Civil Transactions under the new Civil Code 2015 – Vietnam Law Insight

On 24 November 2015, the National Assembly passed the new Civil Code 2015, a leading code governing all civil relations in the society, which will take effective and replace the current one on 1 January 2017.

The official text of the new Civil Code has not yet been announced and published. However, referring to the most updated draft which was submitted for adoption of the National Assembly, it finds that the new code has many significant and progressive amendments learning from shortcomings of the current one and from the practice. These amendments surely will significantly change the way contracting parties negotiate, agree and enter into agreements.

Among those amendments, there are some initial notable changes as follows:

  • Company charter may provide the term and scope of the representative authority a legal representative may have. Accordingly, companies may have a chance to limit the representative scope of their legal representative in their charter, which is not possible under the current prevailing laws. However, it will also increase the burden on contracting parties when entering into an agreement, because they must check other parties’ charters, or other evidence, to make sure that they are dealing with the right persons.
  • Civil transactions which are not in compliance with form, e.g. not notarized when it is required so, may NOT invalid if one party or both parties have implemented at least two thirds of their obligations under the relevant transaction. Though, identification of such “two thirds” may require further guidance from competent authorities.
  • Statute of limitations shall only be applied to a lawsuit upon request of a party(ies) if such request is given before the issuance of the first instance judgment. A party who may benefit from applying statute of limitations is also entitled to refuse such application.
  • The new code also entitles contracting parties to “new” security means for performance of obligations in contracts, in addition to the current ones, including (i) reserving ownership of assets until completion of payment, and (ii) putting a lien on assets in case of any violations. Actually, these means have been practically employed for a long time, but they are not legally recognized until the establishment of the new code.

There is still a long way before the new code comes into effect and brings its progressive changes to Vietnam practice. However, it is expected that the new Civil Code shall, together with other significant changes in various sectors of law, support the development of Vietnamese market and help to narrow down the gap between the effectiveness of Vietnamese legal frameworks and of other developing countries.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Compulsory Social Insurance – Vietnam Law Insight

Decree No. 115/2015/ND-CP providing detailed regulations on compulsory social insurance

The Decree No. 115/2015/ND-CP (Decree) shall take effect from 01 January 2016. Following the Law on Social Insurance, this Decree has provided detailed regulations on compulsory social insurance (CSI) as follows:

The Decree has extended the applies, adding the male employee whose wife is in the gestation, the employee who works pursuant to the at least 1 month to 3 months labour contract, etc., which stipulated in Article 02 the Decree.

Regarding the CSI regime, there are 03 remarkable principles

  • First and foremost, the payment of CSI drawing from the monthly wage shall be calculated not only on the monthly wage rate but also the allowances and other additional payments[1]. Particularly, from 01 January 2016 to 31 December 2017, the allowances will be added to calculate the payment; and since 01 January 2018, the payment thereof will include the wage rate, allowances and other additional payments.
  • Second, the Decree supplemented the provisions on the maternity regime and maternity leave in case of surrogacy stipulated in Section 1 Chapter II.
  • The third noticeable principle is that the Decree has changed the benefit rate of one-time CSI subsidies from 1.5 months’ wage up to 02 months’ wage.

This Decree shows a great effort of the Government in protecting the labour’ legitimate rights and interests, as well as in implementing the Law on Social Insurance on the right track.

Such exemption is mentioned in item h clause 7 article 5 of the Circular 219. The Circular 193 will take effect on 10th January 2016.

[1]. In case the allowances and other additional payments are mentioned in the Labour Contract (Article 17 the Decree)

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Implementation of the Law on Value Added Tax – Vietnam Law Insight

Circular No.193/2015/TT-BTC amending Circular No.219/2103/TT_BTC guiding implementation of the law on value added tax


On 24th November 2015, Ministry of Finance issued Circular No. 193/2015/TT-BTC (hereinafter referred as “Circular 193”) amending Circular No. 219/2013/TT-BTC (hereinafter referred as “Circular 219”) guiding implementation of the Law on Value-Added Tax and Decree No. 209/2013/ND-CP detailing and guiding implementation of some articles of Value-Added Tax issued by Minister of Finance Ministry.

The Circular 193 supplements one (01) exemption of declaration and payment of the value added tax (hereinafter referred as “VAT”). Therefrom, organizations, enterprises who receive remunerations from state agencies by collecting, paying such remunerations on behalf of the state agencies shall not be obliged to declare and pay VAT relating to such remuneration.

In details, such exempted remunerations have to be collected and paid on behalf of the state agencies from the following activities: collecting from voluntary social insurance, voluntary medical insurance for Social Insurance agencies, paying preferential allowances for people contributed to revolution, other allowances for Ministry of Labor – Invalids and Social Affairs; collecting tax of households for tax agencies and other remunerations collected, paid on behalf of the state agencies for the State agencies.

Such exemption is mentioned in item h Clause 7 Article 5 of the Circular 219. The Circular 193 shall take effect on 10th January 2016.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Regulations on Development of Supporting Industries – Vietnam Law Insight

Decree 111/2015/ND-CP guiding regulations on development of supporting industries

On 03 November 2015, the Government issued Decree No.111/2015/ND-CP on developing supporting industries and replaced Decision 12/2011/QD-TTg dated on 24 February 2011 on development policy of a number of supporting industries and Decision No. 1483/QD-TTg dated 26 August 2011 on promulgating the list of products of supporting industries prioritized for development.

Under Decree 111/2015/ND-CP which shall take effect on 01 January 2016, organizations and individual operating in supporting industries that are subject to the list of prioritized sectors under the Decree may be supported with financial funding as well as incentive policies from the State for their activities, i.e. research and development, application and transfer, human resources, international cooperation, market development.


Decree 111/2015/ND-CP stipulates general incentive policies for enterprises operating in supporting industry, including incentives on import-export tax, VAT, favorable interest rates for investment credits capital of the State. In additions, small and medium-sized enterprises producing supporting industrial shall be exempted or reduced land or water surface from rentals. The maximum loans at credit institutions for these enterprises can be up to 70% invested capital. To provide prompt supports, especially in local area, the development program of supporting industries and the supporting industry development center are also established under this Decree.

In the context of rapidly growing of Vietnamese economy, there should be more and practical support from the State to attract more investments into supporting industries thereby meeting the high development pace of Vietnam’s economy and industry. Decree 111/2015/ND-CP has made a significant improvement in providing a clearer and more complete legal framework for such development of supporting industries.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at Our website

Simplify Requirements in Importing Used Machinery – Vietnam Law Insight

Enhancing the government’s regulation on importation of used machinery, equipment and production line (“used Machinery”), new provisions have been provided as follows:

Manifest clearly groups of imported used Machinery to be governed by Circular 23 which are Chapter 84 and 85 of Vietnamese List of Goods imported and exported provided for in Circular 103/2015/TT-BTC, whereas the precedent Circular 20/2014/TT-BKHCN (“Circular 20”) did not;

Expand governing scope to used accessories, component and replacement parts of used Machinery falling into the above-mentioned groups;

Change requirements for used Machinery to be imported which are more simple;

Used Machinery listed in Dossier of Investment Project which is issued Decision on Investment Policy or Certificate of Investment Registration can be imported regardless of requirements set out in the Circular;

List of Goods banned from import is to be publicized on official website of Ministry of Science and Technology (“MST”), whereas such list is combination of lists provided for in specialized legal documents;

List of Qualified Examination Organizations is to be publicized on official website of MST and foreign organizations can be listed by providing certain information to the Ministry, such information is less severe than these stipulated in Circular 20;

Importers can take used Machinery before completing customs clearance procedures in order to put the goods in preservation, whereas in the past, importers could not;


Requirements and procedures for importing used Machinery is more transparent as such requirements, procedures are provided for in Circular 23 and publicized in website of MST. These helps enterprises import used Machinery easier albeit regulates more strictly import of used accessories, component and replacement parts.

For used Machinery listed in Dossier of Investment Project, they can be imported straightforwardly without further requirements. This provision make it more feasible especially for FDI enterprises since they all have to obtain Certificates of Investment Registration. By incorporating list of desire used Machinery into the Dossier, FDI enterprises can save more time.

Unlike Circular 20, foreign Qualified Examination Organizations nowadays have more chances to issue acceptable qualified test certificate if they are listed on website of MST. FDI enterprises can actively obtain a certificate at importing countries to save time in Vietnam.

Finally, used Machinery while waiting for a qualified test certificate can be put on preservation. Importers therefore could decrease expenses.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at

New Laws on Investment and Enterprise Come Into Effect from Midnight

As you now all know, the new Law on Enterprise (LOE) and Law on Investment (LOI) will take effect from 0.00AM tomorrow, 1 July 2015 promising to bring many positive changes to Vietnam business environment. 

What enterprises and investors are all now waiting for are the Decrees implementing the LOE and LOI, which have not been issued yet.

While the final draft of the decrees are now being circulated, and the vacatio legis by law would be 45 days after promulgation by the Government, the Ministry of Planning of Investment (MPI) sent and urgent Official Letter No. 4211/BKHĐT-ĐKKD dated 26 June 2015 (OL 4211) on business registration, implementing LOE (please click here to download).

Another Official Letter implementing the LOI are expected to be circulated anytime from now until Midnight (we have been informed that this Official Letter No 4326/BKHĐT-ĐTNN dated 30 June 2015 implementing LOI was issued, and will provide you with updates in the next legal alert).

Under OL4211, notable changes are as follows:

  1. Application of ERC for current foreign invested enterprise (FIE): for enterprises operating under an Investment Certificate (IC) or an Investment License (IL), when amending  the IC or IL, they will apply for the Enterprise Registration Certificate (ERC). The ERC dossier will be similar to the dossier for applying a new ERC, attached with the current IC or IL.
  1. Simplified ERC registration process: Art 24 LOE only requires applicants to file, among others, scope of business, and not the HS Code or CPC to the registration request or establishing an enterprise, be it a limited liability company (LLC) or a joint stock company (JSC). The form under Art 24 LOE is now being drafted by the local department of planning and investment (DPI) and to be released soon.  The CPC will be filled in by the DPI, and there is still a risk that the CPC/HS Code filled by the DPI are not matched by the CPC/HS Code of products to be imported by the enterprise. However, the enterprise’s application will no longer be rejected because the CPC/HS Code is not found or unfit.   Please note that with respect to FIEs, the filing of HS Code and CPC would still be required under form MĐ-6 of Circular 08/2013/TT-BCT dated 22 April 2013 of (Circular 08) of Ministry of Industry and Trade (MOIT).  This requirement is still valid until 1 July 2016, at the latest (LOI, Art 74.3).
  1. Place of business to be notified, not registered: the notice shall be sent within 10 days to the local DPI from the date of the decision to open a new place of business. This regulation does not affect requirements to have specific license for each type of business (e.g. a supermarket license, warehouse license, school license etc).
  1. A change of the scope of business, a JSC private placement, and entry of foreign shareholders to be notified, not registered: these changes are notified at the local DPI, who will then reconfirm within 3 working days from receipt of notice. The DPI reserves the right to reject the notice if the conditions for foreign investors’ entry under WTO assessments or other local laws are not met (for “conditional projects”). Therefore it is advisable that the scope of business of an enterprise must be “clean” from conditions, before a notice of foreign shareholders are sent. After foreign shareholders have been duly notified, the enterprise may change its scope of business. This change may still be subject to scrutiny, but the conditions will be strictly by law (e.g., percentage of foreign shareholding) rather by the authorities’ discretion.
  1. Enterprises can make more than one seals by notice. The new seals will be published on the National Business Registration Portal (NBRP).
  1. Liquidation process to be simplified: the enterprise’s liquidation shall be made within 6 months from the passing of the resolution for its liquidation. Within that 6 months, the tax authority should confirm the enterprise’s fulfillment of tax obligations. Unless the tax authority send a notice of objection, the liquidation process will complete within that time period and the enterprise will be deleted from the NBRP.


Some issues are still unclear under OL4211:

  1. Whether enterprises operating under an IC or IL must surrender its original IC or IL when receiving the ERC, and if so, what would be their new Investment Registration Certificate (IRC) under the new LOI, and what would be the In Principle Approval (IPA), should an IPA be required under the new LOI.
  1. Must a foreign shareholder have a “project” when it acquires shares (i.e., indirect investment) in a local company? It is likely that it is not required, but we might need to confirm this by an official letter implementing the LOI (ad hoc regulation pending Decrees implementing LOI).
  2. What is the real difference between “registration” and “notice” if DPI may have the right to send a negative opinion on a notice filed?

For more information about this article, please contact the author: Dr. Le Net at the email:

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Expands Customs Priority Policy to Brokers and Key Investment Projects

New Circular from the Ministry of Finance Expands Customs Priority Policy to Brokers and Key Investment Projects

The law

On 12th May 2015, Ministry of Finance issued Circular No. 72/2015/TT-BTC that will regulate on the application of priority policies in customs procedures, customs inspection and supervision for exported and imported goods of enterprises (hereinafter referred to as “Circular 72”). Circular 72 will replace Circular No. 86/2013/TT-BTC dated June 27, 2013 (hereinafter referred as “Circular 86”) and Circular No. 133/2013/TT-BTC dated September 24, 2013 of the Ministry of Finance.

Under the new circular, the priority policy has had its subject and scope broadened and expanded, with the conditions for application of priority now less strict, and the procedures simplified in comparison with the previous Circular 86.

The customs priority regime will be expanded to include eligible customs brokers and projects, rather than only for enterprises, as noted in the previous Circular 86. The scope of privileges has expanded beyond just businesses to include various subjects including enterprises, customs brokers and key investment projects agreed by the Prime Minister. The conditions stated for the amount of import or export turnover for enterprises has been reduced from US$200 million annually to US$100 million annually.

What does this mean for businesses?

In terms of procedures, Circular 72 waives the stage of undertaking the Memorandum of Understanding (“MOU”) in the verification process. Instead of separating the appraisal procedure into two stages which are generating the MOU and issuance of the Decision on recognition of prioritized enterprises as stipulated in Circular 86. Circular 72 streamlines the process as the Decision will be signed by the Director of the General Department of Customs within 10 working days since the completion of inspection process, without making the memorandum if enterprises meet the conditions for application of priority policy. Moreover, enterprises will submit the dossiers to the Customs Department of the province where the headquarters of the enterprise is located, instead of the General Department of Customs. Furthermore, the right to customs clearance with incomplete declarations will be granted to enterprises more generally, instead of only applying this in the event that the database system of the customs offices meet malfunction or temporarily stop operation.

Businesses should also note that the time schedule for the processing of dossiers is not clearly stated in this Circular, while Circular 86 explicitly specifies that the time limit for consideration to recognize the prioritized business shall not exceed 45 working days.

Circular 72 will take effect on 26th June 2015.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

New Advertising Confirmation: One Procedure and One Form

New Circular on Advertising Products, Goods and Services under the Governing Authority of Ministry Of Health

The Law

On 25 May 2015, the Ministry of Health of Vietnam issued Circular No. 09/2015/TT-BYT on confirmation of advertisement information about products, goods and services under the governing authority of the Ministry of Health (“Circular 09”). Particularly, products, goods and services subject to advertising confirmation procedures under Circular 09 comprising of (if under the governing scope of the MOH) cosmetics, food, food additives, anti-insect chemistry and preparations used in household and medical areas, medical equipment, milk and nutritional products, medical examinations and treatment services.

Accordingly, Circular 09 sets out the general conditions, application requirements, procedures, validity of and authorities of department under MOH relating to confirmation of advertising of the above listed products, goods and services.

Circular 09 shall take effect from 16 July 2015 and replaces provisions on drug advertising under Circular No. 13/2009/TT-BYT and Circular No. 45/2011/TT-BYT, provisions on cosmetic advertising under Circular  No. 06/2011/TT-BYT and Circular No. 08/2013/TT-BYT on advertising of foods under MOH’s authority.  Receipt of advertising dossiers that have been issued prior to the effective date of Circular 09 shall remain its validity until their expiry dates.

Impact on Businesses

Circular 09’s key impact is that it will allow for one procedure and one form of application for advertising confirmation for all products, goods and services. The applicants will submit the application dossier to the respective MOH’s departments governing their advertised products and receive a standardized “certificate of confirmation of advertisement”.

Under Circular 09, advertising activities of special products, goods, and services governed by MOH are stipulated in the manner of consistency and harmonization with Law on Advertising and its guiding legislations (i.e. Decree 181/2013/ND-CP). This strong link reduces overlap between specialized regulations, i.e. regulations on pharmacy, food safety, medical examination and treatment services, and advertising regulations.

The changes undertaken in Circular 09 will help to streamline the advertising procedure for the aforementioned business activities. It is expected to have positive effects for the advertising activities in the consumer health industry, with less regulatory restraint, there may be a boost in the advertising demand for these products.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

New Regulation on Automobile Transportation Activities

Circular 10/2015/TT-BGTVT dated 15 April 2015 regulating on the responsibilities and handling of violations relating to automobile transportation activities. (Click here for the full Circular in Vietnamese)

Circular 10/2015/TT-BGTVT dated 15 April 2015 on stipulating the responsibilities and penalties with regard to the abovementioned; (“Circular 10”) is in replacement of Circular 55/2013/TT-BGTVT dated 26 December 2013 (“Circular 55”) on the same matter and will take effect on 01 June 2015.

In addition to the 4 main applicable subjects stipulated under Circular 55 including directorate applicable to the roads of Vietnam which are transport services of provinces and centrally-affiliated cities; transport business unit by vehicles, business units of bus station, freight car stations and rest stops, it appears that the commodity owners, longshoreman and establishments providing journey monitoring services are also governed under the jurisdiction of Circular 10.  Some certain noticeable points of Circular 10 are mentioned as follows:

Obligations of organizations engaging in the passenger transport business

By providing the specific responsibilities of organizations engaging in the passenger transport business, this Circular 10 is expected to help established businesses understand clearly how they must comply according to their responding scope of services. Of note, Circular 10 provides and explains the responsibilities of organizations providing equipment for journey monitoring which includes the requirement on the development of data explorer software under QCVN 31:2014/BGTVT.

With respect to establishments that are engaging in the passenger transport business under contracts or transport for tourists, it is required that such organisations are responsible for (i) signing one transport contract for each correlative journey; (ii) registering for and notifying the municipal Department of Transport of terms and provisions of transport contracts in case of using automobiles with the capacity of more than 10 (ten) passengers for transportation. Furthermore, the duties of organisations having business activities in bus stations, freight automobile stations, and rest stops are also stipulated in detail in Article 10, and favour the rights and interests of passengers.

Various types of penalties for different violations

With the principle suggesting that the penalties under Circular 10 only apply when organisations and individuals violate the responsibilities of the organisation, the management of businesses in road transport by cars, and road transportation supporting services, would not be remedied from the warning notice of the first violation or violate for the second time within 1 year, it seems that Circular 10 creates the condition in which the organizations and individuals can deal with, and remedy,  their breaches by themselves first before having the provided penalties applied to them under the laws.

Determining the types of penalties that may be applied for the breached organizations and individuals under Circular 10 is very clear. More specifically, the highest punishment applied to the breaching organisations that are providing equipment for journey monitoring is revocation of organisations’ licenses for satisfying requirements for monitoring journey equipment on a permanent basis. The lawmakers also supplement this with further punishments for transport business establishments. In particular, apart from suspending their transport operation routes for up to 03 months, such establishments would be suspended from conducting any business for up to 03 months in case of violation of provisions stipulated in Article 22.5 of Circular 10.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

New Guidance on Customs Procedures

On 25 March 2015, the Ministry Of Finance issued the Circular No.38/2015/TT-BTC guiding custom procedures; which entails custom audit and supervision, import and export duty and tax administration for imported and exported goods (“Circular 38”).

There are three significant changes provided by Circular 38 including (i) classifying and evaluating enterprises in terms of tax and customs regulations; (ii) reviewing the declared custom value and suspending the customs procedure solely in the event that a sufficient amount of proof is discovered, and (iii) review and approving the Certificate of Origin (C/O) shall be in conformity with the goods’ location of origin.

Regarding the goods’ value that is declared by enterprises, Circular 38 provides more details on this, which will help the involved parties to conduct the relating procedures more easily. Accordingly, clear requirements of the type of proof which need to be obtained are listed clearly.

The C/O will be reviewed on the basis of the principal of goods’ origin. As such, a C/O will only be rejected if the difference between the C/O and the customs declaration dossier is stipulated in this Circular 38. As a result, although C/O contents are not compatible with customs declaration dossiers, the declarer will have the opportunity to provide evidence as proof of such content.

In addition, goods shall only be suspended in the event that clear and sufficient proof on the difference between the C/O and the goods are provided.  Otherwise, such goods must be released and a consultation procedure would commence if necessary. This regulation helps the owner of the goods to avoid any delays during the customs declaration process without reason.

Another key point that should be noted is that the Circular 38 helps to abolish the registration requirement on material codes and consumption norms for export processing and manufacturing. Neither the processing contract, nor the norms registration procedure, nor the material products codes need to be notified.

Circular 38 provides more details on the customs procedures so that the declarer may follow easily. In addition, the Circular also provides some regulations in favor for the declarer to avoid any goods stuck without clear and sufficient evidence from the customs agency. This may help the customs procedure to function more smoothly, and cut down the time required by enterprises for the importation and exportation processes.

The Circular No.38/2015/TT-BTC will take effect on 01 April 2015.

By Vietnam Law Insight, LNT & Partners

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Regulation for Signature Validation and Transaction Notarization

Pursuing the roadmap to simplify the administrative procedure in Vietnam, the Government recently issued Decree 23/2015/ND-CP (“Decree 23”) on 16 February, 2015. Decree 23 regulates, among others, the notarization of signature and transaction.

Signature validation is a procedure whereby a competent authority, as prescribed in Decree 23, validates the signature belonging to a person in a document. Signature validation is a fairly simple procedure, yet certain restrictions should be observed. The competent authority shall not validate a signature in a document of which the content is, among others, (i) contrary to the laws and social ethics; or (ii) an agreement or transaction, except for a power of attorney which (a) has no fee; (b) the authorized representative is not obliged to compensate; and (c) does not involve a transfer of asset ownership and the right to use real estate.

Transaction notarization is a procedure whereby a competent authority, as prescribed in Decree 23, will legally validate and is responsible for (i) the time and place of concluding an agreement; and (ii) civil capacity, free will, and signature of the parties of the agreement. The parties who request a notarization shall be responsible for the content and legality of the agreement.

The competent authorities under Decree 23 include a district level justice department, ward people’s committee, consulate, and notary public. Each authority shall have different scope of validation and notarization. For instance, the district level justice department only deal with transactions or agreements involving movable assets.

Decree No. 23/2015/ND-CP shall take effect from 10 April 2015

By Vietnam Law Insight, LNT & Partners

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

New Rules on Remittances of Profits Overseas

Regulations restricting remittances of profit overseas are of considerable concern to foreign investors. Which makes it surprising that no new regulations have been issued to govern this topic since the approval of the Law on Investment back in 2005 – leading to a situation of “new law, old guidance”.

Until now, the Ministry of Finance issued Circular No 186/2010/TT-BTC on November 18 providing guidelines on remittance of profit overseas by foreign organisations and individuals deriving profit from direct investment in Viet Nam. It finally replaces Circular No. 124/2004/TT-BTC issued under the old Law on Foreign Investment back in 2004.

The new circular governs remittances of profits from different forms of direct investment, namely investment in an enterprise, under a contract, to develop a business, or make a capital contribution to an enterprise.

Profits are defined in the circular as lawful profits derived from direct investments under the Law on Investment after fulfilling tax and other financial obligations to the State of Viet Nam in accordance with regulations (Article 2.1). Profits can be annual profits or profits realized upon termination of direct investments in Viet Nam.

Annual profits are defined as profits distributed to or received for the fiscal year based on audited financial statements and income tax declarations, plus or minus other profits and expenses. This distribution is conducted at the end of fiscal year after the enterprise has fully discharged its financial obligations to the State, lodged audited financial statements, and made a corporate income tax declaration for the fiscal year to the tax office with jurisdiction over the enterprise (Articles 3.1 and 4.1).

The total amount of profit received by the foreign investor during the process of its direct investment in Viet Nam, less profits used for re-investment, profits already remitted overseas and profits used to pay other disbursements in Viet Nam, is used to determine the amount of profits to be remitted overseas at the termination of investments in Viet Nam (Article 3.2). The investor must also have fully discharged its obligations under the Law on Tax Management.

In cases in which, based on financial statements of an enterprise in which the foreign investor has invested, accumulated losses remain after carrying forward losses in accordance with the Law on Corporate Income Tax, the foreign investor shall not be allowed to remit profits overseas. This is new point of the circular aimed at restricting some foreign investors from preparing a fraudulent report on losses when remitting profits to a parent company.

Lastly, the new circular provides the standard form which the foreign investor must submit to the tax office at least seven days prior to the intended date of remittance of profits overseas.

The new regulation takes place 45 days after its promulgation and is expected to establish a solid legal framework for the regulation of remittance of profits abroad by foreign investors.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://