The document discusses a draft law in Vietnam to support small and medium enterprises (SMEs) as they face increasing competition from foreign firms. The law aims to introduce a comprehensive set of supporting measures for SMEs. It defines SMEs based on employee numbers and capital. The key supporting measures in the draft law include improved access to bank loans and funding, lower corporate tax rates, access to industrial zones, support for market expansion, and priority in public procurement contracts. The draft law seeks to increase the number and quality of SMEs to drive Vietnam's economic growth.

1. SUPPORTING REGIME FOR SMALL AND MEDIUM ENTERPRISES (“SMEs”) IN
VIETNAM
Oliver Massmann
In the context of Vietnam’s deeper integration into regional and world’s economy, domestic firms,
especially the SMEs, are now facing fierce competition from foreign enterprises. If not timely and
sufficiently supported, these SMEs will not grow proportionately to their existing capacity and drive
the country’s growth as expected. In an attempt to ease restrictions for SMEs, pave the way for their
further development, the Ministry of Planning and Investment has actively coordinated with the
Ministry of Finance and other relevant authorities to draft the Law on Supporting SMEs. This Law,
being supposed to be officially adopted next year, will introduce a comprehensive set of supporting
measures for SMEs based on the country’s development targets, strengths of each province and the
national resources, with a final aim of increasing the number as well as operation quality of SMEs
sector. Details of the Draft Law can be found below.
SMEs – Who are they?
SMEs are enterprises which meet a criterion on total capital OR an average number of working
employees, and can be classified into 3 categories: super small enterprises, small enterprises and
medium enterprises.
Category
Sector
Super small
enterprises
Small enterprises Medium enterprises
Average
number of
working
employees per
year (person)
Total
capital
(VND)
Average
number of
working
employees
per year
(person)
Total capital
(VND)
Average
number of
working
employees per
year (person)
Agriculture,
forestry and
fisheries
<10 <20 billion 10 - 200 20 billion -
100 billion
200 - 300
Construction and
industrial
<10 <20 billion 10 - 200 20 billion –
100 billion
200 - 300
Trade and services <10 <20 billion 10 - 50 20 billion –
50 billion
50 - 100
Supporting mechanism – What are specific measures?
Supporting the entry into and exit from the market
The authorities will adopt measures to improve business environment, administrative reforms, ensure
transparency and compliance for the business of SMEs. SMEs will be able to access business
resources in a fair manner compared with other types of enterprises.

2. Access to bank loans
SMEs will have access to various types of bank loans according to their demands at interest rate and
terms suitable for their payment capacity and financial status of the banks. With the Government’s
support, SMEs will improve the feasibility of their business plans, management capacity and
transparency in corporate operations, resulting in better ability to access bank credit.
Access to fund credits
The Fund for developing SMEs will have the function of lending, investing in, sponsoring for SMEs
to conduct innovation, putting them in sustainable value chain. In case the activities of the mentioned
Fund are caused losses due to force majeure in the business operations of the borrowing entities,
relevant persons and organizations will be exempted from criminal penalty.
Corporate income tax
SMEs are entitled to a tax rate of 3% lower than that stipulated in the Law on Corporate Income Tax.
Meanwhile, super small enterprises will enjoy a much lower rate, i.e., 5% lower than that in the Law
on Corporate Income Tax.
Access to locations for business operation
The Government encourages the development of industrial zones, high-tech zones, economic zones,
industrial complex for SMEs to lease. In doing so, enterprises who develop such infrastructure are
entitled to a waiver or reduction of land rental according to the Government’s regulations. The more
area in the industrial zones, high-tech zones, economic zones, industrial complex the SMEs lease, the
more preferential treatment in terms of corporate income tax and land rental is granted to the
developers.
Market promotion and expansion
The Government invests in the form of PPP by allocating land and other resources to establish a
national supply chain, which prioritizes goods and products by SMEs. These products will enjoy
preferential treatment if falling into the list of innovation goods stipulated by the Government. The
Government also supports the establishment and operation of organizations supporting export
activities to promote and expand market for SMEs.
Participation in public procurement
Small and super small enterprises are granted exclusive access to construction bid of maximum VND
5 billion and goods/ services bid of maximum VND 3 billion with state budget. For bids having
greater value, small and super small enterprises are also prioritized over others pursuant to Article
14.4 of the Law on Bidding. In addition, in case the contractors sub-contract to the SMEs, the main
contractors will also enjoy certain preferential treatment when bidding.
The Draft Law also introduces many other programs to support SMEs. Please do not hesitate to
contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to
know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam
LLC.