1. Law on Personal Income Tax (PIT) rules 10 kinds of earnings that will be levied with VAT, including salary, wage, capital investment , dividend interest, capital transference, franchising, gifts, bonus and the work copyright valued at over 10 million dong.

The most important point is the issues relating to the family circumstance deduction for PIT payers with the maximum deduction of four million dong a month or 48 million dong a year, 1.6 million dong PIT deduction a month for each defendant (old parents, the invalid, wife and children aged under 18) of taxpayers.

Defining defendants mainly depend on available personal documents of defendants, such as birth certificate, marriage certificate, health certificate, labour ability. Also, the tax agencies will grant tax code to all Vietnamese individuals including newborn babies to consider the family circumstance reduction for PIT payers.

2. Fixed telephone charge is cut down 70%

From yesterday, the inner region telephone charges will be common at 200 dong a minute instead of the previous 120 dong, 400 dong and 700 dong. The subscriber charge will be reduced from 27,000 dong to 20,000 dong a month.

According to the new calculation, the inner region telephone charges (calls made between subscribers in the same districts) will increase by 66% but the inner province telephone charge will fall by 50-71.4%.

3. New land price frame in Hanoi and HCM City

From January 1, 2009, the highest land price in Hanoi is 67.5 million dong a square metre, which is as high as the regulated ceiling level of 2008. In HCM City, the land price is up from 67.5 million dong a square metre in 2008 to 81 million dong/square metres. Particularly, the land price in Dist 2 of HCM City surges by 100%, followed by that of Tan Binh Dist, and Dist 7 up 59-100% compared with the previous price benchmark.

4. 100% foreign owned supermarkets are allowed to enter Vietnam

In line with WTO commitments, all limitations for 100% foreign owned distributors and retailers are removed. However, based on the allowable technical barrier, Vietnam will open the door of its retail market for essential goods items including fuel, pharmaceutical, book and newspapers, steel, cement, fertiliser according to a roadmap.

Analysts said, while Vietnamese distribution system remains limited, the presence of foreign competitors would help the market become more professional whereby consumers will have more options. But for domestic retailers, the competition pressure will be heavier.

5. Foreigners are allowed to purchase houses in Vietnam

The resolution of piloting the decree allowing foreigners to purchase houses in Vietnam was approved by the prime minister's office and enforced from January 1, 2009 with the maximum ownership time of 50 years.

According to statistics of the Construction Ministry, at least 10,000 among 80,000 foreigners working and living for a long time here will be allowed to buy houses. Up to the end of July 2008, the foreigners rent about one million square metres of land in Vietnam, including 660,000 square metres (equalling to 4,000 apartments) in HCM City's districts of 1, 3, 5, and 7. And in Hanoi, about 1,300 apartments with a total area of 220,000 square metres mainly in Hoan Kiem, Tay Ho and Ba Dinh districts were rent by foreigners. 6. Corporate Income Tax is reduced to 25%

According to new Law on Corporate Income Tax (CIT), the kinds of income subject to CIT include earnings from production, business, service, capital transference, real estate, asset leasing. The common CIT applied on businesses is 25% instead of the previous 28%. CIT on operations of petroleum exploration, drilling ranges between 32% and 50%, depending on each project.

As for preferential projects, the highest CIT is 10% that will be applied within 15 years. The maximum CIT exemption is imposed in no more than four-years and a 50% CIT reduction in nine following years will be applied on newly established enterprises operating in specially disadvantaged areas. Annually, all businesses are allowed to deduct 10% of pre-tax profit for the scientific and technological development fund.

7. Extra subjects under VAT

Pursuant to new Law on Value Added Tax (VAT) that takes effect from January 1, 2009, the 0% VAT will be applied on export services, international transport (excepting technological transference contracts, intellectual property right transfer, or insurance service.

5% VAT will be applied on the services of clean water for production and life, specialised machines for agricultural production, medical equipments, fresh food, and foodstuff. And the 10% VAT will be imposed on other goods.

8. Minimum salary of enterprises is raised by 110,000-200,000 dong a month

From January 1, the minimum salary of eight million people working in domestic enterprises will be 800,000, 740,000 dong, 690,000 dong and 650,000 dong a month, a rise of 110,000-180,000 dong against 2008. Meanwhile, that of over 1.5 million people working in foreign invested enterprises will be 1.2 million, 1.080 million, 950,000 dong and 920,000 dong a month, increasing by 120,000 to 200,000 dong/month year-on-year.

In line with the guidance of Ministry of Labour, Invalid and Social Affairs, those with the salary recorded in labour contracts lower than the above minimum level will be adjusted.

9. Unemployment insurance policy

According to the government's Decree No 127, Vietnamese citizens who signed labour contracts in 12-36 months will enjoy the unemployment insurance. By 2010 at soonest, the unemployed may enjoy the unemployment welfare.

Lao Dong - January 2, 2009