Foreign investors must be aware of Vietnam’s import and export regulations and procedures when setting up a trading company. Here are things should know as foreign investors.
Vietnam joined the World Trade Organization (WTO) in January 11, 2007, following more than a decade-long negotiation process. WTO membership has provided Vietnam an anchor to the global market and reinforced the domestic economic reform process.
Vietnam is a member of the Association of South East Asian Nations (ASEAN) and a signatory to the ASEAN Free Trade Agreement (FTA), which aims to reduce tariff and non-tariff barriers to trade between member states. ASEAN has also negotiated FTAs with Australia, New Zealand, China, India, South Korea and Japan.
Vietnam shares the top spot in South East Asia with Singapore for having the most number of bilateral and multilateral FTAs, being a signatory to 16 of them. As Vietnam continues to live up to its commitments to further reduce import tariffs, this will lead to deeper economic integration with the world, boost foreign investments, and enhance productivity.
Related: Company formation in Vietnam
Some reductions in import tariffs have already come into effect since January 2018 (such as 0% import tariff for car, motorbike, vehicle components under the ASEAN FTA) and there are further commitments to progressively reduce tariffs to 0% by 2022 for a range of other commodities. For instance, under the Vietnam – South Korea FTA, a range of commodities with import tax rates ranging from 10-20% will also see a gradual reduction to 0% by 2022.
Import duty rates are classified into three categories: Ordinary rates, preferential rates, and special preferential rates. Preferential rates are applicable to imported goods from countries that have most-favoured-nation status with Vietnam. The MFN rates are in accordance with Vietnam’s WTO commitments and are applicable to goods imported from other member countries of the WTO. Special preferential rates are applicable to imported goods from countries that have a special preferential trade agreement with Vietnam.
Vietnam has concluded three important agreements in recent quarters: The ASEAN-Hong Kong FTA, the European Union (EU) FTA, and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). In addition, Vietnam is negotiating other agreements, including the Regional Comprehensive Economic Partnership (RCEP), the FTAs with the European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway and Switzerland), and with Israel.
Import duty exemptions are provided for encouraged projects and goods imported in certain circumstances.
Export duties are charged only on a few items, mainly certain natural resources and these rates range from 0% to 40%.
Vietnam has reserved the right of importation to state trading entities in the following product categories: Cigars and cigarettes, crude oil, newspapers, journals and periodicals, and recorded media for sound or pictures (with certain exclusions).
Vietnam also prohibits importation of equipment and technologies which are more than 10 years old. However, there are exceptions in some special cases.
Vietnam currently prohibits the importation of certain products, including weaponry, ammunition, explosive materials, military technical equipment, firecrackers, second-hand consumer goods, types of publications, and cultural products in the category prohibited from dissemination and circulation in Vietnam, right-hand-drive cars, materials and transport facilities, chemicals, plan protection agents prohibited from use in Vietnam, scrap and waste, refrigerating equipment using C.F.C., products, raw material containing asbestos of the group of amphibole, chemicals on the list of prohibited chemicals.
Foreign investors are exempt from import duties on goods imported for their own use which cannot be procured locally, including: Machinery, vehicles, components and spare parts for machinery and equipment, raw materials, inputs for manufacturing, and construction materials that cannot be produced domestically.
Valued added tax (VAT) of 10% applies to goods and services that are not specifically included in the list of goods and services subject to the 0% or 5% rates or the list of goods exempt from VAT. The 5% rate applies to the supply of essential goods and services (water supply, agricultural goods, medical goods and teaching aids).
VAT refunds are now allowed for imported goods that are then exported (this was previously disallowed). In addition, the scope of items not subject to VAT was amended to include exported products being primarily processed from natural resources and mined minerals. Both these changes are effective from February 1, 2018.
Sources: WTO – Trade Policy Review, Fitch Solutions, National Sources