Since these play an important role in social development and conducting business activities mainly for social goals instead of profit, social enterprises are provided specific mechanisms and policies to encourage and maintain such activities from the Vietnamese State.
1. What is a social enterprise?
In addition to the economic development, the State of Vietnam recently encourages enterprises to carry out production and business activities for the purpose of progressive community and social development to ensure balanced equality, and stability in the country.
A social enterprise, as its name suggests, is an enterprise established in accordance with the Enterprise Law, ensuring all the conditions of a legal entity.
The operational goal of social enterprises is to solve social and environmental problems for the benefit of the community. When established, social enterprises must submit a Commitment to implementing social and environmental goals (“Commitment”) signed by the business owner, including:
- For private enterprises: Private enterprise owners;
- For partnerships: partners;
- For limited liability companies: members are individuals;
- Legal representative or authorized representative for organizational members;
- For joint stock companies: founding shareholders, other shareholders if this shareholder agrees with the Commitment and wishes to sign this Commitment with the founding shareholder.
The business registration agency will post this Commitment on the National Business Registration Portal when issuing Business Registration Certificates to social enterprises.
In addition, social enterprises must use at least 51% of total annual after-tax profits to reinvest to implement registered social and environmental goals.
2. Responsibilities of social enterprises
Social enterprises must maintain social and environmental goals and retain profits for reinvestment and other content stated in the Commitment throughout their operations. Except in cases where social and environmental goals are terminated before the committed deadline, the social enterprise must refund all incentives, aid and sponsorship that the social enterprise has received to carry out its registered social and environmental goals if not implemented or incompletely implemented Commitments and retained profits for reinvestment.
At the same time, the state binds social enterprise owners, and related subjects such as shareholders of joint stock companies, members of the Board of Directors, Director, General Director in the relevant term or time to be jointly responsible for damages arising in case the social enterprise violates the Commitment and retains profits for reinvestment.
For social goals and to ensure the fulfillment of the responsibilities of social enterprises, the State introduces specific policies specifically for this group as follows:
2.1 License support
Owners and managers of social enterprises are considered, facilitated, and supported in granting relevant licenses, certificates, and permits in accordance with the Law so that social enterprises can operate properly and achieve their Commitment.
2.2 Mobilized, received sponsorship and aid
Social enterprises are allowed to receive foreign non-governmental aid to achieve the goal of solving social and environmental problems in accordance with the Law on receiving foreign non-governmental aid.
In addition, social enterprises can receive sponsorship in the form of assets, finance, or technical support to achieve the goal of solving social and environmental problems from domestic individuals, agencies, and foreign organizations registered to operate in Vietnam but must ensure relevant procedures.
Please note that social enterprises are not allowed to use aided or mobilized funds for purposes other than offsetting management and operating costs to solve social and environmental problems that the enterprises have registered.
2.3 Preferential corporate income tax (CIT) rate
Social enterprises operating in the fields of education – training, vocational training, health care, culture, sports and environment, and judicial expertise enjoy a preferential CIT rate of 10% throughout their operating period.
Thus, social enterprises operate not for profit but for social and environmental goals, contributing together with the State to maintain and develop a safe and healthy living environment. With policies to encourage and support the operations of social enterprises, the State of Vietnam has created conditions to expand the number and ensure the maintenance of operations of domestic social enterprises.
