Issue April 2022

Nguyen T. Thu Trang

Nguyen T. Lien Lien 
Legal Assistant

After the issuance of the National Assembly’s Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the socio-economic development and recovery program (“Resolution 43”), on January 28, 2022, the Government issued Decree No. 15/2022/ND-CP on tax exemption and reduction policies (“Decree 15”) according to the above-mentioned Resolution 43/2022/QH15 to implement the tax exemption and reduction policy in the National Assembly’s fiscal policy.

Value-added Tax Reduction from February 1, 2022 to December 31, 2022

In order to facilitate entities, individuals and tax administration departments in application with specialized tax legal regulations, Decree 15 provides the reduction of value-added tax (“VAT”) for goods and services subject to the VAT rate of 10%, and also clearly states the goods and services not eligible for VAT reduction, as particulars:

  1. Telecommunication, financial activities, banking activities, securities, insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products;
  2. Goods and services subject to excise tax;
  3. Information technology as prescribed in the laws on information technology.

The reduction of VAT shall be applied consistently in all stages including import, production, processing, trading, except for coal products which the reduction of VAT is only applied to the stage of mining for purpose of sale. Accordingly, the VAT reduction is determined according to the tax calculation method and shall be applied from February 1, 2022 to December 31, 2022, specifically including:

  1. For businesses whose VAT payable is calculated by tax credit method, the businesses are entitled to the VAT tax rate of 8% for their goods and services;
  2. For businesses whose VAT payable is calculated per percentage on revenue, the businesses are entitled to reduction of 20% of the percentage rate to calculate VAT for their goods and services.

Procedures for VAT Reduction

In order to apply the deducted VAT rate, businesses must issue separate invoices for goods and services subject to VAT reduction. In case the businesses fail to issue separate invoices, the VAT reduction prescribed under Decree 15 will not be applied. For cases where the businesses issued an invoice and declared at the tax rate or percentage to calculate VAT that has not yet been deducted, the seller and the buyer shall make a minutes detailing the mistakes and the seller must issues and deliver an adjusted invoice to the buyer for the application of VAT reduction. Businesses declare goods and services eligible for VAT reduction according to the declaration on “VAT reduction according to Resolution 43” together with the value-added tax declaration.

Reduction of Expenses for Supporting and Financing the Covid-19 Prevention and Control

Decree 15 has additionally provided for the case that an enterprise provides support and sponsorship through the transfer of this donation to its parent company. In case the enterprise is a member unit, it is required to meet following conditions to be eligible for deduction of support and sponsorship expenses upon determination of deductible expenses:In addition to the expenses prescribed in laws on excise tax, in the corporate income tax period of 2022, expenses for supporting and financing the Covid-19 prevention and control in cash and in kind are included in deductible expenses for determination of taxable income for corporate income tax amounts through certain organizations including Vietnam Fatherland Front Committee at all levels, medical facilities, educational institutions, press agencies and other agencies specified under Decree 15.

  1. The parent company must have a minutes or document certifying the expenses of support or sponsorship signed and stamped by the representatives of enterprises being the member unit and parent company;
  2. The enterprise has legal invoices and documents for support or finances in cash or in kind as prescribed by law;
  3. The parent company has a written confirmation of the supports and finances of the member unit; and
  4. The parent company provides supports and finances through certain organizations  listed in Decree 15.

This is a new regulation in Decree 15 compared to the corresponding regulations in Decree 44/2021/ND-CP on guidelines for deductible expenses upon determination of income subject to corporate income tax regarding enterprise/organization’s grants to prevention and control of Covid-19 pandemic and is supplemented on the basis of arising expenses of supports and finances from economic groups in Vietnam.

Decree 15 takes effect from February 1, 2022.

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LEGAL UPDATE – APRIL 2022 – Vietnam’s Virtual Hearings under new regulations: Step-by-step approaches for e-Court system

Issue April 2022

Nguyen Dang Viet

Nguyen Ngoc Ly 
Assisting Lawyer

1. Overview

Facing numerous difficulties and delays amid the on-going COVID-19 pandemic, courts across the globe have been utilizing their electronic systems in order to implement remote courts.  Such movement is an appropriate solution to balance public health directives with the need to continue upholding the rule of law and thus Vietnam is no exception. Indeed, the Vietnamese government has been applying a series of technological solutions to develop electronic court system.

Within the past 2 years, considered as a component of the e-court platform, term “virtual court hearing” has been gradually used in Vietnam as the possible solution to support physical hearings specially when the pandemic continues to disrupt litigation practice. In many countries, thanks to virtual hearings stakeholders dont have to come to courtrooms.

In this regard, the National Assembly of Vietnam issued Resolution 33/2021/QH15 dated 12 November 2021 (“Resolution 33”) to regulate virtual hearings as a coexistent method with the current method of hearings.

Notably, a Joint Circular issued by the People’s Supreme Court of Vietnam, the Supreme People’s Procuracy, the Ministry of Public Security, the Ministry of Defence and the Ministry of Justice on December 15, 2021 (Joint Circular 05/2021/TTLT-TANDTC-VKSNDTC-BCA-BQP-BTP, “Joint Circular 05”) aims to set out the guidelines and procedures on organizing online court hearings which took effect from February 1, 2022.

A virtual hearing may be conducted by using videoconference or teleconference facilities, where cases are progressed without the need for participants to attend the court in person. From the current legal perspective, a  virtual hearing court is held in a courtroom, using electronic devices connected to each other via a network, allowing the defendant, victims, litigants and other participants to join the court session from outside the courtroom, but still ensuring they are able to fully follow the hearings through images and sounds, and to fully take part in the hearing by verbalizing and actions continuously and publicly proceeding at the same time of the court’s proceedings.[1]

2. Cases and authority of holding online hearings

According to Resolution 33/2021/QH15 (Art.1.1), the People’s Court is entitled to hold online court sessions for first-instance trial and appellate trial of the cases that satisfy the following 02 conditions: Cases and authority of holding online hearings

  • Criminal, civil and administrative cases having simple facts and characteristics;
  • Cases having clear factual documents and evidences.

However, e-hearings shall be not applied for:

  • Criminal, civil and administrative cases related to State secrets;
  • Criminal cases for crimes in national security specified in Chapter XIII of the Penal Code;
  • Criminal cases for crimes of against peace, humanity and war crimes specified in Chapter XXVI of the Penal Code.

3. General guides on holding Virtual Hearings

The organization of online court hearings is carried out according to the general principles of organizing the hearings of cases specified in the 2015 Criminal Procedure Code, the Civil Procedure Code 2015 and the Law on Administrative Procedure 2015. Besides, an important legal basis for the People’s Court to organize an online trial is the Resolution 33 and the Joint Circular 05 with some notable points as follows:

3.1  Obligation of the competent authorities

In the stage of preparation for an e-court hearing and decision to bring a case to trial, the court and relevant authorities (including procuracies, detainment centres and legal aid centers) have to coordinate effectively to ensure that the e-hearing is organized in compliance with applicable regulations.[2]

The court as the host of the virtual hearing shall ensure that all parties are properly notified of the virtual hearing so that necessary technical arrangements are made by the parties to test and connect to the e-platform.

3.2  Technical and procedural requirements

Online hearings shall be held by setting up 02 types of connecting points.

The main connecting point or an online courtroom may be at the Court’s headquarters or at a location selected by the Court, held in accordance with the provisions of Circular 01/2017/TT-TANDTC with the compulsory participants (the Trial Panel, the Court Clerk and the procurator assigned to handle the case).

The aforementioned e-courtroom shall be fully equipped with the devices for the online hearing such as lighting system, transmission lines and network equipment, sound systems and image display device, data and power and, etc.

For most civil, administrative or criminal trials, the component points only need to meet the basic conditions of space, image quality and sound to ensure online transmission of the trial. For a criminal court hearing where a component pount is located at a detention facility, separate regulations must be met according to Circular No. 01/2017/TT-TANDTC dated July 28, 2018 of the Chief Justice of the People’s Court. The Supreme People regulates the courtroom.

The participants other than the judges shall joint the hearing through a maximum of 03 component connecting points accepted by the Court.

In addition to the normal procedures as prescribed by the Criminal Procedure Code, the Civil Procedure Code and the Administrative Procedures Law, the online court hearing has other requirements,[3]  e.g. identifying participants in the e-hearing; the dissemination of some information about the online hearing at the opening of the same by the presiding judge.

3.3 General requirements for participants

To attend a hearing virtually, the participants have to comply with the notable etiquettes as follows:

·       Keep the camera and audio on at all times;

·       Do not create any extraneous and distracting noises.

·       Dress appropriately for court when appearing via videoconference;

·       Do not walk around or step away during a videoconference meeting unless allowed by the judge;

·       Ensure the confidentiality and the safety of the court, do not take photos, record audio or distributing documents on the media, etc.

·       Present ID documents as required by the court.

4. Conclusion

Vietnam is applying timely IR4.0 to virtual court hearings, which may bring benefits for stakeholders. virtual court hearings shall save time and costs, and be accessible. If Vietnam develop well such system, it shall improve the court capacity and to avoid the stagnancy of case settlements.

[1] Article 1.2 Resolution 33/2021/QH15

[2] Chapter II Joint Circular 05/2021/TTLT-TANDTC-VKSNDTC-BCA-BQP-BTP

[3] Article 13 Joint Circular 05

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April 19, 2022

During the partnership, Bizconsult supported GE Hydro in obtaining the foreign construction operating permission for the M&E work on the Hoa Binh Hydropower Expansion project. The Hoa Binh Hydropower Expansion is a large-scale project with significant financial capital. This transaction was led by Senior Partner Le Hong Phong and assisted by Associate Phan Van Huy.


April 19, 2022

Acted as Vietnamese counsel, Bizconsult performed Vietnam-related legal due diligence for Bridgepoint Advisers II Limited in relation to a M&A transaction at a global level, whereby Ropes & Gray were acting for Bridgepoint (the Purchaser) who had agreed terms for the acquisition of the Achilles Group (the Target), and Ropes & Gray had conducted UK due diligence but had requested DLA’s assistance in performing top-up foreign law due diligence on specific documentation for the purpose of obtaining W &I Insurance. This legal due diligence has the participation of Senior Partner Le Hong Phong, with the support of Associate Huynh Hoang Sang.

For further information about this transaction, please refer to below announcement:


April 06, 2022

The lawyers of bizconsult Law Firm advised as Vietnamese counsel for DuPont c/o Skadden to acquire Laird Performance Materials from Advent International. The transaction was conducted at a global level with deal size more than US$2.3 billion; legal due diligence, non-reliance letters to W&I insurers and other transactional issues.

The case was led by Senior Partner Le Hong Phong.

For further information about this case, please refer to DuPont’s announcement:


March 30, 2022

During the first period of 2022, the lawyers of bizconsult Law Firm advised a leading bank BIDV on a Strategic Cooperation Agreement with Hana Financial Investment Co., Ltd (HFI) in relation to the transaction where BIDV Securities Company (BSC) issued 65,730,042 stocks (35%) as private placement to Hana Financial Investment Co., Ltd (HFI). The total value of the transaction is approximately US$120 equivalent to 2.700 billion VND.

This transaction was performed by Senior Partner Le Hong Phong with the support of Associate Nguyen Thi Thu Trang.

For further information about this transaction, please refer to BSC’s announcement:

LEGAL UPDATE – MARCH 2022 – Decree 02/2022/ND-CP dated on January 06, 2022 of Government on elaboration of certain articles of the Law on Real Estate Trading

Issue March 2022

Nguyen Thu Huyen

Nguyen Hoang Quan
Legal Assistant

In recent years, real estate business in Vietnam has always been on the top list of industries with the highest profit growth. According to the statistics of the PROFIT500 Ranking, conducted by Vietnam Report in the period 2017 – 2021[1], the top 7 industries achieved the highest compound annual rate (“CAGR[2]“) and made great contributions to the overall growth: Steel Industry (34.5%); Retail (17.5%); Finance sector (17.3%); Agriculture (16.0%); Food and Beverage Industry (11.9%); Chemical Industry (11.7%) and Real Estate – Construction Industry (10.8%). Not only the high profit growth rate, the real estate industry also appears many new types such as officetel, condotel, resort villa or shophouse that require a legal corridor to govern.

Facing the rapid development of the market, on January 6th, 2022, the Government issued Decree No. 02/2022/ND-CP on elaboration of certain articles of the Law on Real Estate Trading (“Decree 02”) to meet new requirements on State management in the field of real estate business. This Decree takes effect from March 1st, 2022 and replaces Decree No. 76/2015/ND-CP dated September 10th, 2015 of the Government detailing the implementation of a number of articles of the Law on real estate business (“Decree 76”). There are several notable new points in this Decree 02 as followings:

 1.Real estate businesses must disclose information

Decree 02 stipulates the responsibility for information disclosure as an eligibility criterion for organizations and individuals to conduct real estate trading, whereby real estate businesses, real estate project management Boards, and real estate trading floors must publicize information on enterprises’ websites, the headquarters of the Project Management Board, and the trading floor. The required information to be disclosed consist of (i) business information; (ii) information onn real estate put into business; (iii) information on mortgage of houses, construction works, real estate projects put into business; and (iv) information on the quantity and type of real estate products being traded, sold, transferred or leased out, and the rest are continuing to do business.[3]

The above regulation is a new regulation compared to Decree 76, concretizing the provisions in Article 6 of the Law on Real Estate Business 2014 on publicizing information about real estate put into business. This regulation aims to make information transparent in real estate business and, if it is implemented effectively, it will creates reference information channel for those in need of real estate transaction.

2. Regulations on legal capital and equity of investors:

Decree 76 stipulates the conditions for organizations and individuals doing real estate business to have a legal capital of not less than 20 billion VND. [4] This provision is annulled under the Investment Law 2020 and accordingly abolished in Decree 02.

In addition, Decree 02 supplements regulations on the owner’s equity of real estate project investors based on land use scale, consistent with regulations on owners of real estate project investors under the Decree 43/2014/ND-CP (not less than 20% of the total investment capital for projects using less than 20 hectares of land, not less than 15% of the total investment capital for projects with less than 20 hectares of land or more) as well as the method of determining this level of equity. The determination of equity specified in this Clause is based on the results of the most recent audited financial statements or the results of independent audit reports of the operating enterprise (made in the year or immediately preceding year); In the case of a newly established enterprise, the equity capital shall be determined according to the actual contributed charter capital as prescribed by law.[5]

Decree 02 clarifies conditions on financial capacity of real estate project investors which was not provided under Decree 76, ensuring synchronization between the law on real estate business and land law as well as new provisions of the Investment Law 2020.

3. Applying the general contract form in real estate business

One of the new points of Decree 02 is the application of model contracts in transactions of sale, transfer, lease, lease-purchase, sub-lease of real estate and transfer of real estate projects, including: Sample contract for sale/lease-purchase of tourist apartments, office apartments combined with accommodation, etc.

Decree 02 promulgates the form of a contract of sale/lease-purchase of tourist apartments, office apartments combined with accommodation for uniform application, which stipulates clearly and in detail the provisions related to such as: definition for “Tourist apartment/office apartment combined with accommodation”, “Shared ownership”, “Private ownership”, “Maintenance expenses”, “Warranty”, “Features of Tourist apartments/office apartments combined with accommodation are bought, sold/lease-purchased, “Rights and obligations of the parties”…This is an important step forward in terms of legality for these new real estate products.

In addition, it is worth noting that the forms of contracts specified in Decree 02 are mandatory and not only for reference in the process of signing contracts as the previous regulations in Decree 76.[6]

For real estate transfer transactions that have been signed before the effective date of the Decree 02, the parties do not need to re-sign the Contract according to the provisions of Decree 02. However, for cases where the parties are carrying out procedures for signing contracts for purchase and sale, lease-purchase of houses and construction works but the parties have not yet signed contracts by the effective date of this Decree, they must sign contracts according to regulations of Decree 02.[7]

4.  New points in buying and selling housing projects to be formed in the future and existing houses and constructions.

Decree 02 has detailed regulations on conditions for the transfer of contracts for sale and purchase of houses to be formed in the future[8], in addition to regulations on conditions for transfer of lease-purchase contracts available in Decree 76. The transfer of a contract for purchase, sale, or lease purchase of a house or construction work must satisfy the following conditions: (i) a contract is drawn up according to the provisions of Article 6 of Decree 02; (ii) are in the category of not yet submitting the application for the Certificate to the competent state agency; (iii) the contract is not subject to dispute and (iv) the house and works under the contract are not subject to distraint or mortgage to secure obligations, unless otherwise agreed by the mortgagee.

Decree 02 also stipulates in detail the order and procedures for transferring contracts of purchase, sale and lease-purchase of houses to be formed in the future and existing house and construction lease-purchase contracts.

5. The new regulation of transferring all or part of a real estate project

Decree 02 clearly stipulates the principle of transferring all or part of a real estate project. Accordingly, the transfer of real estate projects can only be done when all conditions are met and the project is being implemented under the approved schedule and contents. This is a new point and stricter requirement for real estate projects to be transferred, compared to the regulation “In case of transfer of the entire infrastructure construction investment project, the construction must be completed corresponding technical infrastructure works according to the approved schedule” [9] of the Law on Real Estate Business, forcing investors to strictly comply with the approved schedule and content of the project.

For real estate projects which investors are approved according to Law on Investment 2020 and projects that are granted with an Investment Registration Certificate in accordance with the provisions of the Law on Investment 2020, when transferring, the law on investment will be applied. Projects not falling into the above cases will be transferred according to the provisions of the Law on Real Estate Business and Decree 02.

Decree 02 includes 16 articles along with contract templates, to replace Decree 76, shall create new legal corridor for the real estate market in the coming years.


[2] Compound Annual Growth Rate

[3] Article 4.1 (b) Decree No. 02/2022/ND-CP

[4] Article 3.1 Decree No. 76/2015/ND-CP

[5] Article 4.2 Decree No. 02/2022/ND-CP

[6] Article 7.2 (a) Decree 02/2022/ND-CP

[7] Article 14.1 and 14.2 Decree No. 02/2022/ND-CP

[8] Article 7 Decree No. 02/2022/ND-CP

[9] Article 49.1 (b) Law on Real Estate Trading on 2014

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LEGAL UPDATE – NOVEMBER 2021 – Tax exemption and reduction to assist enterprises affected by Covid-19

Issue November 2021

Nguyen Bich Van

Nguyen T. Minh Thu
Assisting Lawyer

Supportive measures to assist enterprises and people who are affected by COVID-19, the Government enacted Decree No. 92/2021/ND-CP dated 27 October 2021 to elaborate of Resolution No. 406/NQ-UBTVQH15 of National Standing Committee. Decree No.92 has detailed guidance on the contents which impact on operation of enterprises, including (i) Corporate income tax (CIT) reduction, (ii) VAT reduction, (iii) Exemption of delayed payment.

CIT reduction

Enterprises established in accordance with Vietnam’s law, Organizations that are established in accordance with the Law on Cooperatives whose revenue in the tax period of 2021 does not exceed 200 billion VND and is smaller than the revenue earned in the tax period of 2019 are subject to enjoy CIT reduction. For enterprises who are newly established, consolidated, merged or acquired for the tax period of 2020 and 2021, the reduction shall be applicable provided that the condition on revenue in the tax period of 2021 does not exceed 200 billion VND.

The reduction rate is 30% of payable amount of CIT in 2021. CIT deductible amount is counted for enterprise’s entire revenue, including incomes from capital assignment or transfer the right of capital contribution; incomes from real estate transfer (exclusive social housing); incomes from transfer of investment projects, transfer the right to invest in projects, and other incomes which are excluded when applying tax incentives under the Law on Corporate Income Tax. CIT deduction is not applicable to deducted revenue, revenues from financial activities and other incomes. The reduced CIT under Decree 92 does not include the CIT which is eligible for incentives according to prevailing regulations.

The Decree 92 also provide guidance to determine revenue for enterprises with less than 12 months of operation and declaration of tax reduction.

VAT reduction

Enterprises, organizations shall be reduced 30% of VAT’s rate or 30% of the rate for calculating VAT depending on applicable tax calculation method. The period of VAT reduction is from 01 November 2021 to 31 December 2021.

Deduction of VAT is applicable to goods, services which are heavily impacted by Covid-19, including: (i) transportation services (railway, waterway, air, and other road transport); accommodation services; food and beverage services; travel and tourism agencies, travel and tourism related or supportive services; (ii) Publishing products and services; cinematography services, TV show production, music recording and publishing; artworks, composing, art, recreation services; services of library, archives, museum, cultural activities; sport and entertainment services. The goods and services mentioned in item (ii) do not include software and online sales of goods and services.

Out of noting on how to make VAT invoice, handling issued invoices which have not been noted on tax reduction, enterprises and organizations need to declare the goods and services to be reduced VAT in the “Appendix on reduction of VAT under Resolution No. 406/NQ-UBTVQH15″ in Appendix II issued attached to this Decree together with the VAT Declaration Note.

Exemption of late payment

Enterprises, organizations which incur losses in the tax period of 2020 shall be exempted late payment amount incurred in 2020 and 2021 for on outstanding tax payable amount, land use levies and land rental. If the outstanding tax payable, land use levies, land rent are increased by enterprise itself or in accordance with decisions of the State Authorities, enterprises are not subject to pay late payment amount incurred in 2020 and 2021 for such increased amount if the taxpayer incurs a loss in 2020. The exemption, however, is not applied in the cases that late payment amount has been paid before the effective date of this Decree.

To be exempted from late payment, enterprises must submit request for exemption of late payment to responsible tax authority for determination of losses in 2020 and consideration of exemption of late payment. Time limit for consideration is 15 working days from the receipt of the taxpayer’s application form for exemption from late payment.

It should be noted that in case the tax authority wrongly determines the right to be exempted from late payment, the tax authority may revoke the decision on exemption from late payment interest and the enterprises must pay in accordance with the laws.

The Decree 92 takes effect from 19 October 2021.

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LEGAL UPDATE – AUGUST 2021 – Decree No. 47/2021/ND-CP detailing a number of regulations of the Law on Enterprises 2020

Issue August 2021

Huynh Hoang Sang

Nguyen Thi Thu Ha
Assisting Lawyer

On April 1st, 2021, the Government promulgated Decree No. 47/2021/ND-CP detailing a number of regulations of the Law on Enterprises 2020 which replaced Decree No. 81/2015/ND-CP, Decree No. 93/2015/ND-CP, Decree No. 96/2015/ND-CP and Decision No. 35/2013/QD-TTg (“Decree 47”). Decree 47 shall guide a number of provisions pertaining to enterprises and concretize a number of issues which were not recorded specifically in the Law on Enterprises 2015 and take effect as of 04 January 2021.

Social Enterprises

Decree 47 supplements and regulates more clearly that social enterprises responsibility must maintain social and environmental objectives, retain earnings for reinvestment and other stipulations recorded on the Commitment on implementing social and environmental objectives during the operation term. Except in a case of early termination of its social and environmental objectives prior to the committed term, any social enterprise which fails to fulfil such Commitment or to retain profit for re-investment must refund all incentives, aid and support it received to achieve its registered social or environmental objectives.

Social enterprises is permitted to divide or separate, or consolidate or merge with another social enterprise or another enterprise in accordance with the relevant provisions of  the Law on Enterprises.

For termination of social and environmental objectives before the end of the committed term and dissolves, then the balance of its assets or the residual financial resources with respect to the assets and financial resources received by the social enterprise must be returned to the donor or transferred to another social enterprise or organization with similar social objectives or must be transferred to the State in accordance with the provisions of the Civil Code.

Information Disclosure of State-Owned Enterprises

Regarding the disclosure of information of state-owned enterprises, Decree 47 regulates on information disclosure in the form of, including: (i) the enterprise’s website, (ii) the portal or website of the owner’s representative agency, and (iii) the enterprise portal.

Previously, it was only obliged for State-owned enterprises whose 100% charter capital is held by the State to disclose periodic information. However, Decree 47 has supplemented new subjects under which State-owned enterprises whose 50% of charter capital or voting shares are held by the State have to disclose periodic information as follows:

  • Basic information about the enterprise and its company
  • Report on implementation of the annual production and business plan in the standard form attached with this Decree 47 before June 30th of the year preceding the succeeding year.
  • 6-month report on actual management and organizational structure of the enterprise in the standard form attached with this Decree 47 before July 31st every year.
  • Annual report on actual management and organizational structure of the enterprise in the standard form attached with this Decree 47 before June 30th of the execution year.
  • Six (6) monthly report and summarized report on the financial statements audited by an independent auditor before 31 July each year.
  • Annual report and summarized report on the financial statements audited by an independent auditor, including the financial statements of the parent company and consolidated financial statements (if any) in accordance with the law on enterprise accounting within 150 days from the end of the fiscal year.

Cross-ownership between Companies in A Group of Companies

Subsidiary companies are not permitted to invest in purchase of shares in or contribute capital to the parent company. Subsidiary companies of the same parent company are not permitted to jointly contribute capital or purchase shares at the same time in order to have mutual cross ownership.

Subsidiary companies having the same parent company which is a State-owned enterprise whose 65% of charter capital or voting shares or more is held by the State, are not permitted to jointly contribute capital to establish a new enterprise, jointly purchase capital contribution portion or shares of an established enterprise, and jointly receive transference capital contribution portion or shares from members or shareholders of established enterprise. The business registration authority shall refuse to register the change of members or shareholders of the company if during the course of processing dossiers, they find out that there are violations related to such regulations.

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Issue June 2021

Ha Thi Hai

Phan Van Huy
Assisting Lawyer

On March 26, 2021, the Government issued the Decree No. 31/2021/ND-CP (“Decree 31”) detailing and guiding the enforcement of a number of provisions of the Law on Investment on investment conditions; business lines and conditions for market access by foreign investors; guarantees for business investment; investment incentives and supports; overseas investment activities; investment promotion; state management of investment in Vietnam and overseas investment. Below are notable contents:

1. List of business lines restricted from foreign investors’ market access

Complying with Vietnam’s commitments to market opening under new generation free trade agreements, one of the most important changes of the Investment Law 2020 is the regulation that foreign investors may apply market access conditions applicable to domestic investors, except for investment in business lines restricted from foreign investors’ market access. Accordingly, Decree 31 has promulgated the List of business lines restricted from foreign investors’ market access. This list provides for 84 business lines, including 25 business lines not allowed to foreign investors’ market access, and 59 business lines conditional to foreign investors’ market access. According to the principle of negative listing, Decree 31 once again affirms that, except for those business lines restricted from foreign investors’ market access, foreign investors shall be able to access the market same as domestic ones.

Decree 31 provides for the concept of “business lines without market access commitment of Vietnam which are business lines that, under investment-related international treaties, Vietnam made no any commitment or reserved the right to impose measures against market access obligations, national treatment or other obligations on non-discriminatory treatment between domestic investors and foreign investors”. For business lines without market access commitment of Vietnam, market access conditions will be applied in accordance with Vietnamese laws, if any. Where Vietnamese laws provides for no regulation on market access restriction to such business lines, foreign investors shall be able to access the market same as domestic ones. That means Decree 31 should be interpreted that there shall be no process for obtaining opinions from governing ministries when the investment registration agency considers granting foreign investment licenses into business lines without market access commitment of Vietnam.

Market access conditions for foreign investors in the business lines specified in the List of business lines restricted from foreign investors’ market access will be publicly posted on the National Investment Portal.

The above change is a very important new point of the Investment Law 2020 when changing from the principle of positive listing to the principle of negative listing to consider applying market access conditions to foreign investors which express the efforts of Vietnamese Government to attract foreign investment, especially in the context of the 4.0 economy where more and more new forms of business are coming. However, in practice, specialized management agencies as well as local licensing agencies will take a long time to review, research, unify and implement this new regulation.

2. Detailing many cases of adjustment of investment projects

One of the important new points of Decree 31 in particular and the Law on Investment 2020 in general is the provisions for detailed legal corridors for new forms of investment project mergers and acquisitions, especially investment projects using land. Before the issuance of the Law on Investment 2020 and Decree 31, forms of merger and acquisition of projects such as separation of projects, use of land use rights and properties attached land for contribution of capital or contribution to business cooperation faced difficulties in many provinces due to the lack of specific regulations. Now, in addition to the forms of project adjustment inherited from the Investment Law 2014 and Decree 118/2015/ND-CP such as:

  • Adjustment of investment projects in case investors partially or wholly transfer investment projects
  • Adjustment of investment projects in case of division, separation, merger or conversion of economic organizations
  • Adjustment of investment projects according to court or arbitration judgments or decisions

Decree 31 adds new forms of project adjustment including:

  • Adjustment of investment projects in case investors receive the transfer of investment projects which are collateral assets
  • Adjustment of investment projects in case of division, separation or merger of investment projects
  • Adjustment of investment projects in case of use of land use rights andproperties attached to land belonging to investment projects as capital contribution to enterprises
  • Adjustment of investment projects in case of use of land use rightsand properties attached to land belonging to investment projects for business cooperation

New forms of project adjustment in Decree 31 are expected to make the mergers and acquisitions market more exciting, especially land-use projects, in the context that the economy is being heavily affected by the Covid-19 epidemic.

3. Conditions for investment in the form of capital contribution, share purchase or purchase of contributed capital

In order to tighten the management of investment activities of foreign investors in the form of capital contribution, share purchase, purchase of contributed capital, the Investment Law 2020 added two additional mandatory conditions for investment in the form of capital contribution, share purchase, purchase of contributed capital which are: Ensuring national defense and security in accordance with the Law on Investment; and Satisfying the provisions of law on land on conditions for receiving land use rights, conditions for land use in islands, border communes, wards and towns, coastal communes, wards and towns. Accordingly, Decree 31 supplements the mechanism of consultation with the Ministry of National Defense and the Ministry of Public Security on satisfaction of the above conditions for foreign investors investing in the form of capital contribution, share purchase, purchase of capital contributions to economic organizations with land use right certificates in islands, border communes, wards and towns, coastal communes, wards and towns; other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial parks, export processing zones, high-tech parks and economic zones established under the Government’s regulations.

In order to clarify conditions on areas affecting national defense and security, Decree 31 introduced the concept of “Other areas affecting national defense and security” including many areas under the law on protection of defense works and military zones; in accordance with the law on guards; the law on protection of important works related to national security; the Government’s regulations on combining national defense with socio-economic and socio-economic with national defense; the Prime Minister’s decision on approving the master plan on defense layout combined with socio-economic development; The area prohibiting foreign organizations and individuals to own houses to ensure national defense and security in accordance with the law on housing.

In fact, for both foreign investors and Vietnamese enterprises, determining whether a specific location subject to Other areas affecting national defense and security” is a complicated task due to the fact that there are many relevant legal documents, even internal documents of State agencies which are not public.

4. Security deposit for implementation of investment projects

The Investment Law 2020 introduced a new regulation that benefits investors by allowing investors to secure the implementation of the project by submitting a credit institution’s guaranty instead of compulsory deposit in cash.

The Decree 31 clarifies that the investors shall have to make a deposit or submit the guarantee certificate of a credit institution after the investor’s approval or approval of the auction winning result, and before making compensation for ground clearance (in case the investor does not advance the compensation for resettlement support) or before the decision on land allocation or lease or approval on the change of land use purposes. In case the project is secured by a guarantee certificate of a credit institution, such credit institution shall have to pay the deposit amount which is payable by the investor in case the project’s schedule for putting into exploitation and operation is delayed or in case the project is terminated by the investment registration agency (except for case of termination of the project to protect national relics, antiquities or treasures).

5. Supplementation of conditions and procedures for shutdown of investment projects

The Investment Law 2020 provides for new regulation allowing investors to cease operation of investment projects (without terminating investment projects). Especially, in case of shutdown of the project due to force majeure, investors are entitled to land rental exemption or land use fee reduction during the shutdown period.

Decree 31 provides for conditions and procedures for shutdown of investment projects in cases of self-determination of shutdown of investment projects; decision for cease operation of investment projects of state investment management agencies; investment projects causing harm or risk to national defense and security. The total downtime of the investment project shall not exceed 12 months.

6. Attraction of investment in innovative start-up small and medium-sized enterprises and innovative start-up investment funds

Decree 31 supplements the regulations on facilitating foreign investors to establish innovative start-up small and medium-sized enterprises or contribute capital, buy shares or capital contributions to these enterprises. Accordingly, foreign investors shall only need to conduct procedures as prescribed for domestic investors in accordance with the Law on Enterprises without obtaining Investment Registration Certificate or approval for capital contribution, share purchase, contributed capital purchase if such enterprises meet certain conditions of innovative start-up investment projects. 

7. Decree 31 amends, replaces and abols many other Decrees

Decree 31 takes effect on March 26, 2021, amending and supplementing many of relevant Decrees to conform with new changes in Decree 31 such as:

  • Decree No. 46/2014/ND-CP on land and water surface rents;
  • Decree No. 52/2020/ND-CP on golf course investment and business;
  • Decree No. 25/2020/ND-CP on elaboration of some Articles of the Law on Bidding on investor selection;
  • Decree No. 96/2016/ND-CP providing for security and order conditions for a number of conditional business lines;
  • Decree No. 82/2018/ND-CP on management of industrial parks and economic zones;
  • Decree No. 11/2013/ND-CP on management of investment in urban development;
  • Decree No. 99/2003/ND-CP on promulgation of hi-tech zone regulations;
  • Decree No. 94/2020/ND-CP regulating preferential mechanisms and policies for Vietnam National Innovation Center.

At the same time replace and repeal many of the following decrees and regulations:

  • Decree of Government No. 118/2015/ND-CPdated November 12, 2015, guidelines for some Articles of the Law on Investment;
  • Decree No. 37/2020/ND-CPdated March 30, 2020 on amendments to list of industries benefitting from investment incentives attached to Decree No. 118/2015/ND-CP on elaborating to Law on Investment;
  • Decree No. 83/2015/ND-CPdated September 25th 2015, regulations on outward investment;
  • Decree No. 104/2007/ND-CPof June 14, 2007, on provision of debt collection services.;
  • Decree No. 69/2016/ND-CPdated July 01, 2016, requirements for running debt trading service;
  • Decree No. 79/2016/ND-CPdated July 01, 2016, conditions for training business in specialist knowledge, professional competence in management and operation of apartment buildings, knowledge of real estate brokerage practicing, real estate transaction management;
  • Article 2 of Decree No. 100/2018/ND-CPdated July 16, 2018 amending and annulling some regulations on necessary business conditions in fields under the management of the Ministry of Construction.

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