News Bulletin 18 - Week 3 June, 2020
As Vietnam continues its post Covid-19 economic and business resumption it is attracting headlines as being the preferred destination for foreign investments in the Asia region for its successful management of the outbreak and timely rollout of stimulus policies to help businesses. Notably, in the previous week, Vietnam’s National Assembly agreed to reduce corporate income tax to 14% from 20% with a hope to better assist businesses in recovering their operations in the post pandemic market.
The past week spotlight
National Assembly green-lights tax cut for businesses
Workers prepare lychee for exports at a factory in the northern province of Hai Duong. Photo by VnExpress/Ngoc Thanh.
Vietnam's National Assembly has agreed to a corporate income tax reduction of 6 percentage points for most businesses to help them deal with Covid-19 impacts.
On Friday an overwhelming majority of National Assembly members voted in favor of a proposal by the Ministry of Finance to reduce the tax from 20 percent to 14 percent.
Let’s look at some other related financial and business news during the past week:
1. PouYuen Vietnam - Ho Chi Minh City firm lays off 3,000 employees due to COVID-19
A major company in Ho Chi Minh City has recently laid off approximately 3,000 employees due to difficulties brought about by the novel coronavirus disease (COVID-19) epidemic.
PouYuen Vietnam, a sports shoe manufacturing company located in Binh Tan District, announced the job cuts on Saturday.
2. NA passes EVIPA, Public-Private Partnership Law
The National Assembly passed the EU-Vietnam Investment Protection Agreement (EVIPA) Thursday morning in Ha Noi. The agreement will replace current bilateral agreements on investments between Viet Nam and 21 countries in the European Union. The NA recognises and enables the enforcement of final judgements issued by a dispute settlement institution, designated to settle investment disputes between Viet Nam and the EU as well as EU members.
3. ADB believes Vietnam’s 2020 growth will still be highest in Southeast Asia
The Asian Development Bank (ADB) recently forecast that Vietnam’s economic growth this year would be 4.1 percent, 0.7 percentage points lower than its April estimate but still the highest expected in Southeast Asia.
4. Origin rules may bar textile makers from EVFTA boons
Many of Vietnam’s textile and garment businesses could be deterred from the benefits of the free trade agreement between the European Union and Vietnam by falling short of the requisite rules of origin.
According to the Ministry of Industry and Trade (MoIT), to benefit from tax slashes in the EVFTA, Vietnamese textiles and garments must strictly obey rules of origin (ROO), meaning product materials must be sourced from Vietnam or the EU, and the cutting and sewing processes must take place in either, too. The EVFTA also allows materials sourced from South Korea, with which the EU and Vietnam have an FTA, to be eligible for tax incentives.
5. NA passes revised investment law
The National Assembly (NA) passed the Law on Investment (revised) in the afternoon of June 17, with 92.34 percent of deputies voting in favour. With seven chapters, 77 articles, and four appendixes, the new law will take effect from January 1, 2021.
6. NA deputies debate tax exemption for Vietnamese SMEs
A policy that may grant up to 30 percent tax exemption for small-to-medium-sized business (SMEs) to mitigate the adverse effects of COVID-19 was discussed on Tuesday by National Assembly deputies during a meeting in Hanoi.
7. EVFTA paves way for high-quality FDI flows from Europe to Vietnam
The European Union (EU)-Vietnam Free Trade Agreement (EVFTA) is expected to trigger high-quality FDI flows from Europe to the Southeast Asian country, said Vietnamese Trade Counsellor in Italy Nguyen Duc Thanh.
The Ministry of Planning and Investment estimated prior to the COVID-19 outbreak that, thanks to the EVFTA, Vietnam’s export revenue to the EU would expand about 20 percent this year, 42.7 percent in 2025, and 44.37 percent in 2030, primarily vehicles and transportation equipment, machinery, spare parts, phones and electronic components, pharmaceuticals, garments and textiles, and leather and footwear.
8. Ministry plans to support enterprises with related party transactions
The interest expense deduction limit may be raised from the current 20% to 30% to support businesses, according to a draft decree on tax management for enterprises with related party transactions, the Ministry of Finance recently made public for comments. The draft would replace Decree 20/2017/NĐ/CP.
9. KKR-led consortium enters into a $650 million investment in Vinhomes
A consortium led by KKR that includes Temasek, has today completed the acquisition of an investment in Vinhomes JCC, the leading integrated real estate developer in Vietnam.
The KKR-led consortium has collectively invested VND15.1 trillion ($650 million) which translates into a 6 per cent equity stake in Vinhomes. Following the transaction, Vingroup JSC will continue to be the controlling shareholder of Vinhomes.
10. Vietnam considers specific investment incentives to attract FDI
Under the draft law, financial incentives would be given in three fields – corporate income tax, import/export tax; finance and land; and accelerated depreciation.
These include high technologies; hi-tech supporting industry products; new material production, new clean renewable energy; electronics and key mechanical engineering, agricultural machines, automobiles and car parts; shipbuilding; IT and software; farm, forestry and seafood culture and processing; and waste treatment.
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Mazars Host & Co-host events
Mazars Webinar - June 2020
On June 12th 2020, Mazars in Vietnam, Savills Vietnam, Auscham Vietnam and Cancham Vietnam will be hosting a virtual panel discussion on the topic "Signs of post Covid-19 recovery: Mobility - Consumerism - Travel - Real-estate".
Mazars Webinar - May 2020
On May 20th 2020, Mazars Vietnam, Navigos Search and The Canadian Chamber of Commerce Vietnam will be hosting a webinar on the topic "How HR Leaders Navigate Recruitment and Employment during and post Covid-19".
Mazars Webinar - April 2020
On April 21st 2020, Mazars Vietnam, The Canadian Chamber of Commerce Vietnam (CanCham) and CPA Australia will be hosting an online webinar on the topic "How Finance Executives are Navigating the Financial Impact of Covid-19 in Vietnam". This will be an online panel discussion addressing the current and ongoing challenges that businesses in Vietnam are facing as a result of Covid-19.