Vietnam: Insights from Industry Professionals

In our fourth episode, we've brought together Fidinam Vietnam's experts, Phuong Thao Bui (Managing Director and Lawyer), My Phan (Accounting Manager), and Francesca Severoni (Relationship Manager and Business Developer), to shed light on essential technical and non-technical insights for foreign investors.

Our discussion kicks off with an overview of Vietnam's allure for foreign investment, highlighting the country's strategic location, burgeoning middle class, and government incentives. Francesca Severoni underscores the necessity of a comprehensive market analysis to understand and leverage Vietnam's unique business landscape.

The conversation then delves into the specific challenges and opportunities that define the Vietnamese market. From adapting to the local business culture to understanding legal and tax frameworks, our experts share their experiences and advice on achieving success in Vietnam.

My Phan discusses the robust wave of global investment flowing into the country. Phuong Thao Bui provides a deep dive into the legal considerations for foreign investors, including company setup, investment types, and sector-specific regulations. She also sheds light on the simplified yet crucial processes for business establishment and operation in Vietnam.

Join us on this dialogue as we aim to provide insights into Vietnam's business landscape, offering guidance for ambitious companies seeking global success.

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Transcript

Thao: 0:14

Hello everyone, welcome to Fidinam Podcast. It has been over four months since the day that we started this podcast project. Within this short span of time, we have received a lot of valuable feedback and also compliments from our audience. We sincerely thank you for tuning in, watching, and also posting your questions. That fuel our ongoing podcast production. In order to respond to feedback that we have received, many of you have expressed interest in technical and non technical aspects from industry professionals regarding doing business in Vietnam. That's why in today's episode, we have our own Fidinam members, Ms. My Phan, our Accounting Manager, and our Relationship Manager and Business Developer, and myself, the Managing Director and Lawyer at Fidinam. We have gathered today in order to share with you our experience and crucial insight focusing on technical and non technical aspects that we believe that all foreign investors should be aware of before venturing into business in Vietnam. So let's get started. Thank You have heard from various sources, that Vietnam has been emerging at a bright spot in South Asia in terms of foreign investment. In this regards, I would like to turn to my colleague Francesca first, who from Switzerland but now living in Asia. So Francesca, with your stay in Vietnam and previously in Hong Kong, You have been supporting numerous clients, mostly coming from the western side, in evaluating and analyzing, exploring the business opportunities in both Vietnam and Asia. So may I ask you about what is the

Francesca: 1:54

the element of the word? that

Thao: 1:56

is all present in foreign companies that decided to come to Asia for a business expansion?

Francesca: 2:01

Thank you very much, Thao. Yes, so I think the common denominator of foreign companies that decide to come to Asia is the need to first analyze which country can really fit their needs best. Asia has a lot of opportunities in many different industries, But of course, some countries are better for some industries and other countries for other industries. So what we do usually is to take time in the early stages of their expansion plans and we do a feasibility study. And this take into consideration a lot of factors, business and tax implications, but also, products positioning, the the competitor analysis, and and many others. In this way, we are able to understand and track which country can really fit the the business. And this can be done for companies that want to establish a physical presence, but also for companies that are looking for this local partner or local distributors. So the goals can be multiple and different.

Thao: 3:04

little mistakes. So Francesca. I do confirm that starting the market effort is essential for a substantial and long term success in the Asian market. now seeing because you come from Europe and living in Asia, may I also ask you about your

Francesca: 3:18

perception

Thao: 3:19

on the business environment, in particularly in Vietnam?

Francesca: 3:23

Of course. Say, from from a macroeconomic point of view. We mentioned that also in the previous episodes, there are a lot of, opportunities and positive factors that kind of, attract foreign investors in Vietnam. We can talk about GDP growth rate, which has been, very positive in the last years. Even with, up and downs, we can talk about, the, increasing international relationships that the country has with a lot of, countries around the world. We can talk about the incentives that government is giving To foreign companies and many other factors. But I think the most important one is about demographics. Vietnam is reaching almost 100 million people with a median age of 32. The middle class is growing. The global trends are influencing also the consumer market, in Vietnam. And this means that the consumption is shifting from consumer goods to services. And this means that there are a lot of new needs. that, must be covered here, and related to these and to your question, what we are experiencing right now is that, we see a lot of, businesses coming here and replicating their business ideas, their business models, that overseas already worked and have a moderate success, coming here and replicate exactly the same with some adaptation of course. So we are experiences exactly that, because linked to the new needs, and to what I just mentioned. So the people, the middle class, this portion of population is increasingly demanding for more, services, sophisticated services, such as, private banking, insurance, but also high-end experiences. Let's think about the food and beverage, area. I, I think this is the trend we see right now.

Thao: 5:18

So thank you. I think that you have raised a very excellent observation about Vietnamese Demography. Because, in my opinion, Vietnam now is becoming a very promising consumer market. Due to the rising of the Western influencer, due to the expansion of the middle class. which has a growing appetite for foreign products. that's why this presents significant opportunities for foreign investors in Vietnam. How about you, Miss My? You have been working with foreign companies for accounting and also tax filing services. Have you also seen a strong wave of investment coming to our country?

My Phan: 5:57

my previous role with some companies, Japanese, German, Korean, I, witnessed substantial investment in Vietnam. Recently, I have noticed a similar trend with companies come from the United States, western countries, and Asian nations like Thailand and China.

Francesca: 6:19

they

My Phan: 6:20

to flock to Vietnam, not only for diversity, on their products but also for capitalize on available incentives. Also, I have a chance to work in a company with foreign investors in Vietnam, and support them in accounting, service, tax filing, and commercial insurance,

Fidina: 6:42

so

Thao: 6:42

thank you, that's great. Based on what you have just shared, according to your real life experience, I do have a question for you, Francesca. according to your experience, what should a foreign enterprise know before they come into the country for a business expansion?

Francesca: 7:00

What foreign investors, must pay attention to, or must be aware of, is that Vietnam has a lot of opportunities, but also some challenges, which are typical of a, developing country.

My Phan: 7:14

And,

Francesca: 7:14

remember always that without these challenges, the opportunities were not so, big. in this regard, maybe Thao, since you are a Vietnamese lawyer, practicing these activities since many years, you might want to share with us some of the examples, of factors to take into consideration.

My Phan: 7:35

Yeah, Thank

Thao: 7:36

you. In this regard, I have some important notes that I would like to give to our, potential investor who have already some interest. in my country in Vietnam. So when it comes to foreign investment, I would say that foreign investors have various options. Either they can set up a new company themselves or with local partner. Or they can invest in an existing company in Vietnam. Or they have another choice is to enter into a business cooperation with local and foreign partner in Vietnam. But it is very important to note that, the possibilities of setting up a foreign company is highly dependent on the target business that you want to do in Vietnam. The good news is that Vietnam is already very open for foreign investment, meaning that foreign investors can come to my country, set up their own company to do various activities.

My Phan: 8:26

However,

Thao: 8:27

for a few sectors like transportation or advertisement, the laws still require the participation of local partners. So these come from various reasons. Some of that may be, I think that is a part of the government policy to protect the domestic business among other considerations. And also, as Francesca already raised about some complicated process, I would say For example, for the legalization. I know that you don't have it in, in Switzerland. And some neighboring country like Singapore or Hong Kong, they do not have it. But in Vietnam, when foreign company coming to our country and set up here, they need to submit the document that are legalized by Vietnamese embassy or consulate. So this process, in order to confirm the authenticities and also the legal validation of the document that they submit to the authority. And, what else?

My Phan: 9:16

I think the loan incorporation process. and visa process.

Thao: 9:21

Yes, yes, exactly. So she reminded me because she witnessed a lot of clients keep asking me why so the incorporation in Vietnam is so, it takes so long time, but I have to admit that it is still a headache in Vietnam, and I hope the government can work harder and harder to simplify it. But on the other hand, as I already raised in the previous podcast, we have witnessed a remarkable improvements in the administrative process. So in the past, to set up the foreign company, it use to involve a mountains of paper and months of waiting. But now,

Francesca: 9:53

the

My Phan: 9:53

procedure

Thao: 9:54

has significantly reduced, and and most importantly, a part of them can now be done online.

My Phan: 9:59

Yes, correct. You should highlight the requirement for capital contribution. saying this is the new factor for foreign investor. This So

Thao: 10:09

talking about investor. So first information that I want to highlight, it has in Vietnam, except for some highly regulated sector like banking, insurance, or healthcare or education. There's no kind of specific minimum capital requirement. So this means that the amount of capital to be injected in Vietnam, it will be decided by the, the investor. And typically speaking, as you know already, as we talk with our clients, share with our clients already, then the capital structure in a foreign invested company in Vietnam, including the contributed capital, which might be contributed within 90 days from the company is incorporated. And the long term loan capital will be disbursed according to the plans of the investor. But in this regard, there's another important note I want to raise here, is for the long term loan capital. Before a foreign company, foreign investor, inject any long term loan capital into the Vietnamese company, they need to do a registration at the central bank. And also I think it's worth emphasizing about a deadline of 90 days for the capital contribution, because in some certain case, if investors, they couldn't do the capital contribution, the company need to be closed. So that's a pity if they are not aware of that. So the last point that I would like to discuss with my colleague in the discussion today is about investment incentive. As I and also Francesca already highlighted this factor in our previous podcasts, right? So in Vietnam, we offer various incentives a to foreign investor coming to my country, including the corporate income tax incentive, the exemption of the custom duty, or exemption or reduction of the land use rights, and so on. So these incentives are available for example, for the, the, the company investing in the encouraged sectors. For the company which is situated in the encouraged location. And I think this information is quite available on the internet sources. you can find it. But what is less known is about the other conditions, about the other procedure for the company to get the investment incentives. So, in this matter, Ms. My could you please help me to elaborate a bit about if there's any other condition or other procedure that foreign investors need to be aware in order to enjoy the incentivs available in Vietnam.

My Phan: 12:49

Certainly, to enjoy tax incentives the company must satisfy some requirements outlined in specific regulations. For example, if the company engages in a software production, it will be eligible for 10 percent corporate income tax for 15 years, including 4 years of tax exemption, following with a 50% tax reduction for a subsequent nine years.

Thao: 13:20

And in order to enjoy the incentive, I understand that not only registering the, software production in the license will allow foreign companies to enjoy the incentives, but also other conditions. So let, let me, elaborate a bit on that.

My Phan: 13:34

so

Thao: 13:35

in order to enjoy that, there also are three conditions. The first one is they need to produce softwares that are subject to the tax relief as provided in the specified regulation that you just shared. And second one, they need to, implement at least certain steps as, again, regulated in the regulation to satisfy the condition that to be recognized that, ah, they are doing the software production in Vietnam. The last point is that they need to do also some mandatory report to the ministry. Once they certify all this conditions, they will be entitled to to get the tax incentives. So, again, many of us are already aware of the investment incentives in Vietnam, but, understanding about additional conditions and specific steps to take advantage of them still remain a significant challenge. So it's evident that without proper guidance of experts in this field, the investor can run to the risk of losing out on this crucial incentive. thank you Ms My for the information.

My Phan: 14:46

to

Thao: 14:46

the discussion today, so Francesca and also Ms My, could you please give to our audience some

My Phan: 14:53

Absolutely.

Francesca: 14:53

Thank you, Tao. I have two points actually. So the first one is related to the expansion plans. I think, it is very important to take time in the beginning to really think carefully which country can really, make my expansion plan a success. and this requires also some analysis in terms of where are my stakeholders, who are they, where is my parent company, what are the intra company relations, which kind of products or services, do I offer, etc, etc. So there are a lot of questions and factors to take into consideration, and it is very important to, to undertake an analysis, in the first stages. and the second point is linked to the middle class that is growing. so there is room for, companies that have business ideas and business models that work and have a success already overseas. to jump into the Vietnamese market and leverage on this economic and wealth growth.

Thao: 15:57

Thank you, Francesca. How about you miss My some final words.

My Phan: 16:00

My final message. When foreign investors come to Vietnam, they need to know the requirements and the conditions And we are here. for them.

Thao: 16:09

for them. Okay. both for your valuable insights. The internal discussion today has been plenty of technical and non technical aspects, I