Since the emergence of economic challenges in recent years, the world has witnessed many changes, including economic difficulties, which have demonstrated the importance of innovation to adapt and advance. Numerous small and medium-sized companies opened during challenging times, and the online business sector also showed resilience. Vietnam, by controlling the pandemic well, has proven that it is a stable and promising investment destination.

Despite the challenges affecting the global economy and forcing many businesses into crisis, Vietnam’s economy has continued to expand at a rate of 2.91 percent, greater than the previous year [1]. The country’s economic balance hit US$343 billion, making it Southeast Asia’s fourth-biggest economy. Furthermore, many manufacturing businesses have steadily departed China’s vast market and relocated production plants, technological research centers, and warehouses to Vietnam resulting from the US-China trade war. Additionally, because of the Free Trade Agreement between Vietnam and the European Union (EVFTA), Vietnam is starting to reap the benefits, particularly in terms of tax rates and investment rates. The scope of EVFTA is more open, even compared to Vietnam’s WTO commitments.

1.1 New provisions of the Investment Law (2020)

Along with the benefits like a good market and human resources, there have also been significant policy shifts. On January 1st, 2021, the Investment Law (2020) went into force. It’s also crucial to look at the Enterprise Law (2020). These are two major legal documents that investors must regard in order to run their business in Vietnam.

To demonstrate the provisions of the new Investment Law, we should also look at several decrees and circulars that were issued.

1.2 Vietnam’s commitment to trade in services in the WTO

Vietnam’s WTO commitment in services trade is a list of Vietnam’s commitments in each service industry. Hence, investors in Vietnam should look for information on the competitive conditions and market openness of the services they are interested in. This allows them to modify their business plans accordingly. Vietnam’s WTO schedule of commitments includes 11 service sectors with about 110 sub-sectors.

1.3 Other legal documents

Apart from the legal documents on business and investment, legal issues for a corporation might also include tax laws, environmental laws, and information technology. Legal matters shall be addressed based on the 2015 Civil Code if there are no provisions in specialized legal documents. Specifically, provisions on contracts, compensation for damage, or compensation for damage outside the contract.

2. Business sectors in Vietnam

2.1 Register business sector in Vietnam

A corporation can register in a variety of business areas once it has been formed. Thus, businesses should prepare a list of anticipated business operations that includes information about the company’s primary business, and adjacent sectors that support it, and other auxiliary industries. The core business will also determine the types of sublicenses the company needs and the areas the company is allowed to operate. The lines will be operated according to the individual local planning. In particular, for some industries, there are conditions for charter capital.

2.2 Potential industries and related investment incentives

Vietnam, with its inherent agricultural strength, exports food and agricultural goods. Thus, Vietnam is an ideal location for food industry, and for developing facilities that use natural resources because of the availability of a wide range of products, reasonable costs, and well-trained human resources.

With the rapid growth of the internet, science and technology, the optimization of machines, and the increasing demand for online shopping, the Investment Law (2020) has granted incentives to several industries and professions, including:

  • University education
  • Production of scientific and technological results in accordance with the law on science and technology
  • Producing products on the list of supporting industry products prioritized for development.
  • Preservation of medicines, and production of medical equipment.
  • Producing goods and services to create or participate in value chains, or industry clusters.

Vietnam has diversified investment incentive policies such as corporate income tax incentives, tax exemptions and reductions. As an extra factor to this circumstance, investors are also exempt from import tax on goods imported to create fixed assets like raw materials, supplies and components imported for production in compliance with the laws on import and export tax.

As for the location of the investment project, since land in Vietnam is owned by the people, foreign investors cannot privately own land. However, Vietnam has certain exemptions like reduction of land use levy, land rent, and land use tax for foreign-invested enterprises. Hence, they are eligible for incentives.

2.3 Conditional business lines

Alcohol and tobacco businesses are two of the most interesting conditional businesses in Vietnam. These two industries have long attracted the attention of investors of all types, from tobacco industry giants like British American Tobacco and Philip Morris to smaller retailers drawn by revenues from innovative tobacco products like e-cigarettes and many others.

Foreign investors, like those in the alcohol sector, must fulfil specific requirements and are only permitted to conduct business within the scope of their licence. After fulfilling the requirements for company formation, they must apply for a ‘sublicense’. Companies must satisfy a variety of industry-specific conditions set by specific regulatory agencies to operate in conditional business lines. Accordingly, to build a successful business, investors should thoroughly acquaint themselves with the laws to properly prepare for the formation of a ‘conditional lines’ company.

[1] according to the General Statistics Office

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.