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Home » Countries » Asia » Vietnam

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as Vietnam – which is characterized by a highly-skilled and educated workforce, transparent employment and tax laws, a robust infrastructure network linking to the rest of Asia, and leading sectors in agriculture, information technology, manufacturing, tourism, construction, and logistics – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Vietnam – The Economy

The economy of Vietnam is a mixed socialist-oriented market economy, which is the 37th-largest in the world as measured by nominal gross domestic product (GDP) and 23rd-largest in the world as measured by purchasing power parity (PPP) in 2020. Vietnam is a member of the Asia-Pacific Economic Cooperation, the Association of Southeast Asian Nations (ASEAN), and the World Trade Organization.

A developing country with a lower-middle-income economy, Vietnam is nevertheless one of the fastest growing economies of the 21st century, and its total GDP is predicted to rival those of several developed nations by 2050.

Almost all Vietnamese enterprises are small and medium enterprises (SMEs). Vietnam has become a leading agricultural exporter and served as an attractive destination for foreign investment in Southeast Asia. Vietnam’s economy also relies largely on foreign direct investment to attract the capital from overseas to support its continual economic rigor.

It is part of international and intergovernmental institutions including the United Nations, the CPTPP, the Non-Aligned Movement, and the OIF. It has assumed a seat on the United Nations Security Council twice. Contemporary issues in Vietnam include corruption and a poor human rights record.

Small and Medium-Sized Companies

In Vietnam, SMEs are defined as enterprises with capital investment of less than 100 million VND and total employees of less than 300. SMEs are often planned within industrial clusters.

SMEs continue to play a major role in Vietnam, accounting for 98 percent of all enterprises, 40 percent of GDP, and 50 percent of employment or 1.2 million jobs. As per the Ministry of Finance, Vietnam has more than 600,000 firms, with nearly 500,000 private and 96 percent being small and micro-enterprises.

SMEs also play a relevant role in exports, accounting for 88% of exporting enterprises and for about half of export volume. However, 70% of Viet Nam’s SME export volume comes from foreign-owned SMEs which have relocated to Viet Nam to be closer to multinational enterprises (MNEs) acting as their lead buyers.

CountryVietnam (the Socialist Republic of Vietnam)
No. of States/Provinces57 provinces and 4 centrally administered cities
Principal CitiesHo Chi Minh City, Hanoi, Da Nang, Haiphong, Biên Hòa, Can Tho, Thuận An, Dĩ An, Huế, & Vũng Tàu
Local CurrencyVietnamese dong (VND)
Major ReligionIrreligion/folk beliefs, and Buddhism
Date Format(d)d/(m)m/yyyy or (d)d-(m)m-yyyy
Time ZoneIndochina Time (GMT+7)
Country Dial Code+84
Population98.9 million
Border CountriesChina to the north and Laos and Cambodia to the west. The South China Sea lies to the east and south.
Tax Year1 January – 31 December (calendar year)
VAT %10%
Minimum WageN/A – but have regional minimum wages
Taxpayer Identification NumbersVietnam Tax Code (Mã Sṍ Thuḗ) – Personal & Business
Social Insurance Code
VAT Number
Leading Sectorselectronics, machinery, steel, food processing, wood industry, textile, footwear, vehicle, rice, coffee, cashews, seafood, vegetables, and tourism
Main importsintegrated circuits, telephones, semiconductor devices, light rubberized knitted fabric, and broadcasting accessories
Main exportsbroadcasting equipment, telephones, integrated circuits, textile footwear, and office machine parts
Main trading partnersUnited States, China, Japan, South Korea, Hong Kong, Chinese Taipei, and Thailand
Government TypeUnitary Marxist–Leninist one-party socialist republic
Current Prime MinisterNguyễn Xuân Phúc (President), Phạm Minh Chính (Prime Minister)

The Main Sectors of the Vietnamese Economy

Vietnam focuses on the following key sectors, which all have a significant impact on the country’s economy:

  1. Electronics – Vietnam has invested in the manufacture of electronics which has seen that sector contribute 24% of the country’s GDP. Although the electronics industry is dominated by foreign giants like Samsung and Panasonic, the nation still reaps a lot of benefits since these multinational corporations have set up industries in Vietnam that employ the local people.

  2. Food Processing – Vietnam is a food processing hub that tries to meet the high demand for processed food from both local and international markets. The food industry is dominated by agricultural and sea products that are canned and shipped overseas, the sector accounts for 40% of Vietnam’s export and directly contributes 15% of the GDP.

    The abundance of raw materials has catapulted the country to the top of the charts in the export of rice, coffee, and cashew nuts among other food products.

  3. Construction – Any growing economy is always besieged by the need to construct infrastructure that meets the demands of both the people and trade, an increase in foreign investment has led to construction boom that has led to the building of high-rise apartments and office space especially in the urban centers like Ho Chi Minh City.

    The construction industry has directly contributed 39% of the GDP, and this is mainly due to the massive support from the government that has formulated laws that are favorable to the sector.

  4. Mining – Mining is a significant contributor to the economy with statistics showing that it directly adds 8.1% to the GDP. Vietnam is home to more than 5000 deposits of minerals that include rare metals that are in high demand around the world. The country has 7% of the world’s bauxite reserves as well as tungsten, titanium, phosphate, coal, and iron ore.

    One sector that has greatly benefited in the mining sector is the steel industry which is projected to grow further in the coming years with plans already in motion to set up a plant that will be rolling out 2 million tons of steel every year.

  5. Services & Tourism – The service industry in Vietnam accounts for 38.2% of the country’s GDP. In the period between 1994 and 2004, the contribution to the GDP by the service sector averaged about 6%. Tourism plays a significant role in the economy of Vietnam and in 2012 the country received approximately 6.8 million visitors from different countries around the world. The number grew to more than 7 million in 2013.

    Vietnam has emerged as an attractive destination for tourists from different parts of the world, and according to the trip advisor, the top 25 destinations in Asia included major cities in Vietnam such as Halong, Hoian, and Ho Chi Minh City.

    In 2016, Vietnam attained a record of 10 million visitors from around the world, which represents a 26% increase from the previous year.

  6. Industry/Manufacturing – Vietnam is a major exporter in the key sectors of telecommunications equipment, computer parts, footwear, and garments. Manufacturing makes up around 85% of Vietnam’s merchandise exports. Industry contributed 33.7% of GDP and employed 27% of the total workforce in 2021 (World Bank).

Compliance Highlights

  • General Department of Taxation – The General Department of Taxation forms part of the Ministry of Finance and is entitled to the regime of package funding prescribed by the Prime Minister. The organizational structure of the tax branch is reorganized according to the following principles:
    • determining fully tax administration tasks
    • appreciate responsibilities and obligations of taxpayers in self-calculation and self-declaration toward self-tax payment and take responsibility before law
    • strengthen tax authorities
    • strengthening the function of state management on taxes to well enforce the law
    • adding more powers to tax authorities
    •  strengthening information campaigns to support taxpayers
    • strengthen inspection and examination
    • streamline the apparatus in the direction of administrative reform and modernize tax administration
  • The MOLISA (Ministry of Labor, Invalids and Social Affairs) Inspectorate – the central authority of the labor inspection system in the country. It has six functional divisions: Labor Policy Inspections, OSH Inspections, Child and Social Affairs Policy Inspection, Inspections of “Policy for Meritorious People”, General Services and Administrative Inspections, Citizen Reception and Complaint and Denunciation Handling.

Labor Contracts Law

The employer-employee relationship in Vietnam is governed by the Civil Code and Labor Code, which was amended in 2021 to bring in new worker guarantees. Additionally, proposals from the Ministry of Public Security will impose stricter obligations on employers regarding privacy and data protection.

Amendments to the Labor Code stipulated that a contract can either be open-ended (indefinite) or fixed term, with no other options allowed, apart from probationary contracts.

When hiring new staff and drawing up their contracts, specific requirements from the Labor Code apply and must be considered. These include:

  • Contractual terms and conditions come under the Labor Code, supplemented by government decrees, articles and statutes.
  • Employer and employee should each have a signed copy of the contract.
  • The terms should be in Vietnamese for legal verification and to guard against inconsistencies in translation. The employee can request a copy in a language they understand.
  • By law, contracts must cover basic information. This includes the full names and addresses of both parties, specifying the position of the individual signing on behalf of the employer; job location and details of role; salary and payment schedule covering any extra reimbursements; working hours, breaks and vacation allowance; details of provisions for employee’s social, health and unemployment insurance.
  • The new Labor Code accepts the validity of e-contracts related by data messaging.
  • Employees’ roles must be declared to the labor authority within 30 days along with any subsequent changes to their role, within six months of coming into effect.
  • Local employees must be paid in Vietnamese Dong; foreigners, whether resident or non-resident, can be paid in another currency.

Generally, a labor contract in Vietnam is effective from the date it is signed, not from when it is lodged with the labor authorities. The Labor Code, as amended in 2019 and coming into force from January 2021, recognizes these types of contracts and employment agreements:

  1. Open-ended, indefinite employment contracts: These are the most common type of contract and are terminated by agreement between the parties or resignation by the employee.
  2. Fixed-term, definite employment contracts: These can be agreed for up to a 36-month period, but only two consecutive contracts are permitted. If employment continues after this the contract automatically becomes indefinite.
  3. Probation or trial period employment contracts: Probationary or trial periods are agreed on a case-by-case basis depending on the type of job and the qualifications or experience of the new employee. The Labor Code allows for probation periods of six, 30, 60 or 180 days as agreed by the contract.
  4. Foreigner employment contracts: These are generally for a maximum of 24 months, due to visa and work permit regulations.
  5. Seasonal employment contracts: There is no specific contract type for seasonal workers as the amended Labor Code eliminated the categories of ‘seasonal or specific employment’ workers. Seasonal, temporary, or part-time workers are now treated as workers on a fixed-term contract, which has no minimum period but must not last longer than 36 months. Workers with these contracts now have the same benefits and entitlements as employees on indefinite contracts.
  6. Collective and trade union agreements: The Vietnam General Confederation of Labor (VGCL) is the only employment group that can represent employee bodies in collective bargaining negotiations or agreements.

Payroll – Tax Contributions and Benefits

Income Tax:

Vietnam residents are taxed on their worldwide income, while non-residents are taxed only on locally earned income at a fixed rate of 20%.

Individuals become tax residents if they reside in-country for 183 days or more between January 1 and December 31 or for 12 months continuously after arriving in Vietnam.

Residences for foreigners include homes that are owned or leased for 183 days or more, hotel rooms, guest houses etc. that are covered by a Resident’s Card issued by the Ministry for Public Security.

Employment income is generally deducted at source by employers for remitting to the Vietnam Tax Agency. Generally, all types of income and remuneration – including benefits and payment in kind – are considered taxable. This would include royalties, commission, bonuses paid in stocks or shares for example.

Health and Social Insurance: Employers and employees contribute towards the Health Insurance Fund (HI), including foreigners. Vietnamese nationals also contribute to the Social Insurance Fund (SI) and Unemployment Fund (UI). State insurance allows all workers access to a stipulated public hospital for basic treatments. Most foreigners take out insurance for access to private clinics and hospitals.

Employers’ statutory costs include contributing a percentage of employees’ salaries to three social security funds: 17.5% to social insurance, 3% to health insurance and 1% towards unemployment insurance. These are remitted to the Social Insurance Agency (SIA).

Sick Pay: Employees receive sick pay from the Social Insurance Fund, not from the employer, and it is based on 75% of salary from which social insurance premiums were paid during the preceding month. An employee is entitled to sick leave if the following conditions are met:

  • To take leave due to sickness or accident, with the certification of a medical care establishment. In case of taking leave due to sickness or accident because of self-infliction, drunkenness, abuse of drugs, or other additives, employees are not entitled to the sickness benefit.
  • To take leave to take care of children who are less than seven years old get sick, with the certification of a medical care establishment.

The maximum number of paid sick leave days within a year, calculated according to working days and excluding public holidays, New year holidays, and weekends, is as follows:

  • 30 days after paying 15 years of premiums
  • 40 days for between 15 and 30 years of payments
  • 60 days after paying premiums for more than 30 years

Qualification for employees in hazardous, toxic, or heavy industrial occupations are:

  • 40 days after 15 years of premiums
  • 50 days after paying premiums between 15 and 30 years
  • 70 days after paying premiums for more than 30 years

Paid Vacations: Under National Employment Standards (NES), full-time employees are entitled to four weeks’ annual leave each year. Employees classified as shift workers receive five weeks annual leave.

Casual workers are not entitled to annual leave, but their salary is ‘casual loaded’ above their basic rate as compensation. Employees covered by award or enterprise agreements may receive additional leave; employees not covered by such agreements may ‘buy’ extra vacation by giving up equivalent pay.

Public Holidays: Entitlement for employees includes 11 paid public holidays yearly as decided by the Prime Minister. These include:

  • New Year’s Day – January 1
  • Lunar New Year Holidays: 5 days (The government authority shall decide the specific public holiday of Lunar New Year on an annual basis)
  • Hung Kings Commemoration Day – April 21
  • Reunification Day – April 30
  • Labor Day – May 1
  • National Day – September 2
  • National Day Holiday – varies (the government authority shall decide the specific public holidays of National Day on an annual basis)

Foreign nationals are given an extra day off to celebrate their National Day. An extra day is given when a public holiday falls on a weekend. An employee who works overtime during the nighttime on a public holiday shall receive compensation at the rate of 390%.

Effective January 1, 2021, one day off for the National Day, either on 1st or 3rd September has been added. The schedule of “National Day” holidays will be decided annually by the government authority.

Maternity/Paternity Allowance & Entitlements: Maternity leave is six months for a full pregnancy, with days off varying between 10 and 50 days in the case of miscarriage or termination. The Social Insurance Law allows 100% of salary for the six months. After giving birth (or adopting a child less than four months old) the mother is entitled to a lump sum of two months’ average salary


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