Macroeconomic review of Vietnam

by Dang Vu Hoai Nam on Tuesday, Feburary 22 , 2014 at 9:15am

Since the beginning of 2014, macroeconomic indicators of Vietnam have been revealed, including GDP, FDI, export and import revenues. These figures might lure the overall grassroots. However, they turn out to be manipulated by the Government if we scrutinize one by one.

GDP

GPD of Vietnam in 2013 reached $170 billion, meaning per capital equivalent to $1,900 roughly (total population of Vietnam by the end of 2013 up to 90 million). Each Vietnamese earned $175USD per month approximately, including the unemployed? It sounds great! However, this indicator includes turnovers of FDI enterprises, of those a majority would be transferred to parent companies.

Export & Import

Export revenue of Vietnam in 2013 was $132 billion, equivalent to import. However, FDI enterprises accounted for $88 billion while local enterprises only $44 billion. As for import revenue, FDI accounted for $74 billion while local enterprises $58 billion. It means that Vietnam encountered a trade deficit of $14 billion.

That’s the reason why there was a plunge in buying power of Vietnamese by the end of 2013 while the economy has theoretically developed.

FDI

Another indicator is FDI, which reached $21.6 billion in registered capital and $11.5 billion disbursed. In the list of top FDI countries in Vietnam, Korea is the leader with $3.7 billion, followed by Singapore with $3.0 billion, China $2.3 billion, Japan $1.3 billion, Russia $1.0 billion, Hong Kong and Taiwan. Which story could we tell from this statistics?

It is the domination of other Asian countries, instead of Europe and America.

More ironically, phones and accessories are topping the list of Vietnam exports.

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Tax incentives for FDI in Vietnam

by Dang Vu Hoai Nam on Tuesday, Feburary 25, 2014 at 4:15pm

This analysis is focused on how foreign investors could benefit from the tax system of Vietnam.

Foreign-invested projects and foreigners in Vietnam are subject to 4 categories of tax as follows:

-          CIT (Corporate Income Tax)

-          VAT (Value-Added Tax)

-          PIT (Personal Income Tax)

-          CTT (Capital Transfer Tax)

However, compared to their peers, they benefit a lot of incentives from the “Red Carpet” policy.

-          First, the standard CIT rate for both local and foreign enterprises is 25%. However, the Government is offering preferential rates of 10% (for 15 years or the whole operation period) and 20% (for 10 years) for FDI enterprises which invest in certain fields of business and in encouraged geographical locations. They are also offered tax exemptions for 2 to 4 years and a 50% reduction for a further period of 2 to 9 years. When a FDI enterprise fails to make a profit within 3 years from the year of revenue generation, the period of tax exemption and reduction will be calculated from the 4th year.

-          Second, CTT is easily evaded as foreign investors and Vietnamese partners could lower the transferred value as contracted and then, change the name and BoD of the enterprise.

-          Third, the export duty (0-50% FOB) is mostly charged on primarily agricultural products and natural minerals

Thus, it is a good idea to partner with a foreign investor when setting up a new business in Vietnam.

 
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