The most significant trade agreement to date between the European Union and Vietnam, abbreviated as EVFTA (EU-Vietnam Free Trade Agreement), entered into force on the 1^st of August of 2020, and since then it has created a number of opportunities to facilitate trade and strengthen relations between the two economies. This trade agreement improves the investment climate and offers more certainty to both European and Vietnamese investors in the two markets.

The total turnover between the EU and Vietnam was USD 41.29 billion in the first nine months of this year, which is an increase of 13.4% compared with the same period last year. This is a positive development, especially taking into account the pandemic situation in Vietnam in mid-2021 and the impact it had on both local and foreign-invested businesses in the country.

Additionally, the export turnover of Vietnamese goods to EU markets utilizing the certificate of origin has reached almost USD 8 billion. This emphasizes the significance of the EVFTA, as businesses who used the certificate of origin for export purposes have benefited from various tariff reductions incentives outlined in the EVFTA. The industries that have benefited the most include agriculture, textiles, and the fishing industry.

Vietnamese officials have emphasized that since the implementation of the EVFTA in August 2020, the one-year results thus far have met the expectations of the targets set. Trade has increased not only in terms of numbers but also in quality, paving a way for a sustainable two-way trade increase. Compared to other multiple free trade agreements Vietnam has entered into over the past decade, the investment sentiment and expectations levels with the EU have been higher than average.

The implementation of EVFTA ensures the expansion of the Vietnamese markets, as well as the provision of greater transparency, updated regulations, and public institutions to facilitate the new investment environment between the two regions. Nevertheless, many improvements are still on the way to be implemented in both markets. Additionally, due the global pandemic, logistics costs and delays have increased significantly, which further impaired the trade processes and is a significant hurdle to overcome in the short-term.

At PHC Advisory, we continuously monitor the recent updates of tax policy in Vietnam. Please, feel free to contact us at info@phcadvisory.com for more information.

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