Category: MONTHLY LEGAL UPDATE

MONTHLY LEGAL UPDATE – OCTOBER 2019

NEW REGULATIONS ON FOREIGN EXCHANGE MANAGEMENT OF FOREIGN DIRECT INVESTMENT ACTIVITIES IN VIETNAM

 

By Phan Thi Minh

Legal Assistant

 

On 26 June 2019, The State Bank of Vietnam issued Circular No. 06/2016/TT-NHNN (“Circular No.06”) guiding on foreign exchange management to foreign direct investment in Vietnam, which was officially effective as of 06 September 2019 and replaced Circular No.19/2014/TT-NHNN dated 11 August 2018 (“Circular No.19”).

In general, Circular No. 06 fixed a number of provisions of Circular No.19 which are ambiguous and incompliant with Law on Investment 2014 and Law on Enterprise 2014 as follows:

1. Supplement of entities to be required to open direct investment capital account (“DICA”)

Previously, Circular No.19 regulated merely two (02) entities which are required to open DICA, including: foreign invested enterprise (“FDI Enterprise”) and foreign investor (“FI”) entering into business cooperation contract (“BCC”).

Circular No. 06 supplements a new subject which is a FI entering into public private partnership (“PPP”) in case of not establishing project enterprise.

2. Clarification of definition of FDI Enterprise

According to Circular No.06, FDI Enterprise refers to:

  • An enterprise established by FI and FI is required to implement procedure for issuance of Investment Registration Certificate (IRC).
  • An enterprise with FI(s) holding at least 51% charter capital of such enterprise as a result of (i) shares acquisition/capital contribution of FI; or (ii) being established upon split, de-merger, merger or consolidation; or (iii) being newly established in accordance with specialized laws.
  • Project Enterprise established by FI(s) to implement PPP project.

3. Expansion of supporting documents usable to open DICA other than Investment Certificate/Investment Registration Certificate

Apart from Investment Certificate/Investment Registration Certificate as prescribed in Circular No.19, FDI Enterprise and FI may use one of the following supporting documents to open DICA:

  • Incorporation and operation certificate;
  • Notice on satisfaction of conditions for share acquisition, capital contribution of FI;
  • Signed PPP with competent authority;
  • Other documentation certifying the capital contribution of FI in line with laws.

4. Clear provision on capital transfer transactions to be conducted via DICA

Circular No.19 has no detailed guidance on capital transfer transactions which are subject to conduct via DICA. According to Circular No.06, account which is used to pay transfer price in FDI Enterprise is regulated as follows:

  • The capital transfer transaction between a non-resident and a resident must be coursed through DICA. Currency for payment must be Vietnamese Dong.
  • The capital transfer transaction between two residents is not required to make through DICA. Currency for payment must be Vietnamese Dong.
  • The capital transfer transaction between two non-residents is not required to make through DICA. Currency for payment is either Vietnamese dong or foreign currency.

5. Payment of pre-investment costs of FI can be remitted directly from oversea

According to Circular No.06, FI is permitted to remit funds directly from foreign country to settle the payment of lawful costs in the course of implementation of pre-investment activities in Vietnam, which has no longer been required to make via operating account in foreign currency at a domestic bank as stated in Circular No.19.

6. Supplement of regulation on cases of closing opened DICA

According to Circular No. 06, FDI Enterprise (except enterprise established by FI and subject to issuance of IRC) is required to close its opened DICA in the following cases: (i) Upon conducting share acquisition, capital contribution or additional shares issuance, foreign capital ownership ratio falls below 51% on (ii) FDI Enterprise become public JSC whose shares are listed or registered at the Stock Exchange. In those cases, non-resident FI owning shares/contribution capital in the FDI Enterprise must open an indirect investment capital account to conduct receivable and payable transactions.

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LEGAL UPDATE – SEPTEMBER 2019

NEW REGULATIONS ON INTELLECTUAL PROPERTY LAW

On June 14th, 2019, the National Assembly enacted Law No. 42/2019/QH14 on amendment and supplement of a number of articles of Law on Insurance Business and Law on Intellectual Property (“Law No. 42”) to comply with the Intellectual Property regulations set forth in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Law No. 42 will officially take effect from November 1st, 2019 with points related to Intellectual Property noted as follows:
1. Novelty and inventive step of patent

A patent shall not lose its novelty if the patent application is submitted within 12 months in Vietnam from the date that:

i. The patent is directly or indirectly disclosed by the person who is entitled to registry or the person who has information about it.

ii. The disclosure of the patent by the State administrative agency of industrial property rights is inconsistent with the laws;

iii. The patent application is submitted by the person who is ineligible for registration.

The patent shall not be considered losing its novelty as new regulation of Law No. 42 extends the time limit for submission of patent application from 6 months to 12 months. Besides, Law No. 42 provides wider range of the applicants than the former regulations of Law on Intellectual Property.

In addition, Law No. 42 supplements the regulations that a technical solution which is a patent disclosed in the above cases shall not be used as a basis for evaluating the inventive step of such patent.

2. Validity of the Trademark Licensing Agreement (“TLA”)

The TLA between the parties is legally binding upon third parties without being registered at the National Office of Intellectual Property.

3. Obligation to use the trademarks

In the event that a dispute arises due to a request for termination of validity of Trademark Certificate of Registration of the third party as the trademark has not been used for five (05) consecutive years, the use of licensed trademark by a licensee is still considered the use of the trademark owner.

4. Self-defense right

According to Law No. 42, an organization/individual that is abused by intellectual property defense procedures (intentionally exceeding the scope or purpose of the procedure) is entitled to request the Court to compel the abusing party of compensation for damages caused by abusive procedures (including reasonable fees for hiring a lawyer).

Moreover, there are additional amendments as follows:

1. Names and indications, which are the common name of goods and widely accepted by consumers in Vietnam, are ineligible for protection as geographical indications;

2. Refusal or cancellation of geographical indications due to “potentially confusing” instead of “will cause confusion” with protected trademark in Vietnam;

3. An application for registration of industrial property rights shall be submitted in paper or electronic form according to the online filing system;

4. Supplementing provisions on International proposals and processing of International proposals for protection of geographical indications;

5. Material losses caused by intellectual property’s infringement can be determined by the intellectual property right’s holder in accordance with provisions of laws.

MONTHLY LEGAL UPDATE – FEB 2018

New regulations on foreign investment conditions in logistics services

On 30 December 2017, the Vietnamese Government issued the Decree No. 163/2017/ND-CP (“Decree 163”) replacing the Decree No. 140/2007/ND-CP (“Decree 140”) on the logistics service. Decree 163 shall take effect from 20 February 2018.

1.Classification of logistics service

Previously, Decree 140 classified logistics services into three groups with a range of services. Under Decree 163, logistics services are divided into 17 service categories with clearer and more consistent regulations comparing to Vietnam’s commitments in the Schedule of Specific Commitments in Services of Vietnam when access to the World Trade Organization (WTO). Such classification does not limit the form of logistics service since it recognizes “Other services agreed by logistics service providers and customers which are in compliance with the basic principles of Law on Commerce”.

2.Conditions of foreign investors for investment in logistics service business

In comparison with Decree 140, Decree 163 does not provide the conditions of foreign investors for investment in logistics service businesses which are already allowed 100% market access such as: Warehouse services; Transportation agency services but regulates the conditions of foreign investors for investment in other logistics service business pursuant to the Schedule of Specific Commitments in Services of Vietnam to WTO. Accordingly, the maximum foreign ownership in some logistics services are regulated as follows:

  • For cargo transport services classified as sea transport services (except for inland transport) (excluding sea transport company), cargo transport services classified as inland waterway transport services or cargo transport services classified as rail transport services (does not exceed 49%);
  • For container handling services classified as auxiliary services for sea transport and multimodal transport, except for services provided at airports (does not exceed 50%);
  • For cargo transport services classified as road transport services (does not exceed 51%);
  • For customs clearance services classified as auxiliary services for sea transport and for other services (does not exceed 100%);
  • For technical inspection and analysis services which are  provided in order to exercise authority of the Government (does not exceed 100% after three years or 100% after five years, as from the date on which the private enterprise is permitted to conduct business in such services)

Noteworthy, Decree 163 acknowledges foreign investment by way of capital contribution and share purchase and business cooperation contract beside the establishment of enterprises as prescribed in Decree 140.

Moreover, foreign invested organizations providing the unbound logistic services must obtain the business license under regulations of Decree No. 09/2018/ND-CP.

 

New Decree amending certain decrees related to business investment conditions under the State management scope of the Ministry of Industry and Trade

 

On January 15th, 2018, the Government issued Decree No. 08/2018/ND-CP amending certain decrees related to business investment conditions under the State management scope of the Ministry of Industry and Trade (“MOIT”) (“Decree 08”). According to this Decree, the Government has eliminated a total of 675 conditions among 1216 business conditions managed by MOIT. Accordingly, the following areas are mainly focused:

1.PETROL AND OIL

Decree 08 completely repeals Article 5 on the master plans on development of the petrol and oil trading system and Article 10 on the conditions for petroleum production. The planning conditions related to production location, production scale has been reduced to facilitate the enterprises in freely selecting suitable petroleum production and business models.

Decree 08 abolishes the conditions related to the storage system, transport vehicles. Accordingly, a petrol and oil trader is no longer required to own or co-own (with a capital contribution of at least 51%) regarding the storage system and to be able to satisfy at least one-third of the trader’s reserve demand. This article also applies to the local petrol transport vehicles having capacity of 3,000m3 after being granted the Business License for import and export of petrol and oil.

In addition, Decree 08 abrogates the conditions for scale expansion by requiring petrol and oil traders to own or co-own at least four (04) retail stations each year until they reach at least one hundred (100) petrol retail stations belonging to the distribution network of the trader after being granted the Business license for import and export of petrol and oil.

However, this abrogation may lead to the situation of disorder, inappropriate distribution of petrol stations, only focus on urban areas, large roads, not satisfy the demand of people in rural and remote areas.

2.FRANCHISING

The only condition applied to franchisor is the business system intended for franchising has been operating for at least one (01) year. Although it is not explicitly stated yet, it may be construed that the removal conditions applicable to both the original franchisor and the sub-franchisor. In addition, the conditions for the franchisee and the goods and services allowed to be franchised have also been abolished.

3.E-COMMERCE

Decree 08 abolishes unclear regulations related to conditions of individuals, organizations when they want to set up sales e-commerce websites, e-commerce service provision websites and credit rating of e-commerce websites.

In particular, in relation to evaluation and certification of protection of private information policy in e-commerce activity, Decree 08 annuls the conditions on having business registration or establishment decision specifying the field of operation as evaluation and certification of protection of private information policy in e-commerce; independence in organization and finance from traders, organizations and individuals who are assessed and certified for their privacy policy; having detailed activity plan approved by the MOIT; having criteria and procedures for assessing privacy policies in compliance with the regulations of the MOIT.

Moreover, Decree 08 also eliminates the conditions related to valid domain name or request for financial and technical evidence in the certification of e-contracts.

4.CHEMICALS

 Decree 08 abolishes the conditions of locations, workshops, machinery, equipment, technological processes, warehouses and conditions for testing and analyzing chemicals related to Table 1 chemical production conditions.

This relaxation seems to be a bold move as the production of chemicals is highly dangerous while safety conditions are minimized. However, if based on the provisions of Decree 113/2017/ND-CP detailing and guiding the implementation of certain articles of the Chemicals Law dated October 9th, 2017 (“Decree 113”), the abolition of these regulations is only formalistic when more stringent conditions are already stipulated in Decree 113.

5.FOOD BUSINESS UNDER THE MANAGEMENT OF THE MOIT

Decree 08 amends, supplements a number of articles and clauses of Decree No. 77/2016/ND-CP dated July 1st, 2016 of the Government on amendment and supplementation of certain regulations on investment and trading conditions on international trade in goods, chemicals, industrial explosive material, fertilizer, gas business and food business under the state management of MOIT. In particular, the Decree 08 focuses on reducing regulations related to general conditions to ensure food safety for food production and trading establishments. There are remarkable points including the abolition of conditions on business registration certificates, household business registration certificates or equivalent documents. In addition, the regulations related to production facilities, business facilities and equipment for production and business activities are also reduced, such as the conditions of ventilation, lighting, water supply systems; warehouse conditions such as full nameplate, having temperature and humidity monitoring equipment, and warehouse conditions monitoring records, etc.; unclear conditions of the conformity of equipment; conditions for the prevention of animals, insects and harmful microorganisms are also more appropriately regulated.

 

In addition, Decree 08 also abolishes some conditions related to production facilities, equipment and tools for processed milk, beer and vegetable oil production. Particularly, all provisions related to food safety conditions specifically provided for small food production and retail facilities were abolished.

Aside from the above-mentioned areas, Decree 08 also reduces the business conditions in the areas of tobacco, electricity, industrial explosive material. This Decree takes effect from the signing date.

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Monthly Legal Updates – October 2014

Remarkable new points of the regulations on foreign contractor tax

By Nguyen Thu Huyen
Associate

On 06 August 2014, the Ministry of Finance issued Circular No. 103/2014/TT-BTC guiding on the implementation of the tax liabilities applicable to foreign organizations, individuals doing business or earning incomes in Vietnam (“Circular 103”), taking effects as from 01 October Continue reading “Monthly Legal Updates – October 2014”