Legal & Regulatory

Vietnam Regulatory Brief: Import Standards, Offshore Indirect Investment Requirements, and Proposed SME Tax Breaks

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New Requirements for Machinery, Equipment to Take Effect on July 1, 2o16

The Ministry of Science and Technology (MoST) issued a decree describing the requirements and procedures for import of used machinery, equipment and production lines which will take effect on July 1, 2016. Under the decree: used machinery, equipment and production lines which are not specifically prohibited from importing into the country may be imported if they meet the following conditions:

  • They are imported within 10 years from the manufacture date.
  • They are manufactured based on standards which conform to Vietnam’s National Technical Standards or National Standards; or that confirm with standards of G7 countries on safety, energy saving and environment protection.

The above requirements are exempted if the list of machinery, equipment and production lines has been approved in the investment license application dossier. In addition, used replacement components and spare parts can only be imported if companies need to fox or replace the currently used ones.

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Vietnam Regulatory Brief: Business Registration Fines, Lost and Damaged Bill Guidance, and Increased Scrutiny of Real Estate Loans

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New sanctions announced for late business registration

Government officials have announced new penalties for late business registration. The sanctions were published under Decree 50/2016 / ND-CP  and will be effective July 15, 2016.  Late registrations of content change certificates will be fined up to US $671. The exact fine will depend on how late the registration is; the details of the sanctions are as follows:

  1. Fine between US $ 45 to US $ 224, if registration is delayed by 1-30 days.
  2. Fine between US $ 224 to US $ 447, if registration is delayed by 31-90 days.
  3. Fine between US $ 447 to US $ 671, if registration is delayed by more than 91 days.

Companies should ensure compliance with the latest regulations to mitigate the financial and reputational risk to their business. In addition, companies should note that the regulations in Vietnam are amended often. Enterprises that keep track of such regulations ensure that their business operations in Vietnam do not suffer.

Professional Service_CB icons_2015 RELATED: Corporate Establishment Services from Dezan Shira & Associates
New regulations announced for lost and damaged bills

The government issued Decree 49/2016 / ND-CP which announced new regulations for lost and damaged bills. The decree clarifies that rules for bills that are lost, burnt or damaged. If customers have not received the bills, a fine will be applicable dependent on a case-by-case basis. The fine will be between US $ 179 and US $ 358. This is  a reduction from the current amount. The latest decree will come into effect on August 1, 2016.

If natural disasters, fires or any other unexpected event result in the loss of or damage to a bill, then the company that issues the bill must ensure the transaction is properly recorded and the associated taxes are paid. If such measures are taken, the government can wave off the fine or the minimum fine would be applicable. Companies that ensure proper bill preparation, invoicing and associated tax filings stand to avoid the fines for lost or damaged bills.

Related-Reading-Icon-Asean Link RELATED: Oscar Mussons speaks with CNBC on the implications of Obama’s Trip to Vietnam
Central Bank to institute stricter rules for real estate loans in 2017

The State Bank of Vietnam (SBV) has announced stricter regulations for real estate lending starting from 2017. Released May 30, the bank circular increases the risk weights of loans for real estate businesses from 150 percent to 200 percent. The change will be effective January 1, 2017.

The SBV instituted new reals to prevent the risk of bubbles in the Vietnam’s real estate sector. The changes are not as strict as expected by market analysts. The country’s real estate market is heavily dependent on loans. The outstanding loans to the sector in 2015 were valued at US $ 17.42 billion. The new regulations should significantly insulate the Vietnamese real estate sector from the risks of bad debt. The changes also underline the importance of tracking legislations in Vietnam, as several agencies in Vietnam announce regulatory changes that would be applicable only several months down the line.


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

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Annual Audit and Compliance in Vietnam 2016
In this issue of Vietnam Briefing, we address pressing changes to audit procedures in 2016, and provide guidance on how to ensure that compliance tasks are completed in an efficient and effective manner. We highlight the continued convergence of VAS with IFRS, discuss the emergence of e-filing, and provide step-by-step instructions on audit and compliance procedures for Foreign Owned Enterprises (FOEs) as well as Representative Offices (ROs).

VB_2015_Navigating_the_Vietnam_Supply_Chain_ImageNavigating the Vietnam Supply Chain
In this edition of Vietnam Briefing, we discuss the advantages of the Vietnamese market over its regional competition and highlight where and how to implement successful investment projects. We examine tariff reduction schedules within the ACFTA and TPP, highlight considerations with regard to rules of origin, and outline the benefits of investing in Vietnam’s growing economic zones. Finally, we provide expert insight into the issues surrounding the creation of 100 percent Foreign Owned Enterprise in Vietnam.

Tax, Accounting and Audit in Vietnam 2016 (2nd Edition)
This edition of Tax, Accounting, and Audit in Vietnam, updated for 2016, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who must navigate Vietnam’s complex tax and accounting landscape in order to effectively manage and strategically plan their Vietnam operations.

 

Leveraging Vietnamese Customs to Block Counterfeit Exports

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Vietnamese CustomsBy the South-East Asia IPR SME Helpdesk

Vietnam now operates a diverse, modernized economic structure, with manufacturing, information technology, and high-tech industries forming a large, fast-growing part of its national economy. It is also the third-largest oil producer in south-east Asia.

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Vietnam Regulatory Brief: Life Insurance, Relaxing Airport Restrictions, and New Classification for Securities Trading in Vietnam

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New Rules for Universal Life Insurance

Circular No. 52, effective from June 1, 2016, will amend rules on universal life insurance. The rules are aimed to help life insurers expand their distribution channels. Highlights of the changes are:

  • Insurance agents will just need three months of experience as life insurance agents as compared to six months before or one year of working in the field of finance, banking, or insurance as compared to two.
  • The circular removed the minimum 24 hour mandate to train insurance agents, and amends the rule to whatever time is needed to train such insurance agents provided they are competent.

In addition, insurance agents must not violate any laws on operation of insurance agents and the rules on insurance agent occupation ethics. The circular also sets guidelines on the setting up of professional operation insurance reserves by life insurers.

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Managing Corporate Name Infringement in Vietnam

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Fake BrandsBy: Dezan Shira & Associates 
Editor: Maxfield Brown

In the midst of attracting record investment from all corners of the globe, Vietnam has a nasty secret – intellectual property (IP). Not only does the nation rank 88th out of 140 economies in terms of IP protection, but policy instability is increasingly cited by investors as a concerning aspect of doing business within the country.

For manufacturing companies flocking to Vietnam for its low costs and close proximity to China, IP may seem an issue of little concern. Traditionally manufacturing operations have been devoid of high value add trade secrets and thus faced little exposure to theft. While the nature of production is likely to change as Vietnam solidifies it position in electronics manufacturing, a more salient IP risk in the near to medium term regards the safeguarding of brand reputation.

MNCs and well regarded SME brands choosing to invest in Vietnam are often faced with competitors branding themselves under the same or similar names. Not only can this cut into profits, but it also hurts the reputation of emerging brands in the event that competitors manufacture similar goods at a lower quality.

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Vietnam Regulatory Brief: Business Climate Improvements, Foreign Currency Credit, and Auto Import Taxation

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New Resolution Passed to Improve Business Climate

The Vietnamese government recently issued a resolution listing measures aimed at improving the business climate and competitiveness within the country. Resolution 19-2016/NQ-CP passed on April 28 and seeks to propel Vietnam into the top-four ASEAN member states in terms of business climate. The resolution lists out plans from 2017 until 2020 and highlights the importance of changing trade regulations and government management of import-export products. The resolution aims to simplify administrative procedures and strike down outdated economic laws. Ministries will need to prepare action plans to achieve the goals set by the resolution by May 30.

The new resolution lists out several changes, the details of which are as follows:

  1. Issuance of building permission and relevant papers in less than 77 days.
  2. Registration of property possession in less than 14 days.
  3. Maximum time to handle contract disputes to be reduced to 200 days.
  4. Processing of bankruptcy cases in 24 months instead of five years.
  5. Maximum customs duration of 10 and 12 days for exports and imports respectively.

In addition, tax reform, including tax refunds and petition tackling are also expected; however the details have not been announced yet. If Vietnam is able to successfully implement the resolution, the share of foreign investment that it will attract is expected to rise exponentially. The resolution bodes well for investors that plan to invest in the country and for companies that are currently operating in Vietnam.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Corporate Establishment Services
New Regulation to Tighten Foreign Currency Credit

The State Bank of Vietnam (SBV), has issued a new regulation to limit foreign currency credit to firms. Circular 24/2015/TT-NHNN issued by the SBV states that commercial banks would not be allowed to extend loans in foreign currency to companies that do not need it for offshore payments. The rule came into effect on March 31.

The SBV said that the new regulations would only apply to firms that frequently take foreign currency loans from banks and later convert it to Vietnamese Dong (VND) to use for reasons other than offshore payments. Monetary analysts believe that the new rules will help to stabilize exchange rates and strengthen the VND. However, the new regulations may also severely limit funding options for some companies in Vietnam. Dezan Shira & Associates notes that a few listed companies are planning to counter the new regulations by calling for new funds or issuing corporate bonds. The regulation from the SBV is the part of a larger anti-dollar drive by Vietnam’s central bank.  

Related-Reading-Icon-Asean Link RELATED: Vietnamese Growth Slows to 5.46% in Q1 2016
Tax Policy Change Affects Auto Importers

Auto importers in the country have complained against recent changes in tax policy. Around 10 auto manufacturers in the country sent a petition to the Prime Minister Nguyen Xuan Phuc, relevant ministries, and related agencies to complain about proposed changes to the calculation method used for special consumption tax on completely-built-up (CBU) autos. The manufacturers complain that the changes make their business plans unviable.

Currently, the tax calculation method, effective from January 1 2016, is in line with government’s Decree 180/2015/ND-CP and the Ministry of Finance’s Circular 195/2015/TT-BTC, where the special consumption tax is based on the prices of imported autos plus 5 percent. However, from July 1, a new law regarding taxes on imported autos will take effect and change the special consumption tax. In addition, the auto importers complain that detailed information about the execution of the new method is currently unavailable.

The change in calculation methods twice in the span of six months is expected to cause unnecessary fluctuation in the market and tax collections. While, the exact impact on the car dealerships and consumers is not clear yet, the change in the tax laws will certainly push up auto prices. The frequent changes in tax laws necessitate a cautious approach for companies planning to enter Vietnam’s auto industry and for those already operating in it.


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

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Annual Audit and Compliance in Vietnam 2016

In this issue of Vietnam Briefing, we address pressing changes to audit procedures in 2016, and provide guidance on how to ensure that compliance tasks are completed in an efficient and effective manner. We highlight the continued convergence of VAS with IFRS, discuss the emergence of e-filing, and provide step-by-step instructions on audit and compliance procedures for Foreign Owned Enterprises (FOEs) as well as Representative Offices (ROs).

VB_2015_Navigating_the_Vietnam_Supply_Chain_ImageNavigating the Vietnam Supply Chain
In this edition of Vietnam Briefing, we discuss the advantages of the Vietnamese market over its regional competition and highlight where and how to implement successful investment projects. We examine tariff reduction schedules within the ACFTA and TPP, highlight considerations with regard to rules of origin, and outline the benefits of investing in Vietnam’s growing economic zones. Finally, we provide expert insight into the issues surrounding the creation of 100 percent Foreign Owned Enterprise in Vietnam.

Tax, Accounting and Audit in Vietnam 2016 (2nd Edition)
This edition of Tax, Accounting, and Audit in Vietnam, updated for 2016, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who must navigate Vietnam’s complex tax and accounting landscape in order to effectively manage and strategically plan their Vietnam operations.

 

The Guide to Drafting PPP Proposals and Feasibility Studies in Vietnam

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ppp_proposalsBy: Dezan Shira & Associates
Editor: George Llewellyn-Jones

On March 1, 2016, the Vietnamese ministry of Planning and Interior passed Circular 02/2016/TT-BKHDT  regarding the preparation and appraisal of PPP project proposals and feasibility studies. Outlining specific requirements and methods of evaluation for both reports, Circular 02 is a welcome supplement to the Law on Bidding originally passed in 2013 as well as Decree No. 15/2015/ND-CP passed in February. For investors considering Vietnamese infrastructure projects as a potential opportunity, a thorough understanding of the requirements outlined in this Circular is strongly advised.

For a general introduction to PPP arrangements in Vietnam, please refer to our previous publications introducing Public Private Partnerships and providing an overview of the tendering process in Vietnam.

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Vietnam Regulatory Brief: Timber Export Standards, Venture Capital Funding, and Proposed Increases to Business Licensing Fees

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Timber Export Regulations Agreed by Vietnam, EU

Representatives of Vietnam and the European Union (EU) reached an agreement on export regulations for the timber market. Vietnam will apply the Timber Legality Assurance System of Vietnam (VNTLAS) for timber exports to the EU as well as other countries and the domestic market. The EU is the fourth largest importer of Vietnam’s timber and wood products, after the US, Japan, and China. In turn, the EU reached an agreement on applying a licensing mechanism called the Forest Law Enforcement, Governance & Trade (FLEGT) to timber exported to the EU. As such, all FLEGT licensed timber products from Vietnam will be considered legal and not subject to requirements of the EU Timber Regulation.

The developments come after the sixth negotiating session between EU and Vietnam officials on April 13. Negotiations have been ongoing since October 2010. In the first eight months of 2015, Vietnam exported timber and wood products worth around U.S. $442 million. The next negotiation session is scheduled for July 2016.

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Public Private Partnerships in Vietnam – Part 2: The Tendering Process

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Contruction in VietnamBy: Dezan Shira & Associates
Editor: Ellena Brunetti

Public Private Partnerships (PPP) are a growing and profitable entry point to the Vietnamese market. For firms seeking to tap into these opportunities, several steps must be followed as part of the investment process, including the preparation of a project proposal, its submission, and the tendering process. In part two of Vietnam Briefing’s series on PPPs, we help to shed light on the tendering stage of this process.

In recent years, the procurement law, which was amended in 2014, and its implementing regulations have brought significant changes to existing regulations on the selection of investors for PPPs. While the revision of this legislation has resulted in regulatory uncertainty for current and potential investors, its amendments are largely seen to be in line with international standards regarding public procurement. The adoption of these standards represents great strides for the development of regulatory infrastructure in Vietnam and is set to enhance transparency, efficiency, and competition regarding bidding documents and bidding procedures.

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The EU – Vietnam FTA: Understanding Rules of Origin

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Recently signed, the European Union – Vietnam FTA (EVFTA) presents exciting opportunities in a multilateral trading partnership that was valued at over 28 billion Euros in 2015. Not only has the agreement slashed tariffs on nearly 99 percent of all Vietnamese exports to the EU, measures have also been taken to ensure that the FTA stays updated in the face of future agreements on both sides. For those seeking to tap into the agreement’s cost saving measures, an important consideration, and the focal point of this article, are the EVFTA’s rules of origin.

In the face of low cost sourcing options in close proximity to the Vietnamese market, and increasing regional integration on the part of the Association of South East Asian Nations (ASEAN) – of which Vietnam is a member, existing producers and newcomers to the region alike will be hard pressed to deny the benefits of regionally integrated supply chains. However, while sourcing materials from third party states may decrease the overall cost of producing a given good, introduction of third party inputs may compromise coverage under the EVFTA – leading to a reduced competitiveness upon export to European markets.   

The following paragraphs highlight the conditions under which goods will be granted coverage under EVFTA and outline the documentation that should be expected as part of the customs compliance process. 

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