Question on doing business in Vietnam!

Interview by Vietnam Financial Times
Oliver Massmann

Question 1: What do you think about the reform in tax and customs of Vietnam so far? For the German enterprises in Vietnam, how do these policies affect them?

Over the past year, we have seen significant efforts and progress made by the General Department of Customs in terms of improved regulations, more effective e-customs operations, and increased dialogue and consultation with the business community. From 01st January 2015, the new Customs Law takes effect with its implementing Decrees coming into force later on 15 March. The implementing Circulars are also already in force from 01 April with the most notable one being Circular No. 38/2015/TT-BTC. This Circular, which replaces 13 previous customs regulations, is considered most comprehensive among the new regulations. While there are still more regulations being adopted soon following the new Customs Law, for example, regulations on advance customs rulings, post-clearance inspection, or regulations in anticipation of the upcoming Free Trade Agreements, impacts on German enterprises need to be accessed later.

We have also seen much progress in reforming Vietnam’s tax procedures over recent years. Up to 01 January 2015, the total time for tax compliance is reduced to 370 hours per year, which is an impressive decrease compared with 872 hours annually according to the 2013 statistics. Time for tax declaration and payment is also reduced to 121.5 hours per year, with possibility of online tax declaration and payment. Although German enterprises highly appreciate these tax reforms, we would expect that the efforts are not only at Government or ministerial levels but also at the local levels where we have to deal with the authorities there directly.

Question 2: How do the German enterprises in Vietnam look at the VN’s business environment? In the future, what should VN adjust to attract more German enterprises?

The Government of Vietnam has made certain success in stabilizing the economy to reach a high growth rate projection in 2015 by World Bank (i.e., 6%) and maintain import-export balance over the five years.

Vietnam is also extremely successful in international economic integration, especially by joining the negotiations for the Trans-Pacific Partnership (“TPP”), the European – Vietnam Free Trade Agreement (“EVFTA”), Korea – ASEAN Free Trade Agreement, Japan – ASEAN Economic Partnership Agreement, and establishment of the customs union Russia- Kazakhstan-Belarus, and notably the ASEAN Economic Community by end of this year. Vietnam is expected to be the main beneficiary of the major trade pacts, with additional growth of 13.6% (for the TPP) and 15% growth of GDP (for the EVFTA). With such deep integration into the multilateral and regional economy, Vietnam is expected to be an attractive investment environment for investors and witness a significant growth in the upcoming years.

Moreover, with the adoption of the 2014 Investment Law and Enterprise Law, the investment environment in Vietnam now even becomes more attractive to foreign investors, especially to German investors. Nevertheless, there are still certain outstanding issues that should be further addressed to attract foreign investors in general and German enterprises in particular. These problems include annulment and unenforceability of arbitral awards in Vietnam, certain trade restrictive measures in the field of import and export, burdens created for enterprise in tax administration by state authority, and especially corrosive and widespread corruption in Vietnam. These problems require Government’s stronger efforts and urgent actions to solve, in addition to several current attempts which we really appreciate.

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Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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