Legal & Regulatory
By: Koushan Das
Vietnam’s Ministry of Transport has rejected a bid to set price floors on air tickets as proposed by the country’s national carrier, Vietnam Airlines, as well as its subsidiary, Jetstar Pacific. Under the proposals, Vietnam Airlines advocated for a floor price for domestic travel between US$68 (VND 1.5 million) and US$185 (VND 4.2 million), while Jetstar Pacific proposed rates between US$26 (VND 600,000) and US$53 (VND 1.2 million).
By: Dezan Shira & Associates
Editor: Maxfield Brown
In the event that a company has established operations and turned a profit within the Vietnamese market, challenges will remain with respect to ensuring that its proceeds may be sent abroad without a hitch. Whether it be a decision over the method of repatriation or when to take profits, the ways in which investors choose to approach the remittance process can have a significant impact on the quantity and timeframe under which profits will become accessible.
One of the first decisions that will have to be made by investors is that of banking. Upon entering the Vietnamese market, foreign investors who wish to remit profits to their home markets will be required to open a foreign currency bank account. This account is to be utilized for all foreign currency transactions carried out within the country.
For companies that have already established operations in Vietnam, foreign currency accounts will have been set up during the transfer of funds to capitalize given projects. Alternatively, those considering Vietnam as a destination for future investment should note that, while the use of foreign bank accounts is important at the latter stage of the remittance process, it is nonetheless crucial to finalize banking arrangements on the front end of investment.
Understanding which actions require the use of a foreign currency account, where restrictions are placed upon these types of accounts, and what documents must be prepared will all ensure that operations are optimized effectively.
Actions requiring foreign currency accounts
The following are transactions which require the use of a foreign currency bank account:
- Receipt of charter capital
- Increased capital expenditure in which the funding of such expenditure originates in third party countries
- Receipt of financing via loans from foreign sources
- Disbursement of loan payments to third parties outside of Vietnam (inclusive of interest)
- Disbursement of dividends and other profits to shareholders, the origins of which have been derived from Vietnam based operations
When selecting and operating a foreign currency account, investors are faced with a number of restrictions. The following are some of the most pressing issues that investors should prepare for when opening foreign currency accounts:
When opening a foreign currency account, investors are limited to the selection of a single account with a bank that has been licensed by the SBV. In practice, the only banks that will be able to operate foreign currency accounts for investors are those with this license. While limiting the selection of institutions, a number of large international banks such as Standard Chartered and HSBC are able to host foreign accounts. Individual banks should be contacted in order to ascertain their status with Vietnamese officials.
When opening foreign currency accounts, investors must select the account’s denomination. At present, foreign firms are limited to one foreign currency account in a single currency. Exceptions to this rule may be made in the event that investors can prove that the denomination of their overseas loans differ from the currency utilized in the funding FDI projects within the country.
Pursuant to the aforementioned limitations on foreign accounts, those seeking to switch banks may be required to close existing accounts prior to establishing relations with new financial institutions. In the event that this course of action is taken, the closure of accounts must be conducted in compliance with procedures outlined by respective banks.
Upon selection of a government approved bank, the following documentation should be prepared in order to open the foreign currency account. It should be noted that the specific requirements of banks may vary and that requirements may differ depending on the nature of FDI projects within the country (i.e. 100 percent Foreign Owned Enterprise vs Joint Venture).
Optimizing your remittance process
As Vietnam continues to attract record levels of investment, the importance of repatriation will only continue to increase, with banking playing a significant role. Those investing within the country are highly advised to maintain an up to date understanding of all regulations and procedures related to accounting, banking, and the general remittance process. Given the rapidly changing nature of regulation within the Vietnamese market, it is also highly advisable to consult with government bodies or other professional service firms should any concern arise over compliance and related procedures.
The following has been an excerpt from our Vietnam Briefing Magazine entitled: “Remitting Profits from Vietnam“. In this edition, we outline current regulations on remittance, including those regarding banking, and provide guidance on how to ensure compliance in order to repatriate profits in a timely fashion.
Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, Russia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India and Russia. For assistance with investments into Vietnam please contact us at email@example.com or visit us at www.dezshira.com
Dezan Shira & Associates Brochure
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.
An Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.
Managing Contracts and Severance in Vietnam
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.
Compulsory M&A for weak banks
The State Bank of Vietnam (SBV) will be submitting a draft plan to the government on restructuring the credit institutions to reduce bad debts during the 2016-2020 period, by encouraging mergers and acquisitions (M&A) for weak credit institutions such as commercial banks, financial institutions, financial leasing companies, and people’s credit unions. The SBV will also have the authority to compel institutions enter into M&A deals to ensure stability. The SBV has identified five weak commercial banks in need for restructuring and aims to restructure them in 2017. Investors are also encouraged to be part of the restructuring to reduce the number of weaker firms.
Smaller banks are unable to compete in the market due to declining profits, poor administration, and reduced chartered capital, currently standing at US$131 million (VND3 trillion). Banks such as SaigonBank and DongABank also issued preferred stock to increase their chartered capital, but stockholders are not willing to invest further due to reduced growth, affecting the lending capabilities and total assets of the bank. Industry experts have suggested increasing the FDI cap in banking sector to more than 30 percent for foreign investors.
By: Dezan Shira & Associates
Following the relevant customs procedures when importing or exporting goods from Vietnam is one of the most vital aspects of doing business in a country where manufacturing costs are leveraged to its favor. Goods to be imported or exported are subject to the relevant customs clearance standards, which effectively check the quality, specifications, quantity and volume of the goods. Currently, these standards are set out under Law No. 54/2014/QH13 on Customs as well as numerous implementing decrees and guiding circulars.
Following the standards set by the Vietnamese government, certain imported goods are subject to inspection. For example, imported pharmaceuticals must undergo testing and also include documents detailing product use, dosage and expiration dates (written in Vietnamese), which must also be included in or on the product packaging.
By: Dezan Shira & Associates
Editor: Edward Barbour-Lacey
Once an investor has set up their trading company within Vietnam, it is important that their workers gain a strong understanding of the country’s import and export regulations and procedures. Below we lay out the key takeaways that companies must be aware of before starting their trading activities in Vietnam.
By Dezan Shira & Associates
Editor: Maxfield Vandel Brown
Since January 2017, a range of policies have come into effect for foreigners and foreign firms. The introduced changes impact international tourism companies, foreign advertisement firms, trade offices, foreign crew on ships, and visa processing.
Passport and visa fees
According to Circular No.219/2016/TT-BTC, the stipulated fee for a single-entry visa for foreigners will be US$25 (VND 570,000) for a single individual, while the price of a multiple-entry visa for a duration of three to 12 months ranges from US$50 to US$155 (VND 1.14 million to VND 3.55 million). Exemptions will be applicable for guests (including spouses and children) invited by the government.
Fees for overseas diplomatic missions
As per Circular No.264/2016/TT-BTC, the naturalization process will cost US$250 (VND 5.7 million) per person. Charges for restoring nationality will be the same as registering for retaining ones nationality, namely US$200 (VND 4.57 million). Fees for issuing new passports are fixed at US$70 (VND 1.6 million) while charges for extending diplomatic and public passports are US$30 (VND 684,210).
Government invited guests, employees, and technical staff (including spouses and children) of foreign diplomatic and consular representative missions are exempt from the fees.
An Introduction to Doing Business in Vietnam 2017, the latest publication from Dezan Shira & Associates, is out now and available for complimentary download through the Asia Briefing Publication Store.
Vietnam stands as a key country in the ASEAN region. Located advantageously near China and to important shipping lanes, with a growing population and middle class, Vietnam is a dynamic and growing country that is increasingly attractive to foreign businesses looking to expand their operations in Asia.
There are a number of key advantages that make Vietnam stand out from the rest of Asia. Unlike many other countries in the region, Vietnam’s government is very stable and committed to seeing the country grow. Consumer confidence is strong and improving. Labor costs are currently 50 percent those of China and around 40 percent of those reported in Thailand and the Philippines. The country’s workforce is seeing an annual increase of 1.5 million people, and its workers are young and, increasingly, highly skilled.
Government eases restrictions for rice exporters
Vietnam’s Ministry of Industry and Trade (MOIT) approved an agreement easing restrictions on rice exporters. Under the previous regulation, the maximum number of rice exporters was capped at 150, who were all required to meet certain standards on storage and factories. Companies holding licenses to export rice were required to have at least one warehouse with a minimum capacity to store 5,000 tons of rice and a rice husking factory with a minimum capacity of 10 tons of paddy per hour. The facilities also had to be in planned areas.
Due to these restrictions, companies developing their own rice were forced to use intermediaries rather than having the ability to export directly. Companies with rice export certificates were required to export at least 10,000 tons of rice per year or 20,000 tons of rice in two years in case the first year quota was not reached. The abolition of the regulations is in line with the government’s plan of removing unsuitable laws as per the Investment Law 2014. The move has been lauded by rice export companies.
New Guidelines in Effect for Issuing Work Permits
The Ministry of Labour, Invalids and Social Affairs (MOLISA) issued Circular No. 40/2016/TTBLDTBXH providing guidance on implementation of Decree No. 11/2016/ND-CP, effective December 12, for work permits issued to foreign workers in Vietnam. The key change is the transfer of authorization from The Department of Labour, Invalids and Social Affairs (DOLISA) to MOLISA for certain types of enterprises. MOLISA will be responsible for approving proposals for using foreign laborers, identifying unlicensed foreign workers, reusing and revoking work licenses and deportation of unlicensed foreign laborers.
The organizations under the authority of MOLISA are state agencies, business associations established based on legal regulations, foreign non-governmental organizations, foreign entities in Vietnam, operational offices of international organizations in Vietnam and projects with foreign investment. Public organizations functioning under the ministries, ministerial-level agencies, organizations established by the government and the Prime Minister, also fall under the scope of MOLISA. DOLISA will still be the authority for approving demand for foreign laborers from contractors. Employers are therefore required to inform either MOLISA or the Chairman of the Provisional People’s Committee 30 days prior to hiring foreign laborers or if there is a change in demand for such workers.
By: Dezan Shira & Associates
Editor: Mike Vinkenborg
As in many countries across the world, instituting changes at a corporate level in Vietnam requires the approval of a majority of shareholders during a shareholder meeting. The Law on Enterprises outlines matters that can be discussed and decided during these meetings, what is required to convene shareholder meetings, and what percentage of shareholders, or members, are required to successfully pass decisions.
The latest update of the Law on Enterprises was passed in late 2014 and has been effective since July 2015, bringing with it some changes to the way shareholder meetings are being held. This article outlines how shareholder meetings in Vietnam are used, what can be achieved during these meetings, and how meetings differ between corporate structures.
Given the significant growth of foreign investment seen in recent years, in conjunction with market opportunities emerging each day, navigating the ins and outs of shareholder meetings will be an important consideration for new market entrants when structuring their holdings in Vietnam.