Vietnam offers big preferences to foreign firms

Minister of Information and CommunicationTruong Minh Tuan said at Internet Day 2017 that Vietnam is pursuing a ‘reverse protection policy’, i.e. instead of protecting domestic enterprises, it is giving many preferences to foreign firms. 

While foreign companies are exempt from the fee for putting servers in Vietnam, Vietnamese corporations such as VNG and VC Corp have to pay a leasing fee and be under strict management.

While foreign firms which provide services across borders only have to pay the contractor withholding tax of 5 percent, Vietnamese firms which provide similar services have to pay many kinds of tax, including the 25 percent CIT.

“We are thinking of creating favorable conditions for Vietnamese firms to be on equal terms with foreign companies operating in Vietnam,” Tuan said.

The Committee for Private Economic Sector Development, or Committee IV, belonging to the Prime Minister’s Advisory Council for Administrative Procedure Reform (ACAPR), pointed out that there are many barriers hindering the development of domestic digital content firms.

While foreign firms which provide services across borders only have to pay the contractor withholding tax of 5 percent, Vietnamese firms which provide similar services have to pay many kinds of tax, including the 25 percent CIT. 

This has prompted many Vietnamese investors to set up businesses overseas to avoid tax.

Nguyen The Tan, CEO of VC Corp, said while foreign digital content firms don’t bear sanctions when providing noxious content, domestic firms are subject to very strict control over content they provide. 

Domestic firms have the advantage of providing services in the home market and understanding local customers, but they have less money than foreign firms. Vietnamese firms also use advanced technologies, but have many limitations. 

Tan said that digital content is the last domain that Vietnam internet service providers still can protect. But they don’t have much room in the domains of email, search and social networks.

However, he is optimistic about the future of the digital content industry. 

The annual revenue of the industry is $1 billion and the economic value it brings is equal to that of the textile & garment industry. Vietnam exports $5-8 billion worth of textiles and garments every year, but the real income is just 5-10 percent.  

If the digital content industry continues to develop and have revenue of $5.5-10 billion, it will be listed among the most important industries of Vietnam. 

Tan suggested setting up a ‘virtual special zone’ for digital content firms, a zone with no geographical boundary in which all businesses have to commit to observe regulations and pay tax, so they can all enjoy more open policies on working conditions and licensing.

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