Legal & Regulatory

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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Vietnam Regulatory Brief: Foreign Investment Scrutiny, Foreign Research Restriction, and the Regulation of Photo Exhibitions

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Authorities Increase Scrutiny of Foreign Investors

The Ministry of Planning and Investment (MPI) recently issued Circular 09/2016/TT-BKHDT, which aims to inspect and assess FDI across the country. The government hopes to ensure that foreign firms observe relevant regulations and that violations will be discovered quickly. Examinations will be made in relation to capital contributions, project construction, the implementation processes, realization of investment targets, technology transfers, and fulfillment of investment requirements.

The regulation is expected to be implemented within 45 days and will include checks on tax obligations, labor regulations, land use, natural resources and environmental protection. The monitoring of companies will be conducted via routine as well as snap inspections. Despite the use of snap inspections, the circular states that all checks will be conducted in accordance with current regulations and should not overlap or affect operations of companies under inspection.

As a whole, the new bill is thought to allow for greater scrutiny of FDI, something which may discourage some from entering the country. Foreign investors in the country presently must ensure they are in compliance with all regulations to avoid any violations.

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Vietnam Market Watch: Tax Reform, Foreign Companies, and Increased Credit for Land Administration Projects

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Reforms in Tax Sector Likely

The tax authorities plan to create regulations to prevent tax losses and enforce transfer pricing as announced by the Deputy Minister of Finance on July 8. The regulations will create a legal framework to restructure the tax sector. Authorities also plan to improve competitiveness and implement administrative reforms by focusing on e-tax payments and building data on taxpayers. In the first six months of the year, tax collections from individuals and corporate incomes increased from 12 to 16 percent. Between January and June, tax collections in Da Nang and Ho Chi Minh City increased from 18 to 22 percent.

Taxes paid by foreign companies reached 49 percent of previously set targets. Tax officials have monitored businesses to correct incomes and have also helped firms in preparing tax reports. In addition, the Finance Ministry is also preparing a proposal to reform corporate income taxes for small and medium-sized companies. If approved, the regulation will apply from January 1, 2016 to 2020. The draft proposes two types of corporate income tax – 17 and 15 percent from the present 20 percent. The proposed reforms are in line with the government’s Resolution 19, which aims to improve the business environment in the country. Resolution 19 will put Vietnam on par with the top four ASEAN countries in the implementation of tax procedures by 2020.

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Understanding Vietnamese Mergers and Acquisitions

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How to acquire a company in VietnamBy: Dezan Shira & Associates
Editor: Eugenia Lotova

As Vietnam increasingly becomes a hub for foreign businesses, the government is streamlining the mergers and acquisitions (M&A) process to encourage investment in new sectors of the economy. While establishing a business in Vietnam may prove too cumbersome for some hopeful entrants, the M&A route provides a unique solution to many of these obstacles. With this path, investors will enjoy preexisting access to consumers, locations, and distribution channels. This local knowledge can prove critical to successful operations within Vietnam’s vibrant but rapidly changing investment environment .

To successfully carry out M&As within Vietnam, it is important to recognize the legal foundation of current policies, and to understand the procedures and limitations associated with acquisitions in Vietnam.

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Vietnam Regulatory Brief: European Visa Waivers, Preferential Income Tax Guidelines, and Emerging Insurance Standards

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 Visa Waiver Program Extended for More Countries in Europe

On June 30, Vietnam extended its visa waiver program to a number of countries in Europe. Implementing these changes, Resolution No. 56/NQ-CP will grant visa free entry to citizens from the United Kingdom, France, Germany, Spain, and Italy who wish to enter Vietnam for a maximum of 15 days.

The waiver of visa requirements applies regardless of the passport and immigration purpose. The waiver extension will remain valid for at least a year and end on June 30, 2017 if it is not renewed. The resolution directs relevant ministries, government agencies, and provincial administration officials to implement changes immediately. The new law will enable easy access to Vietnam for nationals from the aforementioned countries. This is a favorable development for companies from United Kingdom, France, Germany, Spain, and Italy that wish to invest in Vietnam, as it makes entry more convenient for business personnel to travel to the country.

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Formosa’s US$500 Million Settlement Set to Usher in New Era for Environmental Enforcement

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Formosa Fish Deaths Vietnam SettlementBy: Kurt Nguyen

Dead fish washed ashore. Polluted water. Fishermen losing their economic livelihood and having their well-being threatened. A Taiwanese company implicated. This is not 2016; the year is 2008, and we are looking at the Thi Vai river in southern Vietnam’s Mekong Delta, with an MSG factory upstream owned by Vedan. This was the first prominent case of environmental regulation being enforced upon a major foreign firm. Comparing Vedan’s case with Formosa’s makes the selective enforcement of regulations quite clear, and this could very well have a negative environmental fallout. Nevertheless, although an unofficial settlement was reached, saving Formosa’s operations in Vietnam for the time being, there are reasons to believe that Formosa will mark a turning point in the prosecution of cases of this caliber moving forward.

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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.

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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.

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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.


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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.

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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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