Vietnam SME

Vietnam SME: Quick look through 

The Vietnam SME covers micro, small, and medium-sized enterprises, classified by criteria such as field of operation, registered employees under state social insurance, and financial factors like annual revenue and capital.  

These businesses, including medium-sized enterprises in Vietnam, remain vital, constituting 98% of all enterprises, contributing 40% to GDP, and supporting well over half of the country’s employment. The SME sector experienced significant growth in 2016, with an estimated 100,000 new businesses, most of which were largely propelled by government initiatives and reforms. 

Vietnam SME: The SME Law  

The Vietnam SME law, effective since January 1, 2018, defines SMEs as micro, small, and medium-sized enterprises with up to 200 employees registered in the state social insurance scheme annually and meeting either of the following criteria: 

  • Total capital not exceeding VND100 billion (approximately USD4.4 million). 
  • Total revenue in the preceding year did not exceed VND300 billion (around USD13.2 million). 

The law offers several key incentives for SMEs in Vietnam, including: 

  • Tax benefits: SMEs can enjoy a reduced Corporate Income Tax (CIT) rate for a specified period, with details provided in regulations. 
  • Simplified accounting: SMEs have the option to follow a simpler accounting system in accordance with accounting regulations. 
  • Credit access: SMEs can access credit guarantees through the SME Development Fund and SME Credit Guarantee Funds. 
  • Favorable land prices: Domestic SMEs in industrial parks or high-tech zones may benefit from reduced land costs. 
  • Technology support: Support for research and development, technology transfer, intellectual property protection, and common technology working units, with potential reductions or exemptions in land-related fees and CIT. 
  • Market expansion: Enterprises investing in distribution chains with a significant proportion of locally supplied goods may receive land-related fee reductions or CIT exemptions. 
  • Other assistance: SMEs can access support for human resource development and legal consulting. 

SMEs eligible for multiple support measures can choose their preferred options. Priority is given to women-owned or female-employment-intensive SMEs. 

Vietnam SME: Challenges to overcome  

Vietnam SMEs have undergone various challenges, including access to finance, limited integration in global supply chains, unfair competition from foreign-invested enterprises, insufficient R&D investments, and a complex regulatory environment. 

Access to finance:  

Vietnamese SMEs face difficulties in securing credit due to higher default risks, financial opaqueness, and insufficient assets for collateral. To enhance their credit prospects, SMEs must prioritize transparency and adopt advanced production technologies to mitigate risks and improve efficiency. 

Global supply chain integration:  

Only 21% of Vietnamese SMEs are currently integrated into global supply chains, lagging behind Thailand and Malaysia. Deeper integration across procurement, operations, and sales can help SMEs manage competition, reduce risk exposure, and trim production costs, which currently exceed those of neighboring countries. 

Unfair competition:  

Foreign-invested enterprises, fueled by foreign direct investment, pose tough competition for domestic SMEs, challenging their growth prospects. The SME Law aims to level the playing field by addressing issues related to land access, capital, and technology. 

R&D investments:  

R&D activities in Vietnam are concentrated in larger corporations, with only a small fraction invested by private sector SMEs. To remain competitive in the Fourth Industrial Revolution, SMEs need to focus on digitization and innovation. Government-backed programs supporting research and technological development can help enhance SMEs’ technology capabilities. 

Regulatory environment:  

Ungainly and unnecessary regulations have burdened domestic businesses, leading to increased costs and delays. Vietnam’s efforts to streamline regulations, including a significant reduction in business and investment conditions, seek to simplify administrative processes, particularly benefiting private, small, and medium-sized enterprises. 

Vietnam SME: The general support available 

Vietnam SMEs can access support for technology, consulting, training, innovative startups, and industrial clusters. Priority is given to women-owned SMEs, those with a substantial female workforce (at least 50% for less than 100 employees or 30% for more than 100 employees), and social enterprises. 

Vietnam SMEs can access various forms of support: 

Technology assistance: 

  • SMEs can seek reimbursement for digital consultation service expenses. 
  • Support includes renting or purchasing digital transformation solutions. 

Consulting services support (excluding advice on administrative procedures according to specialized laws): 

  • Micro-sized companies may receive a 100% subsidy for consulting services, up to 3 million VND per year. 
  • Small enterprises can get a 30% subsidy, up to 5 million VND per year. 
  • Medium enterprises are eligible for a 10% subsidy, up to 10 million VND per year. 

Training assistance: 

  • SMEs may receive full reimbursement for startup training and a 70% subsidy for corporate governance training. 
  • Training options include face-to-face and online courses. 

Support for innovative start-ups: 

  • Trainees at innovative start-ups can receive assistance with tuition, materials, accommodation, and travel for intensive training courses. 

Support for SMEs in industrial clusters: 

  • Industrial clusters, with a minimum of 10 cooperating enterprises, can receive support for activities like joint material purchases, product sales, land transactions, and brand creation and utilization. 

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What defines an SME in Vietnam?

SMEs in Vietnam are categorized based on their sector, registered employees with state social insurance, and financial metrics like revenue and capital.

Why are SMEs important in Vietnam?

SMEs make up 98% of businesses, contribute 40% to GDP, and employ half of the country's workforce.

What support is available for Vietnamese SME?

The government offers tax incentives, credit access, land rental discounts, and technology support.

How can SMEs access financing in Vietnam?

SMEs can access credit through schemes like SME Credit Guarantee Funds and simplified loan processes.

What challenges do Vietnamese SMEs face?

Challenges include limited financial access, competition with foreign firms, global supply chain integration, and regulatory complexities.