Thứ Hai, 24 tháng 2, 2025

Can Foreign Owned Company Distribute Pharmaceuticals in Vietnam? 3 Questions!

 With the complex developments of the Covid-19 pandemic worldwide and in Vietnam specifically, the research, production, importation, and distribution of Covid-19 vaccines have become topics of great interest for everyone. Beyond domestic companies, foreign companies are also interested in the process to import, transport and to distribute pharmaceuticals in Vietnam

Can a foreign-invested company distribute pharmaceuticals in Vietnam?

Currently, Vietnam law restricts foreign-invested enterprises to distribute pharmaceuticals in Vietnam. Vietnam has reserved the right not to commit to opening the market for drug distribution services and has not committed to doing so under any trade agreements or international conventions up to the present moment because the pharmaceutical sector is sensitive and directly related to people’s access to medicines and public health.

What does pharmaceutical distribution in Vietnam entail?

According to regulations, pharmaceutical distribution involves the division, movement, and storage of drugs during transportation from the manufacturing facility, imported drugs, or from the distribution center to users or between distribution points, using various means of transportation. Concerning distribution services, the WTO Commitment Schedule explicitly excludes pharmaceutical distribution in Vietnam from its coverage for all supply methods.

Additionally, Appendix 03 to Circular No. 24/2013/TT-BCT announcing the roadmap for implementing trading activities and activities directly related to trading goods by foreign-invested enterprises in Vietnam notes that pharmaceuticals are in the list of goods not allowed for distribution.

How does pharmaceutical distribution in Vietnam differ from storage and transportation of pharmaceuticals in Vietnam?

Regarding this matter, the Drug Administration expressed the following viewpoint: “The suspension of allowing foreign-invested enterprises in Vietnam to provide drug storage and transportation services aims to prevent the operation of counterfeit drug distribution in Vietnam, contribute to ensuring public health security, and move towards professionalizing the drug distribution system in Vietnam.”

Clause 10, Article 91 of Decree No. 54/2017/ND-CP, effective from May 8, 2017, specifies cases where entities are not allowed to distribute pharmaceuticals in Vietnam:

“10. Facilities with the right to import but are not allowed to exercise the right to distribute drugs and drug materials in Vietnam shall not perform activities directly related to the distribution of drugs and drug materials in Vietnam, except for drugs and drug materials produced by the facility itself in Vietnam, including:

c) Transportation, receipt, and storage of drugs and drug materials.”

According to this content, foreign-invested enterprises in Vietnam are not allowed to transport and store drugs, except for drugs and drug materials produced by the enterprise itself in Vietnam.

It can be seen that restricting the right to distribute drugs for foreign-invested enterprises aims to ensure health security, proactively supply and distribute drugs, work towards professionalizing the domestic drug distribution system, and contribute to better control of drug prices in the market.

Some information and opportunities to distribute pharmaceuticals in Vietnam

What makes pharmaceutical market in Vietnam attractive and how foreign companies could cooperate with local entities to distribute pharmaceuticals in Vietnam?

The pharmaceutical market in Vietnam has been experiencing significant growth and presents several opportunities that make it attractive for foreign companies to cooperate with local entities to distribute pharmaceuticals in Vietnam. Here are some key aspects of the pharmaceutical market in Vietnam and the factors that contribute to its attractiveness:

1. Rapid Market Growth

Vietnam’s pharmaceutical market has been growing rapidly, driven by factors such as an increasing population, rising income levels, and improved healthcare awareness. The demand for a wide range of pharmaceutical products is on the rise, creating opportunities for companies to enter and expand in the market.

2. Increasing Healthcare Spending

The Vietnamese government has been increasing its investment in healthcare, leading to higher healthcare spending. This includes investments in healthcare infrastructure, facilities, and services. As a result, there is a growing demand for pharmaceuticals to meet the healthcare needs of the population.

3. Disease Patterns and Aging Population

The prevalence of chronic diseases is increasing in Vietnam, attributed to changing lifestyles and an aging population. This has led to a higher demand for pharmaceuticals, including those for the management of chronic conditions, creating a favorable market for various drug categories.

4. Government Initiatives

The Vietnamese government has been implementing initiatives to enhance the pharmaceutical sector, including policies to encourage research and development, investment incentives, and efforts to improve the regulatory environment. These initiatives create a more favorable and supportive ecosystem for pharmaceutical companies.

5. Foreign Direct Investment (FDI) Policies

Vietnam has been actively attracting foreign direct investment, and pharmaceuticals are among the sectors that welcome foreign investment. The government’s openness to foreign investment creates opportunities for international pharmaceutical companies to establish a presence in Vietnam, through setting up company in Vietnam.

6. Changing Regulatory Landscape

The regulatory environment for pharmaceuticals in Vietnam has been evolving to align with international standards. Efforts to streamline registration processes, enhance intellectual property protection, and improve overall regulatory efficiency contribute to a more attractive environment for foreign companies.

7. Consumer Preferences and Demand for Quality

As consumer awareness regarding healthcare and product quality increases, there is a growing demand for high-quality pharmaceutical products. Foreign companies with established reputations for producing safe and effective medications are well-positioned to meet this demand.

8. Strategic Alliances and Partnerships

Collaborations between foreign pharmaceutical companies and local entities, such as partnerships with Vietnamese pharmaceutical manufacturers or distributors, can be strategic in navigating the local market and complying with regulatory requirements.

In conclusion, the pharmaceutical market in Vietnam is attractive for foreign companies due to its growth potential, government support, changing demographics, and evolving regulatory landscape. The increasing demand for high-quality healthcare products and the openness to foreign investment create opportunities for companies looking to enter or expand their presence in the Vietnamese pharmaceutical market.


Thứ Năm, 20 tháng 2, 2025

Vietnam Company Formation. How to proceed?

 Foreign investors may invest in the form of 100% capital to establish company in Vietnam, being limited liability company, joint stock company, partnership company.  Vietnam company formation has been getting easier due to the openness policy of Vietnam government in the recent years. 

Foreign investors that invest in Vietnam for the first time must have investment projects and fill in investment registration or examination procedures at state agencies in charge of investment in order to be granted investment registration certificates.

Company with 100% foreign capital has founded and operated from the date of issuance of the investment certificate and enterprise registration certificate.

Vietnam company formation dossiers

A dossier to establish company in Vietnam shall comprise more than 10 types of documents to name below:

-Registration/Request for issuance of Investment Certificate;

-A report on financial capability of the investor;

-Draft of the company’s charter;

-List of members of company;

-Copy of the people’s identity card, passport or other lawful personal certification, for individual members;

-Copy of the establishment decision, business registration certificate or other equivalent document, for member organizations;

-Copies of the authorization document, the people’s identity card, passport or other lawful personal certification, for authorized representatives.

-Copies of the business registration certificates of the foreign member organizations must be authenticated within three months before the date of submission of the business registration dossier by agencies where such organizations are registered;

-Written authorization of the investor in case investor is organization and valid copy of the lawful personal certification of the authorized representative. Documents in foreign languages must be translated into Vietnamese, notarized and legalized;

-The joint-venture contract or Business Cooperation Contract (BCC);

-Other documents required by Vietnam law.

The Vietnam company formation at investment registration process would take around 30 days. The extra time might be needed in case the investment area is conditional or the State government needs to examine the investment project.

Minimum capital, special licenses or other conditions might be required in certain investment projects.

5 Steps Guide to Register Company in Vietnam

How a law firm in Vietnam would help with Vietnam company formation?

With professional English speaking staff and experience in foreign investment, diligent lawyers would be able to support clients with Vietnam company formation.

While the process of Vietnam company formation is straight forward most of the time, there are many situations which it would be better that the client engages a law firm in Vietnam to assist with document preparation, legal translation, notarization, and authentication of application dossiers.  

The lawyers at law firm in Vietnam could also assist with market entry legal advice for strategic decision since the rental of office, work site might impact the business. Employment matters of the company also requires compliance from the beginning. Mandatory submissions of report are also part of the compliance process to follow.  Tax declaration should be done and other investment reporting should be correct at the start of the business.  


Vietnam Tax Laws: 10 Crucial Insights Every Foreign Company Must Know Before Investing

Vietnam has emerged as a key destination for foreign investors due to its dynamic economy, strategic location, and competitive labor market. However, navigating the complexities of Vietnam tax laws is critical for companies planning to enter this burgeoning market. In here we discuss Vietnam’s taxation system, covering essential aspects that can make or break their investment strategies.

Introduction to Vietnam Tax Laws

Vietnam’s tax system is designed to support economic growth while ensuring compliance. For foreign investors, understanding the nuances of Vietnam tax laws is essential to avoid penalties, optimize tax obligations, and leverage available incentives. Whether you plan to establish a manufacturing hub or a service-based operation, your success depends on aligning your tax strategies with Vietnam’s legal framework.

Overview of Vietnam Tax Laws

Vietnam’s tax framework is governed by the Ministry of Finance and the General Department of Taxation. It includes direct and indirect taxes, each catering to specific economic activities.

- Corporate Income Tax (CIT): Applied to profits of companies.

- Personal Income Tax (PIT): For individuals earning income in Vietnam.

- Value-Added Tax (VAT): A consumption-based tax for goods and services.

- Foreign Contractor Tax (FCT): Unique to foreign entities operating under contracts in Vietnam.

Foreign companies must familiarize themselves with these taxes to ensure full compliance under Vietnam tax laws.

Corporate Income Tax (CIT) in Vietnam

Corporate Income Tax is a cornerstone of Vietnam tax laws. Foreign companies operating in Vietnam are subject to a CIT rate of 20%, although preferential rates are available under certain conditions.

Key Features of CIT:

- Standard Rate: 20% for most industries.

- Preferential Rates: High-tech, environmental, and educational projects may qualify for rates as low as 10%.

- Exemptions: Enterprises in special economic zones or engaging in R&D may be exempt from CIT for up to four years.

- Understanding CIT is crucial for tax planning, as compliance errors can lead to severe penalties.

Personal Income Tax (PIT) for Employees

Vietnam imposes a progressive Personal Income Tax on both residents and non-residents. Foreign companies hiring expatriates must be aware of PIT obligations under Vietnam tax laws.

Tax Rates:

- Residents: Taxed on worldwide income at rates from 5% to 35%.

- Non-residents: Taxed at a flat 20% on Vietnam-sourced income.

Key Considerations:

- Residency status affects PIT calculations.

- Foreign employees can benefit from tax treaties to avoid double taxation.

- Companies must ensure timely PIT withholding and reporting.

Value-Added Tax (VAT): A Consumption-Based Tax

VAT is a critical component of Vietnam tax laws, applied to goods and services consumed within the country.

VAT Rates:

- Standard Rate: 10%.

- Reduced Rate: 5% for essential goods like food and medicine.

- Zero Rate: Applicable to exports.

Foreign companies must implement robust VAT accounting systems to ensure compliance.

Foreign Contractor Tax (FCT): A Unique Vietnam Tax Law

Foreign Contractor Tax applies to foreign entities earning income from Vietnam without establishing a legal presence. It combines elements of CIT and VAT.

Key Points:

- Applicable Activities: Supply of goods, services, and royalties.

- Rates: Vary based on the nature of income.

- Calculation Methods: Deduction or deemed method.

Understanding FCT is crucial for companies engaging in short-term projects or licensing agreements.

Tax Incentives for Foreign Investors

Vietnam’s tax policies are designed to attract foreign investment. Companies can benefit significantly from incentives under Vietnam tax laws.

Common Incentives:

- CIT rate reductions for high-tech industries.

- Tax holidays for enterprises in special economic zones.

- VAT exemptions for export-oriented businesses.

Strategic Importance:

Leveraging these incentives can reduce operational costs and enhance competitiveness.

Compliance with Vietnam Tax Laws

Tax compliance is non-negotiable for foreign companies. Vietnam has stringent laws to ensure timely and accurate reporting.

Key Requirements:

- Tax Registration: Mandatory for all foreign entities.

- E-Invoicing: Required for VAT compliance.

- Annual CIT Reports: Submission within 90 days of fiscal year-end.

Failure to comply with Vietnam tax laws can result in fines, audits, and reputational damage.

Recent Changes in Vietnam Tax Laws

Vietnam regularly updates its tax laws to align with global standards and domestic priorities.

Recent Amendments:

- Introduction of e-commerce tax obligations.

- Adjustments to PIT for expatriates.

- Enhanced regulations on transfer pricing under Decree 132.

Foreign companies must stay informed to adapt their strategies effectively.

Tax Treaties and Double Taxation Agreements (DTAs)

Vietnam has signed DTAs with over 80 countries to prevent double taxation. These agreements are pivotal for foreign companies navigating Vietnam tax laws.

Benefits:

- Reduced withholding tax rates on dividends, interest, and royalties.

- Elimination of double taxation for cross-border income.

- Clear guidelines for tax residency.

Tax Disputes and Penalties

Tax disputes can arise from misinterpretation of Vietnam tax laws or compliance errors.

Common Issues:

- Miscalculated VAT or CIT.

- Disputes over FCT obligations.

- Non-compliance with transfer pricing rules.

Resolution Process:

- Administrative appeals.

- Mediation through the General Department of Taxation.

- Legal proceedings in extreme cases.

Mastering Vietnam Tax Laws for Success

Navigating Vietnam tax laws is a critical component of establishing a successful business in the country. From understanding the nuances of CIT and PIT to leveraging tax incentives, foreign companies must adopt a proactive approach. Partnering with local tax experts and staying updated on legal changes can ensure compliance and optimize tax obligations.

By mastering Vietnam tax laws, foreign investors can unlock the full potential of this vibrant economy while minimizing risks.

This guide ensures foreign companies are well-prepared to enter Vietnam, making informed decisions that align with both legal requirements and business goals.

Thứ Hai, 17 tháng 2, 2025

Granting Investment Registration Certificate in Vietnam

 As Vietnam integrates further into the global supply chain, foreigners are more and more encouraged to invest in Vietnam in many areas for pursuing profit. The foreign direct investment of the foreigners is required to be registered at Vietnam state authority to protect the rights of the investor. The investors could then establish company in Vietnam and apply investment certificate in Vietnam

According to the Law on Investment, investment projects of foreign investors; projects of setting up a economic organization in which foreign investors holding 51% of charter capital or more or the majority of the general partners are foreigners in a partnership; projects of BCC contract between domestic investors and foreign investors or between domestic investors and economic organization which foreign investors holding 51% of charter capital or more or the majority of the general partners are foreigners shall need to conduct the procedure of applying investment registration certificate as regulations of law.

Preparation of dossier to apply investment certificate in Vietnam

-A written request for permission for execution of the investment project;

-A copy of the ID card or passport (if the investor is an individual); a copy of the Certificate of establishment or an equivalent paper that certifies the legal status of the investor (if the investor is an organization).

-An investment proposal that specifies: investor(s) in the project, investment objectives, investment scale, investment capital, method of capital rising, location and duration of investment, labor demand, requests for investment incentives, assessment of socio-economic effects of the project;

-Copies of any of the following documents: financial statements of the last two years of the investor; commitment of the parent company to provide financial support; commitment of a financial institutions to provide financial support; guarantee for investor’s financial capacity; description of investor’s financial capacity;

-Demand for land use; if the project does not use land allocated, leased out by the State, or is not permitted by the State to change land purposes, then a copy of the lease agreement or other documents certifying that the investor has the right to use the premises to execute the project shall be submitted;

-Explanation for application of technologies to the project which specifies: names of technologies, origins, technology process diagram, primary specifications, conditions of machinery, equipment and primary technological line;

-The business cooperation contract (BCC) (if the project is executed under a BCC).

Order and procedure to apply investment certificate in Vietnam

-Investors submit the dossier at Department of Planning and Investment (or management of economic zones, high-tech zones);

-Within 15 working days from the date of receipt of a complete and valid dossier, the competent authority shall grant the investment registration certificate in Vietnam for investors. In practice, the time duration would be lengthened due to the time for preparation of documents from investor, getting them notarized, legalized, authenticated and translated into Vietnamese before being accepted in Vietnam.

The actual time for processing paper at the State authority would also last longer in practice when the State authority evaluate the project plan of the investor to ensure that its investment purpose is achievable economically and in accordance to the regulations of Vietnam.  It is advised that the client engage professional law firms in Vietnam to assist with advisory and to apply investment certificate in Vietnam for doing business in Vietnam.