Investors Missing Out on Benefits of Vietnam’s Free Trade Agreements

HCMC – Vietnam has a range of free trade agreements (FTA) in place, and even more currently in the negotiation phase. However, many investors are still unaware of the potential benefits of these trade deals for their businesses. In fact, many investors are unaware that Vietnam even has an applicable FTA that could be of use to them.
Over the past few years, Vietnam has been quite active in signing bilateral trade agreements with countries throughout the world. Additionally, due to its membership in the Association of Southeast Asian Nations (ASEAN), Vietnam has become a party to a number of FTAs that the regional trade bloc has signed.

Wading one’s way through the legalese that many of these FTAs use to spell out their rules and regulations can often be headache inducing. This frequently is one of the most cited reasons why businesses fail to take advantage of the benefits available to them. Therefore, it is strongly suggested that businesses and investors consult with a legal and tax professionalwith strong experience in the region. This will allow a business to have a reliable, and clear, source of information on this complex topic.

Key free trade agreements that Vietnam has already signed and which are in effect include the following:

Chile-Vietnam Free Trade Agreement:

• Reduces tariffs and a number of tax categories.

Japan-Vietnam Economic Partnership Agreement:

• Around 92 percent of commodities are exempt from tariffs in each member state’s market.

Vietnam-Customs Union of Russia, Belarus, and Kazakhstan Free Trade Agreement:

• Reduces export duties on many goods to zero from 10 percent and simplifies many procedures.

Republic of Korea-Vietnam Free Trade Agreement:

• Reduces or eliminates tariffs on over 90 percent of all goods.  

ASEAN Free Trade Area:

• Imposed the Common Effective Preferential Tariff (CEPT) Scheme. Over 99 percent of the products in the CEPT

Inclusion List (IL) for Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand, have been reduced to the 0-5 percent tariff range.

• Cambodia, Laos, Myanmar and Vietnam, are moving slower but are expected to reach the 99 percent level for their respective CEPT ILSwithin the next few years.          

ASEAN-Australia and New Zealand Free Trade Agreement:

• Tariffs eliminated on 99 percent of all goods.  

ASEAN-India Comprehensive Economic Cooperation Agreement:

• Reduces tariffs on a range of goods.  

ASEAN-Japan Comprehensive Economic Partnership:

• Eliminated tariff rates on tariff lines and trade value for many goods.

ASEAN-People’s Republic of China Comprehensive Economic Cooperation Agreement:

• Includes a zero percent tariff on 90 percent of traded goods.

ASEAN-Republic of Korea Comprehensive Economic Cooperation Agreement:

• Reduces tariffs on a range of goods traded between members.  

Vietnam has also recently reached an agreement in principle on an FTAwith the European Union (EU). The deal, which is expected to be finalized before the end of this year, will eliminate tariffs on over 99 percent of all items, among other benefits.

Additionally, Vietnam is currently in negotiations on a number of other trade agreements, these include:

• ASEAN-Hong Kong, China Free Trade Agreement  

Regional Comprehensive Economic Partnership (RCEP):

• Includes the 10 ASEAN nations and Australia, China, India, Japan, New Zealand, and South Korea. Expected to significantly reduce tariffs.

Trans-Pacific Partnership (TPP):

• Twelve nations, including the U.S. and comprising a region with US$28 trillion in economic output. Will remove tariffs on almost US$2 trillion in goods and services exchanged between the signatory countries.

 
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.

For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.