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. 

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.