Vietnam Regulatory Brief: Timber Export Standards, Venture Capital Funding, and Proposed Increases to Business Licensing Fees

Timber Export Regulations Agreed by Vietnam, EU

Representatives of Vietnam and the European Union (EU) reached an agreement on export regulations for the timber market. Vietnam will apply the Timber Legality Assurance System of Vietnam (VNTLAS) for timber exports to the EU as well as other countries and the domestic market. The EU is the fourth largest importer of Vietnam’s timber and wood products, after the US, Japan, and China. In turn, the EU reached an agreement on applying a licensing mechanism called the Forest Law Enforcement, Governance & Trade (FLEGT) to timber exported to the EU. As such, all FLEGT licensed timber products from Vietnam will be considered legal and not subject to requirements of the EU Timber Regulation.

The developments come after the sixth negotiating session between EU and Vietnam officials on April 13. Negotiations have been ongoing since October 2010. In the first eight months of 2015, Vietnam exported timber and wood products worth around U.S. $442 million. The next negotiation session is scheduled for July 2016.

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Proposed Venture Capital Regulations to Ease Funding for Start-ups

The Ministry of Planning and Investment (MPI) is drafting a law on creating a legal framework for Venture Capital (VC) funds to help start-ups secure funding. The Circular will guide the establishment, organization, and management of venture funds. VC funds will not be covered by laws that regulate operations of securities investment funds. The draft has been released for public knowledge and comments. As per the draft, VC is defined as investors contributing funds in a start-up or buying stakes to launch the business or increasing equity when a business has not earned a pre-tax profit. The law hopes to ease capital flow into start-ups with simpler procedures.

The MPI’s Agency for Enterprise Development (AED) stated that the new regulation would trigger a significant increase of VC funds, particularly from the private sector for start-ups. It also stated that the government views start-ups as a new driver for growth. As per current laws, angel investors can contribute funds to start-ups through the Securities Law, which mandates that there must be at least 100 investors with the minimum value of a fund to be U.S. $2,243,500 (VND 50 billion), which is a high requirement. Analysts estimate that only 10 start-ups receive investment capital per year. Many register in other countries to easily access capital.

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Government Keen to Increase Business License Fees

The Ministry of Finance may double or triple business license fees, according to a draft being prepared for approval. The proposed decree will have different fee levels for businesses.

• Business with a registered capital between U.S. $447,838 and under U.S. $4,487,000 will be required to pay a fee of U.S. $225 per year, while those over U.S. $4,487,000 will be regarded as large businesses, and be required to pay U.S. $448 per year.
• Businesses with charter capital of under U.S. $448,700 would pay U.S. $135 per year.
• Business households and individuals with an annual turnover of U.S. $13,461 would have to pay U.S. $45 per year. Those earning between U.S. $4,487 and under U.S. $13,461 per year would pay VND, 300,000.
• Business households and individuals with an annual turnover of below U.S. $13 would be exempt from any fee.

If the decree is approved, it will be effective from January 1, 2017 and will be called a fee rather than a tax. Currently, annual revenue from the business license tax is around U.S. $76,279,000 (VND 1.7 trillion); the ministry expects to collect U.S. $121,149,000 (VND 2.7 trillion) if the new law is enacted. The ministry is expected to complete and submit the decree to the government in July.

Annual Audit and Compliance in Vietnam 2016

In this issue of Vietnam Briefing, we address pressing changes to audit procedures in 2016, and provide guidance on how to ensure that compliance tasks are completed in an efficient and effective manner. We highlight the continued convergence of VAS with IFRS, discuss the emergence of e-filing, and provide step-by-step instructions on audit and compliance procedures for Foreign Owned Enterprises (FOEs) as well as Representative Offices (ROs).

Navigating the Vietnam Supply Chain
In this edition of Vietnam Briefing, we discuss the advantages of the Vietnamese market over its regional competition and highlight where and how to implement successful investment projects. We examine tariff reduction schedules within the ACFTA and TPP, highlight considerations with regard to rules of origin, and outline the benefits of investing in Vietnam’s growing economic zones. Finally, we provide expert insight into the issues surrounding the creation of 100 percent Foreign Owned Enterprise in Vietnam.

Tax, Accounting and Audit in Vietnam 2016 (2nd Edition)
This edition of Tax, Accounting, and Audit in Vietnam, updated for 2016, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who must navigate Vietnam’s complex tax and accounting landscape in order to effectively manage and strategically plan their Vietnam operations.

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