Rechtsanwalt in Vietnam Oliver Massmann - Lawyer in Vietnam - Vietnam - Legal Update September 2015

1. Rechtsanwalt in Vietnam Oliver Massmann - Lawyer in Vietnam
- Vietnam - Legal Update September 2015
1. Decree No. 78/2015/ND-CP issued by the Government guiding Law on Enterprise 2014
on enterprise registration, replacing Government’s Decree 43/2010/ND-CP (“Decree
78”)
Issuance date: 14 September 2015
Effective date: 1 November 2015
No more supporting documents to prove satisfaction of conditions in conditional business
activities
Under Government‟s old Decree 43/2010/ND-CP, enterprises doing conditional business activities
must satisfy all legal requirements at the time of enterprise registration. Accordingly, supporting
documents with regard to conditional sectors (e.g. relevant party‟s confirmation re legal capital and/or
the legitimate copy of the required practicing certificate) would be included in the licensing
application dossier. Nonetheless, under Decree 78, enterprises conducting conditional business
activities are not required to provide such supporting documents.
Putting that aside, it is worth noting that enterprises must still satisfy all legal requirements before
commencing their business operation. Should the licensing authority receive a written notice of
relevant competent agencies regarding an enterprise‟s misconduct of its business, the following
actions will be taken:
(i) The licensing authority, via a written notice, will request the enterprise in question to
temporarily suspend its conditional business activities;
(ii) In the event that the enterprise in question fails to comply with the request, the licensing
authority will require such enterprise to report its compliance with the Law on Enterprises;
(iii) Unless the enterprise in question is not able to make the report, its Enterprise Registration
Certificates (the “ERC”) will be revoked by the licensing authority.
No need to do tax registration for offshore investors
Previously, offshore investors investing in Vietnam will obtain an investment certificate which
concurrently serves as an ERC. After obtaining such certificate, offshore investors will conduct tax
registration procedure and then be granted with a tax code. Under the new Law on Investment 2014,
offshores investors would need to apply for two separate certificates: the Investment Registration
Certificate (the first step); and ERC (the second step). Then according to Decree 78, all enterprises
(including foreign invested enterprises) will automatically receive (i) a tax code issued by National
System of Tax registration Information and (ii) an enterprise code issued by National System of
Enterprise Registration Information as well. Hence, foreign invested enterprises are exempted from
applying for a tax code at the tax authority.
No need to notify the cessation of existing of enterprises having been divided, consolidated or
merged
Under Decree 43, enterprises having been divided, consolidated or merged have to submit a written
notice on its cessation of existing to the licensing authority within ten (10) business days from the date
of division, consolidation or merger. Since the effectiveness of Decree 78, such notice is no longer
required. The licensing authority will automatically process deregistration of such enterprises within

2. three (3) business days after the issuance of ERC for the newly-established enterprises as a result of
these transactions.
Solution for inconsistency among ERC and others
Decree 78 stipulates a clearer solution for such inconsistency, in comparison with Decree
43/2010/ND-CP. That is, the certificate having the contents exactly the same as those in the
enterprise registration application dossier would prevail over other certificates.
2. Decree No. 76/2015/ND-CP issued by the Government guiding Law on Real Estate
Business 2014 (“Decree 76”)
Issuance date: 10 September 2015
Effective date: 1 November 2015
Below are some worth noting changes in Decree 76 which will be of full force and effect as of 1
November 2015.
Small Scale and Not Regular Basis
In principle, entities conducting real estate business would be subject to certain statutory conditions.
However, it is not clear whether or not this new Law on Real Estate business is to apply for small
scale and retail real estate business transactions. To provide further guidance in this regard, Decree
76 provides a quantitative definition of such category. That is, family households and individuals
who sell, transfer, lease out, hire-purchase real estate by way of investment in a real estate project for
business purpose but the total investment capital is lower than VND20 Billion equivalent to US$0.89
Billion (land use fee exclusive) are considered as carrying out real estate business on a „small scale
and not regular basis‟.
Requirement on Minimum Capital
Minimum capital applicable for real estate business enterprise still remains as VND20 Billion
equivalent to US$0.89 Million even though the Draft Decree did propose other higher rates (i.e.
VND50 Billion equivalent to US$2.2 Million) for certain real estate projects.
Procedure for Real Estate Project Transfer
Pursuant to the Draft Decree, the business/enterprise registration certificate of the transferee
(including both local investors and offshore investors) must be submitted together with the application
dossier for project transfer.
As such, it would be almost unfeasible for those who invest in Vietnam for the first time with the
investment project being the transferred project. In other words, they may not have any valid
business/enterprise registration certificate under Vietnamese laws and then may be prevented from
receiving project transfers. Under Decree 76, investors who have not yet established economic
organizations in accordance with the Law on Investment will be not subject to the requirement on
business/enterprise registration certificate.
Real Estate Contract Templates
Decree 76 provides a number of contract templates for relevant real estate transactions e.g. sale and
purchase agreements, presales contracts and hire-purchase agreements. Someone may ask whether
such standard templates are mandatory or not. To respond to this query, Decree 76 for the first-time
clearly states that such contract templates are for reference only and that the parties if so agreed, are
entitled to amend and supplement articles and clauses set out in contract standard templates in
accordance with the laws.

3. 3. Circular No. 127/2015/TT-BTC issued by the Ministry of Finance guiding the grant of
enterprise code for newly-established enterprises and decentralization of tax
administration agencies applicable to enterprises (“Circular 127”)
Issuance date: 21 August 2015
Effective date: 10 October 2015
Grant of Enterprise Code
Enterprise code will be automatically granted by e-grant method at the National System of Tax
Registration Information on the business date of receipt of validly sufficient applications from the
National System of Enterprise Registration Information.
Decentralization of Tax Management
(i) Departments of Taxation are responsible for direct management of the following enterprises:
- State-owned enterprises;
- Foreign-owned investment Enterprises;
- BOT, BTO or BT project enterprises established by the investors;
- Enterprises account all over the branch, enterprises operate on many areas; large scale
enterprises; enterprises where the State budget allocates the revenue for multiple
provincial locations or multiple district-level locations; and
- Enterprises doing special business activities with complicated legal matters such as:
finance, banking, securities, real estate, accounting, audit, legal, mine ores.
(ii) Sub-departments of taxation are responsible for direct management of the remaining
enterprises conducting their business and/or manufacture within single-district locations.
However, please note that so far, this Circular 127 has been silent on the tax code grant and tax
management applicable to branches and representative offices. There should be incoming documents
to provide guidance in this regard. We will timely keep you informed of any development.
4. Decree No. 85/2015/ND-CP issued by the Government guiding Labor Code 2012 on
special provisions for female employees (“Decree 85”)
Issuance Date: 01 October 2015
Effective Date: 15 November 2015
According to Decree 85, female employees are entitled to the following statutory benefits:
(i) The Employer is responsible for improving employment conditions (e.g. to ensure the
sufficiency of bathrooms and restrooms for female employees at the workplace). Also, the
working schedule should be flexibly applied in accordance with female employees‟ demands.
(ii) Special health care scheme will apply, as below:
- Entitlement of obstetrics and gynecology check during the annual health check;

4. - Entitlement of fully-paid 30-minute rest per day, 3+ days per month during their
periods;
- Entitlement of fully-paid 60-minute per day for milking and/or feeding their under-
twelve children.
(iii) Female employees are entitled to unilaterally termination or suspension of their labor
contracts should a health care provider confirms in writing that such female employees‟
continuous working will negatively affect their fetuses;
(iv) The Employer will assist its female employees to set up nursery class, if applicable or partly
support with regard to nursery education fees. From our view, this provision right this second
has been not detailed enough until being further guided by the implementing circular issued
by Ministry of Labor, War Invalids and Social Affairs. We will keep posted of promulgation
of any new relevant stipulations.
5. Draft decree guiding Law on Investment 2014
The below is to only focus on analyzing the M&A procedures under new Law on Investment 2014
and its latest draft decree which is supposed to be soon released. The below will be accordingly
updated upon the official promulgation of the implementing decree.
Key highlights
(i) Law on Investment 2014 and its Draft Decree emphasizes the separation of (i) foreign
investors‟ obligation re investment registration and (ii) target company‟s obligation re
business registration;
(ii) It will be not the case to obtain the Investment Registration Certificate (the “IRC”) in case of
capital contribution or shares purchase regardless the proportion capital/shares to be owned
by foreign investors at the time of acquisition.
(iii) Upon the completion of M&A transactions, according to Article 31.1(b) of the draft, should
the target company fall under the definition of a „FIEO‟ (i.e. Foreign Invested Economic
Organization) as described under Article 23.1 of Law on Investment 2014, and the target
invests in new investment projects excluding other M&A transactions, such target company
then have to apply for IRCs for such new projects.
(iv) The foreign investors are only required to register capital contribution or shares purchase with
the authorities when:
- The targets operate in conditional sectors with conditions apply to foreign investors
(regardless ownership proportion); or
- Upon the completion of the M&A transactions, the total ownership proportion the
foreign investors and/or FIEOs specified in Article 23.1 of Law on Investment is 51%
or more.
(v) The timeline and procedure for capital contribution and share purchase agreement according
to the draft, in theory are faster and simpler than the previous legal framework.
Registration requirement

5. Despite the absence of IRC obtainment, the procedure for registration of capital contribution or of
purchase of shares or portion of capital contribution to a target company will be required for either of
following circumstances:
- The foreign investor makes capital contribution or purchases shares or portion of capital
contribution to a target company doing conditional business activities applicable for foreign
investors. As such, a list covering 159 conditional business activities applicable for foreign
investors is proposed to be promulgated as an Annex of the Draft Decree according to
Ministry of Planning and Investment‟s official letter No. 6193/BKHĐT-ĐTNN dated 03
September 2015; or
- The capital contribution or purchase of shares or portion of capital contribution will result in
the fact that the foreign investor or FIEOs prescribed in Art. 23.1 of Law on Investment holds
at least 51% of the charter capital of the target company.
Registration procedure
Step 1: Filing the application
The foreign investor files the registration application to relevant authorities, Department of
Planning and Investment (the “DPI”) or Authorities of Industrial Zones, at the case maybe
(collectively “Authorities”)
Note: Please note that the Draft Decree clearly indicates that DPI is the authority to receive
and handle the registration. However, we found it odd when Authorities of Industrial Zones
also have the competence to issue the IRC, but only DPI has the competence to handle the
registration.
Step 2: Initially checking the application
Within three (3) business days from the date of receipt of registration application, Authorities
will keep the investor informed in writing only once re the invalid contents. It is worth noting
that DPI is expressly prohibited to challenge the investor more than one time.
Step 3: Examining the application
Within fifteen (15) days form the date of receipt of the completely valid registration
application, Authorities will examine whether the foreign investor satisfies the statutory
investment conditions or not. If yes, Authorities will get back to the foreign investor with a
notification. The latest Draft Decree is silent neither on the standard form of such notification
nor how DPI will do once concluding that the conditions cannot be satisfied by the foreign
investor.
Step 4: Registering to change members/shareholders
After the receipt of the approval notification addressed in Step 3, the target company will
conduct the procedure to change members/shareholders at DPI in compliance with Law on
Enterprises.
Registration exemption
The requirement of capital contribution and shares purchase registration of foreign investors will be
exempted in the following cases:

6. - The target company does not operate in conditional business activities applicable for foreign
investors; and upon acquisition completion, less than 51% of the charter capital of the target
company is held by foreign investor and/or FIEOs prescribed in Art. 23.1 of Law on
Investment; or
- Unless the target company operates in conditional business activities applicable for foreign
investors, such acquisition does not increase the total ownership proportion of all foreign
investors in the target company and „FIEOs‟ specified in Article 23.1 of Law on Investment.
Please note that although it does not mention about these FIEOs in the draft decree, we are on
the view that this provision also includes them). For example: the purchase of shares from an
existing foreign shareholder.
Accordingly, the target company will be only subject to procedure to change members/shareholders
under Step 4 above.