2

VIETNAM
INVESTMENT GUIDE
2016

DR. MATTHIAS DHN, FOREIGN REGISTERED LAWYER (VIETNAM)

MS. MAI THI PHUONG LAN, LAWYER
MS. HOANG MINH CHI, TRAINEE LAWYER

3rd EDITION 2016

Status of Information: July 2016

VIET DILIGENCE LEGAL COMPANY LTD.

DISCLAIMER:
The information provided in this booklet has been researched with the
utmost diligence, however laws and regulations are subject to change
and we shall not be held liable for any information provided. The
information provided herein also does not constitute or substitute
individual legal advice; we suggested that you seek individual legal
advice prior to embarking on any investment decision.
 3

Dear Investors and Readers,

Vietnams economy grew 6.8% GDP in 2015, driven mostly by the
manufacturing and construction sectors. The World Bank has predicted
that Vietnams growth would reach 6.2% in 2017 and 6.3% in 2018,
stemming from rising foreign direct investment and growing exports. On
an international level, Vietnam has further integrated into the world
economy, in particular with the conclusion of the EU-Vietnam free trade
agreement (FTA) in August 2015 and the conclusion of the Trans Pacific
Partnership (TPP) Agreement in October 2015. Vietnam therefore remains
an attractive investment destination for foreign investors.
It is the goal of this guidebook to provide an overview of both the legal
framework and the investment conditions in Vietnam. Rather than
commenting on all relevant areas of the law, we have focused in our 3rd
edition on 10 key areas that we believe are most relevant for foreign
investors and persons interested in doing business in Vietnam. For
example, we have completely revised the chapters on the different forms
of doing business, investment licensing and intellectual property law. We
have added a chapter on arbitration instead of focusing on the
Vietnamese court system.
In Vietnam, there is still a pronounced difference between the law in
books and the law in action: Therefore, this guidebook cannot
substitute individual legal advice, but only provide a general overview of
substantive issues that you may encounter in your business activities in
Vietnam. We finally note that Vietnamese laws and regulations are
changing fast, and parts of this guidebook may soon be outdated. To keep
this guidebook up-to-date, we encourage you to let us know any changes
that may have occurred since this guidebook was published.
Please send your feedback to: info@vietdiligence.com
Kind regards,
Dr. Matthias Dhn, LL.M. (Georgetown)
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TABLE OF CONTENTS

1. TRADE RELATIONS AND FREE TRADE AGREEMENTS ........................... 6

2. FORMS OF DOING BUSINESS ............................................................ 11
3. INVESTMENT LICENSING .................................................................. 36
4. TAXATION ........................................................................................ 46
5. JOINT VENTURES, INTERMEDIARIES AND SME COMPLIANCE ............ 61
6. LABOR AND EMPLOYMENT LAW ...................................................... 66
7. WORK PERMITS ................................................................................ 77
8. LAND AND REAL ESTATE LAW ........................................................... 82
9. INTELLECTUAL PROPERTY (IP) PROTECTION...................................... 89
10. PRINCIPLES OF ARBITRATION ......................................................... 98
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LIST OF ABBREVIATIONS

No Abbreviation Interpretation

(1) CIT Corporate income tax

(2) DOLISA Department of Labor, Invalids and Social Affairs

(3) DTA Double Taxation Agreement

(4) IPR Intellectual property rights

(5) JSC Joint Stock Company

(6) LLC Limited Liability Company

(7) LUR / LURC Land Use Right (Certificate)

(8) MC Members Council

(9) MOIT Ministry of Industry and Trade

(10) MOLISA Ministry of Labor, Invalids and Social Affairs

(11) NA National Assembly of Vietnam

(12) NOIP National Office of Intellectual Property Protection

(13) PE Permanent establishment

(14) PIT Personal income tax

(15) PPP Public Private Partnership

(16) RO Representative Office

(17) SST Special sales tax

(18) VAS Vietnamese Accounting System / Standards

(19) VAT Value added tax

(20) VIAC Vietnam International Arbitration Centre

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1. TRADE RELATIONS AND FREE TRADE AGREEMENTS:

Since joining the United Nations (UN) back in 1977, Vietnam has
established diplomatic relations with over 170 countries, and trade
relations with 165 countries and territories. Starting with the enactment
of Vietnam's "doi moi" (renovation) policy in 1986, Vietnam has increased
economic liberalization and made structural reforms needed to build
more modern, competitive and export-driven industries. In July 1995,
Vietnam became an official member of the Association of South East
Asian Nations (ASEAN). In 2001, Vietnam signed the U.S-Vietnam
Bilateral Trade Agreement. In January 2007, Vietnam joined the World
Trade Organization (WTO) after more than a decade-long negotiation
process. Since joining the WTO, Vietnam has become party to numerous
Free Trade Agreements (FTAs), trade pacts and international economic
partnerships, the most important of which are outlined below:
- ASEAN Trade in Goods Agreement (ATIGA): Effective since May
17th 2010, ATIGA is the first comprehensive agreement to govern
the entire intra-ASEAN trade in goods, built on the basis of
aggregate commitments in 1992 Common Effective Preferential
Tariff scheme for ASEAN Free Trade Area (CEPT/AFTA), as well as
relevant agreements and protocols. Accordingly, the ASEAN
member countries will grant priorities to each other equal or higher
than those to partners in FTAs which ASEAN has entered into.
Tariffs on most of goods were removed in 2015, with only 7% of
them flexible until 2018. From 2018 on, all tariffs must be reduced
to zero, with only a few agricultural products of Viet Nam being
allowed to keep a 5% tariff after 2018. In addition to commitments
on tariffs, ATIGA includes many other commitments, such as the
elimination of non-tariff barriers, rules of origin, trade facilitation,
customs, standards and conformance, the sanitary and
phytosanitary (SPS) measures.
- ASEAN India Trade in Goods Agreement (AITIG): ASEAN and India
signed the AITIG on 13 August 2009, after six years of negotiations
 7

then entered into forced in January 2010. The ASEAN-India FTA

allows tariff liberalisation of over 90 percent of products traded
between the two dynamic regions, including the so-called special
products, such as palm oil (crude and refined), coffee, black tea
and pepper. Tariffs on over 4,000 product lines will be eliminated
by 2016, at the earliest.
- ASEAN Australia New Zealand Free Trade Agreement
(AANZFTA): Effective since 2010, AANZFTA is the most
comprehensive FTA concluded by ASEAN, as well as the largest FTA
concluded by Australia. According to this FTA, ASEAN, Australia and
New Zealand are committed to gradually liberalise tariff as of the
effective date of the Agreement and remove at least 90% of tax
rates on all tariff lines by specific timeframe. For trade in services,
the parties agreed to gradually liberalise trade barriers and allow
service providers to get more convenient market access. In
particular, this is the first Agreement in which ASEAN is committed
to facilitate the movement of natural persons participating in
commercial activities and investment in the region. The agreement
also provides progressive provisions such as treatment in
investment, compensation for damages, transfer of profits/capital,
and transfer investment licensing/request. Another notable content
in AANZFTA is the facilitation for the flow of goods through the
application of specific provisions on rules of origin, customs
procedures, SPS measures, technical standards and conformity
assessment procedures. These commitments are considerably
significant since Australia and New Zealand are among countries
having the strictest SPS requirements and technical standards in
the world.
- ASEAN Japan Comprehensive Economic Partnership Agreement
(AJEPA): ASEAN Members and Japan completed the process of
signing the AJCEP Agreement in April 2008 and entered into force in
December 2008. The AJCEP Agreement is comprehensive in scope,
covering such fields as trade in goods, trade in services, investment,
and economic cooperation. ASEAN China Free Trade Area
 8

(ACFTA): In November 2002 China and ASEAN signed the

Framework Agreement on Comprehensive Economic Cooperation
which aims at the establishment of ASEAN-China Free Trade Area
within 10 years. In November 2004, the Agreement on Trade in
Goods of the ACFTA was signed then entered into force in July
2005. In January 2007, the two parties signed the Agreement on
Trade in Services, which entered into effect in July of the same
year. In August 2009, the two parties signed the Agreement on
Investment.
- Vietnam Japan Economic Partnership Agreements (VJEPA):
VJEPA was signed in December 2008 and entered into force on
October 2009. This is Vietnams first bilateral FTA, in which Vietnam
and Japan has granted more priorities to each other than the
AJCEP. However, VJEPA do not replace AJEPA, both of them has
validity and the enterprises can choose the more beneficial FTA for
use.
- ASEAN Korea Free Trade Agreement (AKFTA): In December 2005,
ASEAN Members and the Republic of Korea signed the Framework
Agreement on Comprehensive Economic Cooperation to
strengthen and enhance economic, trade and investment
cooperation among ASEAN Member States and Korea. The ASEAN-
Korea Trade in Goods Agreement, which is to allows 90% of the
products being traded between ASEAN and Korea to enjoy duty-
free treatment, took into effect in June 2007. Following the Trade
in Goods Agreement, the ASEAN-Korea Trade in Services
Agreement, a legal framework to liberalize trade in services among
ASEAN Member States and Korea in various services sectors, was
signed on November 2007. And last but not least, in June 2009, the
Parties in AKFTA signed the ASEAN-Korea Investment Agreement, a
legal framework to expand investments between the Parties
through measures such as improved protection for investor s and
most-favoured nation (MNF) that will guarantee protection from
discriminatory measures by Governments.
 9

- Vietnam Korea Free Trade Agreement (VKFTA): VKFTA was

signed in May 2015 and officially entered into force on December
2015. In comparison with AKFTA, in VKFTA Vietnam and Korea has
granted more priorities to each other in the field of goods, services
and investments. However, VKFTA do not replace AKFTA, both of
them has validity and the enterprises can choose the more
beneficial FTA for use.
- Vietnam Chile Free Trade Agreement (VCFTA): As of January
2014, VCFTA officially took effect, creating a great opportunity to
boost the economic tie between the two countries. This FTA only
targets the trade of goods by entailing provisions on facilitating
market access, rules of origin, SPS measures, technical barriers,
safeguards, etc According to the agreement, Vietnam committed
to abandon 87.8 percent the tariff rates for Chile for 15 years. In
exchange, Chile shall eliminate tariff for the goods accounting for
99.62 percent of the export value of Vietnam as of 2007 within 10
years; among them 81.8 percent export value and 83.54 percent
tariff lines would be abandoned immediately.
- Vietnam - Eurasian Economic Union Free Trade Agreement (VN-
EAEU FTA): VN-EAEU FTA was signed on 29 May 2015 between
Vietnam and five Member countries of Eurasia Economic Union,
including Russia, Belarus, Kazakhstan, Armenia, Kyrgyzstan.
According to the FTA, Vietnam and the EAEU will reduce and/or
eliminate customs duties on 87% of goods originating in the other
party. It also stipulates trade protection, anti-dumping and
compensation measures in accordance with regulations of the
World Trade Organisation (WTO). This FTA is expected to take
effect in 2016.
EU-Vietnam Free Trade Agreement: On August 4th, 2015 the EU and
Vietnam have concluded a free trade agreement (FTA). The FTA will -
amongst other things - reduce Vietnam customs duties to zero levels for
virtually all products (except sensitive agricultural items, as is usually the
case). Vietnam will liberalise those custom duties for 65 per cent of
 10

imports upon entry into force, with the remainder being liberalised over a
subsequent 10-year period. The EU customs duties will be liberalised over
a 7-year period, with the exception of agricultural products which will still
be subject to certain tariff rate quotas. EU duties on textiles will be lifted
mostly at the back-end, and textiles would be subject to strict rules of
origin. Vietnam will also eliminate almost all of its export duties. The FTA
will also create new market access opportunities in services and
investment: Vietnam has agreed to liberalise trade in financial services,
telecommunications, transport, and postal and courier services. On
investment, Vietnam will open its market to the EU, for instance by
removing or easing limitations on the manufacturing of food products and
beverages, as well as in the non-food sectors. Implementation and actual
entry into force is likely to take until mid-2017.
Trans Pacific Partnership Agreement: In October 2015, Vietnam has
concluded the Trans Pacific Partnership (TPP) Agreement that will
liberalize trade in 12 countries that represent 40 percent of the world
economy (excluding China). The common principle of the TPP is that all of
the import tariffs will be cut to zero (except for some sensitive sectors).
However, the TPP is pending approval from legislative bodies of its
members, including Australia, Brunei, Canada, Chile, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.
 11

2. FORMS OF DOING BUSINESS

2.1 The Single-Member Limited Liability Company (LLC):
A single-member LLC is an enterprise owned by one organization or
individual (also referred to as company owner). A single-member LLC
has legal entity status from the date it is granted an enterprise
registration certificate. Single-member LLCs may not issue shares. The
company owner is liable for all debts and other property obligations of
the company within the amount of the charter capital of the company,
with charter capital at the time of enterprise registration equaling the
total value of assets committed to be contributed by the company owner
and recorded in the company charter.
Contribution of Charter Capital: Within 90 days after being granting an
enterprise registration certificate, the company owner must fully
contribute the charter capital to the company (with the right types of
assets as committed upon enterprise establishment registration). In case
of failing to contribute the charter capital within this time limit, within 30
days from the last day the charter capital was due to be contributed in
full, the company owner must register an adjustment/reduction of the
charter capital to equal the actually contributed amount. In this case, the
company owner is liable in proportion to the committed contributed
capital amount for financial obligations of the company arisen before the
company registers for a change in charter capital. The company owner is
fully liable for financial obligations of the company and any damage
caused by failure to contribute the charter capital or on time.
The institutional company owner has the following rights:
- To decide on the contents of the company charter and
amendments and supplementations thereto;
- To decide on development strategies and annual business plans of
the company;
 12

- To decide on the organizational and managerial structure of the

company, to appoint, relieve of duty and remove from office
managers of the company;
- To decide on development investment projects;
- To decide on market development, marketing and technology
solutions;
- To approve loan agreements and other contracts as provided in the
company charter which are valued at 50 or more percent of the
total value of assets recorded in the latest financial statement of
the company or a smaller percentage or value as provided in the
company charter;
- To decide on sale of assets valued at 50 or more percent of the
total value of assets recorded in the latest financial statement of
the company or a smaller percentage or value as provided in the
company charter;
- To decide on the increase of the charter capital of the company; on
the transfer of part of the whole of the charter capital of the
company to other organizations or individuals;
- To decide on the establishment of subsidiaries or on capital
contribution to other companies;
- To organize supervision and assessment of the companys business
operations;
- To decide on the use of profits after fulfilling tax obligations and
other financial obligations of the company;
- To decide on reorganization, dissolution and request for bankruptcy
of the company;
- To recover all of the value of assets of the company after the
company completes the dissolution or bankruptcy process.
The individual company owner has the following rights:
- To decide on the contents of the company charter and
amendments and supplementations thereto;
 13

- To decide on investment, business and internal management of the

enterprise, unless otherwise provided by the company charter;
- To decide on the increase of charter capital, on the transfer of part
or the whole of the charter capital to other organizations or
individuals;
- To decide on the use of profits after fulfilling tax obligations and
other financial obligations of the company;
- To decide on reorganization or dissolution and request for
bankruptcy of the company;
- To recover all of the value of assets of the company after the
company completes dissolution or bankruptcy process.
Legal Representatives: The legal representative (sometimes also called:
legal representative) of an enterprise means an individual who
represents the enterprise to exercise the rights and perform the
obligations arising from transactions of the enterprise, and represents the
enterprise in the capacity as plaintiff, respondent or person with related
interests and obligations before the arbitration or court, and other rights
and obligations as prescribed by law. Limited liability companies and
joint stock companies may have one or more than one legal
representative. The company charter should specify i) the number, ii)
managerial titles and iii) rights and obligations of the companys legal
representatives Note that the law strictly distinguishes between the -
different - rights and obligations of the companys legal representative
and those of the companys director or director general (GD).
Specifically, the legal representative of a company has the following
responsibilities and obligations:
- To exercise vested rights and perform assigned obligations in an
honest, prudent and best manner in order to protect the lawful
interests of the enterprise;
- To be faithful to the interests of the enterprise; not to use the
business information, know-how and opportunities of the
enterprise; not to abuse his/her title, position and assets of the
 14

enterprise for personal purposes or for the interests of other

organizations or individuals;
- To notify the enterprise in a timely, sufficient and accurate manner
about him/her and his/her affiliated persons owning or having
controlling shares or contributed capital amounts in, other
enterprises.
Even though GDs of a company will usually also be appointed as the Legal
representative of the company, the two functions are to be clearly
distinguished: By no means is it legally required that a companys GD
automatically also be its legal representative. This is important, as the
companys legal representative - other than the GD - is personally liable
under the LOE for any damage caused to the enterprise by breaches of
his/her obligations under the law.
GDs who are also employed by a foreign overseas / parent company
and who are asked to act as the Vietnamese companys legal
representative should therefore request their (overseas) employers to
indemnify and hold them harmless against any personal liability
resulting from their additional appointment as the companys legal
representative. In practice, this is often overlooked and may have
serious consequences for employed GDs.
Organizational and management structure: A single-member LLC of an
individual owner must have a company president and a GD. The
company president may work concurrently or hire another person to
work as the GD. The rights and obligations of the GD shall be provided in
the company charter and the labor contract which the GD has entered
into with the company president. The single-member LLC of an
institutional company owner may follow two models: (i) Members
Council, GD and supervisor; or (ii) Company president, GD and
supervisor. If it is not provided in the company charter, the chairperson of
the Members Council or the company president, the GD shall act as the
legal representative of the company.
- Members Council and Chairperson: The members of the
Members Council shall be appointed or relieved of duty by the
 15

company owner, comprising 3 to 7 members with terms not

exceeding 5 years. The Members Council shall exercise the rights
and obligations of the company owner and the company on behalf
of the company owner, except the rights and obligations of the GD.
The rights and obligations of the Members Council and its working
relationship with the company owner shall be detailed in the
company charter. The chairperson of the Members council shall be
appointed by the company owner or elected by the members of the
Members Council on the majority principle and according to the
order and procedures provided in the company charter. A
resolution of the Members Council shall be adopted when
approved by over half of the attending members. Any amendment
or supplementation to the company charter, reorganization of the
company, transfer of part or the whole of the charter capital of the
company shall be approved by at least three-quarters of the
attending members.
- The Company President: The company president shall be
appointed by the company owner, and exercise the rights and
obligations of the company owner and the company on behalf of
the company owner, except the rights and obligations of the GD.
The rights and obligations of the company president and his/her
working regime with the company owner must be detailed in the
company charter. A decision of the company president concerning
the exercise of the rights and performance of the obligations of the
company owner must take effect on the date of approval by the
company owner, unless otherwise provided in the company
charter.
Director or director general (GD): The Members Council or the
company president may appoint or hire a GD for terms not exceeding 5
years each to manage day-to-day business operations of the company.
The chairperson of the Members Council, another member of the
Members Council or the company president may concurrently act as the
GD, unless otherwise provided in the company charter. The GD has the
following rights and obligations:
 16

- To organize the implementation of decisions of the Members

Council or the company president;
- To decide on all matters related to day-to-day business operations
of the company;
- To organize the implementation of business plans and investment
plans of the company;
- To issue the internal management regulation of the company;
- To appoint, relieve of duty and remove from office managers in the
company, except those falling within the competence of the
Members Council or the company president;
- To sign contracts in the name of the company, except cases falling
within the competence of the chairperson of the Members Council
or the company president;
- To make recommendations on the organizational structure of the
company;
- To submit annual financial statements to the Members Council or
the company president;
- To make recommendations on the plan for use of profits or
handling of losses in business;
- To recruit employees;
- Other rights and obligations provided in the company charter and
in the labor contract which the GD has entered into with the
chairperson of the Members Council or the company president.
Supervisors: The company owner shall decide on the number of
supervisors and appoint supervisors for terms not exceeding 5 years each,
and decide on the establishment of the Supervisory Board. A supervisor
has the following rights and obligations:
- To check the lawfulness, honesty and prudence of the Members
Council, the company president and the GD in organizing the
implementation of ownership rights and in managing and running
the business of the company;
 17

- To evaluate financial statements, reports on business situations,

reports on assessment of management work and other reports
before submitting them to the company owner or relevant state
agencies; to submit evaluation reports to the company owner;
- To propose to the company owner solutions for modifying and
supplementing the organizational and managerial structure and
business administration of the company;
- To examine any documents or papers of the company at the head
office or a branch or representative office of the company.
Members of the Members Council, the company president and the
GD and other managers are obliged to provide in full and on time
information on the exercise of ownership rights and on the
management and administration and the business operations of
the company at the request of the supervisor;
- To attend and discuss in meetings of the Members Council and
other meetings in the company; and
- Other rights and obligations provided in the company charter or as
requested or decided by the company owner.
2.2 The Multiple-Member Limited Liability Company:
A multiple-member LLC consists of at least two (2) and a maximum of 50
members. The charter capital of a multi-member LLC is the total value of
portions of capital contribution which the LLC members undertake to
contribute to the company. The LLC members liability is limited to the
amount of their capital contribution. The capital contributions of each LLC
member may be sold and transferred. LLCs may increase or decrease their
charter capital. LLC members must fully contribute their portions of the
charter capital to the LLC within 90 days from the date of issuance of the
enterprise registration certificate (ERC).
Organizational and management structure: A multi-member LLC must
have a Members Council, a chairperson of the Members Council (or
company president for single-member LLC) and a GD. A LLC with 11 or
more members shall form a Supervisory Board; if having fewer than 11
 18

members, it may form a Supervisory Board to meet its management

requirements. The rights, obligations, criteria, conditions and working
regulations of the Supervisory Board and the head of the Supervisory
Board shall be provided in the company charter.
- General Director: The GD of a LLC is the person who manages day-
to-day business operations of the company, and has the following
rights and obligations:
o To organize the implementation of the resolutions of the
Members Council;
o To decide on matters related to day-to-day business
operations of the company;
o To organize the implementation of business plans and
investment plans of the company;
o To issue the internal management regulation of the
company, unless otherwise provided in the company charter;
o To appoint, relieve of duty and remove from office managers
in the company, except those falling within the competence
of the Members Council;
o To sign contracts in the name of the company, except cases
falling within the competence of the chairperson of the
Members Council;
o To make recommendations on the companys organizational
structure;
o To summit annual financial statements to the Members
Council;
o To make recommendations on the plan for use of profits or
for handling of losses in business;
o To recruit employees.
- Members Council (MC): The Members Council is composed of all
company members and is the highest decision-making body of the
company. The company charter must make specific provisions on
 19

the frequency of meetings of the Members Council, but the

Members Council shall meet at least once a year. The Members
Council decides on:
o Development strategies and the annual business plan;
o Increase or reduction of the charter capital and on the timing
and method of raising additional capital;
o Development investment projects of the company;
o Solutions for market development, marketing and
technology transfer;
o Approval of loan agreements and contracts for sale of assets
valued at 50 or more percent of the total value of assets
recorded in the most recently publicized financial statement
of the company, or a smaller percentage or value as provided
in the company charter;
o Election, relieving of duty or removal from office the
chairperson of the Members Council;
o The appointment, relief of duty, removal from office, signing
and termination of contracts with the GD, chief accountant
and other managers provided in the company charter;
o Wages, bonus and other benefits for the chairperson of the
Members Council, the GD, chief accountant and other
managers provided in the company charter;
o Approval of the annual financial statements, plans for use
and distribution of profits or plans for dealing with losses of
the company;
o The organizational and management structure of the
company;
o The establishment of subsidiaries, branches and
representative offices;
o Making amendments and supplements to the company
charter;
 20

o Reorganization of the company;

o Dissolution or to request bankruptcy of the company; and
o Other rights and obligations provided in the LOE and in the
company charter.
- Chairperson (of the MC): The Members Council shall elect a
member to be its chairperson. The chairperson of the Members
Council may concurrently work as the companys GD. The
chairperson of the Members Council has the following rights and
obligations:
o To prepare working programs and plans of the Members
Council;
o To prepare programs, agenda and documents for meetings of
the Members Council or for collecting opinions of members;
o To convene and preside over meetings of the Members
Council or to organize the collection of opinions of members;
o To supervise, or to organize the supervision of, the
implementation of resolutions of the Members Council;
o To sign resolutions of the Members Council on behalf of the
Members Council;
o Other rights and obligations provided in this Law and the
company charter.
The term of office of the chairperson of the Members Council must
not exceed 5 years. The chairperson of the Members Council may
be reelected for an unlimited number of terms.
Quorum: For a quorum to be present at the first meeting, members
representing 65% of the multiple member LLC's charter capital must be
present. If there is no quorum, a second meeting must be held within 15
days. In the second meeting, a quorum is reached if 50% of the multiple
member LLC's charter capital is present. If there is still no quorum, a third
meeting is held within 10 working days at which there is no necessary
minimum attendance to obtain a quorum.
 21

Voting: The Members Council shall adopt resolutions within its

competence by voting at meetings, collecting written opinions or other
forms as provided in the company charter. Unless otherwise provided in
the company charter, decisions on the following issues shall be passed by
voting at meetings of the Members Council:
- Amendments and supplementations to the company charter
provided in Article 25 of this Law;
- Decisions on the development orientation of the company;
- Election, relief of duty and removal from office of the chairperson
of the Members Council; appointment, relief of duty and removal
from office of the GD;
- Adoption of annual financial statements;
- Reorganization or dissolution of the company.
Unless otherwise provided by the company charter, a resolution of the
Members Council shall be adopted in a meeting in the following cases:
- It is approved by the number of votes representing at least 65
percent of the aggregate contributed capital amount of the
attending members, except:
- For a decision relating to the sale of assets valued at 50 or more
percent of the total value of assets recorded in the latest financial
statement of the company, or a smaller percentage or value as
provided in the company charter, the amendment and
supplementation to the company charter, the reorganization or
dissolution of the company, it is approved by a number of votes
representing at least 75 percent of the total contributed capital
amount of the attending members.
2.3 The Shareholding Company / Joint Stock Company (JSC):
A Shareholding Company or Joint Stock Company (JSC) is an enterprise
in which the charter capital is divided into equal portions called shares.
Shareholders may be organizations or individuals. The minimum number
of shareholders is three and there is no restriction on the maximum
 22

number. Shareholders are liable for debts and other property obligations
of the enterprise only within their amounts of capital contributed to the
enterprise. Shareholders may freely assign their shares to other persons,
except where there are contractual holding obligations or other specific
legal requirements. A JSC has legal entity status from the date of grant of
the enterprise registration certificate. A JSC may issue all types of shares
to raise funds and a JSC also has the right to issue bonds, convertible
bonds and others types of bonds in accordance with the law and the
company charter.
Charter Capital: The Charter capital of a JSC at the time of registration for
enterprise establishment is the total par value of the shares of different
types already registered for purchase and recorded in the company
charter. Shareholders shall make full payment for the shares they have
registered to purchase within 90 days since the date the enterprise
registration certificate is granted, unless a shorter period is provided in
the company charter or the share purchase registration contract. The
Board of Directors shall supervise and urge the full and timely payment
for the shares registered for purchase by shareholders.
Types of shares: A JSC must have ordinary shares. In addition to ordinary
shares, a JSC may have preference shares. The following applies:
- Each share of the same type must entitle its holder to the same
rights, obligations and interests.
- Ordinary shares may not be converted into preference shares.
Preference shares may be converted into ordinary shares pursuant
to a resolution of the General Meeting of Shareholders.
- Preference shares must be of the following four types: i) Voting
preference shares; ii) Dividend preference shares; iii) Redeemable
preference shares or iv) Other preference shares provided in the
company charter.
- Only organizations authorized by the Government and founding
shareholders have the right to hold voting preference shares. The
voting preference of founding shareholders must be valid for only 3
 23

years from the date of grant of the enterprise registration

certificate of the company. After that period, voting preference
shares of founding shareholders must be converted into ordinary
shares. Persons entitled to purchase dividend preference shares,
redeemable preference shares and other preference shares shall be
provided in the company charter or decided by the General
Meeting of Shareholders.
Rights of ordinary shareholders: An ordinary shareholder has the
following rights:
- To attend and express opinions at the General Meeting of
Shareholders and to exercise the right to vote directly or through
an authorized representative or in other forms provided by law or
the company charter. Each ordinary share must carry one vote.
- To receive dividends at the rate decided by the General Meeting of
Shareholders;
- To be given priority in purchasing new shares offered for sale in
proportion to the number of ordinary shares the shareholder holds
in the company;
- To freely transfer his/her/its shares to other persons, except where
contractual restrictions such as a shareholders agreement exist, or
in cases specified in the LOE;
- To examine, look up and extract information in the list of
shareholders with voting rights and to request modification of
incorrect information;
- To examine, look up, extract or copy the company charter, the
minutes of meetings of the General Meeting of Shareholders and
resolutions of the General Meeting of Shareholders;
- Upon dissolution or bankruptcy of the company, to receive part of
the residual assets in proportion to his/her/its number of shares in
the company.
A shareholder or a group of shareholders holding 10 percent of the total
ordinary shares for a consecutive period of at least 6 months or more, or
 24

holding a smaller percentage provided in the company charter has the

following rights:
- To nominate candidates to the Board of Directors and the
Supervisory Board;
- To examine and extract the book of minutes and resolutions of the
Board of Directors, mid-year and annual financial statements made
according to the forms of the Vietnamese accounting system, and
reports of the Supervisory Board;
- To request convening of a General Meeting of Shareholders in the
certain specified cases;
- To request the Supervisory Board to inspect each particular issue
related to the management and administration of the company.
General Meeting of Shareholders (GMS): The GMS must include all
shareholders that have the right to vote and is the highest decision-
making body of a JSC. The GMS has the following rights and obligations:
- To pass the development orientations of the company;
- To decide on the types of shares and total number of shares of each
type which may be offered for sale; to decide on the rate of annual
dividends for each type of shares;
- To elect, remove from office or dismiss members of the Board of
Directors and supervisors;
- To make investment decisions or decisions on sale of assets valued
at 35 or more percent of the total value of assets recorded in the
latest financial statements of the company unless another
percentage or value is provided in the company charter;
- To decide on amendments and supplements to the company
charter;
- To approve annual financial statements;
- To decide on redemption of more than 10 percent of the total
number of shares of each type already sold;
 25

- To consider and handle violations committed by the Board of

Directors and the Supervisory Board which cause damage to the
company and its shareholders;
- To decide on reorganization and dissolution of the company.
The annual GMS must take place at least once a year. In addition to the
annual meeting, the GMS may meet on an extraordinary basis. The venue
of a meeting of the GMS must be within the territory of Vietnam. The
GMS shall hold the annual meeting within 4 months from the end of the
financial year. At the request of the Board of Directors, the business
registration agency may extend that time limit, but not beyond six
months from the end of the financial year. The annual GMS must at least
debate and pass the following issues:
- The annual business plan of the company;
- The Annual financial statements;
- The report of the Board of Directors on the governance and results
of operation of the Board of Directors and performance of each
member of the Board of Directors;
- The Report of the Supervisory Board on the business results of the
company, results of performance of the Board of Directors and GD;
- The self-evaluation reports on the operation of the Supervisory
Board and performance of each member of the Supervisory Board;
- The dividend amount payable on each type of share; and
- Other mandatory matters falling within its competence.
Quorum: Shareholders meetings need at least 51% of voting shares to be
present to reach a quorum. If there is no quorum, within 30 days of the
first meeting a second meeting is held. The second meeting requires 33%
of voting shares to be present to reach a quorum. If still no quorum is
reached, a third meeting will be held within 20 days without a required
quorum. Adoption of resolutions of the Shareholders Meeting requires
different majorities depending on the matter being voted on.
 26

Voting: A resolution on the following contents shall be adopted when

approved by a number of shareholders representing at least 65 percent of
the total votes of all attending shareholders; the specific percentage shall
be provided in the company charter: i) Types of shares and total number
of shares of each type; ii) Change in business sectors, trades and fields; iii)
Change in organizational and management structure of the company; iv)
Investment projects or sale of assets equal to or more than 35 percent of
the total value of assets recorded in the latest financial statements of the
company, or a smaller percentage or value provided by the company
charter; v) Reorganization or dissolution of the company. Other
resolutions shall be adopted when approved by a number of shareholders
representing at least 51 percent of the total votes of all attending
shareholders,
Organizational and management structure: JSCs may choose to organize
their management and operations after one of the two following models:
i) General Meeting of Shareholders, Board of Directors, Supervisory Board
and GD. If a joint stock company has fewer than 11 shareholders and the
institutional shareholders own less than 50 percent of the total number of
shares of the company, a Supervisory Board is not compulsory; or ii)
General Meeting of Shareholders, Board of Directors and GD. In this case
at least 20 percent of the members of the Board of Directors must be
independent members and an Independent Auditing Board shall be
required in the Board of Directors. The independent members shall
supervise and control over the management and administration of the
company.
- Mandatory Legal representatives: In case there is only one legal
representative, the chairperson of the Board of Directors or GD
may be the companys legal representative as provided in the
company charter; unless otherwise provided in the company
charter, the chairperson of the Board of Directors must be the
companys legal representative. If there is more than one legal
representative, the chairperson of the Board of Directors and GD
must naturally be the companys legal representatives.
 27

- The Board of Directors: The Board of Directors (BOD) is the body

managing the company and has full competence to make decisions
in the name of the company and to exercise the rights and perform
the obligations of the company which do not fall within the
competence of the GMS. The BOD has the following rights and
obligations:
o To decide on medium term development strategies and plans
and annual business plans of the company;
o To recommend the types of shares and total number of
shares of each type which may be offered;
o To decide on offering new shares within the number of
shares of each type which may be offered for sale; to decide
on raising additional funds in other forms;
o To decide on the selling prices of shares and bonds of the
company;
o To decide on redemption of shares;
o To decide on investment plans and investment projects
within the competence and limits prescribed by law;
o To decide on solutions for market expansion, marketing and
technology;
o To approve contracts for purchase, sale, borrowing and
lending and other contracts valued at 35 or more percent of
the total value of assets recorded in the latest financial
statements of the company;
o To appoint, remove from office or dismiss the chairperson of
the BOD;
o To appoint, remove from office and sign contracts or
terminate contracts with the GD and other key managers of
the company as provided in the company charter; to decide
on salaries and other benefits of such managers; to appoint
an authorized representative to participate in the Members
 28

Council or the GMS in another company, and decide on the

level of remuneration and other benefits of such persons;
o To supervise and direct the GD and other managers in their
work of conducting the daily business of the company;
o To decide on the organizational structure and internal
management regulations of the company, to decide on the
establishment of subsidiaries, the establishment of branches
and representative offices and the capital contribution to or
purchase of shares from other enterprises;
o To approve the agenda and contents of documents for the
GMS; to convene the GMS or to solicit written opinions for
the General Meeting of Shareholders to pass decisions;
o To submit annual final financial statements to the GMS;
o To recommend dividend rates to be paid; to decide on the
time limit and procedures for payment of dividends or for
dealing with losses incurred in the business operation;
o To recommend reorganization or dissolution of the company
or to request bankruptcy of the company.
The BOD must have between three and eleven members. The
specific number of members of the BOD shall be provided in the
company charter. The term of office of members of the BOD and
independent members of the BOD must not exceed 5 years and the
members may be re-elected for an unlimited number of terms. If a
JSC is organized and managed with independent members of the
BOD, all documents and transactions of the company must clearly
indicate independent member before the full name of the
concerned member of the BOD. The specific number, rights,
obligations and method of organization and coordination of
activities of independent members of the BOD shall be provided in
the company charter.
- Chairperson of the Board of Directors: The BOD must elect a
member of the BOD to act as chairperson. The chairperson of the
 29

BOD may concurrently be the GD of the company. The chairperson

of the BOD has the following rights and obligations: i) To prepare
working plans and programs of the BOD; ii) To prepare agendas,
contents and documents for meetings of the BOD; iii) To convene
and chair meetings of the BOD; iv) To organize the adoption of
resolutions of the BOD; v) To monitor the implementation of
resolutions of the Board of Directors; vi) To chair the GMS and
meetings of the BOD.
- General Director: The BOD shall appoint one of its members or hire
another person as the GD, who shall manage day-to-day business
operations of the company. The term of office of the GD must not
exceed 5 years, however the GD may be re-appointed for an
unlimited number of terms. Specifically, the GD has the following
powers and obligations:
o To decide on issues relating to day-to-day business
operations of the company independently from decisions of
the BOD;
o To organize the implementation of resolutions of the BOD;
o To organize the implementation of business plans and
investment plans of the company;
o To propose the organizational structure and internal
management regulations of the company;
o To appoint, relieve of duty and remove from office managers
in the company, except those within the competence of the
BOD;
o To decide on salaries, wages and other benefits for
employees of the company, including managers who may be
appointed by the GD;
o To recruit employees;
o To propose methods of paying dividends and dealing with
loss in business.
 30

- The Supervisory Board: The Supervisory Board has between 3 and

5 members. The rights and obligations of the Supervisory Board
include:
o To supervise the BOD and the GD in the management and
administration of the company,
o To inspect the reasonableness, legality, truthfulness and
prudence in the management and administration of business
operations; the consistency and appropriateness of
accounting and statistical work and preparation of financial
statements;
o To appraise the completeness, legality and truthfulness of
the companys business reports and annual and biannual
financial statements, and reports evaluating management
work of the BOD; and to submit appraisal reports at the
annual GMS.
o To review, inspect and evaluate the effect and efficiency of
internal control, internal audit, risk management and early
warning systems of the company.
o To review accounting books, accounting entries and other
documents of the company, and examine management and
administration activities of the company when finding it
necessary or pursuant to a resolution of the GMS or as
requested by a shareholder or a group of shareholders;
o To propose to the BOD or the GMS measures to modify,
supplement and improve the organizational structure for the
management, supervision and administration of the
companys business operations;
o When detecting that a member of the BOD or the GD violates
the law, to immediately send a written notice to the BOD and
request the violator to stop the violation and take remedial
measures;
 31

o To participate in and discuss at the GMS, meetings of the

BOD and other meetings of the company;
o To use independent consultants and the internal audit unit of
the company to fulfill its assigned tasks; and
o To consult the BOD before submitting reports, conclusions
and recommendations to the GMS.
The term of office of supervisors must not exceed 5 years and
supervisors may be reelected with an unlimited number of terms.
Supervisors shall elect one of them to be the head of the
Supervisory Board on the majority principle. The Supervisory Board
must have more than half of its members permanently residing in
Vietnam. The head of the Supervisory Board must be a professional
accountant or auditor and work on a full-time basis in the company,
unless higher qualifications are required in the company charter. A
supervisor must not be a spouse, natural father, adoptive father,
natural mother, adoptive mother, natural child, adopted child or
sibling of any member of the BOD, the GD or other manager in the
company, and must not hold any other managerial position in the
company.
2.4 Private enterprises and Partnerships:
A Private Enterprise (Sole Proprietorship) is an enterprise owned by one
individual who shall be liable for all activities of the enterprise to the
extent of all his or her assets (unlimited liability). The private enterprise
may not issue any type of securities or shares. An individual owning a
private enterprise may not establish a second one or corporate
partnership. A Corporate Partnership is a business with at least two
owners who jointly conduct business under one common name. Such co-
owners must be individuals who shall be liable for the obligations of the
partnership to the extent of all their assets. The partnership may not issue
any type of security. In addition to co-owners, there are capital-
contributing members in the partnership. These capital-contributing
members shall only be liable for the debts of the partnership to the extent
of the amount of capital they have contributed. The owner of a
 32

partnership is not entitled to owning a private enterprise or be a co-

owner of another partnership unless otherwise agreed.
2.5 Representative Office (RO):
A Representative Office (RO) is the simplest form of presence for a
foreign company in Vietnam. A RO is merely a liaison office, which itself
does not generate any revenue, but rather from which an overseas
company can facilitate the signing of contracts with local Vietnamese
companies for the sale and purchase of goods or the delivery of services
(both outbound and inbound). A RO must therefore not conduct any
business- or revenue-generating activities, and is prohibited to enter into
commercial contracts in its own name.
What a RO can do:
- Exercise the function of a liaison office;
- Promote the formulation of co-operative projects of a foreign
business entity in Vietnam;
- Market research to promote opportunities to purchase and sell
goods or to provide and sell commercial services of the foreign
business entity that it represents;
- Monitor and activate the implementation of contracts of the
foreign business entity that it represents which have been signed
with Vietnamese parties or which relate to Vietnamese markets.
What a RO cannot do:
- conduct any business activities to earn profits directly;
- sublet its office;
- represent other business entities in Vietnam (i.e. any company
other than the company which established it);
- enter into commercial contracts, except where they are legally
authorised in writing by the company which established it. Under
the law, the head of a representative office is specifically prohibited
from signing commercial contracts with Vietnamese business
entities if he does not have such legal authority (i.e. a power of
 33

attorney); or
- do anything which is not specifically permitted under the
representative office legislation.
Establishment requirements: A foreign company can set up a RO under
the following conditions:
- It must have obtained a certificate of incorporation in the relevant
foreign country where its head office is situated;
- The ROs parent company must have been in operation for at least
one year prior to application for a RO license; and
- The proposed operating activities of the RO are not be prohibited
by the laws of Vietnam.
License term: The license term for a RO is 5 years and can be extended.
The RO must begin to operate and submit an operation notice together
with other required documents to the competent authority within 45
days from the licensing date.
Powers of the chief representative: The chief representative of the RO
can sign contracts relating to the operation of the RO such as an office
lease, employment contracts, bank account forms for the RO and
purchasing necessary facilities for the operation of the RO, without any
authorization from the foreign business entity. There is no requirement
that the chief representative should be permanently resident in Vietnam.
A chief representative can only sign contracts, amend or supplement
contracts which have already been signed if the parent company
authorizes him to do so and the parent company must provide a written
power of attorney in respect of each transaction of signing a contract or
of amending and supplementing a contract which has already been
signed. A chief representative is not permitted to hold concurrently the
following positions: i) head of a branch in Vietnam; or ii) legal
representative of the parent foreign company who is able to sign
contracts without written power of attorney from such foreign business
entity; or iii) legal representative of a company established pursuant to
the laws of Vietnam.
 34

Tax implications of the RO: A representative office is not permitted by

law to generate income/revenue and therefore is not subject to corporate
income taxation. However, ROS which conduct activities by which they
become permanent establishments in Vietnam pursuant to the Law on
Corporate Income Tax must declare and register with the tax authorities
for the purpose of paying Corporate Income Tax. A permanent
establishment under the Law on Corporate Income Tax is defined as
meaning the "business establishment through which foreign companies
conduct part or all of their business activities in Vietnam and earn income,
including . representatives in Vietnam in cases where they are
representatives with authority to sign contracts in the name of foreign
companies or where they are representatives without authority to sign
contracts in the name of foreign companies but regularly deliver goods or
provide services in Vietnam".
2.6 Branch:
Foreign companies may establish branches in Vietnam to conduct trading
activities and activities directly related to trading of services and goods.
Unlike the RO, a Branch may generate profits. A branch is not an
independent legal entity under Vietnamese laws. To open a branch in
Vietnam the foreign legal entity must have operated for at least five years
since its legal establishment or valid business registration in the country
of origin. The branchs operating license expires five years from the
licensing date and is further extendable. As a matter of practice, except
for some particular fields such as culture, education and tourism, banking,
tobacco, legal services and airlines where previously companies are not
entitled to establishing enterprises in Vietnam, there have been very few
branches established in Vietnam as such a form does not contain many
advantages compared with an independent company.
2.7 Business Cooperation Contracts (BCCs):
A BCC is an agreement between one or more foreign investors and one or
more Vietnamese partners with the objective of cooperating to operate
one or more specific business activities. This form of investment does not
constitute a new legal entity and the investors have unlimited liability for
 35

the debts of the BCC. However, foreign investors can establish executive
offices in Vietnam to perform the BCC. BCC Executive Offices shall have
a BCC seal, can open accounts, recruit personnel, sign contracts and
conduct business activities.
2.8 Public-Private Partnerships (PPPs):
Decree 15/2015/ND-CP (Decree 15), effective since April 2015, provides
a clear and consistent framework for all kinds of PPP projects and related
contracts in Vietnam. Compared to the old - fragmented - regulation of
different types of PPP contracts, Decree 15 is a major improvement for
foreign investors considering PPP projects in Vietnam. Decree 15 governs
both traditional PPP contracts and new, additional project contracts.
Decree 15 governs seven (7) traditional types of PPP contracts: i) Build
Operate Transfer (BOT); ii) Build Transfer Operate (BTO); iii) Build
Transfer (BT); iv) Build Own Operate (BOO); v) Build Transfer Lease
(BTL); vi) Build Lease Transfer (BLT) and vii) Operate Management (O
& M) contracts. Decree 15 also provides a legal framework for unsolicited
projects in which investors may propose suitable projects to the
appropriate public body / agency for consideration.
Decree 15 clarifies in detail the process for getting PPP projects approved,
with important steps such as the project proposal and feasibility studies
explained. Decree 15 also determines clearly the public/private sector
investment capital ratio, with investors equity capital contributions to be
at least 15% of the total investment capital, up to the threshold of 1500
billion VND, and at least 10% of the portion of any additional investment
capital exceeding those 1500 billion. Decree 15 further addresses tax
incentives, the right to mortgage project assets, the rights to land use, the
rules relating to the purchase of foreign currency, rights to utilize public
services and rights relating to ownership of assets.
Decree 15 finally sets out clearly where project contracts can be governed
by foreign law, namely contracts involving a foreign party and
government agency guarantee contracts. Disputes can be settled through
negotiation, conciliation, by arbitration or by the courts of Vietnam.
 36

3. INVESTMENT LICENSING
Vietnams Law on Investment (LOI) and Law on Enterprises (LOE),
both effective since July 1st 2015, introduce a new principle of freedom
of business, and provide both domestic Vietnamese and foreign-invested
companies with greater flexibility, both in the scope of their permitted
activities and their internal organizational structure. Under the LOI,
investors are now allowed to do any business investment that is not
explicitly prohibited or conditional. The LOI clarifies the requirements,
conditions and limitations for investment projects in Vietnam. The LOE
governs the establishment, management organization, reorganization and
dissolution of, and activities related to, enterprises, including limited
liability companies, joint stock companies, partnerships and private
enterprises. The LOE now provides a modernized governance framework
consistent with international practice, and aims at further simplifying the
rules on company formation, business registration and corporate
governance, thereby making it easier for both domestic and foreign-
owned companies to operate in Vietnam. Under the LOE, companies can
now freely choose the number of business activities and business lines
they would like to engage in, and adjust easily the scope of their business
in case operations change.
3.1 Prohibited and conditional business sectors:
The LOI sets out six (6) prohibited business lines and lists in its Appendix 4
267 conditional business lines. Even though 267 certainly sounds like a
lot, the new LOI can be regarded an improvement in that it now
summarizes and defines in its Annex 4 comprehensively all conditional
business lines, with no other additional requirements being set out in
other specialized legal documents.
Prohibited: Prohibited business lines are business lines that may harm
national security and -defense, social safety and -order, community
health, Vietnamese historical traditions, culture and customs and/or
damage or destroy natural resources and the environment. Specifically,
the Law on Investment 2014 points out six (6) prohibited business lines: i)
Trading in drugs; ii) Trading in chemicals and minerals; iii) Trading in
 37

specimens of plants, wildlife as specified in Appendix 1 of the Convention

on International Trade in endangered plants, wildlife; specimens of
endangered and rare wildlife and plants; iv) Activities related to human
trafficking and prostitution; v) Buying and selling human beings, human
tissue and / or parts of human body and vi) Activities related to human
cloning.
Conditional: Similar to other countries, Vietnam reserves its sovereign
right to restrict investment in sensitive fields. This is achieved through the
use of so-called conditional sectors. The list and conditions for investing
in those conditional business lines are all posted on the National Portal
for Business Registration (website: http://dangkykinhdoanh.gov.vn).
3.2 Licensing of Domestic and Foreign Investment Projects:
With regards to foreign and domestic investment licensing, Vietnamese
Law distinguishes three types of investors: (i) Investors that have foreign
(non-Vietnamese) nationality: Considered foreign investor/investment,
(ii) Vietnam-registered enterprises that have 51% (or more) foreign
capital: Considered foreign investor/investment and iii) Vietnam-
registered enterprises that have less than 51% foreign capital: Considered
domestic investor/investment. Only investment projects of foreign
investors must have - beyond the Business Registration Certificate (BRC)
- an additional Investment Registration Certificate (IRC). The IRC is not
required for domestic investors (i.e. enterprises in which foreign investors
hold 51% or less of the equity). Moreover, an IRC is not required where
foreign investors invest more than 51% in existing Vietnamese companies
that are not in conditional investment sectors (see also under 3.6 below).
Once an investment in Vietnam qualifies as foreign, the (intended)
investment projects in Vietnam must obtain both an investment
registration certificate (IRC) and an enterprise registration certificate
(ERC). Accordingly, foreign investors carrying out their first investment
project in Vietnam must simultaneously incorporate their Vietnamese
legal entity and license their first investment project in Vietnam, i.e. a
foreign investor must not incorporate a legal entity without an
investment project. However, after licensing of the initial investment
 38

project, the foreign investor may carry out additional investment projects
by either using the already established legal entity or by setting up a new
legal entity for the additional investment project.
Decree 118/2015/ND-CP detailing and guiding a number of provisions of the
Law on Investment (Decree 118), effective since 27 December 2015
contains detailed provisions regarding the issuance and amendment of IRC
and ERC. Specifically, Decree 118 provides a co-ordination mechanism for
the investment registration authority and the business registration
authority: Under its Article 24, foreign investors are permitted to submit
both investment registration and business registration dossier to one
agency - the investment registration authority - which shall afterwards
transfer the business registration dossier to the competent authority.
Moreover, the registration authorities are allowed to notify to the investors
regarding the shortcomings of the whole dossier once only. The provision
potentially prevents the practice that the investors have to amend the
dossier over and over.
Decree 118 is further supposed to simplify the investment procedure
regarding the purchase of shares, capital, and contribution of capital. In
particular, foreign investors are not required to obtain an IRC if the
investment is conducted via purchase of share, capital, and contribution of
capital. In this case, Decree 118 only obligates the economic organization
whom foreign investor invested into to adjust the list of members,
shareholders at the competent authority, except for the two following
circumstances where the purchase of shares, capital, contribution of capital
need to be registered by the investors: (i) the target company is operating in
a conditional business line for foreign investors; and (ii) the investment
result in a consequence that the foreign investor holds at least 51% of the
economic organizations charter capital.
3.3 Investment Incentives:
Investment incentives, in the form of corporate income tax (CIT) and
import tax exemptions, are granted to new investment projects based on
certain encouraged sectors, encouraged locations and the size of the
project. Business expansion projects, including those licensed or
 39

implemented during 2009 to 2013 which were not entitled to any CIT
incentives previously, and which now meet certain criteria, are also
entitled to CIT incentives. New investment projects and business
expansion projects do not include projects established as a result of
certain acquisitions or reorganizations. Tax incentives which are available
for investment in encouraged sectors only apply for income which directly
relates to the incentivized activities, and not to other income (e.g.
financial / interest income). Where an investment project meets various
requirements for enjoying CIT incentives, investors can choose the most
favorable incentives. Encouraged investment projects include:
- Encouraged sectors: Education, health care, sport/culture, high
technology, environmental protection, scientific research,
infrastructural development, processing of agricultural and aquatic
products, software production and renewable energy.
- Encouraged locations: Qualifying economic and high-tech zones,
certain industrial zones and difficult socio-economic areas.
Specifically, investment projects carried out in rural areas that
employ at least 500 employees.
- Large manufacturing projects: excluding those subject to special
sales tax or in the mining and natural resources sectors, with a total
investment capital of VND 6,000 billion or more, disbursed within 3
years of being licensed can also qualify for CIT incentives if the
investment projects meet at least one of the following criteria: i)
minimum revenue of VND 10,000 billion per year, starting from the
fourth year of operation at the latest; ii) More than 3,000 staff by
the fourth year of operation the latest.
- Projects with a total investment capital of at least VND 12,000
billion, disbursed within five years of being licensed, however
excluding those subject to special sales tax or in the mining or
natural resources sectors.
Further, new investment projects engaged in the production of industrial
products prioritized for development will be entitled to CIT incentives if
they belong to either of the following groups: i) Products supporting the
 40

high technology sector or ii) Products supporting the garment, textile,

footwear, IT, automobile assembly, mechanical sectors that are not
produced domestically, or if produced domestically, do not meet
European Union or similar minimum quality standards.
Preferential tax rates: Preferential rates of 10% and 20% are available for
15 years and 10 years respectively, starting from the commencement of
operating activities. In a few cases, a preferential rate of 15% applies. The
duration of application of the preferential tax rate may be extended in
certain cases. Since January 2016, companies enjoying a preferential CIT
rate of 20% are entitled to a preferential rate of 17% instead. Once the
preferential rate expires, the CIT rate reverts to the standard rate. Certain
projects in the education and healthcare sectors are entitled to the 10%
preferential tax rate for the lifetime of the investment project.
Tax holidays and tax reductions: Tax holidays mean a complete
exemption from CIT for a certain period, commencing immediately after
the enterprise first makes profits, followed by a certain time period where
tax is charged at 50% of the applicable rate. However, where the
enterprise has not made taxable profits within three years of the
commencement of operations, the tax holiday/tax reduction will start
from the fourth year of operation. Additional tax reductions may be
available for companies engaging in manufacturing, construction and
transportation activities which employ many female staff or employ
ethnic minorities.
Expansion of investment project: Investment projects expanding their
business scope, upgrading production capacity or changing to new
production technology, satisfying criteria on increasing the original cost of
fixed assets, and increasing the original cost proportion of fixed assets (to
a minimum of 20 per cent) or of design capacity (to a minimum of 20 per
cent), are able to access either CIT incentives during the remaining
operational period, if any, or CIT exemptions or reductions on the
increased revenue created by the expansion. The period of tax exemption
or reduction on this additional revenue from expanded projects is equal
 41

to the tax exemption or reduction period for new projects in the same
area or sector qualifying for CIT incentives.
Import tax exemptions: Investment projects in sectors subject to special
investment incentives or being implemented in areas with difficult
socioeconomic conditions are entitled to receive import tax exemptions
on imported goods that constitute fixed assets and exemptions for a
period of five years from the start of production on imported materials
and components not produced in Vietnam. The same is true for
investment projects investing in hotels, resorts, amusement parks, clinics,
offices, apartments and houses (except for commercial centers, technical
services, supermarkets and golf courses). Investment projects investing
into culture, finance, banking, and insurance, audit and consulting
services, are also exempt from paying import tax for imported goods that
constitute fixed assets, but only for the first time. Projects enjoying these
exemptions cannot enjoy other import tax exemptions.
3.4 Investment Registration Procedure and Authorities:
To receive an IRC, an investor must carry out a registration procedure
based on the size and type of the project. The Law on Investment
categorizes investment projects into three types:
- Type I (small scale) Provincial Peoples Committee: The
provincial Peoples Committees have authority to decide (i)
projects to which the State allocates or leases out land without
auction, tendering or transfer (among these types of projects, those
which are implemented in an industrial zone, export processing
zone, high-tech zone or economic zone in conformity with the
approved master plan are not required to be submitted to the
provincial peoples committee for its decision on the investment
policy), ii) Projects that will require conversion of the land use
purpose, iii) Projects using technology in the list of technologies the
transfer of which is restricted in accordance with the law on
technology transfer.
- Type II (medium scale) Prime Minister: The Prime Minister has
authority to decide on Investment Projects regardless of the
 42

projects investment budget in the following cases: Projects that

require the migration / resettlement of 10,000 - 20,000 people;
Projects in the field of (i) construction and trade in airports, air
transport, national port, golf course, gambling, betting, casino; (ii)
exploration, mining and processing of oil and gas; production of
cigarettes; (iii) developing infrastructure of Industrial Zones, Export
Processing Zones and Functional Zones in Economic Zones. The PM
also is in charge for Investment Projects exceeding five thousand
(5000) billion VND (approx. USD 230 million), and 100% foreign
Investment Projects in the field of maritime transport business,
service business on telecommunications network infrastructure,
reforestation, publishing, journalism, foundation of the science and
technology organizations.
- Type III (large scale) National Assembly: The NA has authority to
decide on investment projects which (i) have significant or
potentially serious impact on the environment such as nuclear
power plant; transfer of land use of national parks, nature reserves,
protected landscape areas, research forest, science experiments
from 50 hectares or more; headwater forests from 50 hectares or
more; protection forest against wind, sand, waves, sea reclamation,
environmental protection from 500 hectares or more; production
forest from 1,000 hectares or more; (ii) transfer of land use of
paddy land from 500 hectares or more; (iii) migration and
resettlement of 20,000 - 50,000 people.
3.5 Timeline for investment approvals:
Under the LOI, the maximum time for the issuance of the IRC is 45 days
from the date of receipt of complete application dossier by the licensing
authority. However, in practice licensing authorities have often delayed
approvals with various arguments why the submitted application dossiers
were not complete and therefore the legally prescribed timelines could
not be kept or were not started in the first place. Therefore, even though
under the LOI a statutory time-limit applies, it remains to be seen in
practice whether those timelines will be kept.
 43

3.6 Licensing Mergers & Acquisitions (M&A):

Legal framework: Although there is no single law governing M&A in
Vietnam, the LOI acknowledge foreign investors right to invest in
Vietnamese companies e.g. by way of acquiring capital contributions, the
purchase or sales of shares, or a merger. For listed companies and public
offerings, the Law on Securities and its implementing Decree
58/2012/ND-CP dated 20 July 2012 ("Decree 58") contains specific
implementing provisions. The acquisition of capital contributions/shares
in a Vietnamese company operating in certain conditional sectors, for
instance in the banking, financial services and insurance industries, is
further regulated by specialized laws that prevail over general provisions
of the LOE/LOI.
Acquisition of shares / capital contributions (share deal): The share
deal is the most common M&A transaction, in which a purchaser acquires
from the seller i) capital contributions in a LLC, ii) shares in a JSC, iii)
newly-issued shares of a public company by way of subscription or iv)
otherwise shares or share options from existing shareholders of a
company. The key document in a share deal is the share purchase
agreement (SPA, sometimes also referred to as Sale and Purchase
agreement). It is noteworthy that acquisitions by foreign investors of an
interest of 49% or less of the capital contributions/shares in a Vietnamese
target company simply require the amendment of the company's ERC,
and the issuance of an IRC is no longer required under the LOI.
Accordingly, the timeframe to complete the M&A transaction is likely to
be significantly shortened in transactions governed by the LOE/LOI. With
regards to publicly listed Vietnamese companies, foreign ownership caps
of 49% (and max. 30% for financial institutions) exist, so issuance of an
IRC is also not required.
Acquisition of assets (asset deal): Purchaser may also acquire a
Vietnamese company by way of purchase and transfer of the targets
assets, rights, obligations and interests. This type of M&A transaction is
less common, but may sometimes be favorable mostly for tax reasons.
 44

There are no licensing requirements with regards to amending the IRC in

an asset deal, as the ownership structure remains unchanged.
3.7 Foreign exchange and profit repatriation:
Over the past years, the Vietnamese Government has pursued a
consistent de-dollarization of the Vietnamese economy by prohibiting
the use of foreign currency in domestic business transactions (Ordinance
6/2013 on Foreign Exchange Controls). Only payments abroad are
permitted to be invoiced and transacted in foreign currency, on provision
of the documentary evidence (e.g. a contract with a business partner
abroad, specifying exactly the services/products and price in foreign
currency). Whilst foreign investors are generally free to purchase foreign
currency at Vietnamese banks, transaction are always subject to strict
documentary evidence concerning the source and use of the funds.
Direct and indirect investment: With the introduction of Circular
19/2014/TT-NHNN, the law on foreign investment accounts distinguishes
whether a foreign investor is:
- An indirect investor is an investor who does not participate actively
in the management of a foreign-invested company or project.
Indirect investment is governed by Circular 05/2014, and requires
that all indirect investment activities must be conducted through an
indirect investment capital account (IICA), which must be a VND
account, opened by a foreign investor at an authorized bank in
Vietnam. All indirect investments must be conducted via the IICA,
and profits from all indirect investment activities must also be
remitted via the IICA.
- A direct investor is an investor who participates actively in the
management of a foreign-invested company or project. Direct
investment activities of foreign investors are governed by Circular
19/2014, Circular 131/2010/TT-BTC and Decision 88/2009/QD-TTg.
Circular 19 stipulates that each foreign direct investor must open a
direct investment capital account (DICA) at an authorized bank in
Vietnam, through which all direct investment activities must be
channeled. Foreign direct investors may also open additional DICAs
 45

in order to e.g. repayment of foreign loans, as well as to conduct

other permitted foreign currency transactions specified in Circular
19. However other DICAs must be opened with the same
authorized bank as the primary DIAC.
- Circular 19 contains a list of transactions that must be conducted
via the foreign investors DICA: i) Receiving capital contributions
from investors; ii) Drawing and repayment of foreign loans; iii)
Remitting profits and other income; and iv) Receiving and then
remitting money in payment of the value of an assignment of
investment capital and of an investment project. Only the last of
those transactions has been changed with Circular 19, and the
requirements are still unclear. However it seems that payments
from an offshore purchaser to an offshore seller for a transfer of
capital in an FDI enterprise must be routed through the direct
investment capital account of the FDI enterprise itself.
Profit Repatriation: Profits must be deposited into the above IICA or
DICA, and may be remitted outside Vietnam from those accounts only.
Only once all tax- and other obligations relating to profits and
distributions have been met, proceeds of investments from Vietnam may
be converted back in to foreign currency and remitted abroad. According
to Circular 186/2010/TT-BTC, governing the repatriation of profits from
direct investment activities abroad, profits may only be transferred
abroad at the end of each fiscal / business year (i.e. only once annually
and not quarterly).
 46

4. TAXATION
4.1 Corporate Income Tax (CIT):
CIT is levied on the taxable income of all organizations doing business in
Vietnam, including foreign invested companies, and branches and
affiliates of offshore companies licensed to operate in Vietnam. Since
January 2016, the standard CIT rate is 20%. Only enterprises operating in
the oil and gas industry will remain being subject to CIT rates ranging from
32% to 50%.
Calculation of taxable income: CIT payable is assessable income
multiplied by the CIT rate. The assessable income within any one tax
period is equal to the taxable income minus tax exempt income and
losses carried forward. The taxable income (or taxable profits) includes
business- and other income. In particular, taxable income is turnover
minus deductible expenses plus other income (including income received
from outside of Vietnam). Taxpayers are required to prepare an annual
CIT return which includes a section for making adjustments between
accounting profits and taxable profits. Taxpayers may carry forward tax
losses fully and consecutively for a maximum of five years. Losses arising
from incentivized activities can be offset against profits from non-
incentivized activities, and vice versa. Losses from the transfer of real
estate and the transfer of investment projects can be offset against
profits from other business activities.
Non-deductible expenses: Expenses which relate to revenue generation,
are properly supported by suitable documentation (including bank
transfer vouchers where the invoice value is VND 20 million or above) and
not specifically identified as being non-deductible are tax deductible.
Non-deductible expenses include:
- Employee remuneration expenses which are not actually paid, or
are not stated in a labour contract or collective labour agreement;
- Staff welfare payments exceeding a cap of one months average
salary and voluntary contributions to health insurance schemes or
pension funds exceeding VND 1 million per month per person;
 47

- Provisions for severance allowance and payments of severance

allowance in excess of the prescribed amount per the Labour Code;
- Overhead expenses allocated to a permanent establishment (PE)
in Vietnam by the foreign companys head office exceeding the
amount under a prescribed revenue-based allocation formula;
- Interest on loans corresponding to the portion of charter capital not
yet contributed or interest on loans from non-economic and non-
credit organizations exceeding 150% of the maximum interest rate
set by the State Bank of Vietnam;
- Provisions for stock devaluation, bad debts, financial investment
losses, product warranties or construction work which are not
made in accordance with the prevailing regulations;
- Unrealized foreign exchange losses due to the year-end revaluation
of foreign currency items other than account payables;
- Depreciation of fixed assets not in accordance with prevailing
regulations;
- Reserves for research and development not made in accordance
with the prevailing regulations;
- Donations except certain donations for education, health care,
natural disaster or building charitable homes for the poor;
- Administrative penalties, fines, late payment interest;
- Creditable input value added tax, corporate income tax and
personal income tax.
For certain businesses types such as insurance companies, securities
trading and lotteries, the Ministry of Finance provides specific guidance
on deductible expenses for CIT purposes. Business entities in Vietnam
are allowed to set up a tax deductible research and development fund to
which they can appropriate up to 10% of annual profits before tax.
Various conditions apply.
CIT Administration: Companies are required to make quarterly
provisional CIT payments based on estimates. If the provisional quarterly
 48

CIT payments account for less than 80% of the final CIT liability, any
shortfall in excess of 20% is subject to late payment interest (currently as
high as 18% per annum), applying from the deadline for payment of the
Quarter 4 CIT liability. Final CIT returns are filed annually. The annual CIT
return must be filed and submitted not later than 90 days from the fiscal
year end. The outstanding tax payable must be paid at the same time.
The standard tax year is the calendar year. Companies are required to
notify the tax authorities in cases where they use a tax year (i.e. fiscal
year) other than the calendar year.
Capital assignment (profit) tax: Profits resulting from the sale of capital
contributions or shares in a Vietnamese company are generally subject to
20% CIT. This is generally referred to as capital assignment (profit) tax or
capital gains tax, even though this is not a separate tax as such. The
taxable gain is determined as the excess of the sale proceeds less cost (or
the initial value of contributed charter capital for the first transfer) less
transfer expenses. Where the seller is a foreign entity, a Vietnamese
purchaser is required to withhold the tax due from the payment to the
vendor and account for this to the tax authorities. Where the purchaser is
also a foreign entity, the Vietnamese enterprise in which the interest is
transferred is responsible for the CIT administration. Where the seller is a
foreign or Vietnamese individual resident in Vietnam, the profit resulting
from the sale is taxed according to the general rules of personal income
tax (PIT).
The return and payment of the capital assignment tax, be it as CIT or PIT,
is required within 10 days from the date of official approval of the sale by
the competent authority or, where approval is not required, 10 days from
the date the parties reach contractual agreement on the sale. The tax
authority has the right to adjust the purchase price where it is not in line
with the market price or - where such market price does not exist or is
hard to determine - significantly below the companys book value.
Transfers of securities (bonds, shares of public joint stock companies, etc.)
by a foreign entity are subject to CIT on a deemed basis at 0.1% of the
total sales proceeds. Gains derived by a resident entity from the transfer
of securities are however taxed at 20%.
 49

4.2 Personal Income Tax (PIT):

PIT Rates apply to both Vietnamese and expatriate residents as follows:

Taxable Income in VND PIT Rate

0 5,000,000 5%

5,000,001 10,000,000 10%

10,000,001 18,000,000 15%

18,000,001 32,000,000 20%

32,000,001 52,000,000 25%

52,000,001 80,000,000 30%

80,000,001 + 35%

Tax Residency and Calculation of Taxable Income: Tax residents are

subject to Vietnamese PIT on their worldwide taxable income, wherever it
is paid or received. Tax residents in Vietnam are individuals:
- Residing in Vietnam for 183 days or more in either the calendar
year or the period of 12 consecutive months from the date of first
arrival; or
- Having a permanent residence in Vietnam (including a registered
residence which is recorded on the permanent/ temporary
residence card in case of foreigners); or
- Having a leased house in Vietnam with a term of 183 days or more
in a tax year and unable to prove tax residence in another country.
Individuals not meeting the conditions for being tax resident are
considered tax non-residents. Non-residents are subject to PIT at a flat tax
rate of 20% on the income received as a result of working in Vietnam in
the tax year, and at various other rates on their non-employment income.
Employment Income: All Employment Income is subject to PIT.
Employment income includes all cash remuneration and benefits-in-kind,
such as salaries, allowances, bonuses, housing- and other fringe benefits
 50

of employment paid for by the employer, including shares and other

forms of company participation provided to employees. Shares and
share purchase options awarded to employees are treated as
employment income (bonuses) and taxed when the shares are
transferred or sold. In such case, the taxable income equals the value of
the shares recorded in the accounting books of the employer or the
market value of the shares. Income from the transfer of the awarded
shares is also subject to capital assignment (profit) as described above.
Employment Income does not include:
- One-off relocation allowance to Vietnam for expatriates and from
Vietnam for Vietnamese working overseas;
- Annual home leave return trip airfare for expatriates and
Vietnamese working overseas;
- School- and kindergarten fees up to high school in
Vietnam/overseas for children of expatriates/Vietnamese working
overseas;
- Payment for overtime (however the overtime premium only);
- Payments for business trips, mobile phone charges and stationery;
- Certain other benefits in kind provided on a collective basis, such as
e.g. membership fees, entertainment, healthcare, transportation to
and from work, mid-shift meals.
Permitted deductions to PIT deductions include:
- Contributions to mandatory non-Vietnamese social, health and
unemployment insurance schemes; abroad;
- Contributions to voluntary Vietnamese pension schemes (however
subject to a cap);
- Contributions to certain approved charities;
- Personal allowance: VND 9 million per month;
- Dependent allowance: VND 3.6 million per month per dependent.
The dependent allowance is not automatically granted, and the
 51

taxpayer needs to register qualifying dependents and provide

supporting documents to the tax authority (usually passports).
Non-Employment income includes:
- Business income (including rental income): Any income derived
from production and business activities as well as income from
independent practice. For residents, the tax rates applicable to
business income are the same as the tax rates applicable to
employment income. For non-residents, various flat rates apply.
Business losses cannot be offset against employment income if an
individual has income from both business and employment.
- Capital investment income: Any income earned from lending
money, investing in shares and making capital contributions. Types
of income from capital investment include dividends and profit
shares of any kind, interest on capital deposits, bonds, securities,
loan interest and similar types of income. Income from capital
investment is taxed at a flat rate of 5%.
- Capital assignment income: Income from capital assignment refers
to profits made by individuals from the transfer of capital
contributions in a limited liability company, partnership,
shareholding company, business cooperation contract, cooperative
or economic organization, transfers of securities and transfers of
capital in other forms. Income from capital transfers is generally
taxed at a flat PIT rate of 20%. If the profit from the transfer of
securities cannot be determined, or for stocks listed on a stock
exchange, the tax is calculated at 0.1% of the transfer price.
- Real estate income: Income from the transfers of real estate are
taxed at a flat rate of 25%. If the cost of real property is
indeterminable, the tax payable is calculated at 2% of the transfer
price. Income from the transfer of real property by non-resident
individuals is taxed at 2% of the transfer price.
- Income from royalties: Any income derived from the assignment or
transfer of the right to use intellectual property rights or objects
 52

including literary, artistic and scientific works, copyrights,

inventions, industrial designs, trademarks, technical know-how and
similar items. Assessable income equals the amount of the royalties
in excess of VND 10 million, which is determined each time the
royalties are paid. Income from royalties and franchising (exceeding
VND 10 million) is taxed at 5%.
- Income from franchising: Any income derived by an individual from
a franchising contract under which the franchisor authorizes the
franchisee to purchase / sell goods or provide services in
accordance with conditions imposed by the franchisor. Income
from franchising (exceeding VND 10 million) is taxed at 5%.
- Income from winnings or prizes: Income from winnings or prizes is
income derived from winnings in cash or in kind in excess of VND 10
million from lotteries, betting, casinos, promotional prizes and
similar items. Assessable income equals the amount of the prize
determined on a transaction basis. Income from winnings or prizes
(exceeding VND 10 million) is taxed at a flat rate of 10%.
- Income from inheritances or gifts: Income from the receipt of
inheritances or gifts is income in excess of VND 10 million derived
by an individual under a testament or law from the receipt of
inherited or gifted assets, including securities, contributed capital,
real property and other assets that are required to be registered.
The amount of assessable income is determined when the
procedures are completed for the transfer of ownership or the
transfer of the right to use the asset or when the taxpayer receives
the gift. Income from inheritances (exceeding VND 10 million) is
taxed at a flat rate of 10%.
 53

PIT Tax Declarations and Payment: Individuals with taxable income must
obtain a tax code, and submit their tax registration file to their employer
who will subsequently submit this to the local tax office. Those who have
non-employment income are required to directly submit their tax
registration file to the district tax office of the locality where they reside.
Regarding tax declarations, the following applies:
- Employment income: For employment income, tax has to be
declared and paid provisionally on a monthly basis by the 20th day
of the following month or on a quarterly basis by the 30th day
following the reporting quarter. The amounts paid are reconciled to
the total tax liability at the year-end. An annual final tax return
must be submitted and any additional tax must be paid within 90
days of the year end. Expatriate employees are also required to
carry out a PIT finalization on termination of their Vietnamese
assignments before exiting Vietnam. Tax refunds due to excess tax
payments are only available to those who have a tax code.
- Non-employment income: The individual is required to declare and
pay PIT in relation to each type of taxable non-employment
income. The PIT regulations require income to be declared and tax
paid on a regular basis, often each time income is received.
Typically, individuals or groups of individuals deriving income from
business activities are required to file tax declarations on a
quarterly basis. If an individual has both business income and
employment income, only business income is required to be
reported in that declaration.
- Overseas income: A resident individual receiving employment
income paid from overseas must also file tax declarations. For
resident individuals deriving income arising from overseas,
employment income and business income are declared in
accordance with the rules stated above. Other types of income
(capital investment, capital transfer, transfer of real property,
royalties, franchising, winnings, inheritances and gifts) must be
 54

declared within ten (10) days after the date the income arises or is
received.
The Vietnamese tax year is the calendar year. However, where in the
calendar year of first arrival an individual is present in Vietnam for less
than 183 days, his/her first tax year is the 12-month period from the date
of arrival. Subsequently, the tax year is the calendar year.
4.3 Foreign Contractor Withholding Tax (FCWT):
The FCWT applies to certain payments made to foreign parties, including
interest, royalties, service fees, lease, insurance, transportation, transfers
of securities and goods supplied within Vietnam or associated with
services rendered in Vietnam. The FCWT is a combination of CIT and
Value Added Tax (VAT), and sometimes also includes PIT for payments
made to foreign individuals.
Dividends, Interest and Royalties: No FCWT or remittance tax is imposed
on profits paid to foreign shareholders. However, a withholding tax of 5%
applies to interest paid on loans from foreign entities. Interest paid on
bonds and certificates of deposit issued to foreign entities is also subject
to a 5% withholding tax. Sales of bonds and certificates of deposits are
subject to a deemed tax of 0.1% of the gross sales proceeds. A 10%
royalty withholding tax applies in the case of payments made to a foreign
party for transfers of industrial property rights. However, if the transfer of
patents, technical know-how or technology processes is used as part of
the capital contribution of a foreign-invested enterprise, there is no tax
related to the transfer.
Foreign Contractors: The FCWT applies in case of payments to foreign
contractors, i.e. in cases where a Vietnamese party (including foreign
owned companies) contracts with a foreign entity that does not have a
licensed presence in Vietnam. This FCWT generally applies to payments
received by the foreign contractor from Vietnam, except for the pure
supply of goods and services performed and consumed outside Vietnam
and various other services performed wholly outside Vietnam. However,
certain distribution arrangements where foreign entities are directly or
indirectly involved in the distribution of goods or provision of services in
 55

Vietnam are subject to FCWT, for example where the foreign entity
retains ownership of the goods, bears distribution, advertising or
marketing costs, is responsible for the quality of goods or services, making
pricing decisions, and/or authorizes Vietnamese entities to carry out part
of the distribution of goods or provision of services in Vietnam.
The following FCWT rates apply:

Service / Industry Deemed Deemed

VAT rate CIT rate

Supply of goods in Vietnam where sellers Exempt 1%

responsibility exceeds pure supply of goods to
border and passing of full risk to buyer at border.

Services not exclusively performed and consumed 5% 5%

outside of Vietnam

Services together with supply of machinery and 3% 2%

equipment

Construction, installation without supply of 5% 2%

materials, machinery or equipment.

Construction, installation with supply of materials, 3% 2%

machinery or equipment.

Leasing of machinery and equipment 5% 5%

Restaurant, hotel and casino management 5% 10%

services

Logistics and transportation services 3% 2%

Interest Exempt 5%

Royalties Exempt 10%

Transfer of securities Exempt 0,1%

Insurance Exempt 5%
 56

Method of payment: Foreign contractors can choose one of the following

three methods for tax payment:
- Deduction Method: Foreign contractors can apply for the
deduction method if they (i) have a permanent establishment
(PE) in Vietnam or are a tax resident in Vietnam, ii) the duration
of the project in Vietnam is 182 days or more, and (iii) they adopt
the Vietnamese Accounting System (VAS) and obtain both a tax
registration and a tax code. The Vietnamese customer is required
to notify the tax office that the foreign contractor will pay tax under
the deduction method within 20 working days from the date of
signing the contract. If the foreign contractor carries out multiple
projects in Vietnam and qualifies for application of the deduction
method for one project, the contractor is required to apply the
deduction method for its other projects as well. The foreign
contractor will pay CIT at 20% on its net profits.
- Direct Method: For the direct (non-deduction) method foreign
contractors, VAT and CIT will be withheld by the Vietnamese
customer at various rates that are specified according to the nature
of the activities performed. The VAT withheld by the Vietnamese
customer is generally an allowable input credit in its VAT return.
Separate requirements for FCT declarations under this method are
provided for foreign contractors providing goods and services for
exploration, development and production of oil and gas.
- Hybrid Method: Allows foreign contractors to register / pay VAT
based on the deduction method, but pay CIT under the direct
method. Foreign contractors wishing to apply the hybrid method
must: i) Have a PE or be tax resident in Vietnam, ii) operate in
Vietnam under a contract with a term of more than 182 days, and
iii) maintain accounting records in accordance with the VAS.
4.4 Value Added Tax (VAT):
VAT applies to goods and services used for production, trading and
consumption in Vietnam. A domestic business must charge VAT on the
value of goods or services supplied. In addition, VAT applies on the duty
 57

paid value of imported goods. The importer must pay VAT to the customs
authorities at the same time they pay import duties. For imported
services, VAT is levied via the FCWT mechanism. VAT payable is calculated
as the output VAT charged to customers less the input VAT suffered on
purchases of goods and services. The following VAT rates apply:

0% This rate applies to exported goods/services including

goods/services sold to overseas/non-tariff areas and consumed
outside Vietnam/in the non-tariff areas, goods processed for
export or in-country export (subject to conditions), goods sold to
duty free shops, certain exported services, construction and
installation carried out for export processing enterprises,
aviation, marine and international transportation services.

5% This rate applies generally to areas of the economy concerned

with the provision of essential goods and services. These include:
clean water; teaching aids; books; unprocessed foodstuffs;
medicine and medical equipment; husbandry feed; various
agricultural products and services; technical/scientific services;
rubber latex; sugar and its by-products; certain cultural, artistic,
sport services/products and social housing.

10% This "standard" rate applies to activities not specified as not-

subject to VAT, exempt or subject to 0% or 5%.

VAT Administration: All organizations and individuals producing or

trading goods and services in Vietnam must register for VAT. In certain
cases, branches of an enterprise must register separately and declare VAT
on their own activities. Taxpayers must file VAT returns on a monthly
basis by the 20th day of the subsequent month, or on a quarterly basis by
the 30th day of the subsequent quarter (for companies with prior year
annual revenue of VND 50 billion or less).
VAT Refunds: Where the taxpayers input VAT for a period exceeds its
output VAT, it will have to carry the excess forward for a period of twelve
months. It can then claim a refund from the tax authorities. In certain
cases (e.g. exporters where excess input VAT credits exceed VND300
 58

million), a refund may be granted on a monthly/ quarterly basis. Newly

established entities in the pre-operation investment phase may claim VAT
refunds on a yearly basis or where the accumulated VAT credits exceed
VND300 million. Newly established entities and certain investment
projects which are in the pre-operation stage may be entitled to refunds
for VAT paid on imported fixed assets based on shorter timelines than
normal, subject to certain conditions.
VAT Invoices: For input VAT to be creditable, the taxpayer must obtain a
proper VAT invoice from the supplier. Entities in Vietnam can use pre-
printed invoices, self-printed invoices or electronic invoices. The tax
invoice template must contain stipulated items and be registered with or
notified to the local tax authorities. For exported goods, commercial
invoices can be used instead of domestic tax invoices.
4.5 Import Duties:
Categories: Import duty rates are classified into ordinary rates,
preferential rates and special preferential rates. Preferential rates are
applicable to imported goods from countries that have Most Favored
Nation (MFN) status with Vietnam. The MFN specifically apply to goods
imported from other member countries of the WTO. Special preferential
rates are applicable to imported goods from countries that have a special
preferential trade agreement with Vietnam. To be eligible for preferential
rates or special preferential rates, the imported goods must be
accompanied by an appropriate certificate of origin. When goods are
sourced from non-preferential treatment/non-favored countries, the
ordinary rate (being the MFN rate with a 50% surcharge) is imposed.
Calculations: In principle Vietnam follows the WTO Valuation Agreement
with certain variations. The dutiable value of imported goods is typically
based on the transaction value (i.e. the price paid or payable for the
imported goods, and where appropriate, adjusted for certain dutiable or
non-dutiable elements). Where the transaction value is not applied,
alternative methodologies for the calculation of the dutiable value will be
used. SST applies to some products in addition to import duties. VAT will
 59

also be applied on imported goods (unless exempt under the VAT

regulations).
Exemptions: Import duty exemptions are provided for projects which are
classified as encouraged sectors and other goods imported in certain
circumstances. Categories of import duty exemption include:
- Machinery and equipment, specialized means of transportation and
construction materials (which cannot be produced in Vietnam)
comprising the fixed assets of certain projects;
- Raw materials, spare parts, accessories, other supplies, samples,
machinery and equipment imported for the processing of goods for
export and finished products imported for use in the processed
goods;
- Companies manufacturing goods for export do not pay import
duties on raw materials where the products are destined for
export.
Refunds: There are various cases where a refund of import duties is
possible, including for:
- Goods for which import duties have been paid but which are not
actually physically imported;
- Imported raw materials that are not used and which must be re-
exported;
- Imported raw materials that were imported for the production of
products for the domestic market but are later used for the
processing of goods for export under processing contracts with
foreign parties.
4.6 Special Sales Tax (SST):
The SST is a form of excise tax that applies to the production or import of
certain goods and the provision of certain services. Imported goods
(except for various types of petrol) are subject to SST at both the import
and selling stages. Taxpayers producing SST liable goods from SST liable
 60

raw materials are entitled to claim a credit for the SST amount paid on
raw materials imported or purchased from domestic manufacturers.
The following SST rates apply:
Products/ services SST rate (%)
Cigar/Cigarettes
From 1 January 2016 to 31 December 2018 70
From 1 January 2019 75
Spirit/Wine
Spirit/Wine with ABV 20
55
From 1 January 2016 to 31 December 2016
60
From 1 January 2017 to 31 December 2017
65
From 1 January 2018 b)
Spirit/Wine with ABV < 20
From 1 January 2016 to 31 December 2017 30
From 1 January 2018 35
Beer
55
From 1 January 2016 to 31 December 2016
60
From 1 January 2017 to 31 December 2017
65
From 1 January 2018
Automobiles less than 24 seats 10 60
Motorcycle of cylinder capacity above 125% 20
Airplanes, boats 30
Petrol 7 10
Air-conditioners (not more than 90,000BTU) 10
Playing Cards 40
Votive Paper 70
Discotheques 40
Massage, karaoke 30
Casinos, jackpot games, 35
Entertainment with betting 30
Golf 20
Lottery 15
 61

5. JOINT VENTURES, INTERMEDIARIES AND SME COMPLIANCE

5.1 Joint Ventures:
Identifying suitable JV Partners: The identification of a suitable JV Partner
can often be a difficult and tedious process: Good joint JV Partners are in
high demand, and have therefore mostly already found their foreign
business partners. In other instances, the list of potential JV candidates
(fulfilling the investors requirements with respect to capital, know-how
or other matters) may be quite limited. Identifying your JV Partner
without competent help often involves great financial and timing risks.
Screening potential JV Partners: Once one or more potential JV Partners
are identified, it is essential to screen thoroughly the potential JV
Partners background, ideally in a three-step process:
- First step: The potential general risk of cooperation should be
assessed. This assessment depends on various factors such as type
of JV, the contract value, and location of the activity and whether
or not government agencies will be involved. A simple internet
search of the prospective JV Partner should be part of this step,
including search keywords such as e.g. the JV Partners name in
connection with corruption, litigation, investigation,
bribery and criminal. This is the first filter where the easy
cases can be distinguished from the more problematic cases. The
first step generally leads into classification as low, medium or
high risk.
- Second step: If the potential JV Partner poses at least medium
risk, as much specific information as possible should be collected on
the envisaged business partner. Amongst other information, this
should include: general company data, company-, audit- and
external credit rating reports (where available); information on the
reputation or violations of the law in the past, and/or information
about personal relationships to government officials. Sources of
information are e.g. relevant (payable) databases, credit reports
and other information from public records or professional service
providers.
 62

- Third step: If the prospective JV Partner poses a high risk, one

should carefully call on the potential JV Partner to provide a self-
assessment and/or to comment on the findings of the due
diligence. Such assessment will be based on questionnaires and
interviews with key persons related somehow to the JV Partner.
The information collected will then be evaluated for a final decision
on whether or not to cooperate with the JV Partner.
Negotiating the JV Contract: Where the potential JV Partner has passed
successfully the screening, a detailed JV Contract will be drafted. In some
cases, a preliminary Memorandum of Understanding (MOU) or Letter
of Intent (LoI) precedes this step. Attempts to draw up fully
comprehensive legal agreements between JV Partners in different
countries can sometimes lead to endless delays and frustrations.
Eventually, mutual trust and willingness to take some risks are needed,
and no amount of legal activity will alter this. The degree to which
reliance can be placed on mutual trust largely depends on success in
the choice of the right JV Partner.
5.2 The use of intermediaries:
Agents and intermediaries are often used by JV partners to facilitate the
success of the JV project and/or to secure lucrative contracts throughout
the term of the JV agreement. Common cases include using agents and
intermediaries as deal brokers, sales agents, distributors and suppliers.
The wide range of potential intermediaries shows the high importance of
their careful selection and monitoring. The most typical case group relates
to payments made to an agent or broker in order to secure a lucrative
contract. The agent or broker, in turn, uses the sums paid for the most
part to bribe these potential customers. Such payments are then often
referred to as "special charges", "consulting fee" or "sales commission
expenses" and recorded in the books of the company accordingly.
Such transactions bear a relatively high risk of constituting bribery or
corruption. However, such risk does not mean that the use of
intermediaries is forbidden per se. But once the use of an intermediary is
decided, it is advisable to at least check the integrity of your potential
 63

intermediary in the above described three-step process. If - even after

step three - a high risk remains, it is advisable not to use the envisaged
intermediary.
If however, it still seems essential to use the high-risk agent or
intermediary, certain safeguards should be implemented to mitigate the
risks involved: First, the intermediary should undertake in the written
advisory or agency contract to act in full compliance with the applicable
anti-corruption laws. The agreement with the intermediary should
further allow for immediate termination of the contract in case of
corruption offenses, or if such offenses seem likely. An audit right is useful
in this context. To prevent corruption from the outset, a comprehensive
activity report of the intermediarys activity should be mandatory,
including specifically which activities the intermediary has performed at
which cost. Fees for the intermediarys services should be at market
rates, and any doubtful amounts should be carefully questioned.
5.3 SME Compliance and Anti-Corruption:
While multinationals companies (MNCs) have long established worldwide
compliance departments, SMEs are mostly characterized by patriarchal
hierarchies and quick decision-making processes - due to the typical
identity of Managing Director and company owner / founder. In SMEs, the
CEO often handles compliance matters personally, based on the SMEs
traditional standards of conduct that have often not changed over
decades. Further, the identity of ownership and control in practice often
leads to unclear responsibilities and deceptive habits (such as "We have
always handled these matters this way!"). However, such traditional gut
feeling approach may put the company unknowingly into incalculable
risks: For example, an invitation or a present given to a public official in
Vietnam - in good faith - may easily constitute corruption. Long-standing
procurement and sales practices, in particular regarding the exchange of
information amongst companies, can easily violate competition laws.
Failure to comply with labor law or data protection regulations may harm
the faith in the integrity of the company. Certain remittances or payments
may unconsciously constitute money laundering and tax evasion. Such
 64

violations may not only lead to severe penalties for the company in
question, but also result in criminal convictions and possible
imprisonment of the acting managers (regardless of whether or not the
manager in charge was aware of the violation).
Elements of a Basic Compliance (Anti-Corruption) Program: The
establishment of at least a basic compliance program reduces liability
risks for the company and its management. A "minimal" compliance and
integrity program in Vietnam should have the following elements:
- "Code of Conduct" / "Tone from the Top": Essential for each
compliance program is the existence and the global
implementation of a so called "Code of Conduct" (CoC), laying
out the ground values and rules for the company and all of its
employees. Most importantly, any CoC must be introduced by
the top management, and entail a clear commitment towards a
zero tolerance policy. The CoC also forms the core of the
companys corporate culture: It is made for situations where
employees must pay particular attention to responsible action,
and therefore the CoCs rules must be concrete, concise and
binding for all employees.
- Implementation of local compliance policies: As the CoC is a
fundamental document for each company, it cannot (and should
not) go into all details. Therefore, the CoC should be locally
implemented in more detail through company policies, covering
at least the following areas: Anti-corruption; dealing with
consultants and intermediaries; compliance with antitrust laws;
donations and sponsorship activities; gifts, entertainment and
invitations; data protection; prevention of money laundering
and terrorist financing; export control; economic crimes.
- Compliance Hotline, Helpdesk and regular trainings: Even after
carefully reading the companys CoC and corporate policies, an
individual employee may still not be certain about how to act in
a particular conflict situation. To help such employees, and more
importantly to make the CoC a living document, companies
 65

should establish at least one (external) Compliance-Hotline or

Helpdesk, where employees can take their questions to an
outside expert. Outsourcing such hotline or helpdesk to external
lawyers guarantees accuracy, anonymity and neutrality. Further,
regular compliance trainings should be held, and ideally those
training should be extended to the companys business partners.
Process and Responsibilities: A compliance program can only work when
the exact responsibilities for compliance within the company are clearly
defined. Once compliance responsibilities are delegated to several people
with potential overlap, no one feels responsible, and confusion is
inevitable. We recommend that if no full-time Compliance Officer may be
appointed, the Chief Financial Officer (CFO) of the local entity should be in
charge for local compliance. Delegating to the CFO also has the advantage
that they are usually pre-qualified for compliance matters.
Ongoing monitoring and improvement: A compliance program must have
clear processes in place, so that violations will be detected and efficiently
sanctioned. Therefore, a continuous control- and monitoring system
should be established. There must be no doubt that compliance violations
will eventually be both detected and punished. Compliance processes
should also state what happens if a compliance case has occurred and the
authorities are aware. In such case, or in cases of dawn raids, it must be
clear that only full cooperation with the authorities will be tolerated by
the company. Finally, complete documentation and archiving of alleged
compliance violations are essential.
 66

6. LABOR AND EMPLOYMENT LAW

6.1 Types and contents of labor contracts:
Types: The Vietnamese Labor Code distinguishes three (3) types of labor
contracts: i) Indefinite term labor contracts; Definite term labor contracts
(from 12 to 36 months); and iii) Less-than-12-months term labor contracts
(hereinafter referred to as seasonal contracts). Signing a seasonal
contract with a duration of less than one year is prohibited for tasks of a
non-seasonal nature, except when temporary replacement is necessary
for an employee who is called for military duty, takes maternity leave or is
temporarily absent for other reasons.
Form and contents: Any labor contract must be made in writing. Where
the first definite term labor contract has expired but the employee
continues to work, the parties must sign a new labor contract within 30
days from the expiry date of the first contract, otherwise, the first definite
term labor contract will automatically become an indefinite term labor
contract; an employer is entitled to signing definite term labor contracts
with an employee maximum twice; and thereafter, if the employee
continues to work, the two parties must enter into an indefinite term
labor contract. Any labor contract must include at least the following
contents:
- Name and address of the employer or the legal representative,
- Full name, date of birth, gender, residence, ID number or other
legal papers of the employee,
- Work description and work location,
- The labor contract term,
- Salary, method of salary payment, salary payment term,
allowance and other additional pays,
- Grade and salary increase regime,
- Working hours and break time,
- Labor protection equipment for the employee,
 67

- Social insurance and medical insurance,

- Rules on training and improvement courses.
The employer is by law entitled to conclude a written confidentiality
agreement with the Employee on the contents and term of business
secrets, technical know-how protection, and the interests and
compensation for the employees violations of confidentiality.
The standard employment contract template of the Ministry of Labor,
Invalids and Social Affairs (MOLISA) only contains above stated minimum
provisions, but not specific contain provisions designed to protect the
interests of employers, such as for example provisions on confidentiality,
non-competition, non-poaching, conflict of interest and anti-corruption.
Foreign companies operating in Vietnam are therefore advised to create
both a specific labor contract template for their companies, and a
comprehensive system of internal rules to specify employees obligations
and responsibilities by way of:
- Specifying additional terms and conditions to the labor contract,
including major obligations such as non-disclosure of business
information and trade secrets and non-competition (working for or
advising the employer's competitors);
- Issuing a set of mandatory Internal Labor Rules (ILRs) to set out the
obligations and requirements applicable to all employees, and
registering those ILRs with their respective Department of Labor,
Invalids and Social Affairs (DOLISA); and ideally
- Creating for the company and all employees a comprehensive
Code of Conduct (CoC), covering all major compliance topics
(such as anti-corruption provisions, antitrust- and competition laws,
money-laundering and data protection).
6.2 The Internal Labor Rules / Labor Regulation:
Under the Vietnamese Labor Code, companies operating in Vietnam must
issue Internal Labor Rules (ILRs) if they have 10 or more employees.
Regarding the issuance process, the company's employees must be
publicly notified of the ILRs. The ILRs are the basic legal document on
 68

which the company has grounds to discipline its employees. ILRs must
contain at least the following:
- Working hours and rest time,
- Order at the workplace,
- Labor safety and hygiene at the workplace,
- Protection of assets and business and technology secrets and
intellectual property of the employer,
- Acts of violation of the labor rule of the employee and the forms of
labor discipline and material responsibility.
Before issuing the ILR, the Employer must consult the representative
organization of the labor collective/union. The ILRs must then be notified
to all employees and workers, and their main contents must be posted
within the company. ILRs become will be effective 15 days after the date
the provincial-level state management agency of labor receives
Employers registration dossier. In the absence of registered ILRs,
companies operating in Vietnam will find it very difficult to discipline and
particularly to dismiss employees, even in seemingly clear cases of labor
law violations.
6.3 Probationary period:
Employer and Employee may agree on a probation period. If such
probation is agreed, a probation contract may be concluded. The
permissible maximum probation duration varies as follows: i) 60 days for
work that demands a college education or similar; ii) 30 days for work
that demands vocational training / intermediate education, and for
technical workers; and iii) Six working days for other kinds of work. The
Employees salary during the probation period must be at least 85% of the
official later salary. If the probation is successfully passed, the Employer
must conclude the labor contract with the Employee. During the
probation period, each party is entitled to terminate the probation
without prior notice and without compensation if the probation fails to
satisfy the requirements agreed by both parties.
 69

6.4 Suspension of labor contracts:

A labor contract can only be temporarily suspended if the employee is i)
called for military duty or other citizen duties prescribed by law; ii) taken
into temporary custody or detention; or ii) in other circumstances as may
be mutually agreed upon. At the end of the temporary suspension of the
labor contract, the employer must generally reinstate the employee.
6.5 Termination of labor contracts:
Automatic termination: The labor contract is terminated in the following
circumstances: i) expiry of the contract; ii) the tasks stated in the contract
have been completed; iii) both parties agree to terminate the contract; iv)
the employee is sentenced to serve a jail term or is prevented from
performing his former job in accordance with a decision of a court; v) the
employee dies or is declared missing by a court.
Termination by employee: An employee who signs a labor contract with a
definite term of 12 - 36 months, or for seasonal work or a specific task of
less than 12 months, is entitled to unilaterally terminate the contract
prior to expiration if the employee:
- is not assigned to the work or workplace, or working conditions as
agreed under the labor contract;
- is not paid the full amount or at the time specified in the labor
contract;
- is subject to maltreatment or forced labor;
- cannot continue their employment due to adverse personal or
family difficulties;
- is elected to a full-time position in a representative public office or
is appointed to an office in the State apparatus;
- is sick or involved in an accident requiring medical treatment for
either three consecutive months in respect of a fixed-term labor
contract of 12 months to 36 months, or a quarter of the contract
term in respect of a seasonal job or a specific job with a term less
than 12 months; or
 70

- in the case of female employees, is pregnant and must stop

working based on the advice of a doctor.
When the employee decides to unilaterally terminate the labor contract,
he/she must notify the employer of the termination in advance. The time
for advance notification depends on the circumstances of the unilateral
termination. Under the new Labor Code, it looks like the employee must
also state the reason for his unilateral termination in writing in his
resignation letter. However, it is not entirely clear what happens if he
doesnt and whether or not the reason can also be stated later
(potentially as late as in court proceedings). As Vietnamese Labor Laws
are traditionally employee-friendly, Vietnamese courts are likely to allow
later statement of reasons and/or at least not to impose compensation
payments on the employee in case he does not give a reason for
resignation in his resignation letter. An employee who signs a non-
definite term labor contract is entitled to unilaterally terminate the
contract whenever he/she wishes so, provided that a 30/45 day prior
notice is duly given to the employer.
Termination by employer: It is generally difficult for employers to
unilaterally terminate labor contracts in Vietnam. During the term of a
labor contract, unilateral termination by an employer is permitted only in
the following circumstances:
- the employee regularly fails to perform his contractual duties;
- the employee is dismissed for disciplinary reasons;
- the employee has been sick for an extended period (6 months or 12
months depending on the term of the employment contract);
- the employer is forced to make cuts in the production and
workforce due to force majeure events such as fire or natural
disaster; or
- the company or organization ceases operations.
If an employer unlawfully terminates a labor contract, the employer is
obliged to i) reinstate the unlawfully terminated employee into their
(former) employment, and ii) compensate the unlawfully terminated
 71

employee with an amount equivalent to his/her salary and salary

allowances (if any) for the days he/she was prohibited from working due
to the unlawful termination plus at least two-month salary and salary
allowances (if any).
If the employee does not want to return to work for the employer, he/she
will be entitled to receive severance pay equivalent to a half month salary
for each year of his/her service in addition to the foregoing
compensation. If the employer does not want the employee to return to
work, the employer will be obliged to pay the employee severance and
compensation (as set out above) and an additional amount to
compensate the employee for the loss of job. The compensation amount
can be agreed by the parties.
6.6 Dismissal:
The most common reason for a unilateral employer termination is
dismissal for disciplinary reasons. However, there are legal restrictions as
well as procedural requirements of which employers should be aware
when dismissing employees. For example, employers must obtain the
trade union's opinion prior to unilateral termination, and generally give
the employee a written warning notifying him/her of the alleged labor
contract violation. Dismissal is permitted only when the employee has
committed one (or more) of the following acts:
- theft, embezzlement and disclosure of technological and business
secrets;
- any act that causes severe losses to the company's assets or
interest;
- repeating a breach while a disciplinary sanction remains in place for
an earlier breach (this is only applicable where the sanction in
question involves either a delay in awarding a salary rise to the
relevant employee or the transfer of the relevant employee to
another job);
- repeating a breach after being demoted for the earlier breach; or
 72

- absence for 5 working days or more in a month or 20 working days

in a year without justifiable reason.
Dismissal is not permitted with employees who are currently:
- Taking sickness or convalescence leave or a leave with the
employers consent,
- Kept in custody or temporary detention,
- Waiting for results of verification and conclusion of a competent
agency for acts of violation specified above,
- Female employees who are pregnant or on maternity leave or
raising a child under 12 months of age,
- Employees who violate the companys ILRs while suffering a mental
disorder or another disease which deprives him/her of the capacity
to perceive or control his/her acts.
Dismissal requires the Employer to evidence the employees fault, written
statements by the violating employee and a witness (or witnesses), and a
written warning to the employee stating exactly when he / she has
committed each violation, with signature/stamp of the employer, to be
acknowledged (not necessarily: accepted) by Employee. Emails are not
sufficient: A warning letter must be made in writing and with the
signature/stamp of the employer, to be acknowledged (not necessarily:
accepted) by Employee. In practice it is recommended to have two (2)
warning letters, in first of which employee is set a deadline to
correct/adjust his wrong behavior or actions.
Before the issuance of official decision on dismissal, a meeting on
handling labor discipline must be held with the attendance of trade
unions representative and the violating employee to defend
himself/herself or ask a lawyer or another person to defend him/her; if
the employee is under 18 years old, his/her parent or at-law
representative must participate in the handling. A written notice of the
participation in this meeting must be sent by employer to these people at
least 5 working days prior to the meeting.
 73

6.7 Retrenchment:
A company may retrench its employees where there is an organizational
restructuring or technological change, including i) partial or complete
changes of machinery or equipment or replacement by advanced
technological process in order to achieve increased capacity; ii) changes
of product lines or structure of products leading to a reduction in the
number of employees required; or iii) merger or dissolution of a number
of departments within the company. Where one of the above
circumstances arises, which results in the redundancy of an employee
who has worked for the company for 12 months or more, the Labor Code
requires the company to retrain the affected employee and to assign
him/her to a new job that may be available at the company. If no new job
is available, the company may terminate the employment of the
redundant employee and the employee is entitled to retrenchment
allowance equivalent to one month's salary for each year employment,
with at least two months guaranteed.
6.8 Wages, overtime payments, and statutory minimum wages:
The Labor Code requires foreign-invested enterprises to denominate and
pay wages to Vietnamese employees in VND. Salaries for foreigners may
be denominated and paid either in VND or foreign currency. The
Government decides and publishes a minimum wage which varies,
depending on geographical regions and types of work. In particular,
foreign invested companies must not pay salaries to their employees
lower than the statutory minimum wage levels applicable to untrained
laborers. Overtime on a normal working day (six days of the week and
non-public holidays) must be at least one and half times the normal
hourly rate. On non-working days (1 day a week) overtime pay is at least
twice the normal hourly pay, while overtime on public holidays and paid
annual leave is three times the normal pay rate. Overtime may not exceed
4 hours a day or 16 hours a week, up to 200 hours in a year or 300 hours a
year in special circumstances.
 74

6.9 Working time and leave:

A normal working week is 48 hours, comprising six 8-hour working days,
but this may be extended by mutual agreement. Employees working in
dangerous, noxious, or especially toxic jobs (as defined by MOLISA) will
have their working day shortened to 6 or 7 hours. An employee working
for at least 12 months is entitled to annual leave of 12 days in addition to
public holidays. Especially certain hazardous and toxic jobs are entitled to
either 14 or 16 days annual leave as determined by the Government.
Employees will be compensated for their untaken leave prior to departure
from work. An employee is entitled to paid leave for the following
personal reasons: marriage (3 days' leave); marriage of son or daughter (1
day's leave); and death of parents, spouse's parents, spouse, son or
daughter (3 days' leave). Female employees are entitled to maternity
leave of at least six (6) months, with an allowance equal to 100% of the
salary to be paid by the Social Insurance Fund.
6.10 Severance payments:
In some cases of termination, such as dismissal, the employer may be
responsible to grant a severance payment to employees that have been
working for 12 months or more. In such case, a half- month salary shall be
paid for each working year. The working time for severance pay
calculation is the total duration that the employee has actually worked for
the employer excluding the time the employee has taken the
unemployment insurance as prescribed in the Law on Social insurance
and the time the employer paid the severance pay. The salary for
severance pay calculation is the average salary under the labor contract of
the preceding 6 months before the employee is dismissed.
6.11 Labor disputes:
For individual disputes over unilateral termination, dismissal,
compensation for termination and payment of social insurance the
statute of limitation is one (1) year. In these cases, mediation /
reconciliation is not a requirement for court procedures, so these types of
labor disputes may be referred directly to a competent labor court.
However, it is not entirely clear whether or not these dispute types may
 75

only be brought to court by employees, or if they also apply equally for

the employer (e.g. if employer claims compensation/damages from
employee with the reason that the employee has illegally terminated his
labor contract by failing to state the reason for termination in his
resignation letter, and consequently breached his notification period).
For all other individual labor disputes, the statute of limitation is six (6)
months, mostly to protect the employee. In these case groups, the
dispute must first be referred to, and settled by, the labor reconciliation
council at the relevant enterprise (the Enterprise Reconciliation Council)
or the Labor Conciliator. Only if mediation/reconciliation fails, either party
may refer the dispute to the relevant court for hearing.
 76

6.11 Employers social security obligations:

Social Insurance: Employers of Vietnamese employees are obliged to
contribute 3% to the sickness and maternity fund, 1% to occupational
accidents and occupational diseases fund, 14% to retirement and death
fund (totally 18%) of an employees salary to the Social Insurance Fund.
The employee contributes 8% to retirement and death fund. All
contributions and benefits are based on the employees gross monthly
salary. If the gross monthly salary is higher than 20 times the
Governments country-wide minimum salary, then for calculating social
insurance contributions, the salary will be deemed at 20 times the
country-wide minimum salary.
Health Insurance: Both Vietnamese and foreigners employed in Vietnam
for three (3) months or more are subject to compulsory health insurance
contributions (the HIC). The HIC is based on contractual salary and
wage, but capped at 20 times of the regulatory minimal wage.
Unemployment Insurance: Unemployment insurance compensates
Vietnamese employees when they lose their jobs or are terminated.
Employer, employee, and the State will each contribute 1% of the salary
on which contribution is based, up to 20 times the country-wide minimum
salary.

Item Paid by employers Paid by employees

Social insurance 18% 8%
Health insurance 3% 1.5%
Unemployment insurance 1% 1%
Total 22% 10.5%
 77

7. WORK PERMITS
7.1 General requirements:
All foreign nationals who wish to work in Vietnam for three (3) months or
more must obtain a work permit. Unless a work permit is not required or
an exemption applies, any employer in Vietnam and the foreign national
only enter legally into an employment contract after a work permit has
been issued by the DOLISA. A foreigner intending to work in Vietnam
must meet all of the following conditions: i) Have full legal capacity for
civil acts, ii) have good health appropriate for working in Vietnam, iii) be a
managing person, executive director, expert or technician, and iv) have
not been convicted of a crime or been prosecuted for criminal
responsibility under the law of Vietnam and of the foreign country.
7.2 The approval of demand:
Prior to hiring foreign employees, employers must file an annual report of
demand on their use of foreign workers to the local Labor Department for
approval by the Peoples Committee. As a pre-requirement to recruit a
new foreign worker, the employer must get approval from the local
Peoples Committee, and an application for a work permit cannot be
processed until gaining this approval. After the approval of demand from
the Labor Department via the Peoples Committee, the foreigner can
enter Vietnam on a single entry visa by using a previously prepared visa
authorization letter or on a multiple-entry visa obtained a Vietnamese
embassy or consulate.
7.3 Cases in which no work permit is required:
Since April 1st, 2016, foreign nationals who wish to work in Vietnam for a
shorter time period are not required to apply for a work permit in the
following cases:
- Experts, managing persons, executive directors or technicians who
will work in Vietnam less than 30 days and not more than 90 days
within 1 year;
 78

- Persons entering Vietnam for a period of under three months in order

to resolve an incident (breakdown) or technically or technologically
complex situation arising and affecting, or with the risk of affecting
production or business with which Vietnamese experts or foreign
experts currently in Vietnam are unable to deal;
- Persons entering Vietnam for a period of under three months in order
to offer services.
7.4 Cases which are exempted from work permit requirement:
Foreign nationals who wish to work in Vietnam may apply for an
exemption to the work permit requirement in the following cases:
- Capital contributing member or owner of a limited liability
company in Vietnam;
- Member of the Management Board of a shareholding company in
Vietnam;
- Head of a representative office/project of an international
organization or non-governmental organization in Vietnam;
- Entering Vietnam for a period of under three (3) months in order to
offer services;
- Entering Vietnam for a period of under three (3) months in order to
resolve an incident (breakdown) or technically or technologically
complex situation arising and affecting, or with the risk of affecting
production or business with which Vietnamese experts or foreign
experts currently in Vietnam are unable to deal;
- being a foreign lawyer licensed to practice in Vietnam;
- being a student studying in Vietnam;
- being a managing person, executive director, expert, or technician
of a foreign enterprise which the foreigner joined at least 12
months before, and thereby being internally transferred within that
enterprise to a commercial presence in Vietnam; this exemption
only applies to enterprises carrying out certain service lines
included in Vietnams WTO commitments, such as business,
 79

information, construction, distribution, education, environment,

financial, medical health, tourism, culture and entertainment, and
transportation;
- Entering Vietnam to work for a program/ project funded by Official
Development Assistance (ODA) agreed between Vietnam
competent authorities and foreign countries;
- Acting in the field of information and press; permission by the
Ministry of Foreign Affairs is needed;
- Working as a teacher in a foreign agency or organization and being
appointed by the competent authority of a foreign country to come
to Vietnam to teach in an international school managed by a
foreign diplomatic office or international organization in Vietnam;
or having a confirmation from the Ministry of Education and
Training allowed to teach and doing research at Vietnam
educational establishments;
- Volunteers; confirmation from a foreign diplomatic office or an
international organization needed;
- Coming Vietnam to work as an expert, managing person, executive
director or technician under 30 days and not than 90 days in total
for 1 year;
- Foreign students in foreign schools coming Vietnam to work as an
intern;
- Implementing an international agreement signed by a central state
agency or a provincial agency;
- Family members of persons in foreign diplomatic mission in
Vietnam; a permit from Ministry of Foreign Affairs is required;
- Persons holding an official passport coming Vietnam to work for
state authorities; political organizations or socio political
organizations; and
- Other cases pursuant to government decision.
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7.5 Application process:

The application process is supposed to only take 15 working days, but
may take longer in practice. Therefore, companies planning the
secondment of a non-exempted employee to Vietnam are advised to
apply for the work permit ideally at least two (2) months in advance of
the foreign employees intended arrival / start date. Before arriving in
Vietnam, the foreign employee must send the employer a notarized
police clearance certificate from their home country, and the employer
must get it and all other necessary documents legitimized / legalized and
translated into Vietnamese. Documents next to the criminal record
include a health certificate, curriculum vitae and certificates regarding the
skills of the foreign national (such as university degree or evidence of
relevant experience).
7.6 Renewal:
After initial approval, a work permit is valid for a maximum of two (2)
years and cannot be extended. Instead, it must be reissued in an almost
identical process to getting the original work permit. In the renewal
application, the employer must clearly state the reasons why replacement
of the foreign national with a Vietnamese person was not possible, and
the name of the Vietnamese person being trained to replace the foreign
national, the training expenses, the time period of the training and the
place of training. Under the new regulation, a training agreement must be
included in the renewal application.
7.7 Sanctions for breaches:
Working in Vietnam without a valid work permit is a violation of
Vietnamese law. Such breach is subject to administrative sanctions for
both the foreign employee and the employer with sanctions as follows: i)
fines to be paid by the employer with an amount from 30 to 75 million
VND (depending on the total number of breaches); ii) shutting down of
the employers business operations for a period up to three months.
Foreign nationals who work in Vietnam without a valid work permit may
face expulsion from Vietnam.
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7.8 Residence Cards:

Temporary residence: If a foreign national intends to stay in Vietnam for
more than one year and is legally registered for investment (having
papers proving the investment in Vietnam), employment (having work
permits) or for study (having written acceptances of a Vietnamese school
or an education institution) in Vietnam, an application must be filed with
the Immigration Office at the provincial-level or Immigration Department
under Vietnam Ministry of Public Security (MPS) in order to be granted a
temporary residence card (TRC). Processing should in theory take only
five working days only, however in practice significant delays have been
experienced. Depending on entry purposes, the TRCs are valid for one to
five years provided that it is 30 days shorter than the validity period of the
passport. For example, validity period of TRCs for foreign investors shall
not exceed 5 years, but validity period of TRCs for foreign employees shall
not exceed 2 years. The application may be considered for renewal or
extension. After receiving a TRC from the Ministry of Public Security
(MPS), a foreigner is not required to renew their visa periodically, and a
TRC acts as an official ID and a multiple-entry visa when traveling outside
Vietnam.
Permanent residence: Only the following temporary resident foreign
nationals may be considered for permanent resident status: i) persons
who have fought for freedom and independence of the people, for
socialism, for democracy and peace or for scientific work and for which
they were harmed; ii) persons who have contributed to the development
and protection of the Fatherland; and iii) persons who are spouse,
children or parents of Vietnamese citizens residing permanently in
Vietnam. Foreign nationals who would like to apply for permanent
residency may do so with the entry/exit management authority under the
MPS. Once given permanent residency status, a permanent residency
card will be issued to the concerned person and with this card; such
person is exempt from entry/exit visa.
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8. LAND AND REAL ESTATE LAW

8.1 Legal framework:
Vietnam, on behalf of its entire people, owns and administers the land,
and land-users own merely the right to use the land. Accordingly, the
Land Law only recognizes land ownership in form of so-called land use
rights ("LURs"). The Land Use Right Certificate ("LURC") is similar to a
title deed in most countries and evidences ownership of the land.
However, the LURC, unlike a title deed, is technically speaking only a
certificate of ownership of the LUR. Vietnamese land law distinguishes
three (03) main regimes to acquire LURs:
- Allocation of LURs: In such case, the LUR will be granted on a
long-term basis, i.e. without a specific duration of use. However,
LURs will mostly be allocated to Vietnamese citizens for limited
purposes. Accordingly, allocation resembles real ownership.
- Lease of LURs: In such case, the LUR will be granted for a specific
duration of time against the payment of a usage-fee. Accordingly,
the Lease even where sometimes referred to as ownership and
with lease paid upfront - actually does not resemble real
ownership.
- Recognition: In such case, the LUR will be first granted for the
stable land use which does not originate from allocation or lease.
The State can "recognize" the LUR to national entities only.
The term or duration of the LUR for foreign investors is usually 50 years,
and may be up to 70 years (in the case of residential land or in special
circumstances). Foreign investors may obtain LURs by way of:
- Entering into a lease-agreement with the state, and payment of
land rental on an annual basis or in one upfront lump-sum
payment;
- Entering into a Joint Venture (JV) with a Vietnamese party, and
obtaining the LUR as the Vietnamese JV partners capital
contribution to this JV;
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- Acquiring a project from other investors, and taking-over the

projects current lease;
- Receiving a land allocation from the state, with payment of the land
use fee for investment projects on the construction of houses for
sale or for a combination of sale and lease.
Determination of land prices: Land prices may be determined in three (3)
ways: i) By the relevant Peoples Committee, ii) via auction, or iii) by land
users upon transfer/lease, sublease of land use rights or contribution of
land use rights as capital. Minimum land prices are based on the
published land price list issued on the first of January every five (5) years
by the Peoples Committee of each city or province. This list sets the
(minimum) value of land, taking into account location and designated use
of the land. The Peoples Committees determine land prices specifically
for the purposes of assessing:
- Land use fees and land use tax,
- Penalties for administrative violations of the Land Law,
- Compensation payments, and
- Calculating the LUR value in case of voluntary return of land.
The Land Law requires that the land price is determined on a case-by-case
basis by the provincial Peoples Committee. The government may hire
land valuation firms to determine and advise on the land price.
Payment of land lease fee: The Land Law does not distinguish between
local and foreign investors: Both may lease land from the government and
pay rent on an annual basis or as a lump-sum payment. Both may also
acquire land via land allocation. Where foreign investors decide to lease
land from the Government, two payment methods are available:
- Annual rental payment: Under a land lease with annual Payment,
the foreign invested company may use the land only, and is allowed
to transfer, sub-lease or mortgage just the assets attached to the
land, not the LUR itself.
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- Upfront payment for entire lease term: Foreign invested

companies paying upfront for the entire lease terms are entitled to
transfer both the LUR and the assets attached to the land,
subleasing land and assets attached to the land, contributing the
LUR and assets attached to the land as capital to JVs, mortgaging or
guaranteeing the LUR to credit institutions in Vietnam during the
lease term.
If paid annually, the rental is generally 1% of the land value, but a higher
rate of not more than 3% may be applied, and a lower rate of not less
than 0.5% may be applied for low-yield or agricultural land. Where the
rental is paid in one lump-sum, the amount is generally the same as it
would have been if the land had been allocated rather than leased. For
allocations, the land use fee is payable in full upfront at the time the land
is allocated.
Land contribution by a local party to a JV-company: A lot of cases in
which foreign investors acquire land relate to Joint Ventures (JVs)
between foreign investors and a domestic Vietnamese enterprise that
contributes the LUR into the JV in kind, i.e. through contributing the
LUR, valued at its current market price (with the minimum price being
annual Peoples Committees list). The reason is that foreign investors in
most cases cannot obtain that land without jointly investing with the
existing Vietnamese LUR owner, as the relevant land - often located in
attractive investment areas - has been in use by local entities (often state-
owned enterprises). In situations in which foreign investors do not want
to enter into a JV with a Vietnamese company, they can obtain the LUR by
leasing the land directly from the Government after establishing a 100%
foreign-owned company in Vietnam.
Mortgage over LURs: While private ownership of land is not permitted,
Vietnamese law recognizes in principle mortgages over LURs in favor of
banks and credit institutions licensed in Vietnam. Accordingly, LURs
cannot be mortgaged in favor of offshore banks and financial institutions
that are not licensed in Vietnam. To be eligible for giving a mortgage over
LURs, a foreign invested lessee is required to upfront payment of the
 85

entire lease period. In practical terms, there are limits to the value of the
entitlement to mortgage LURs due to the absence of reliable enforcement
procedures. In addition, the comparatively short term of a land lease
(maximum 50 years, or 70 in limited circumstances) means that it does
not constitute a particularly attractive form of security for mortgage
purposes, where internationally a longer term (i.e. 99 years) is the norm.
Land withdrawal: A land withdrawal for a commercial or residential real
estate investment project must satisfy two conditions: (i) it must be
justified by a significant alternate project approved by the National
Assembly, the Prime Minister or the provincial-level Peoples Councils for
which land must be withdrawn, and (ii) it must have prior withdrawal
approval from the relevant land authority.
Notarization requirements: All contracts related to land transactions
must be notarized at the notary public office, except for the transfer or
lease of a property of which the owner or the landlord is licensed to do
real estate business.
8.2 Real estate developments projects:
Both the Land Law sand the Law on Real Estate Business set out strict
requirements for both local and foreign developers, who want to lease or
obtain a land allocation from the government to implement a real estate
investment project. Those requirements are - among others - as follows:
- Charter capital requirements for developers: The legal capital
requirement to engage in the real estate business shall be
determined by the government but must be at least VND 20 billion.
- Equity capital requirements for developers: Developers must
contribute a certain percentage of the project investment capital as
equity capital. For example, for an investment project with a land
area of less than 20 hectares, the developers equity capital must
be at least 20% of the total estimated investment capital of the
project. For a project of 20 hectares or more, the equity capital
must be at least 15%.
 86

- Guarantee for sale or lease of future residential houses: Before

they can sell or lease out/sell residential houses that have yet to be
built, investors in real estate projects must be guaranteed by credit
institutions licensed to operate in Vietnam for such sale and lease
out/sale so that, should they fail to hand over residential houses as
agreed in the sale, lease out/sale contract, the purchaser or the
lessee- purchaser may ask the guarantor to return the advances
and other payments they have made to the investors.
- Deposit payments to government: Developers must pay deposits
to the government to ensure that they will pay the land rent or land
use fees and develop the projects in a timely manner.
The developers obligations towards buyers include:
- They have to invest in the construction, trading, management and
operation of real estate projects as prescribed by applicable laws,
and they must ensure financial resources to run the projects on
approved schedules.
- They must only transfer a house or building to clients if that
building or other infrastructure is finished on schedule as specified
in the approved project, and they are connected to general
infrastructure in such area; in case a house or an unfinished
building is transferred, the whole outside of such house or
construction must have been completed.
- They must apply for the Land Certificate, and ownership of houses /
property on land granted to the buyer or the renter must be issued
by competent agencies within 50 days from the day on which the
house or the building is transferred to the buyer or from the
deadline of lease purchase, except that the buyer or the renter
requests in writing that they shall apply themselves for the Land
Certificate.
Assignment of (parts of) a real estate project: An investor carrying out a
real estate project is permitted to assign the whole or part of the project
to another investor. However, the assigned project must not change the
 87

objectives and contents of the project, and must protect the interests of
the customers and interested parties. The conditions for such transfer
are: (i) the land price and other related financial obligations must be fully
paid by the selling developer, (ii) the land must have been issued a LURC,
and (iii) the transferee conducts relevant and permitted business lines,
and satisfy the conditions prescribed in the Land Law and its guiding
decrees. For the transfer of individual land plots without any houses
constructed on them, the following conditions apply: i) the developer
must have fully paid the land price and other financial obligations for the
project land, ii) the developer has constructed the infrastructure of the
project, iii) the project is not located in the central districts of the city or
province, and iv) the provincial Peoples Committee where the land is
situated agrees to the transfer.

No restrictions on minimum areas of residential houses: The minimum

construction floor area of each condominium apartment shall be 45m2;
the minimum area of an attached house shall be 50m2, with the front
width not less than 5m; and, for a villa, the height must not be more than
3 floors and the construction area must not be more than 50 percent of
the land area. Under the Housing Law, the standard area of each
commercial residential house shall be as decided by the project investor
in conformity to the construction zoning plan, the construction standards
and regulations, and the document approving the investment project.
8.3 Foreign ownership of residential housing:
Under the Housing Law, the following individuals and entities are entitled
to purchase residential housing (apartments, condominiums and houses)
in Vietnam:
- Investors with residential house construction projects in Vietnam;
- Foreign-invested enterprises, branches and representative offices
of foreign enterprises, foreign investment funds and branches of
foreign banks operating in Vietnam: For foreign entities, house
ownership must not exceed the period stated in the Investment
 88

Registration Certificate, including extensions of the term operating

in Vietnam.
- Foreigners permitted to enter Vietnam: Any foreigner with an entry
visa is authorized to purchase an apartment, condominium or
house.
The ownership period is 50 years and can be extended. The individuals or
entities mentioned above may purchase, lease-purchase, receive as a
donation or heritage, or possess not more than 30 percent of the
apartments available in a condominium. For separated residential houses,
including villas and attached houses in a population area equivalent to a
ward administrative unit, the permitted subjects may purchase, lease-
purchase, receive as a donation or heritage, or possess up to 250 houses.
With respect to LURC concerning apartment owners, the LURs and LURC
of the land an apartment building is built on are owned jointly by the
building's unit owners. At first, the initial LURC is issued to the developer.
Then, when the developer sells units in a building, the apartment owner
receives an LURC stating the land is jointly owned and the developer's
LURC is amended to reflect the joint ownership. For common areas used
by one or more apartment buildings, separate LURC may be issued to the
developer or the management company.
 89

9. INTELLECTUAL PROPERTY RIGHTS PROTECTION

9.1 Legal framework:
Vietnams intellectual property right (IPR) legislation is covering most
aspects of protection of IPR in accordance with international standards
required by the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). The following types of IP Protection exist:
Type Description Duration
Patent A technological solution presenting 20 years from the date of
worldwide novelty, an inventive step application for invention
applicable in socio-economic fields. patents. 10 years from the
date of application for utility
solution patents.
Trademark Marks used to distinguish goods or 10 years from the date of
services of different organisations and application, renewable for
individuals. They may take the form of successive 10-year periods
words, images or any combination without limit.
presented in one or more colours.
Industrial The outward appearance of a product 5 years from the date of
design embodied in three dimensional application, renewable for
patent configuration, lines, colours or a two additional periods of 5
combination of such elements. years each, up to a
maximum of 15 years.
Trade information obtained from financial or Recognized and enforceable
Secrets intellectual investment activities, which but only if both violation
has not been disclosed and is applicable and specific damages can be
in business evidenced.
Trade The designation of an organization or Entire duration of use
name individual used in business activities in
order to distinguish the business entity
bearing such trade name from other
business entities in the same business
sector and area
Copyright Rights of an organisation or individual to Authors life plus 50 years
works which such organisation or except movies, photos,
individual created or owns. Works plays, and applied fine arts
means a creation of the mind in the works, which enjoy 75
literary, first artistic or scientific sectors, years protection from date
expressed in any mode or form. of first publication.
 90

Vietnam is a member of a variety of international conventions regulating

IPR matters, amongst others the TRIPS, the Berne Convention, the Paris
Convention for the Protection of Industrial Property, the Madrid
Agreement concerning the International Registration of Marks, the Rome
Convention for the Protection of Performers, the Producers of
Phonograms and Broadcasting Organizations, the Patent Cooperation
Treaty and the International Convention for the Protection of New
Varieties of Plants.
9.2 Patent protection:
Definition and patents types: A patent is an exclusive right granted for an
invention, which is defined as a product or a process that provides, in
general, a new way of doing something, or offers a new technical solution
to a problem. Patents are required to show inventiveness (a new
technical solution or improvement to a product or process), novelty (it
has not been published or disclosed to the public before), and an
industrial applicability, as is the case in most international patent
systems. There are two types of patents under Vietnamese law:
Invention patents and Utility solutions patents. Unlike invention
patents, utility solution Patents do not require an inventive step.
However, the law still requires the utility solution to be something more
than common general knowledge. The registration process is different as
is the length of protection.
Invention Patents are granted for inventions that are novel, involve an
inventive step, and have an industrial application. An invention is deemed
novel if it has never been publicly disclosed inside or outside Vietnam
prior to the filing or priority date, either by means of use, written
description, or in any other way. An invention is not considered publicly
disclosed if it is known to only a limited number of people who are
obliged to keep it a secret. An invention is deemed as involving an
inventive step if the invention constitutes an inventive process, and
cannot easily be created by a person with average knowledge in the
relevant field. The assessment is made by taking into account technical
solutions that have already been publicly disclosed inside or outside
 91

Vietnam prior to the filing date or priority date (if priority is claimed). An
invention is considered capable of industrial applicability if it can be
developed to the stage of mass manufacturing of the invention or to
repeat application of the inventive process.
Registration process: To obtain a patent, an application must be filed
with the National Office of Intellectual Property of Vietnam (NOIP).
Vietnam operates under a first-to-file system, meaning that the first
person to file a patent in Vietnam will own that right once the application
is granted, regardless of whether another party was the inventor or the
first to use the patented creation. This means that if a potential partner or
other third party files your patent or trade mark in Vietnam before you
do, that party will be the legal owner of your IP. Therefore, it is essential
to make your IPR registrations in Vietnam before commencing business
dealings there, and to be careful how much information you disclose to
third parties such as business partners or in the framework of joint
ventures.
As Vietnam is a party to the Paris Convention, applicants for invention
patents and utility solution patents are entitled to a right of priority if
the same filing has been made within the last 12 months in any other
country also belonging to the convention. This is very useful to patent
owners because after first filing the application in their home country,
they then have 12 months of leeway to decide which other countries they
want to register in, before having to commence international filings. The
eventual protection granted in Vietnam (or other countries) within the
time limit will be measured from the original filing date in your own
country, and will overrule any other filings made in Vietnam in the interim
period.
Scope of protection: Once the patent is granted, invention patents last 20
years from the filing date in Vietnam, with no possibilities for
extension/renewal. The registration process typically takes up to 20
months. Utility solution patents last 10 years from the filing date in
Vietnam, with no possibilities for extension/renewal. The registration
process typically takes up to 18 months.
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9.3 Trademark protection:

What is a trademark? A trade mark is a sign that allows consumers to
distinguish goods or services of one producer from those of another.
Trademarks are eligible for protection under Vietnamese law provided
that these are visible signs in the form of letters, words, drawings or
images including holograms, or a combination of these, represented in
one or more colors. A mark is distinctive if it consists of one or more easily
noticeable and memorable elements, or of many elements forming an
easily noticeable and memorable combination. In Vietnam three-
dimensional signs (shapes) can be registered as trademarks, but
trademarks based on sound and smell are not yet recognized. The law
provides a number of circumstances under which a mark is not eligible for
protection, such as when it is identical with or confusingly similar to
national flags, names of political organizations and real names, or would
cause misunderstanding or confusion as to the origin, properties, quality,
or other characteristics of the goods or services. It also cannot be
identical or confusingly similar to another persons mark already
registered or used for identical goods or services.
Registration process: Trademark registrations must be filed at the NOIP,
and the preliminary examination of applications must be completed
during the first three months after receipt. After this, there will be further
evaluations for the following 9-12 months. As with patents, the first-to-
file system also applies for trademark registrations. Trade mark
protection lasts for 10 years from the filing date in Vietnam, with the
option to extend for consecutive 10 year periods an unlimited number of
times. The registration process typically takes up to 15 months.
Trademark applications made in other Madrid Protocol member countries
can be extended to Vietnam via the World Intellectual Property
Organization (WIPO), meaning that application requirements and
approval time may be reduced. As Vietnam is a party to the Paris
Convention, local registration of trademarks have a right of priority if the
same filing has already been made in any other country also belonging to
the convention within a 6 month period prior to registration in Vietnam.
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9.4 Industrial design protection:

An industrial design patent means a specific appearance of a product
embodied by three-dimensional configurations, lines, colors, or a
combination of these elements. Industrial design patents cover products
with a distinctive shape, pattern or color, which still maintain novelty and
industrial applicability.
In order for an industrial design patent to be granted, the design must be
new, creative and have an industrial application. An industrial design
patent is considered 'new' if it differs substantially from industrial designs
that are already disclosed to the public inside or outside Vietnam. An
industrial design is deemed creative if it cannot easily be created by a
person with average knowledge in the relevant field. The assessment is
made taking into account industrial designs that have already been
publicly disclosed inside or outside Vietnam prior to the filing date or
priority date (if priority is claimed). An industrial design is considered
capable of industrial application if it can be used as a model for mass
manufacture of products having the outward appearance embodying
such industrial design by industrial or handcraft methods.
However, the following subject matters shall not be protected as
industrial design patents in Vietnam: i) Appearance of a product, which is
dictated by the technical features of the product; ii) Appearance of a civil
or an industrial construction work; iii) Shape of a product, which is
invisible during the use of the product.
Registration: To obtain an industrial design patent, an application must
be filed with the NOIP. Industrial design patents last 5 years from the
filing date in Vietnam, with the option to extend two more times for
consecutive 5 year periods (with a 15-year maximum protection). The
registration process typically takes up to 15 months. As Vietnam is a party
to the Paris Convention, local registration of trademarks have a right of
priority if the same filing has already been made in any other country
also belonging to the convention within a 6 month period prior to
registration in Vietnam.
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9.5 Trade secrets protection:

Trade Secrets are defined by Vietnamese law as information obtained
from financial or intellectual investment activities, which has not been
disclosed and is applicable in business. A piece of information falls under
the definition of a trade secret when the information: i) Has not been
made to the public, and is not common knowledge, ii) Gives its owner a
business advantage and iii) Remains secret because the owner takes
necessary measures to protect the confidentiality of the information.
Typically trade secrets could include new products or business models,
special techniques, customer and supplier lists, technical know-how, etc.
The following information cannot be protected as trade secrets: i)
Personal status secrets, ii) State management secrets, and iii) Other
confidential information which is not relevant to business.
Trade secrets are protected upon creation without any registration,
provided that reasonable measures have been taken to keep the
information secret. As no formal registration process for trade secrets
exists, these are often referred to as unregistered rights, meaning that
they can theoretically last forever as long as they remain secret. Despite
being unregistered rights, trade secrets are now recognized in Vietnam
and can therefore be enforced provided their owner can evidence that
they are non-public, have commercial value, and has taken measures to
protect their confidentiality (such as by limiting employee access to
information, marking documents confidential, including confidentiality
clauses in employment agreements). As the concept of trade secrets is
a relatively new addition to Vietnamese law, Vietnamese authorities do
not have much experience with infringement cases.
9.6 Copyright protection:
Vietnamese copyright law protects literary, artistic and scientific works
such as:
8 Literary works, scientific works, textbooks, teaching courses,
9 Lectures, speeches, and press works, Musical, stage, photographic and
cinematographic works,
 95

10 Plastic art works and applied art works,

11 Sketches, plans, maps and architectural works,
12 Computer programs and data collections.
Copyrights that are already conferred in countries that are part of the
Berne Convention are automatically granted in all other treaty countries,
meaning that the copyright creator automatically owns the copyrights
without any formal registration procedure. However, it is still advisable to
register copyrights with the National Copyright Office of Vietnam (NCO),
or the Department of Culture in the localities where your office is located,
because this will make court proceedings easier: If you ever need to
enforce copyrights in a Vietnamese court, copyright certificates are
considered documentary evidence, and the certificates are also required
in certain IPR enforcement procedures.
Having been granted copyright to a work means that the copyright owner
holds both the moral and economic rights to the work. Owning the moral
rights means you can attach your name to the work, publish or authorize
somebody else to publish the work, and prevent others from editing the
work. Owning the economic rights means you have the exclusive right to
edit, reproduce and distribute the work. As the copyright owner you have
the right to assign your exclusive rights, with the exception of the moral
rights, and to transfer the right to publish the work. In this case a contract
for assignment of copyrights must be made in writing, and include
grounds for the assignment, price and method for payment, rights and
obligations of the parties, and liability for contractual breach.
A copyright owners moral rights are protected for an indefinite term,
with the exception of the exclusive right to publish the work or authorize
somebody else to publish it. The economic rights and the right to publish
the work and authorize somebody else to do so, lasts for the lifetime of
the author plus 50 years, with the exception for cinematographic works,
photographs, plays, applied art works, and anonymous works, which are
protected for 50 years from the date of first publication, with no
possibilities for extension.
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9.7 IPR enforcement:

Although a comprehensive legal framework for protecting IPR is now in
place, enforcement mechanisms are still insufficient both in terms of
fines/penalties imposed and also in terms of consumer awareness. In
principle, there are four possibilities of enforcement: Administrative
actions, civil litigation, criminal prosecution, and customs seizures.
Administrative actions: Administrative actions are the most common
route for most companies when dealing with IPR infringements.
Depending on the value and nature of the case, different governmental
bodies may be involved in the action, such as the Inspectorate of Science
and Technology, the police, market control force, Vietnamese Customs,
the Vietnam Competition Authority. Those bodies are able to issue on the
IPR holder different penalties and sanctions such as cease- and desist
orders, revoking business licenses, issuing monetary fines, or the
confiscation and destruction of infringing and/or counterfeit goods. While
such penalties are generally not as harsh as penalties that can
theoretically be awarded under civil litigation or criminal prosecution, in
practice administrative actions may offer a more realistic chance of
stopping infringers quickly, and in some cases also obtaining damages. A
request to apply administrative measures against IPR infringers should be
filed with the relevant enforcement authority and include: i) Document
evidence of ownership of the infringed IPR, ii) Proof of damages caused by
the infringement (however in practice, if infringement has been
committed this is already considered as proof of damages), iii) Evidence of
infringement (e.g. samples or photographs or the counterfeit/infringing
goods), iv) Experts opinion (if available), and v) Power of Attorney, if the
request is filed by an IPR Agent.
Upon submission of those documents, the authority in charge will then
examine the request within one month from its filing date. When the
request and its documentation are complete, the relevant authority will
then raid and seize infringing goods without prior notice to the infringer.
If an infringement is found, the relevant authority will also impose
sanctions and penalties upon the infringer.
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Consequences of administrative cases may include the following: i)

warnings, ii) fines up to VND 500 million, iii) confiscation and/ or
destruction of infringing goods, as well as means for producing the
infringing goods, iv) suspension of infringers business license. Other
sanctions include: v) removal of infringing elements from a product; vi)
withdrawal of domain name and/ or companys name containing
infringing elements; vii) recall of infringing goods already on the market;
viii) recovery of illegal profit which the infringer makes from the
infringement; and ix) compulsory distribution or use of infringing goods
(as well as the means of production such as the machinery used) for non-
commercial purposes, as long as this does not influence the IPR holders
commercial activities.
Civil Litigation: For IPR holders to claim - beyond administrative sanctions
and fines - additional civil damages, they must commence civil litigation
against the infringer. Damages are based on the amount of lost sales or
the infringers profits, however if the actual amount of damages owed
cannot be determined, the maximum amount the court can award in such
cases is VND 500 million. By taking civil action, IPR holders may also
request provisional measures (preliminary injunctions) and claim
remedies available under law, especially claims for damages. To initiate a
lawsuit, the IPR holder has to file a petition to the court within two years
from the date of infringement discovery.
Criminal Prosecution: Criminal charges in Vietnam can be brought against
copyright or related rights infringers for the reproduction or distribution
of the work to the public, and this infringement must be deemed to be on
a commercial scale. Criminal charges can also be brought against
industrial property rights infringers, where the object in question is
counterfeit trade mark goods, provided that the infringement is i)
intentional, and ii) on a commercial scale. Penalties for copyright and
industrial property right infringement include a monetary fine up to VND
1 billion and imprisonment up to three years. The cost of criminal
prosecution is borne by the authorities, and a favorable ruling can be a
valuable deterrent to potential future infringers.
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10. PRINCIPLES OF ARBITRATION

In Vietnam, court proceedings are often time-consuming and used by
some parties as a delaying tactic to avoid enforcement. Also, Vietnamese
courts and judges are often still lacking the expertise in disputes involving
complex technical and/or commercial issues. Therefore, foreign parties
are mostly advised to choose international or domestic arbitration instead
of referring their legal disputes to Vietnamese courts.
10.1. Legal framework for arbitration:
The Law on Commercial Arbitration (Arbitration Law) came into effect
on 1st January 2011. In addition, the Civil Procedure Code 2011 (CPC)
also governs issues relevant to commercial arbitration. Both domestic and
foreign parties to a Vietnam-related commercial dispute can freely agree
on a foreign arbitration institution (such as e.g. the Singapore
International Arbitration Center, SIAC), regardless whether or not any of
the disputing parties is a foreign party or domiciled in Vietnam.
The Arbitration Law is applicable to both domestic and international
arbitration. If the Arbitration Law is silent on a particular issue (such as
e.g. the recognition and enforcement of foreign arbitral awards) those
issues will be governed by the CPC and the arbitration procedures of the
arbitration center instead. If a dispute is agreed by the parties to be
resolved at an arbitration center (domestic or foreign), the arbitration
procedures issued by such center will be applied.
As is the case in court proceedings, the general limitation period under
Vietnamese law will apply to arbitration proceedings in Vietnam, i.e. two
years from the date the dispute arose, unless otherwise specified for
particular types of dispute (for example, the Law on Insurance Business
fixes a 3-year limitation period for disputes arising from insurance
contracts).
10.2 Arbitration agreement:
The Arbitration Law and arbitration procedures of arbitration centers
require the parties to have a valid arbitration agreement for a dispute to
be referred to arbitration. An arbitration agreement must be in writing,
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either as an arbitration clause within a contract or by way of a separate

agreement.
If the arbitration agreement is included as an arbitration clause in a
contract, the clause is considered to be independent of the contract. Any
modification, extension, termination, or invalidity of the contract would
therefore not normally affect the validity of the arbitration clause. A
written arbitration agreement may now also take the form of a letter,
telegram, facsimile, electronic mail, or any other written form, so long as
the writing clearly shows the parties intent to resolve their dispute by
arbitration.
If a dispute falls within the scope of a valid arbitration agreement, but a
party attempts to initiate court proceedings, the court does not have
jurisdiction over the matter. Therefore, when a party to a valid
arbitration agreement brings a lawsuit against the other party before a
court in Vietnam, the court must refuse to accept jurisdiction unless the
arbitration agreement is void or incapable of being performed.
10.3 Categories of disputes subject to arbitration:
The Arbitration Law lists three categories of disputes that may be
resolved through arbitration:
- Disputes arising from commercial activities: Commercial activity
is broadly defined and includes any activity for profit-making
purposes comprising the purchase and sale of goods, provision of
services, investment, commercial enhancement, and other
activities for profit-making purposes.
- Disputes where at least one party is engaged in commercial
activities: This category of disputes eligible for arbitration is non-
commercial disputes, such as civil disputes where at least one party
to the dispute is not engaged in commercial activities. However, an
exception to this category is where the dispute is between a goods
and/or service provider and a consumer. In this case, the Law
protects the consumer by allowing the consumer to choose
between the court or arbitration as a method of dispute resolution.
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As a result, even where there is a standard arbitration clause in a

supply of goods or services contract, the dispute may not be
referred to arbitration without the consumers consent.
- Other disputes where the law stipulates that arbitration is a
permissible means of resolution: At present, for example, disputes
arising from investment activities governed by the Law on
Investment may be submitted to arbitration. One area where the
Law is uncertain is whether land-related disputes may be
arbitrated.
10.4 Choice of law and language of arbitration proceedings:
If a dispute involves a foreign element, the arbitral tribunal applies
the law (whether Vietnamese law or the law of another jurisdiction) to
the dispute as agreed by the parties. Under the Civil Code, a
relationship involving a foreign element means: (i) a relationship
where at least one of the participating parties is a foreign body,
organization or individual; (ii) a relationship where at least one of the
participating parties is a Vietnamese residing overseas; or (iii) where all
of the participating parties are Vietnamese (individuals and/or
organizations as the case may be), but the basis for establishment or
modification of such relationship was the law of a foreign country, or
such basis arose in a foreign country, or the assets involved in the
relationship are located in a foreign country.
In the event that the parties do not agree on the applicable law, the
arbitral tribunal applies the law that it considers most appropriate. On
the other hand, in a dispute between purely domestic parties that
does not involve a foreign element, the arbitral tribunal must apply
Vietnamese law. However, if the arbitral tribunal determines that the
choice of foreign law is contrary to the fundamental principles of the
law of Vietnam, such choice of law will be invalid. Further, Vietnamese
law provides specific limitations to the choice of law where (i) it is not
permitted (e.g. in case of real estate transactions where the
land/property is located in Vietnam), or (ii) the contract is signed and
entirely performed in Vietnam.
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Regarding the language of arbitration proceedings, disputes not

involving a foreign element must be conducted in Vietnamese, unless
one party is an enterprise with foreign invested capital. For disputes
involving a foreign element or in which one party is an enterprise with
foreign invested capital, the parties may agree another language to be
used in the arbitration proceedings. If the parties do not agree, the
arbitral tribunal will determine the language.
10.5 Arbitration centers and rules:
The main arbitration institutions in Vietnam are: The Vietnam
International Arbitration Centre (VIAC) based in Hanoi, the ASEAN
International Commercial Arbitration Center ("ACIAC") based in Hanoi and
the Pacific International Arbitration Centre ("PIAC") based in Ho Chi Minh
City. The VIAC is the most well-known institutional arbitration center in
Vietnam. The VIACs Arbitration Rules which have come into effect in
January 2012 are published on its website as follows:
http://eng.viac.vn/quy-tac-to-tung-trong-tai-c122.html.
In drawing up contracts, the VIAC recommends that parties use the
following Model Arbitration Clause:
Any dispute arising out of or in relation with this contract shall be
resolved by arbitration at the Vietnam International Arbitration Centre
at the Vietnam Chamber of Commerce and Industry (VIAC) in
accordance with its Rules of Arbitration.
Parties may add to above clause the following:
- If not a panel of three arbitrators but only one arbitrator is wished:
the number of arbitrators shall be one.
- the place of arbitration shall be [city and/or country].
- For disputes which involve a foreign element: the governing law
of the contract shall be the substantive law of [country].
- For disputes which involve a foreign element or disputes in which at
least one party is an enterprise with foreign investment capital:
the language to be used in the arbitral proceedings shall be
English.
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10.6 Arbitration proceedings administered by an arbitration center:

Arbitration proceedings administered by an arbitration center such as the
VIAC are initiated when the claimant files a statement of claim, which
provides information about the disputing parties, a summary of the
dispute, the desired remedy, the value claimed, and the arbitrator
selected by the claimant from the arbitration center. Other requisite
documents include certified copies of the arbitration agreement and
evidence to support the claim. Unless the relevant rules of the arbitration
center provide otherwise, within ten (10) days of receipt of the claimants
statement of claim and other required documents, the arbitration center
is responsible for sending a copy to the respondent. Unless the relevant
rules of the arbitration center provide otherwise, the respondent then
has thirty (30) days from the date the statement of claim was received to
file a statement of defense.
If the respondent fails to select an arbitrator or requests the chairman of
the arbitration Centre to choose an arbitrator on its behalf, the chairman
has seven days to select an arbitrator from the date by which the
respondent is required to respond. If there are multiple respondents, they
must collectively select an arbitrator. The two arbitrators will appoint a
third arbitrator, who will chair the arbitral tribunal. If a sole arbitrator is
desired, the parties must jointly nominate an arbitrator, or the chairman
of the arbitration center shall select an arbitrator within 15 days.
Counterclaims may be filed by the respondent in the same way an initial
statement of claim is filed, except the respondent is responsible for
providing the arbitration center and the claimant with a copy of the
statement of counterclaim and other required documents. Arbitration
hearings may be attended by authorized representatives of the parties
and invited witnesses. Arbitral decisions are decided by majority vote and
minutes of the proceedings must be kept by the arbitration center.
10.7 Choice and challenging of arbitrators:
Pursuant to Art. 39 of the Arbitration Law, and subject to the arbitration
rules of the arbitration center, an arbitration tribunal may consist of one
or more arbitrators subject to the agreement of the disputing parties. In
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the absence of which, the arbitration tribunal shall consist of three

arbitrators. In practice, the number of arbitrators appointed to form an
arbitration tribunal to resolve a dispute is usually three.
According to Article 42 (1) of the Arbitration Law, an arbitrator must
refuse to resolve a dispute, and the parties shall have the right to request
replacement of an arbitrator in the following circumstances: i) The
arbitrator is a relative or the representative of a party; ii) The arbitrator
has an interest related to the dispute; iii) There are clear grounds
demonstrating that the arbitrator is not impartial or objective; or iv) The
arbitrator was a mediator, representative or lawyer for either of the
parties prior to the dispute being brought to arbitration for resolution,
unless the parties provide written consent.
10.8 Enforcement of domestic arbitral awards:
The procedural steps for the enforcement of domestic arbitral awards in
Vietnam are as follows: If the award debtor does not voluntarily
implement the award and does not file with the court to request
cancellation of the award within 30 days as of receipt of the award, the
award creditor shall have the right to file with the competent
enforcement agency to request the enforcement of the award in
accordance with the Law on Civil Enforcement.
10.9 Recognition and enforcement of foreign arbitral awards:
In September 1995, Vietnam became a signatory to the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the
New York Convention), and its provisions have been incorporated into
Vietnamese law. If a party fails to comply with an arbitral award within
thirty days after compliance is required, a party may submit a written
request to the courts judgment enforcement agency to enforce
recognition and enforcement of foreign arbitral award in Vietnam. A
foreign arbitral award recognized for enforcement has the same effect as
any civil judgment or decision of a Vietnamese court. In practice,
however, the enforcement of foreign arbitral awards in Vietnam can be
onerous and difficult. Foreign arbitral awards will - amongst others - not
be recognized when:
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- The foreign arbitral award is not yet enforceable or binding on the

parties or the arbitration agreement is unenforceable or invalid in
accordance with the governing law, or the laws of the country in
which the award was made if the arbitration agreement does not
stipulate the governing law;
- The individual, body or organization against which enforcement is
sought has not been properly notified of the appointment of the
arbitrator or the procedures for resolving the dispute by foreign
arbitration, or had reasonable cause for failing to exercise
his/her/its right to participate in the proceedings;
- The foreign arbitral award was issued in respect of a dispute which
was not referred to arbitration by the parties, or exceeds the scope
of the request of the parties;
- The foreign arbitral award has been set aside / suspended by a
competent body of the country in which the foreign arbitral award
was made, or of the country whose law governs the arbitration
agreement;
- The court of Vietnam concludes that the relevant dispute cannot be
resolved by arbitration in accordance with the laws of Vietnam or
the recognition and enforcement of the foreign arbitral award is
contrary to the fundamental principles of the laws of Vietnam. The
concept of a foreign arbitral award being contrary to the
fundamental principles of Vietnamese law is still very vague and is
the subject of some concern in relation to the enforcement of
foreign arbitral awards in Vietnam. Therefore, the enforcement of
foreign arbitral awards in Vietnam remains largely untested and
subject to many uncertainties; and the arbitral award enforcement
process is often time consuming.
The procedural steps for the recognition and enforcement of foreign
arbitral awards are as follows:
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- The arbitral award creditors file the petitions for recognition and
enforcement in Vietnam of foreign arbitral awards with the
Ministry of Justice of Vietnam;
- Within seven days of the receipt of the petition dossiers, the
Ministry of Justice of Vietnam forwards the petition dossiers to the
competent court;
- Within three working days of the receipt of the petition dossiers
from the Ministry of Justice of Vietnam, the court accepts the case
and issues notice of acceptance;
- Within a period from two to four months, the court makes one of
the following decisions: i) Temporarily suspending the
consideration of the petition if the award is being reviewed by
foreign competent body; ii) Suspending the consideration of the
petition or iii) Organizing a court meeting for consideration of the
petition.
- Within 20 days of the decision to organize a court meeting for
consideration of the petition, the court summons the involved
parties for the meeting where a panel of three judges will decide if
the award is recognized for enforcement in Vietnam;
- Dissatisfied parties have 15 days as of the judgment date (if they
are present at the meeting) or as of their receipt of the court
judgment (if they are absent from the meeting) to appeal;
- Within one month as of its receipt of the appeal, the higher court
summons the involved parties for a meeting where a panel of 03
judges will decide if the appealed judgment is upheld, partially
amended or wholly amended.