Legal & Regulatory

Understanding Vietnamese Land Rights

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By: Dezan Shira & Associates
Editor: Eugenia Latova 

Once a foreign investor has decided on Vietnam as a location to establish operations, the next big step is identifying where and how to obtain land for the business. In Vietnam, private ownership of land is technically not permitted, but the law allows ownership of a right to use land—called the Land Use Right (LUR). While this may seem like an inconvenient system, other countries such as the United Kingdom also employ this system without significantly constraining investors. In fact, with a proper understanding of current regulation, leasing land in Vietnam can provide all the resources for successful investment within the country. 

With the Housing Law No. 65/2014/QH13 coming into effect on July 1st, 2015, foreigners in Vietnam have acquired many of the same land rights prescribed to Vietnamese nationals, particularly the right to own land. A non-Vietnamese entity can own land for up to 50 years, with the option to extend. Despite the liberalization, foreigners are still prohibited from possessing more than 30 percent of the apartments in a given building and more than 205 houses in an area where the population is that of a ward-administrative division.

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Vietnam Regulatory Brief: Casino Ban Upheld, Dumping Duties on Plywood, and Uber Tax Requirements

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Uber Required to Pay Tax

Vietnam’s Ministry of Finance (MoF) issued a new rule making it mandatory for Uber to pay taxes in the country. Uber will be required to pay taxes as a foreign establishment, which earns income in Vietnam without resident offices. The tax amount will be based on revenue multiplied with the tax rate, which is 3 percent for value added tax (VAT) and 2 percent for corporate income tax (CIT). The MoF has asked Uber to ask either its subsidiary or a third party to pay the relevant taxes. Drivers that have signed contracts with Uber will be required to pay tax on their income.

Uber drivers will be taxed at 3 percent for VAT and 1.5 percent for individual income tax. Uber entered Vietnam in June 2014 and has been able to avoid paying taxes till now. Its rival Grab is registered and has already been paying taxes.

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Vietnam Releases Draft Safety Standards For Heavy Manufacturing

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By: Dezan Shira & Associates

Vietnam’s Ministry of Labor (MOLISA) has released the text of proposed technical standards that, if enacted, would apply to companies involved in commercial forging – a key component of heavy manufacturing and related production. Outlined at the circular level, details of the proposal were made public on August 23rd and have been issued as a means of improving safety standards for workers within the country.

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Understanding Technical Standards

Under the proposed circular, the following aspects of the forging process are set to be standardized and have been detailed extensively within the public draft:

  • Requirements for the structural parts of the control system.
  • System requirements for hydraulic cooling lubrication
  • Requirements for pipes and pressure vessels
  • Requirements for shielding
  • Requirements for working platform and stairway work for workers
  • Electrical safety requirements

Exposure and impact of these changes will likely be dictated by the current practices of companies involved in forging. 

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Vietnam Proposes Removal of Healthcare Investment Restrictions

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By: Dezan Shira & Associates

Vietnam’s conditional investment list may soon see the removal of a number of items related to healthcare and medical services following the submission of a proposal to the National Assembly on September 1. Included as part of a larger proposal to change the nation’s conditional investment list, the removal of items seek to amend the Law on Investment (No. 67/2014/QH13), passed in late 2014 and effective as of July 1, 2015. As adjustments to the conditional investment list are currently in a proposal form, specifics surrounding the time and date of implementation are currently not available.  

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Vietnam Regulatory Brief: Trade with Brunei, Tax Incentives, and a Looming Pokemon Go Ban

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Vietnam and Brunei to Boost Trade, Investment

Vietnam and Brunei are expected to improve trade and invest in several sectors in an effort to strengthen economic ties. During talks held in Brunei on August 26-28, Vietnam’s President, Tran Dai Quang, spoke of several ways in which both countries can cooperate. Dignitaries of both countries have vowed to increase trade to over US $500 million by 2025. In addition, business leaders of both countries signed various documents and have promised to expedite other agreements.

Among the documents signed were MoUs on Cultural Co-operation and Economic and Trade Co-operation, while the leaders applauded the progress on the defense MoU between the Royal Brunei Navy and Vietnam People’s Navy on Bilateral Co-operation which was signed in December 2013. Both governments have also agreed to have the Joint Commission Meeting (JCM) at an earliest date to expand cooperation between the countries. The governments of both countries now want to finalize the agreement on maritime transport. The developments bode well for Vietnam and Brunei as they seek to strengthen ties and plan for greater investment and cooperation.

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Vietnam Announces 7.3 Percent Wage Hike for 2017

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 Vietnamese Minimum Wage 2017By: Anh Ta

Vietnam’s National Wage Council has decided upon a modest 7.3 percent average increase in monthly minimum wages across the country for 2017. From January, workers must be compensated between minimums of VND 2.60 million (US$116) to VND 3.75 million (US$166). This is the lowest annual increase since 1997 and seems to be a compromise between the employers’ proposed increase of 5 percent and that of workers which pushed for an 11 percent increase. The decision also seems to be in response to competition from fellow manufacturing powerhouses in the region and hence primarily an effort to maintain its attractiveness to foreign investors and businesses.

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Vietnam Updates Fines for Investment Violations

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Investment Violations VietnamBy: Dezan Shira & Associates
Editor: Anh Ta

Vietnam’s recent change in leadership with Prime Minister Nguyen Xuan Phuc taking office has opened the gateway for legislative change. Signed on June 1, 2016 and effective starting July 15, 2016, Decree 50 is one adjustment that investors should be sure to understand. Detailing penalties for administrative violations in a variety of business and investment related situations, the decree covers the administration of public investment projects, investments in Vietnam from domestic and overseas investors, and the bidding process for public investments. More importantly, the decree also sheds light on the business registration process for different business models in Vietnam.

Decree 50 seems to be an effort to improve the legal structure and bureaucracy in order to sustain Vietnam’s attractiveness to foreign investment. Despite its previous successes in attracting FDI, Vietnam’s weak legal structure and complicated bureaucracy, amongst other factors, have worsened the investment climate and diverted investors to other ASEAN markets. This decree seems to be an attempt to improve the transparency of the business registration and operations processes, through the outlining of possible violations, fines and remedial actions.

It should be noted that the majority of penalties involve a monetary fine and mandatory remedial measures to be taken. In all cases, individuals will be faced with fines at half the rate that would be applied to a legal entity found in violation of the same infraction. 

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Vietnam Regulatory Brief: Minimum Wage Hikes, Tax Law Amendments, and Noise Limit Adjustments

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New Regulations Define Noise Limits for Offices

The Ministry of Health issued Circular 24/2016 / TT-BYT, which places binding limits on the noise level in offices. The regulation comes under the National Technical Regulations on noise. The details of the circular are as follows:

  • For more than a minute, a person should not be exposed to sound pressure level exceeding 112 A-weighted decibels (dBA).
  • For more than an hour, a person should not be exposed to sound pressure levels exceeding 94 dBA.
  • For more than eight hours, a person should not be exposed to sound pressure levels exceeding 85 dBA.

An overall limit of 85 dBA applies to employees working on factory floors and engaged in manufacturing activities. Meanwhile, employees in the administrative, accounting and planning department should not be exposed to sounds exceeding 65 dBA. In addition, employees working in the design and computer programming department should not be exposed to sounds exceeding 55 dBA. The circular also states that the maximum limit of sound for all department is 115 dBA. Companies should ensure compliance with the latest regulation to mitigate any risk of complaints and of litigation by the government.

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An Introduction to Vietnamese Product Labeling Requirements

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Product Labeling VietnamBy: Dezan Shira & Associates
Editor: Kerstin Jost 

On the heels of inspections carried out in June, Coca Cola Beverages Vietnam Ltd. has been issued a US$19,300 fine and forced to temporarily suspend select sales for violating food safety licensing and labeling requirements. While seemingly serious in nature, the target of inspections – Samurai Energy Drink – fell afoul of regulators for a simple failure to label levels of folic acid on their beverages and to obtain licensing as a supplementary drink. Although subsequently bringing Samurai Energy into compliance, the experience of Coca Cola underscores the consequences of regulatory uncertainly in Vietnam, and the need for foreign enterprises to be aware of labeling and licensing requirements in the country.

Following its accession to the WTO in 2007, the country has seen major revisions to a number of laws, including those on establishment, investment, and trade. For all companies seeking to sell products within the Socialist Republic, product-labeling laws are of critical importance to successful customs clearance and ultimate sale within the country. Maintaining a firm understanding of recent changes, which include the revision of labeling guidelines for pre-packaged food and additives, as well as pre-packaged genetically modified ingredients, will be of great importance for those seeking to tap into Vietnam’s emerging consumer class.

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Highlights of Vietnam’s New Decree for Investment Violations

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By: Dezan Shira & Associates
Editor: Anh Ta

The recent ascension to office of Nguyen Xuan Phuc, Vietnam’s new Prime Minister, has opened the gateway to several legislative changes. One such change is Decree 50, signed on June 1, 2016 and effective starting July 15, 2016, which details updated penalties for administrative violations in planning and investment for businesses and investors. The decree covers the administration of public investment projects, domestic and overseas investment in Vietnam, and bidding investment. More importantly, the decree also sheds more light on the business registration process for different business models in Vietnam, as outlined in its penalties for registration violations in Section 4.

Decree 50 aims to improve the country’s legal structure and bureaucracy in order to sustain Vietnam’s attractiveness to foreign investors. Despite the country’s previous success in attracting foreign direct investment, Vietnam’s weak legal structure and complicated bureaucracy, amongst other factors, have worsened its investment climate and diverted investors to other ASEAN markets in recent years. This decree is an attempt to improve the transparency of the business registration and operation processes, especially in outlining the possible violations, fines, and remedial actions needed.

Most of the penalties for various violations involve a monetary fine and require mandatory remedial measures to be taken. For any monetary fine, an individual is liable to pay half the amount that an organization would be required to pay for the same violation.

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