys, scientific and art books, natural agro-forestry products, animal feeds, services
for scientific and agricultural applications, etc;
(iii) The standard tax rate of 10% is applicable to most goods and services
3.5 Import/Export Duties
Foreign capital projects and foreign investors to BCCs are exempted from duties imposed on
the goods which they import to create their fixed assets, including:
(i) Equipment, machinery;(ii) All and any input material, component, part and other material imported for
manufacture of export products shall be exempted entirely from the import duties.
3.6 Personal Income Tax
All foreigners having incomes in/ from Vietnam, regardless the length of time they live in
Vietnam, are the payers of personal income tax.
With respect to whom living in Vietnam less than 183 days, they will be liable for paying tax at
a fixed rate of 20% of the aggregate income. With respect to whom living in Vietnam over 183days (so called locally-resident foreigners), they will be subject to the progressive tax tariff,
with the rate of their monthly income as following:
Tax
Level
Yearly Income
(million VND/ year)
Monthly Income
(million VND/ month)
Tax Rate
(%)
1. To 60 To 5 5
2. From 60 to 120 From 5 to 10 10
3. From 120 to 216 From 10 to 18 15
4. From 216 to 384 From 18 to 32 20
5. From 384 to 624 From 32 to 52 25
6. From 624 to 960 From 52 to 80 30
7. Above 960 Above 80 35
The taxable income minimum rate applicable when calculating tax for a locally-resident
foreigner is VND 4 million.
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3.7 Transfer of foreign investors’ profits
According to this circular of Finance Ministry, profits earned by foreign investors from capital
investment under the Law on Foreign Investment in Viet Nam which can be transferred
abroad
4 Employment regulations /social security obligations
4.1 Labor code
Under the Labor Code, FIEs may either directly recruit Vietnamese employees or recruit via an
authorised labor agency. The FIE is then required to register the list of recruited Vietnamese
employees with the local labor department and submit the reports on utilization and changes
of employees to the labor department on a periodic basis.
Except for the Director General, Deputy Director General and members of the Boad of
Management, all expatriates working in the company for a period of more than 6 months are
required to obtain a Work Permit. The company is required to submit applications to the locallabor department to obtain the Work Permit for its expatriate employees.
Labor contract: there are different kinds of contract, such as indefinite term, definite term
and seasonal work.
• Social Security contributions: 15% on gross salaries
• Health insurance contributions: 2% gross salaries
4.2 Minimum Wage Regulation in Enterprises
The rate of VND 1,340,000 per month is applicable to employees of enterprises located in
districts of Hanoi and Ho Chi Minh City;
The rate of VND 1,190,000 per month is applicable to employees of enterprises located in
suburb districts of major cities
The rate of VND 1,040,000 per month is applicable to employees of enterprises located in the
other areas.
5 Accounting and auditing
5.1 Accounting
In addition to the accounting regimes released by Ministry of Finance, a number of
Vietnamese Accounting Standards (VAS) is issued.
Recent VAS pronouncements are generally consistent with IFRS (International Financial
Reporting Standard), with a few slight differences to reflect and address the local
circumstances. The reporting of VAS-based financial statements follows a prescribed chart of
accounts and report format.
An FIE may employ a full-time Chief accountant or hire an accounting service firm operatingindependently and legally in Vietnam.
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5.2 Auditing
It is regulated that the annual financial statements of FIEs shall be audited by an independent
auditing firm. The audited financial statements shall be submitted to MPI, MOF and GSO an
the local tax authorities where the head office of the FIE is located. Audited statutory financial
statements should be submitted within 90 days from the end of the financial year. Filing of audited financial statements is the responsibility of the enterprise.
The FIE is required to report to MPI within 6 months from the implementation of its approved
investment capital. All relevant supporting documents for all expenditures during
construction period should be collected and kept.
6 Dispute resolution and governing law
6.1
Dispute resolutionDisputes involving a foreign-invested company may be referred to foreign or international
arbitrators, or ad hoc arbitrators. However, disputes between foreign investors and
Vietnamese state authorities must be referred to either Vietnamese arbitrators or
Vietnamese courts, except where provided otherwise in a contract between the foreign
investor and
a Vietnamese state body or in an international treaty to which Vietnam is a party.
6.2 Governing law
In general, investment activities in Vietnam must be governed by Vietnamese law. In the caseof foreign investment, foreign law may be chosen as a gap filler, provided that the choice of
foreign law is not contrary to fundamental principles of Vietnamese law. It may be expected
that the question of whether Vietnamese law contains a relevant provision, or whether
foreign law is required as a gap filler, will remain as troublesome as ever. The provisions of
any international treaty to which Vietnam is a party will prevail over the provisions of the
Investment Law.
7 Land access/allocation/costs
7.1 Land allocation for foreign investment enterprise
Instead of obtaining the LUR in the form of capital contributions from the local partner to a
JVC, a foreign investor may consider leasing the land directly from the Government after
he/she establishes an FIC in Vietnam
7.2 Lessors permitted to lease land to FICs
7.2.1 Lease term
The lease term must be consistent with the duration of the approved project provided that it
must not exceed 50 years or, in some special circumstances, 70 years. The extension of the
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lease term may be allowed by the Government upon expiry if the lessee wants to continue to
use the land, provided that:
the lessee has complied with the land regulations during its land using period; and
the use of land is consistent with the approved land plan.
7.2.2 Rights of foreign investors to the land leased
The LUR of foreign investors shall vary depending on the payment arrangement of landrentals. Where land is being leased from the Government, the Land Law contemplates two
payment arrangements of land rental:
annual rental payment (the “Annual Payment”); and
one-off payment of rentals for the entire lease term (the “One-off Payment”).
Under a land lease for the Annual Payment, the rights of FICs are basically the same with the
previous land laws: the FIC could use the land only and is not allowed to transfer, sub-lease or
mortgage the LUR. In addition to the LUR given under the Annual Payment regime, FICs
adopting the One-off Payment regime have additional rights as follows:
rights to transfer LURs and assets attached to the land (foreign investors with anAnnual Payment plan may only transfer assets attached to land);
rights to sublease land and assets attached to the land;
rights to contribute LURs and assets attached to the land as capital to joint ventures;
rights to mortgage or guarantee LURs and assets to credit institutions in Vietnam
during the term of the lease;
7.3 Lease of Commercial Property
As an alternative to leasing a piece of land, service or software companies may consider
leasing an office in a commercial building. The procedure for the lease of such an office isquite simple and is not subject to any approval by Vietnamese authorities.
7.4 Land use right certificate (LURC)
The office in charge of granting the certificate on land use right to foreign organizations/
individuals renting land is appointed by the People's Committee of the province/city under
the central authority, even for the cases when the rent of land must be decided by the
government.
8 Energy costs (electricity, diesel)
8.1 Electricity cost
Unit: VND/KWH
Price
1 ELECTRICITY PRICE FOR PRODUCTION
1.1 NORMAL PRODUCTION
1.1.1 110Kv and above
a) “Medium” hours 835
b) “Low” hours 455
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c) “High” hours 1690
1.1.2 From 22 kV to 110 kV
a) “Medium” hours 870
b) “Low” hours 475
c) “High” hours 1755
1.1.3 From 6 kV to 22 kV
a) “Medium” hours 920b) “Low” hours 510
c) “High” hours 1830
1.1.4 Below 6 kV
a) “Medium” hours 955
b) “Low” hours 540
c) “High” hours 1900
8.2 Fuel cost
Diesel Oil: VND 14,300–14,600 / liter
Mogas 92: VND 16,300–16,700 / liter
Mogas 95: VND 16,800–17,200 / liter
9 Domestic road haulage costs
The below rates are subject to an offer (Nov, 2009) of a Forwarder Agent, based in Hanoi.
Trucking fee: Form Hoa Binh Town to Haiphong,not including lift on and lift off at Haiphong
port.• USD160/20’DC,
• USD175/40’DC
10 Labor costs (unskilled, semi-skilled, skilled)
The rates are subject to the survey on similar enterprise, Hoa Binh based. Hoa Binh province
and Thanh Hoa province are in similar level of development and income.
• Unskilled labor: VND 1,000,000–1,200,000 per month.
• University graduated staff for: VND 2,500,000 – 4,500,000 VND per month.
11 Customs cost for 20’ container of bamboo flooring
From experiences of local forwarder agents here, the bamboo product are items that
government encourages to export. So there is no difficulty in the customs and inspections
procedure. The customs procedure could be handled within 1-2 days before each delivery.
Relating the cost, any forwarder can offer a full service including Customs clearance, C/O
preparation, Fumigation process with charges of around 1.5-2 million VND/ 20’ DC and 2-2.5
million VND/ 40’ DC. If the enterprises have time and staff to do the export procedure by
themselves, the cost would be much lower.
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12 Trade tariffs when exporting to USA, Japan, EU
• Export tax (Vietnam) on Bamboo flooring: 0%
• Import tax (USA) on Bamboo flooring: 0%
• Import tax (Japan) on Bamboo flooring: 0%
• Import tax (EU) on Bamboo flooring: 0%
13 Typical shipping costs for a container to USA (port?), Japan (port?)
The below rates are subject to an offer (Dec, 2009) of a Forwarder Agent.
Haiphong –NEW YORK/ USA
• Ocean freight : US$ 1720/20'DC, USD2330/40’DC, USD2330/40’HC (All in)
• Transit time : 40-45 Days
Haiphong –Osaka/ Japan
• Ocean freight : US$ 595/20'DC, USD945/40’DC, USD945/40’HC (All in)
• Transit time : 17-18 Days