As indicated by Newsmarkets, following the entry into the WTO, which took place in January 2007, the Vietnamese government ordered the entry into force of some legislative provisions on investments, with the aim of equating the position of foreign investors to that of local investors. The forms of direct investment available to foreign entrepreneurs include, first of all, the establishment of a greenfield company on site. The authorization by the competent local authorities is issued only following the presentation of a specific business plan (“Investment Project”), containing a detailed medium-long term forecast on the realization of the investment project in a given territory and time frame. In order to be legitimately established, a company must have a special one deed of incorporation ("Investment Certificate") containing information on the corporate project, duration and share capital.
Another option available to investors is thepurchase of an equity stake in an already operational Vietnamese company. In this case it comes often prior approval of the relevant local authorities is required. The specific requirements for the acquisition procedure vary according to whether: the company to be acquired has or does not have foreign investors and has already obtained the approval of its business project from the competent local authorities; the company to be acquired is a limited liability company, with one or more shareholders, or a share holding company; the sector in which the company to be acquired operates.
Alternatively, local commercial law regulations recognize the possibility of settling on site using two further types, both of which require a specific license: the branch and the representative office. The branch of a foreign company is a company that has a fixed office in Vietnam and which is authorized to operate in the national territory, pursuant to the provisions of commercial law in force in the country and in compliance with the international treaties of which Vietnam is a signatory. A foreign company is only allowed to open its branch in Vietnam if it is used to operate in certain specific sectors, including banking, insurance, legal and some trading activities. In order to be able to open a branch in Vietnam, the foreign company must be active and registered in the company register of its country for at least five years. The license is issued by the Vietnamese Ministry of Commerce and Industry, 15 days after the filing of the relevant application, provided with the necessary documentation. As for opening a representative office, not being endowed with legal personality, is not allowed to carry out any business activity in the strict sense. The person in charge will therefore be authorized to carry out only those activities necessary for the management of the representative office such as hiring staff, opening a bank account and signing rental contracts. If the activities carried out through the representative office and authorized by the foreign company should, in any case, be of a different nature, it will be possible to witness a direct tax exposure of the representative office for the income produced in Vietnam.
As regards legal entities, the Vietnamese government has signed up numerous international agreements and treaties against double taxation. Despite this, consulting with local experts on the subject is always recommended. The standard rate of corporate income tax is 25%. Depending on the object of the entrepreneurial activity, the sector and the place in which this activity is carried out, however, numerous tax incentives can be applied. Particularly advantageous rates are envisaged, equal to 10%, 15% or 20% and lasting between five and ten years, in favor of projects in sectors such as infrastructure, reforestation programmes, start-up of export activities, redevelopment of industrial areas. In any case, a period of temporary tax exemption up to a maximum of four years, or a reduction in income tax up to a maximum of nine years for those entrepreneurial projects aimed at sectors deemed worthy of "adequate promotion", resulting in the creation of a certain number of jobs. By addressing, in this way, considerable investments in industrial areas or in the so-called "free zones", as already mentioned in a previous article.
