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OLIVER MASSMANN - Partner, General Director

DUANE MORRIS VIETNAM LLC

VIETNAM’S CURRENT FOREIGN DIRECT

INVESTMENT STATUS AND FUTURE

OUTLOOK ON THE EU- VIETNAM FREE

TRADE AGREEMENT

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AGENDA:

• VIETNAM’S ECONOMIC OVERVIEW

• FOREIGN DIRECT INVESTMENT STATUS

• WHAT ARE IN THE EU- VIETNAM FREE TRADE

AGREEMENT (EVFTA)?

• OPPORTUNITIES FOR AUTOMOTIVE INDUSTRY

• INVESTMENT GUIDANCE FOR FOREIGN INVESTORS

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WHICH COUNTRY HAS ITS TWO MAJOR CITIES

RANKED AS MOST DYNAMIC CITIES

ON THIS PLANET EARTH ?

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Welcome to the most dynamic country on this

planet : Vietnam!

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Increasing Foreign Direct Investment

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EU – Vietnam Free Trade Agreement

(EVFTA)

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EVFTA – Bilateral negotiations

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Launch of

negotiations

First

round in

Hanoi

15 rounds

alternately

in Vietnam

and

Brussels

Last

round in

Hanoi

Agreement

in

principle

06/2012 10/

2012

Conclusion

of

negotiation

FTA text

released

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What happens next?

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EVFTA should

be taken into

effect

Translation into all

European languages

EVFTA should be

signed

Legal review

Current Status Middle 2017 Early 2018

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EVFTA – Comprehensive agreement

• Trade in goods

Market access for goods – tariffs

Rules of Origin

Export duties

Technical Barriers to Trade (TBT)

Sanitary and Phytosanitary Measures

Customs and Trade Facilitation

Administrative Cooperation in Customs Matters

• Services and investment:

National treatment

Liberalisation commitments / market access

Investor to state dispute settlement

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Cross-cutting issues

Dispute Settlement

Government Procurement

State Owned Enterprises & Subsidies

Intellectual Property Rights

Geographical Indications

Trade and Sustainable Development

Cooperation and Capacity building

Annexes (car; green tech and pharma)

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EVFTA – Main features

Symmetrical elimination of nearly all tariffs (over 99%)

Removal of almost all export duties and cap on remaining

ones

Services commitments going beyond GATS

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Dispute settlement

• Much faster than the WTO: 425 days under the EVFTA

compared with up to 860 days under the WTO dispute

settlement system

• A mandatory use of rosters list of arbitrators

• A more transparent system (public hearing, submission

of amicus curiae)

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Legal enforceability

• The decisions of the tribunal are enforceable

• Domestic courts cannot question the legal validity of the

decisions

EVFTA secures a modern reformed investment

dispute resolution standard

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Investment Dispute Settlement

• FTA implements investor-to-state dispute settlement (ISDS)

mechanisms – investors can claim in case that an investor

protection obligation has been breached

• Installation of a permanent Investment Court System (ICS)

• Independent International Tribunal with nine members at first

instance will be competent to all conflicts about investment

protection provisions (5 year transitional period for Vietnam)

• A court of Appeal with six members will be established

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Government Procurement

• Average government procurement in the EU is

about 16%

• Vietnam has one of the highest government procurement

rates of all countries worldwide (with about 39%)

• Vietnam is not a member of the Government Procurement

Agreement of the WTO

• Vietnam undertakes to transparency and procedural fairness

regulations

• Investors will get access to a huge market of government

procurement 14

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Government Procurement (cont.)

• EU companies will be able to bid for public procurement contracts

under the same conditions like Vietnamese companies for 22

central Government bodies, two state-owned enterprises (Vietnam

Electricity and Vietnam Railways), 24 public hospitals, etc.

• EVFTA even provides higher initial transitional threshold than the

TPP.

• Under the EVFTA, offsets are applied based on value of a

contract (including non-covered procurement) but in the TPP, it is

based only on the covered procurement.

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Opportunities for automobile industry

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Cars

• Tariffs:

– Cars: duty free after 10 years

– Cars with large engine (>3000 cc for petrol, > 2500 cc for diesel):

duty free after 9 years

– Motorcycles with engines larger than 150 cc: liberalized after 7 years

– Smaller motorcycles: duty free after 10 years

• Rules of origin:

– Vehicles: maximum 45% of materials not originating in either party

– Motorcycles: change of tariff heading or 50% materials not

originating in either party

– Car parts and accessories: same as motorcycles

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Automotive

• 3 years after the FTA comes into effect, Vietnam will accept UNECE

(standards adopted from the EU, U.S., Russia and many other states

which settle e.g. Worldwide harmonized Light vehicle Test Procedures)

certification without any further testing requirements

Note: Vietnam is not yet a party to the UNECE Agreement

• Demand for automobiles in Vietnam is at no other time set to surge like

this moment

• Vietnam is going to be the new production hub in Asia for the

machinery and especially automotive tier two manufacturing industry

where several German and European automotive companies already

experienced their own success story

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Remanufactured goods

• First time ever concept introduced

• Remanufactured products will received the same

treatment as new like products.

• Trade for high value products is now open, for example

car parts (especially for commercial vehicles) to serve the

aftersales market with original (manufactured) parts.

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INVESTMENT GUIDANCE FOR

FOREIGN INVESTORS

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Investment procedure under new 2014 Investment Law

• Under the Investment Law and Enterprise Law: 2 separate steps - Application for

Investment Registration Certificate (“IRC”) and Application for Enterprise Registration

Certificate (“ERC”)

• Step 1: IRC

– IRCs for projects required to obtain preliminary approval of the National Assembly/ People’s

Committee are issued within 05 working days upon issuance of such approval

– For other projects, IRCs are issued within 15 days (instead of 35 days as in the old law) upon

receipt of the application dossier

• Step 2: ERC

– Submit an application dossier to the licensing authority upon issuance of the IRC

– ERCs are issued within 03 working days upon receipt of the application dossier

• Under recent Decree guiding the Investment Law: 2 steps can be combined and

application dossiers for IRC and ERC can be submitted at the same time to the

investment registration authority only.

• The IRC and ERC will be given to the investors at the same time at the investment

registration authority.

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INVESTMENT INCENTIVES

Items 2017

Inside SEZ Outside SEZ

Tax rates

10% for first 15

years

20%

CIT Holidays

04 years

2 years

CIT reduction

50% for subsequent

09 years

50% for subsequent

04 years

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• Carrying forward losses

• Reduction or exemption of land rental, land use fee

• Incentives for enterprises employing female workers

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Personal Income Tax

– Subjects:

Vietnam residents: those individuals residing in

Vietnam for 183 days or more in a calendar year, or in

12 consecutive months from the first date of arrival

Non-residents: an individual staying in Vietnam from

90 to183 days in a tax year

- Tax rates: varied for employment and non-employment

income (employment income: graduated tax rates from 5-

35%; non-employment income: depending on each type

of income)

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Taxation in Vietnam

• Value-added Tax (“VAT”)

– Tax applied to goods and services used for

production, trading and consumption in Vietnam

(including goods and services purchased from abroad)

– Tax rate: 0-10% depending on types of goods and

services

• Other taxes: special sales tax (applied to luxury goods or

amusement places), natural resources tax, land and

housing tax, etc.

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Labor and Employment

• Minimum regional wages: ranging from US$113 –

US$165/month

• Social security:

– both employer and employee have to contribute to social fund (social

insurance, health insurance, unemployment insurance)

– The Fund covers the employees’ benefits during sick leave, maternity leave,

retirement, allowances for work related accidents and occupational diseases,

and survivors’ benefits

• Pension: Monthly pensions are provided from the Social

Insurance Fund where an individual has contributed social

insurance for more than 20 years and when they reach 60 years

of age for men, or 55 years of age for women.

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Questions & Answers

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DUANE MORRIS VIETNAM LLC

Thank you very much!

HANOI OFFICE HO CHI MINH CITY OFFICE

Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower

83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1

Hanoi, Vietnam Ho Chi Minh City, Vietnam

Tel.: +84 4 39462200 Tel.: +84 8 3824 0240

Fax: +84 4 3946 1311 Fax: +84 8 3824 0241

Contact email:

omassmann@duanemorris.com

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References (1)

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References (2)

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References (3)

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References (4)

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