Vietnam
At a glance

About Vietnam 

Vietnam is one of the fastest-growing economies in the world and has an expanding manufacturing sector due to its low production costs, enabling the country to become a regional manufacturing hub. The economy is also heavily reliant on exports to the U.S. and China.

A coastal country, Vietnam is ranked seventh in Asia for its access to global shipping networks in the most recent Liner Shipping Connectivity Index (LSCI). Its location on the Indochinese peninsula has given it a natural advantage to interact with countries in East Asia and Southeast Asia.

With low valuations, rising foreign cash flow and the ongoing privatisation of state-owned enterprises, there is great potential for investment yield in Vietnam. Furthermore, Vietnam's economy is supported by a young workforce with high literacy rates, and it is undergoing a shift from traditional industries to high-tech production. 

With multiple trade deals and free trade agreements, companies can enjoy competitive tax advantages by investing in Vietnam. Economic reform, in particular the government’s drive for partial or total privatisation of dozens of state-owned enterprises, has also provided a favourable outlook to the economy as it becomes increasingly competitive. 

About Vietnam

Corporate Treasury in Vietnam 

Vietnam is one of the fastest-growing economies in the world, with an expanding manufacturing sector and a dynamic domestic retail market. In this section, we highlight some of the key factors relevant to treasury and cash management in Vietnam. 

Financial Market Development 

  • The main financial centre in Vietnam is Ho Chi Minh City.
  • Vietnam has good business infrastructure in the major cities, a cost-efficient workforce and an evolving legal framework. 
  • The Vietnamese dong is a closed currency. Foreign currency for permitted transactions must be purchased through authorised banks. Foreign businesses are allowed to use foreign currency to remit all profits, pay for imports and services abroad, and to repay foreign loans and interest on them. 
  • The State Bank of Vietnam will intervene in the foreign exchange market to maintain the dong’s stability. 

Sophistication of Banking Systems

  • There are around 35 domestic commercial banks in Vietnam, four of which are state-owned. There are nine foreign-owned banks, as well as around 100 branches of foreign banks and representative offices of foreign banks. 
  • The supply of foreign exchange in Vietnam has been limited in the past. However, the country’s foreign exchange reserves increased to USD97.91 billion in March 2021. 
  • Vietnam's debt market is dominated by government bonds, followed by municipal bonds and corporate bonds. The local currency bond market was valued at VND1,637.3 trillion in March 2021. A derivatives market was launched before 2020.  

Regulatory Bodies

  • The banking industry is regulated by the central bank, the State Bank of Vietnam. It is working to bring Vietnam's banks closer to meeting international regulatory standards, such as Basel II and Basel III. Foreign exchange controls are also overseen by the State Bank of Vietnam. 
  • Transactions between resident and non-resident companies and transactions by resident companies abroad must be reported on a monthly basis. 

Tax

  • The corporate income tax rate is 20%. Different tax rates are available based on industry and location, and on a project-specific basis when certain conditions are met.   
  • Resident companies are taxed on their worldwide income. Foreign enterprises with permanent establishments in Vietnam are generally taxed on income generated in Vietnam as well as income generated outside of Vietnam when it is directly related to the operations of the permanent establishments. 
  • Foreign companies carrying out business in Vietnam without setting up a legal entity are treated as foreign contractors and are subject to Foreign Contractor Tax, which consists of both Value Added Tax (VAT) and corporate income tax elements. 
  • Interest expenses that are used for business purposes are generally tax deductible, although some restrictions apply, including tax deductibility of interest being capped at 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA) for related party transactions. There are no thin capitalisation rules in Vietnam. 
  • Unrealised foreign-exchange gains or losses due to the revaluation of foreign currency items are not taxable or tax-deductible items as the case may be. 
  • Capital gains are generally assessed with ordinary income and subject to corporate income tax. For the transfer of capital outside of Vietnam, where the transferred capital includes capital from investment in Vietnam, it was proposed that tax should be imposed at 2% on the sales proceeds. However, this proposal is still under discussion and review. 
  • The standard rate of VAT typically charged on goods and services is 10%. VAT is charged at 0% for exported goods and/or services, and 5% for essential goods and/or services. A number of goods and services are VAT exempt. A draft law to increase VAT rates has been proposed. 
  • A special sales tax is an excise tax that applies to the production or import of certain goods and the provision of certain services. The tax rate ranges from 10% to 150%. 
  • There is no withholding tax on dividends remitted overseas. Withholding tax for interest, part of the foreign contractor tax, paid to non-resident companies is 5%, unless a tax treaty is in place and non-residents can provide a Certificate of Residence. Withholding tax rates on interest where treaties are in place are 0%, 10% or 15%. 
  • Vietnam has tax treaties with 80 countries and territories. 

Benefits for Shared Service Centres

  • Vietnam is a member of the Asian Payment Network, a common payment-settlement platform within the Asia Pacific region. 
  • Notional pooling in Vietnamese dong and foreign currencies is permitted within the same legal entity. Cross-border notional pooling is not permitted due to regulatory restrictions. 
  • Domestic cash concentration is available in Vietnamese dong within the same legal entity. Cross-border cash concentration is not permitted due to regulatory restrictions. 
  • Vietnam has many advantages as a global outsourcing centre, with low costs, a skilled information technology (IT) workforce and a young, literate and educated population with many university graduates. Vietnam also has a stable, one-party government with low political risk, good infrastructure in urban centres, and a sound and growing English-language proficiency.   
Banking  

Bank Accounts

  • Residents: May hold foreign-exchange accounts domestically and overseas, with prior approval from the State Bank of Vietnam for overseas accounts. Residents may hold domestic currency accounts onshore only, but they are convertible to foreign currency. 
  • Non-residents: May hold foreign currency and domestic currency accounts. 
  • Interest: Offered on current and savings accounts. 

Legal and Regulatory

  • The State Bank of Vietnam oversees the banking sector and administers foreign exchange controls in Vietnam.
  • As a member of the Association of Southeast Asian Nations (ASEAN), Vietnam is subject to financial-sector multilateral agreements. 
  • Non-residents are usually required to gain permission to carry out foreign-exchange transactions within Vietnam. The Ministry of Planning and Investment also requires a permit to carry out any offshore investment activity and, similarly, requires prior approval for any foreign investment. 
  • All investments done by non-residents within Vietnam have to be carried out in the domestic currency (VND). 
  • Vietnam has anti-money laundering and counter terrorism financing regulations in place. It has set up a financial intelligence unit, the Anti-Money Laundering Department (AMLD), which is under the State Bank of Vietnam.
Payments 

Payment Systems 
 

IBPS

(Inter Bank Payment System) 
 
  • Owned and operated by the State Bank of Vietnam.  
  • Approx. 2,353 participants  
  • It is divided into two systems: the High Value Payment (HVP) and Low Value Payment (LVP).  

HVP 

(High Value Payment system)

 

Vietnam's Real-time Gross Settlement (RTGS) system  
  • Processes all high-value (equal to or greater than VND 500 million) VND-denominated interbank transfers.  

LVP  

(Low Value Payment system)

  

Deferred net settlement system  
  • Processes low-value (less than VND 500 million) electronic credit and debit payments.  

ACH

(Automated Clearing House)

Electronic clearing system for low-value electronic payments  .  
  • Owned and operated by the State Bank of Vietnam.  
  • Approx. 131 members  
  • The establishment of the IBPS has diminished the necessity and use of ACH.  
  • Processes bilateral payments through the internal clearing systems of Vietnam's six largest banks.  
  • Processes and clears intra-city/intra-province transactions through the local branch of the State Bank of Vietnam or its National Processing and Settlement Centre
 

Cheque and paper-based transactions 

  • Intra-city cheque payments are cleared through provincial payment centres (part of the State Bank of Vietnam) and are usually settled within three days.  
  • Inter-province cheque payments are cleared through the National Processing and Settlement Centre and are usually settled within four to seven business days.  
  • There are 230 participants.  

 

Payment Instruments  

Credit Transfers 

  • High-value (equal to or over VND500 million) and urgent VND-denominated credit transfers are cleared the same day.  
  • Low-value and non-urgent credit transfers are cleared through the LVP or ACH.  
  • Used for payroll, supplier and third-party payments.  
  • Represents 91.38% of the total value of non-cash domestic transactions as of 1Q21.  

Direct Debits (auto debits) 

  • Only available for low-value, regular payments such as utility bills.  
  • There is no centralised system, therefore, interbank payments are carried out through a bilateral system.  
  • Used for 4.05% of the total value of non-cash domestic transactions in 1Q20.  

Card Payments 

  • Fast increasing in popularity, especially debit cards. However, usage is limited by low bank account penetration and insufficient automated teller machine (ATM) and point of sale (POS) terminals in rural areas. Only 0.71% of the total value of non-cash domestic transaction was facilitated by bank card in 1Q21.   
  • The main brands of international cards in use are China UnionPay, JCB, Visa and MasterCard. The domestic banks issue SmartLink payment cards.  
  • Smartlink and Banknetvn have merged their processing operations to consolidate all mobile phone, ATM, POS and online transactions through a centralised system, the National Payment Corporation of Vietnam (NAPAS).  
  • Vietnam’s VinaPay’s MrTopUp service is one of the country’s biggest pre-paid card distributors. In addition, five banks are authorised to take part in VinaPay’s Vcash e-wallet scheme, which allows individuals and companies to make and receive payments, pay bills and make purchases online.   
  • E-cards are typically used for low-value transactions and to pay utility bills. Vietcombank and eight other institutions are authorised to issue e-money cards in Vietnam.  

Online Payments  

  • The government is committed to becoming a cashless economy and to increase cashless (card and/or digital wallet) transactions to 90% of total transactions. This would culminate in changing to a digital payments infrastructure, encouraging bank account adoption and providing incentives to make electronic transactions.  
  • Digital transactions are increasing in line with the increase in internet penetration and mobile phone ownership. Apart from international digital wallets, such as Samsung Pay and Alipay, there are many local digital wallets, such as MoMo, Appota Wallet and Bankplus.   
  • There are many bank and non-bank mobile wallet applications available, used for almost a fifth of e-commerce transactions.   
  • The e-commerce market is worth USD11.8 billion, around half of which is mobile commerce. However, it represents only 5.5% of total retail transactions. 

Digital Currencies  

  • The government has set out to regulate cryptocurrency activities after a series of cryptocurrency scams that affected thousands of Vietnamese residents.   

Cash, Cheques and Money Orders  

  • Cash is still the most common mode of payment, accounting for 90% of total transactions. This is largely due to the lack of bank account penetration, lack of electronic payment facilities and ATM terminals in rural areas as well as a general lack of trust in system security.  
  • Cheques are not a common form of payment, and occasionally used for low-value retail transactions, if at all.  
  • Money orders are handled primarily through Vietnam Post as well as vendors such as Western Union and MoneyGram.  

Sources (Intro & Corporate Treasury):
IMF, World Economic Forum, PwC, State Bank of Vietnam, Asian Development Bank, DBS, Trading Economies, CEIC, CIA World Factbook, World Bank 

Sources (Banking & Payments): 
State Bank of Vietnam, Alipay, Hanoi Times, J.P. Morgan 

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