Vietnam Economy Overview

Currency

Vietnamese Dong (VND)

Working hours

48 hours/week

Public/bank holidays

10 – 11 public holidays

Capital

Hanoi

Languages

Vietnamese

Population

98 million

Minimum hourly salary

VND 15,600 – VND 22,500

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Misclassifying employees as independent contractors can lead to penalties, including fines, back payment of wages and benefits, and additional tax liabilities. The Vietnamese Labor Code enforces these regulations to protect workers’ rights.

Fun fact

Vietnam is one of the world’s largest exporters of coffee, second only to Brazil.

Vietnam is a growing country with a population of approximately 100.3 million as of 2023. Its bustling economy has seen a steady upward growth, with the GDP expanding at an average rate of 6-7% over the past decade. The nation’s GDP is projected to reach approximately US$469.7 billion by the end of 2024.

How? Well, this strong expansion is driven by dynamic key industries such as manufacturing, IT outsourcing, and agriculture, all supported by a highly educated and cost-effective labor force.

In fact, the country aims to transition to a high-income status by 2045, focusing on greener and more inclusive development strategies. As Vietnam continues to develop, it offers a promising location for business expansion due to its strategic location in Southeast Asia, increasing international connectedness, and a government that is supportive of entrepreneurship and foreign investment.

Overview of Vietnam's Economy

Vietnam’s economy has undergone significant transformations from its early village-oriented structure to a modern, industrialized market.

Before French colonization in the mid-19th century, Vietnam primarily relied on agriculture to drive its economy. During the colonial period, the French reoriented the economy towards specialized regions, with the South focusing on agricultural exports like rice, and the North dealing primarily with manufacturing goods, including coal. This division enhanced Vietnam’s role in global trade but also made it more dependent on imported manufactured goods.

Period Economic Situation
Post-colonial Vietnam Stark economic division between communist North and capitalist South
Vietnam War Devastated infrastructure, significant loss of life and skilled labor
1976-1986 Low productivity levels and widespread shortages despite government efforts

The introduction of the Doi Moi reforms in 1986 marked a pivotal shift towards a socialist-oriented market economy. These reforms relaxed central economic control, encouraged private ownership, and opened Vietnam to international markets and investors.

Since then, Vietnam has experienced a surge in economic growth, significantly reducing poverty and elevating its global economic status. Key industries such as oil and gas, driven by major entities like Petrovietnam, have significantly contributed to this growth.

Taxes

Employer Tax: 21.5%

Social Insurance

17.5%

Health Insurance

3%

Unemployment Insurance 

1%

Employee Tax: 10.5%

Social Insurance (retirement and death)

8%

Health Insurance

1.5%

Unemployment Insurance 

1%

Gross Income (million VND*)

Up to VND 60

VND 60 – 120 

VND 120  – 216

VND 216  – 384

VND 384 – 624

VND 624 – 960

More than VND 960

Tax Rate

5%

10%

15%

20%

25%

30%

35%

Business Regulation in Vietnam

Vietnam has been taking great strides to refine its business regulations to attract more foreign investment and improve its economic environment. The legal guidelines that govern business operations in Vietnam include specific laws on investment, enterprises, and labor, which are essential for companies operating within the country.

Enterprise Law

The Law on Enterprises sets the legal basis for business activities and corporate governance in Vietnam. It allows for the establishment of limited liability companies, joint-stock companies, partnerships, and sole proprietorships. The law mandates that all businesses must register with the Business Registration Office and comply with reporting and disclosure requirements.

Investment Law

Vietnam’s Law on Investment aims to simplify the process for both domestic and foreign investors. It provides regulations on sectors eligible for investment, necessary licensing procedures, and incentives such as tax breaks and exemptions, particularly for investments in certain geographical areas or industries that are encouraged by the government.

Tax Regulations

The corporate income tax rate in Vietnam is generally fixed at 20%. However, incentives are available that can reduce the tax rate to as low as 10% for businesses operating in specific sectors or regions that are being targeted for growth, such as high-tech or economically challenged areas.

Labor Laws

Vietnam’s labor laws outline the rights and obligations of employees and employers. The law covers all aspects of employment including contracts, wages, working hours, and safety regulations. The standard workweek is capped at 48 hours, and employees are entitled to social insurance contributions and health benefits. Additionally, labor regulations enforce strict provisions against discrimination and ensure equal treatment in the workplace.

Compliance and Enforcement

Businesses must adhere to strict compliance and enforcement protocols set by Vietnamese law. This includes regular audits, adherence to financial reporting standards, and compliance with environmental and safety regulations. Failure to comply can result in penalties, fines, or even more severe legal actions.

Benefits of Doing Business in Vietnam

Vietnam offers several advantages that are making it an appealing destination for business expansion by companies from across the globe.

Economic Stability

Vietnam has demonstrated consistent economic growth with a real GDP growth rate averaging 6% over the last decade. This stability is a key factor that is attracting businesses looking for a reliable and growing market.

Strategic Location

Situated in Southeast Asia, Vietnam offers strategic access to other major markets in the region. This geographic advantage makes it easier for export and import activities, creating a central hub for regional trade.

Competitive Labor Costs

One of the most significant benefits of doing business in Vietnam is its competitive labor costs. The workforce is not only cost-effective but also highly skilled, particularly in industries like manufacturing and IT, which provides the double advantage of affordability and expertise.

Government Incentives

The Vietnamese government offers various incentives to attract foreign businesses, including reduced tax rates, investment subsidies, and import-export duty exemptions. These incentives are available to enterprises that are investing in priority sectors or regions.

Business Expansion Options in Vietnam

There are many different, strategic approaches to expanding your business into Vietnam. Each one is suitable for different businesses based on your unique needs.

Vietnam Employer of Record (EOR)

Similar to a PEO, an EOR can hire staff directly, managing all employment-related legalities and paperwork. This is perfect for companies that want to quickly start their operations without having to deal with all of the complexities of establishing a local office.

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Recruitment Agencies

Recruitment agencies in Vietnam help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Vietnamese labor laws.

For businesses looking to grow in Vietnam, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

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Vietnam Professional Employer Organization (PEO)

Companies that want to employ people in Vietnam without having to set up a physical presence in the country can use a PEO. This organization employs individuals on behalf of the company, handling HR, payroll, and compliance, allowing the business to operate without a formal entity.

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Subsidiary Incorporation

Setting up a subsidiary in Vietnam allows for a high degree of control over operations and the ability to tailor your business practices to both local and international standards. This method provides a strong presence in the Vietnamese market but also requires significant investment in terms of both time and capital.

Branch Registration

Establishing a branch is another option, where the foreign company registers a part of its existing entity in Vietnam. This is quicker and less expensive than forming a subsidiary but offers less flexibility in operations and less protection under local laws.

Business Opportunities in Vietnam

Vietnam offers many attractive business opportunities with its growing economy, strategic location, and numerous government incentives. Industries such as manufacturing, IT, and services are expanding rapidly throughout the country and are supported by a skilled, yet cost-effective workforce.

Business Opportunity Reason
Manufacturing Vietnam has emerged as a major manufacturing hub, particularly in the electronics, textiles, and footwear industries. The country’s competitive labor costs, improving infrastructure, and favorable trade agreements make it an attractive alternative to other manufacturing destinations in the region.
IT and Software Development Vietnam has a growing IT sector, with a large pool of skilled software developers and engineers. The country’s strong focus on education in science, technology, engineering, and mathematics (STEM), along with government support for the industry, create opportunities for businesses involved in software development, outsourcing, and related services.
Renewable Energy As Vietnam works to meet its growing energy needs and reduce its reliance on fossil fuels, there are significant opportunities for investment in renewable energy projects, particularly in solar and wind power. The country’s favorable geographic conditions, along with supportive government policies and incentives, make it an attractive market for clean energy companies.
Agriculture and Food Processing Vietnam is a major producer and exporter of agricultural products, such as rice, coffee, and seafood. The country’s diverse agro-ecological conditions, coupled with increasing demand for high-quality and value-added food products, create opportunities for businesses involved in agricultural production, processing, and related services.
Tourism and Hospitality Vietnam has seen rapid growth in its tourism industry, with a rich cultural heritage, stunning natural landscapes, and improving travel infrastructure. The country’s increasing popularity as a tourist destination, along with government efforts to promote the industry, create opportunities for businesses involved in hotel and resort development, tour operations, and related services.

Vietnam’s business opportunities are bolstered by its ongoing economic reforms aimed at improving the overall business environment. These efforts include simplifying regulations, increasing transparency, and attracting foreign investments. Furthermore, Vietnam’s prime location at the center of Southeast Asia, combined with its expanding network of free trade agreements, offers businesses access to a vast and rapidly evolving regional market.

Companies that are looking to capitalize on emerging markets will find that Vietnam is a promising option for both investment and growth.