Vietnam SME support law: what small firms can claim

The Vietnam SME support law is now on the books, and small firms should learn what it offers before it takes effect. The National Assembly passed Law No. 04/2017/QH14 on 12 June 2017. It starts on 1 January next year. The law sets out help for credit, tax, land, technology, markets, information, training and startups. Not every firm gets every item. Each firm must meet the rules for the support it asks for.

This note explains the main parts of the law simply. Treat it as a general overview of the SME rules, and ask a Vietnamese business lawyer before you act on it. Detailed rules will come later from the Government, so some points are still open.

Who counts as a small or medium firm

Article 4 gives the test. A firm is an SME if it has no more than 200 workers on average who pay social insurance. It must also meet one more test. Either its total assets are no more than 100 billion dong, or its revenue in the previous year was no more than 300 billion dong.

The law names three sizes: micro, small and medium. The size is set by industry, such as farming and fishing, industry and construction, or trade and services. The Government will issue the detailed limits. Until then, a firm should not assume which group it falls in.

Source: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, 12 June 2017 (unofficial English translation).

Credit and credit guarantees

Article 8 asks the Government to help banks lend more to SMEs. It also encourages independent firms that give credit ratings to SMEs. Small firms are to get help writing a workable business plan and improving their management and financial reporting. These steps are meant to help them borrow.

Article 9 creates credit guarantee funds for SMEs. These are state funds that sit outside the state budget. A fund can guarantee a loan based on the property offered or on a workable plan. The law says a fund must meet its guarantee promises and must not refuse an SME that qualifies. Article 6 also lists state-backed loans and the state budget as funding sources for SME help.

Source: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, 12 June 2017 (unofficial English translation).

Tax, accounting and land

Article 10 says SMEs may pay a lower corporate income tax rate for a limited time, as set by the tax law. Micro firms may use simpler tax procedures and simple accounting rules.

Article 11 covers production sites. Provincial authorities are to set aside land and help SMEs rent premises. This help does not apply to firms with foreign or state investment. Several articles also allow corporate income tax cuts or exemptions for a limited time for firms in certain support programmes. The tax law will set the exact terms.

Source: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, 12 June 2017 (unofficial English translation).

Technology, markets, information and training

Articles 12 and 13 cover technology and market growth. The State will support incubators, technical centres and shared work spaces. SMEs can use these to test and apply new technology. The State will also help set up product distribution chains that carry SME goods to buyers, and small firms get priority when state contracts are bid.

Under Article 14, ministries and provinces must publish plans, programmes and business guidance on a national SME web portal and on their own sites. They are to set up a network of advisers. An SME that uses a listed adviser can have its consulting fees reduced or waived. The law also provides legal help.

Article 15 gives SMEs reduced or waived fees for state-funded courses. These cover running a business, management and job skills for staff. The State will also offer online and media-based training.

Source: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, 12 June 2017 (unofficial English translation).

Startups and household businesses that register

Article 16 helps household businesses that become companies. To qualify, the household must have been registered and operating under the law before the change, and must have run its business without a break for at least one year by the day the company gets its first registration certificate. Help includes free advice on setting up the company, and on tax procedures and accounting for three years.

Article 17 covers startups. A startup qualifies if it is no more than five years past its first registration and, if it is a joint stock company, has not offered shares to the public. Help includes access to technology, equipment and incubators. Article 18 gives investors in startups a time-limited income tax break on their returns. Article 20 sets up an SME development fund, run outside the state budget, to lend to and finance startups and firms that join business clusters and value chains.

Source: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, 12 June 2017 (unofficial English translation).

What to do before the law starts

Check the size test in Article 4 first. Then list which support you want, such as a loan guarantee, training or advice. Watch for the Government's guiding decrees, which will fill in the details. The law says an SME gets help only if it meets all the rules in this law and other laws.

Priority matters too. Under Article 5, when several SMEs qualify for the same help, firms owned by women, and firms that employ more women workers, are put first. Article 3 defines a women-owned SME as one where one or more women hold at least 51 percent of the charter capital and at least one of them is the manager.

Source: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, 12 June 2017 (unofficial English translation).

Sources: Law on Support to Small and Medium-sized Enterprises, No. 04/2017/QH14, National Assembly, Hanoi, 12 June 2017, Articles 3 to 20 and 34; "NA passes law on supporting SMEs," Viet Nam News, 12 June 2017.