Entering the market in Vietnam continues to attract significant numbers of foreign investors due to its strong economic growth, strategic location, and emerging industries. An article published in Treasury Today highlights the appeal of Vietnam’s market, particularly in the context of Southeast Asia’s economic landscape. However, the path to success in Vietnam requires a broad understanding of operational and cultural challenges.
Foreign investment in Vietnam
Vietnam’s projected economic growth in 2024 is 5.5%, supported by a recovering semiconductor industry and stable growth in the region. Foreign investors from industries like technology, manufacturing, and processing are capitalising on this trend. Leading global companies such as Samsung, Apple, and Intel have made large investments, contributing to Vietnam’s reputation as a growing manufacturing hub. Free trade agreements and improved diplomatic relations with countries like the US and Australia are further opening doors for international businesses.
Challenges in the Vietnamese market
Despite these opportunities, businesses face hurdles when entering Vietnam. Dung Nguyen Hoang, Partner at Kreston VN, warns of several obstacles, including corruption, bureaucracy, legal grey areas, and poor enforcement of intellectual property rights. He also highlights that local companies often struggle to access finance, as most businesses fail to meet the strict credit requirements of Vietnamese banks. Infrastructure and skill shortages add further complexity.
Furthermore, Vietnam’s regional market differences must be considered. For instance, consumers in the north prioritise brand reputation, while those in the south focus on value. Understanding these cultural and economic factors is essential for long-term success.
While Vietnam presents attractive growth prospects, it is crucial for companies to engage local partners and advisors to effectively manage the complexities of entering this promising yet challenging market.
If you would like to speak to one of our experts in Vietnam, please get in touch.
News
Global SME success pathways – Interpreneur Report
September 24, 2024
The 2024 Interpreneur report from Kreston Global revealed vital insights into how small and medium enterprises (SMEs) can succeed globally, focusing on the UK as a business hub. In a recent article for the International Accounting Bulletin, Liza Robbins, Kreston Global’s chief executive, highlighted that the new Labour government under Keir Starmer has introduced several initiatives to drive growth. Still, uncertainty lingers over how these will affect international business prospects. Read the full article here, or read a summary down below.
Legislative shifts shaping business strategy
The government’s central goal is to stimulate economic growth by attracting investment into the UK and making the country more business-friendly. Key legislation, such as the Audit Reform and Corporate Governance Bill, will influence businesses by emphasising digital transformation and data management, even though it mainly targets larger corporations. Another significant proposal, the Employment Rights Bill, aims to enhance worker rights, introduce a new National Living Wage and place restrictions on dismissals and outsourcing, prompting businesses to reassess their cost management strategies.
Increasing role of AI
Robbins notes the increasing role of Artificial Intelligence (AI) in business and how the UK government plans to address its development. While there was no immediate introduction of an AI Bill, the anticipation of future legislation in this area is a call for businesses to prepare for potential changes. This future legislation is expected to regulate AI, further impacting businesses, and SMEs should be ready to adapt.
Tax policy is another concern, as UK growth projections suggest that the government may need to increase business taxes. For now, the Starmer government has avoided raising income tax, national insurance, or VAT. Still, the need for revenue will likely lead to future fiscal adjustments that could affect foreign investment decisions.
Opportunities amid economic volatility
According to the Interpreneur report, Western Europe remains a key region for business expansion, with the UK still attractive to international investors, despite its increasing divergence from its European neighbours. This divergence, however, could present unique growth opportunities for entrepreneurs, who prioritize growth opportunities over other factors such as government incentives or network security. This dynamic poses a challenge for the UK government, as it seeks to balance growth ambitions with the need for economic stability.
The report underscores that economic volatility, exacerbated by global events like the COVID-19 pandemic, Brexit, and inflation, remains a major concern for business leaders looking to expand into the UK. Robbins emphasises that SMEs must navigate these uncertainties, particularly the impact of Brexit on supply chains, which continues to affect trade with the EU.
Building confidence for business growth
The government’s efforts to mitigate fears of instability and build stronger ties with the EU, as seen in events like the European Political Community Summit, are aimed at boosting international confidence. These efforts demonstrate the UK’s commitment to maintaining strong international relations, which is crucial for business growth. However, Robbins concludes that the real test will come with the first Budget, where the government’s economic strategy will become clearer, and potential investors can better assess how the UK plans to attract and support business growth.
For more information on doing business with Kreston Global, contact us here.
News
Jelena Mihic Munjic
Managing Director at Kreston MDM
Jelena Mihic Munjic is a Managing Director with expertise in business strategy, finance, and leadership. A Certified Auditor and Registered Court Expert, she has served on boards like UniCredit Bank Serbia. Jelena holds a Master’s in Quantitative Finance and is a published author in business journals. She is fluent in Serbian and English.
Elena Ramirez Marin
Partner at Kreston Iberaudit
Elena Ramírez Marín currently oversees the Tax and Outsourcing areas at Kreston’s office in Catalonia, representing Kreston Global in Spain, Andorra, and Portugal. With a 30-year background in the tax and auditing sector, her career has been particularly focused on outsourcing and tax services. She holds the position of Manager at the Kreston Iberaudit International Office and is a member of the Kreston Board.
Transfer pricing impact on SMEs: Commentary for Bloomberg Tax
Increasing scrutiny from tax authorities worldwide has amplified the importance of adhering to the arm’s length principle, with recent shifts in TP practices and legislation impacting SMEs. As SMEs engage more in cross-border transactions, compliance with TP rules has become critical. High-profile cases highlight the complexities of TP regulations, as noted in Kreston Global’s “Interpreneur report.” The OECD TP Guidelines offer a framework for determining the arm’s length value of related party transactions but are non-binding, leaving jurisdictions to implement varying domestic regulations. This creates tax uncertainty, higher costs, and double taxation risks, especially for SMEs with limited resources to manage these challenges.
Recent Transfer Pricing Cases
Apple v. European Commission (2016-2020)
The EC ordered Apple to repay €13 billion in back taxes for receiving illegal state aid from Ireland. Apple appealed, and in 2020, the ruling was annulled. The case highlighted scrutiny of multinational tax practices.
Australia v. Rio Tinto (2017-2022)
Rio Tinto settled a profit-shifting dispute with the Australian Taxation Office for nearly A$1 billion. The case emphasised transparency in transfer pricing and the risks of aggressive tax planning.
Amazon v. IRS (2017-2019)
Amazon won a dispute with the IRS over the undervaluation of intangible assets, with courts ruling in its favour. The case stressed the need for solid transfer pricing documentation.
Denmark v. Maersk Oil and Gas (2018-2023)
Denmark challenged Maersk’s transfer pricing, claiming it shifted profits abroad. The case reinforced the importance of clear documentation in transfer pricing.
Fiat Chrysler v. European Commission (2015-2022)
Fiat Chrysler was accused of receiving illegal state aid. The European Court of Justice overturned the ruling in 2023, limiting the EC’s powers over tax rulings.
France v. McDonald’s (2015-2022)
McDonald’s settled for €1.245 billion with French authorities over profit-shifting to Luxembourg, highlighting the risks of aggressive tax strategies.
HMRC v. BlackRock (2012-2024)
The Court of Appeal ruled that BlackRock’s intra-group loan was primarily for tax avoidance, emphasising the need for arm’s length terms in loan agreements.
India v. Kellogg India (2021-2022)
Kellogg India won a transfer pricing dispute, reinforcing the importance of selecting the appropriate entity in analyses.
Norway v. ConocoPhillips (2019-2023)
Norway reduced ConocoPhillips’ interest expenses, ruling its loan terms were not at arm’s length. The case stressed compliance in intra-group loans.
Future Steps
As tax regulations evolve, businesses of all sizes must adapt their transfer pricing strategies to manage risks and stay compliant. The European Commission (EC) has introduced two key Directives (published September 12, 2023), the BEFIT Directive and the Transfer Pricing Directive, aiming to harmonise and simplify tax rules across the EU.
BEFIT Directive
BEFIT targets corporate groups with annual revenues of €750 million or more, aiming to standardise tax bases across the EU. It calculates a preliminary tax result from each group’s financial statements, which is adjusted and aggregated to allow for cross-border profit and loss offsets. Member States can offer additional deductions if they meet the Global Minimum Tax Directive requirements. The goal is to simplify compliance and ensure fair taxation across the EU.
Transfer Pricing Directive
This directive addresses transfer pricing issues, ensuring that intercompany transactions follow the arm’s length principle, aligned with OECD guidelines, to prevent tax avoidance. It sets rules for related entities, transfer pricing methods, and adjustments for non-market transactions.
Directive Impact
The BEFIT and Transfer Pricing Directives will reduce compliance costs, especially for SMEs, and provide greater certainty. They aim to harmonise tax rules, combat tax avoidance, and enhance competitiveness within the EU. However, these directives will only apply within EU Member States, leaving cross-border transactions with non-EU companies unaffected.
Global Developments in transfer pricing
Outside the EU, countries like the U.S., Australia, and Canada have tightened their transfer pricing regulations, increasing scrutiny and compliance costs, especially for SMEs. Globalisation and inconsistent adoption of OECD guidelines create complexities, including double taxation.
Final Thoughts
Businesses, particularly SMEs, must stay informed and agile as global tax regulations evolve. Seeking expert advice and maintaining robust compliance practices will be essential to navigating these changes.
For more information on transfer pricing, click here.
Search
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to change your consent.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checkbox-advertisement
1 year
Set by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category .
cookielawinfo-checkbox-analytics
11 months
This cookie is set by the GDPR Cookie Consent plugin. It is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional
11 months
This cookie is set by the GDPR Cookie Consent plugin to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary
11 months
This cookie is set by the GDPR Cookie Consent plugin. It is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others
11 months
This cookie is set by the GDPR Cookie Consent plugin. It is used to store the user consent for the cookies in the category "Other".
cookielawinfo-checkbox-performance
11 months
This cookie is set by the GDPR Cookie Consent plugin. It is used to store the user consent for the cookies in the category "Performance".
CookieLawInfoConsent
1 year
Records the default button state of the corresponding category & the status of CCPA. It works only in coordination with the primary cookie.
device_id
10 years
Cookie used to maintain a local copy of the user's unique identifier.
viewed_cookie_policy
11 months
This cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not a user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Cookie
Duration
Description
__cf_bm
30 minutes
This cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
bcookie
1 year
LinkedIn sets this cookie from LinkedIn share buttons and ad tags to recognize browser ID.
bscookie
1 year
LinkedIn sets this cookie to store performed actions on the website.
currency
1 year
This cookie is used to store the currency preference of the user.
lang
session
LinkedIn sets this cookie to remember a user's language setting.
li_gc
6 months
Linkedin set this cookie for storing visitor's consent regarding using cookies for non-essential purposes.
lidc
1 day
LinkedIn sets the lidc cookie to facilitate data center selection.
UserMatchHistory
1 month
LinkedIn sets this cookie for LinkedIn Ads ID syncing.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Cookie
Duration
Description
ac_enable_tracking
1 month
This cookie is set by Active Campaign to denote that traffic is enabled for the website.
device_view
1 month
This cookie is used for storing the visitor device display inorder to serve them with most suitable layout.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Cookie
Duration
Description
__kla_id
2 years
Cookie set to track when someone clicks through a Klaviyo email to a website.
_ga
2 years
This cookie is installed by Google Analytics. It is used to calculate visitor, session and campaign data and it also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to identify unique visitors.
_ga_M0XVMQMRZ1
2 years
This cookie is installed by Google Analytics.
_gat_gtag_UA_188891991_1
1 minute
This cookie is set by Google and is used to distinguish users.
_gat_gtag_UA_7661078_5
1 minute
This cookie is set by Google and is used to distinguish users.
_gid
1 day
This cookie is installed by Google Analytics. It is used to store information on how visitors use a website and helps to create an analytics report on how the website is performing. The data collected includes the number of visitors, the source of visitors and the pages visited in an anonymous form.
AnalyticsSyncHistory
1 month
Linkedin set this cookie to store information about the time a sync took place with the lms_analytics cookie.
CONSENT
16 years 5 months 19 days 16 hours 12 minutes
These cookies are set via embedded YouTube videos. They register anonymous statistical data e.g. how many times the video is displayed and what settings are used for playback. No sensitive data is collected unless you log in to your Google account, in that case your choices are linked with your account, for example if you click “like” on a video.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
