Vietnam’s tax environment for mergers and acquisitions (M&A) has evolved over the past few years. Before investing in Vietnam, foreign investors who have targeted companies established in Vietnam should consider the acquisition objectives, the substance of the target company, the economic benefits and the health of the economy before deciding. the type of acquisition: equity or assets. Taxation is one of the most important things to consider when structuring a transaction; a good tax planning strategy can bring significant advantages in the structuring plan. In this tax update, we will discuss popular types of business transfers and our recommendations from a Vietnamese tax perspective. This article will discuss three fundamental decisions faced by a potential buyer: What to buy: the target’s assets or its equity? What should be the acquisition vehicle? What issues should be considered in financing the acquisition vehicle? Although improving, tax laws and regulations in Vietnam are changing rapidly and interpretations often aggressively favor the Vietnamese tax authorities. Investors in Vietnam should not expect the same degree of legal certainty that is available in more developed jurisdictions.
After nearly two years of disruption due to the COVID-19 pandemic, we have seen an increase in M&A opportunities. Expert estimates suggest the global value of M&A deals could have hit US$6 trillion in 2021 as companies continue to use affordable capital investment and insight to recover from the pandemic . In line with global trends, M&A activity in Vietnam is expected to continue to increase as cheap capital and pent-up demand are expected to help the market get back up and running. In the first 10 months of 2021, Vietnam is estimated to have attracted a total of US$8.8 billion in M&A deals, representing a growth of 17.9% from 2020, or growth by 13% compared to 2019 before the pandemic, while the number of transactions decreased slightly. Many buyers, sellers and M&A consultants are going through a very busy time to do deals in Vietnam. The market is expected to see an explosive increase in both the number of M&A deals and post-pandemic value, as Vietnam is one of the bright spots catching the attention of international investors. . Indeed, in the public sector, we note that the VN index on the Ho Chi Minh Stock Exchange (HOSE) increased by 35.7% in 2021 and the HNX index on the Hanoi Stock Exchange (HSE) increased by 133% over the same period compared to 2020. respectively. 2 RECENT LEGISLATIVE CHANGES Over the past year or so, numerous legislative changes have impacted the
mergers and acquisitions in Vietnam. The new law on tax administration which entered into force on July 1, 2020 provides for the responsibility of commercial banks and intermediary payment service providers to withhold and pay the tax debts of foreign suppliers without a permanent establishment. in Vietnam and engaged in e-commerce or digital-based business with organizations and/or individuals in Vietnam. Filing requirements for mergers have been expanded under the new competition law (i.e. beyond simply examining the market shares of the participating parties, the value of the transaction as well as the total value of combined assets and total combined revenues of participating parties in Vietnam are also taken into account), which means that the likelihood of at least one filing notification to the Vietnamese competition authority is significantly increased. The new Securities Law, Investment Law, Enterprise Law and Public-Private Partnership Investment Law which entered into force on January 1, 2021 are expected to have a positive impact on the overall mergers and acquisitions activities in Vietnam. In particular, the new investment law provides certain incentives, especially in innovation, research and development and manufacturing, while the new securities law confirms the removal of foreign ownership restrictions in public enterprises operating in unconditional business sectors.