At last week’s meeting between Prime Minister Pham Minh and foreign-backed enterprises and business associations late last week, a series of issues such as work permits for foreign experts, green investment, supply chains, the upcoming global minimum tax (GMT), and the energy industry were discussed by the various participants, which included heads of influential international organisations.

Prime Minister Pham Minh Chinh addresses the meeting (Photo: VNA)

The foreign business community continues to assert that the issuance of work permits is too lengthy, causing many difficulties for production and business. Even after submitting documents for the first time, it often takes 2-3 months to obtain a work permit if any documents require to be amended or supplemented.

According to the Korean Chamber of Commerce in Vietnam (KorCham), each time additional documents are requested, companies spend considerable time and money on document preparation, translation, notarisation, and consular certification.

“Vietnam also needs to captivate and retain exceptional talent. For this, the current work permit procedures should be streamlined,” KorCham said.

Especially, the GMT is attracting both the government and businesses as currently, there is no announcement or specific regulation regarding the adoption and implementation of Pillar Two in Vietnam. Countries that are members of the Organisation for Economic Co-operation and Development, as well as members of the inclusive framework, have been in the process of developing and changing their domestic laws to cope with the implementation of Pillar Two from 2024.

“We recommend that the government of Vietnam investigate the impact of GMT on investors and the business environment in Vietnam, and provide practical, effective, and timely solutions to compensate enterprises whose corporate income tax (CIT) incentives will become less favourable or ineffective as a result of GMT implementation,” said KorCham.

To overcome the impact of the upcoming GMT rate, the European Chamber of Commerce in Vietnam (EuroCham) has proposed measures to encourage investment, including the exemption of import tax and extension of the tax exemption period.

Currently, CIT incentives are mainly in the form of incentives on income, but some forms of direct cost incentives are not yet popular according to regulations in Vietnam.

At a forum related to GMT last week, Robert King, deputy general director of Ernst & Young Vietnam said that when tax incentives are no longer effective, Vietnam needs to take supportive measures to maintain competitiveness in attracting investment.

“However, monetary support should be carefully considered because it may not be in accordance with the applicable rules of the GMT,” King said.

He suggested that the government should directly support investment costs and research and development (R&D) costs, as well as support production prioritised to draw investment. In addition, to support funding in the construction of environmental protection works, emission reduction activities would encourage environmental protection.

“During times of economic downturn, it is possible to consider supporting costs related to employee welfare, such as the cost of building dormitories, kindergartens, and medical stations for workers in urban areas. In addition, it is possible to consider supporting expenses to reduce production costs, such as supporting electricity bills and transportation costs for workers,” King commented.

Home of global groups such as Samsung, Intel, Bosch, and AES, Vietnam targets luring in $150-200 billion worth of the total registered foreign direct investment (FDI) in the 2021-2025 period. In this period, disbursed FDI will be $100-150 billion, or $20-30 billion annually. In the 2026-2030 period, the total registered FDI will be $200-300 billion and disbursed capital will total at $150-200 billion.

When compared to 2018, the number of businesses in Vietnam adopting advanced and environmentally friendly technology, as well as having modern governance and plans for high-tech application, is expected to increase to half by 2025 and 100 per cent by 2030.

The top priorities for FDI attraction in the coming years will include IT and telecommunications, advanced electronics, cars, agricultural machinery, supporting industries, R&D, the Internet of Things, and AI, among others.

According to the latest Business Climate Index report released by EuroCham and produced by Decision Lab, Vietnam’s draw as an FDI destination remains strong among European business leaders, with 3 per cent more European stakeholders citing it as one of their top three investment hotspots worldwide. Overall, just over one-third of those surveyed ranked Vietnam either first, within their top three, or among their top five investment destinations on a global scale.

Despite this, foreign businesses in Vietnam continue to grapple with regulatory opacity, administrative inefficiencies, and visa and work permit issues, but upcoming reforms to work permit and travel visa procedures will likely have a direct impact on growth.

“We eagerly await further information on these proposed changes. There has also been a notable improvement in liquidity in recent months, and we believe that a clear indication from the government on improved access to finance would boost morale,” said a EuroCham press release.