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NEWS & LEGAL UPDATES
1| Regulations and current status on declaration of transaction value of real estate transfer
According to the tax law, personal income tax (PIT) on real estate transfer income is determined as follows:
Payable amount of PIT = Purchase Price x 2% Tax Rate
Regarding registration fee, Clause 1, Article 7 Decree 140/2016/ND-CP prescribes the rate of registration fee for houses and land is 0.5%. Circular 301/2016/TT-BTC stipulates that the payable amount of registration fee is caculated as follows:(Article 12 of Circular No. 111/2013 / TT-BTC, amended and supplemented by Circular No. 92/2015 / TT-BTC).
Payable amount of Registration fee = The calculating value of property x ratio of registration free (%)
In which, the calculating value of land is the price in The Land Price list issued by the provincial People’s Committee under the Land Law at the time of registration. The calculating value of house is the price issued by the provincial People’s Committee under the Construction Law at the time of registration. (Clause 1, Article 6 of Decree No. 140/2016 / ND-CP, amended by Decree 20/2019 / ND-CP).
In Official Dispatch No. 5235 / TCT-DNNCN dated December 16, 2019 sent to the Provincial Tax Department, the General Department of Taxation addresses the facts that the Transfer Prices of real estate declared by the Tax Payer for submitting PIT and registration fee are not close to the market price, namely:
- Taxpayers declare the Transfer Price much lower than the land price issued by the provincial People’s Committee;
- There is a mass difference in the Transfer Price of the same real estate in different transactions in a short time;
- The taxation of real estate formed in the future is much higher than the taxation of built-up real estate, which is granted a land use right certificate…
2| The viewpoint of tax authorities while handling real estate transfer transactions declared at a low value
According to the above-mentioned facts, the General Tax Department has requested the provincial Tax Departments to strictly implement the following measures:
- Actively coordinate with relevant state management agencies to advise and report to the provincial-level People’s Committee develop a Land Price List for the term 2020-2024 close to the land price on the market. For land located in urban and residential projects, after the infrastructure has been built, the Department of Taxation must actively report and propose the provincial People’s Committee to adjust the Land Price List.
- Report to the provincial People’s Committee to request Notary Offices in the area to strengthen coordination, exchange information with the tax authorities to jointly manage the taxable price of the transfer of real estate to be suitable with the actual price transactions.
- Strengthen monitoring, supervision and direction of Sub-departments of Taxation to strengthen the management of personal income tax for real estate.
From the requests to be more stringent in the tax management work of the General Department of Taxation above, the Sub-departments of Taxation have taken more drastic measures against the acts of declaring low transfer value and have cheating signs of evading taxes.
For example, in December 2019, the Tax Department of District 10, Ho Chi Minh City sent dispatch to the Police of District 10 to request for investigate and clarify the signs of tax evasion in real estate transfer transactions, when the taxable transfer value of apartment (second time) is declared by the parties lower than the published selling value of the investor and lower than the market value.
Therefore, individuals should pay attention to declare the taxable transfer value of real estates in accordance with the actual transfer value to avoid risks of being applied administrative sanctions from state agencies, or more seriously, criminal prosecution.
3| The criminal liability of corporates for committing the intellectual property crimes
The Penal Code Number 100/2015/QH13 coming into effect from January 01st, 2018, has regulated on the criminal liabilities of commercial legal entities for specific crimes prescribed in Article 76 of the Penal Code.
In particular, crimes infringing intellectual property rights include crimes of Infringement copyright and related rights (Article 225) and crimes of Infringement industrial property rights (Article 226); both are in the scope of crimes applicable for commercial legal entities prescribed in Paragraph 1 Article 76 of the Penal Code.
Though being stated in the statutory law, but since the Penal Code came into effect, the enforcement of criminal sanctions against legal entities in general and for intellectual property infringement, in particular, has not been stringently implemented, partly due to the lack of actual handling experience of state agencies.
However, this January, the People’s Court of Phu Tho Province issued a first instance ruling for trademark infringement of a company. In this case, Viet Phap Aluminum Factory – Viet Phap Aluminum JSC (located in Dich Vong Hau Ward, Cau Giay District, Hanoi City) and its Director were prosecuted for using the term “Nhôm Việt Pháp SHAL”, similar to the protected trademark but unrelated under the trademark registration certificate of Viet Phap Aluminum Factory – Viet – Phap SHAL Aluminum JSC (located in Ninh Binh City, Ninh Binh Province).
Under the ruling of the First Instance Court on January 14, 2020, Viet Phap Aluminum Factory – Viet Phap Aluminum JSC (Hanoi) was fined 2 billion VND (about USD 86,300), and had to pay compensation to Viet Phap Aluminum Factory – Viet – Phap SHAL Aluminum JSC (Ninh Binh) for physical damage of VND 500 million (about USD 21,600) and spiritual damages of 15 million VND (approximately 650 USD).
The director of Viet Phap Aluminum Factory – Viet Phap Aluminum JSC (Ha Noi) was also fined VND 500 million and prohibited from holding the position for 18 months.
Although this is just a decision of the first instance court, has not yet come into effect and may be appealed or protested, this is also good news for intellectual property rights holders in Vietnam. Therefore, organizations and individuals should also pay attention to register for protection of intellectual property rights to protect their eligible rights, and not arbitrarily use the protected IP assets of others in business activities.
Dear Value Clients – Partners,
Apolat Legal Law Firm (“Apolat Legal”) would like to send sincerely thank you for your trust in our legal services.
Vietnamese Lunar New Year 2020 is coming, Apolat Legal wish you a prosperous and successful year ahead.
Apolat Legal is pleased to announce that our offices will be closed from January 23rd, 2020 (December 29th Lunar Calendar) to January 29th, 2020 (January 5th Lunar Calendar) for Lunar New Year. All the work will be resumed from January 30th, 2020 (January 6th Lunar Calendar).
In case of urgent matters or in the events of emergency, please do not hesitate to contact any of our Partners on their normal email address or mobile phone.
We are sorry for any of your inconvenience possibly happening during the holidays and appreciate all of you for supporting us.
On December 8th, 2019, Apolat legal signed a Cooperation Agreement with Tanna Law – a US law firm be operated by Indian attorney – Mr. Chetan P. Tanna, specializing in providing fast Visa services and immigration procedures in the US for many citizens who want to live and work in the United States. Moreover, Tanna Law supports Indian investors in trade promotion in countries around the world including Vietnam. Please see details at website: https://tannalaw.com/tannaus/
In addition, Apolat Legal and Nguyen and Associates Law Firm (“Nguyen and Associates”) work together and cooperate with Tanna Law to support Indian individuals/organizations to implement projects in Vietnam.
Specifically, on January 13rd, 2020, representatives of Apolat Legal, Nguyen and Associates; and Tanna Law had a visit to the Consulate General of India in Ho Chi Minh City to discuss the orientation of supporting and cooperating with Indian organizations/individuals to promote the development of Indian investment in Vietnam.
APEC Business Travel Card, abbreviated to an ABTC, mean a kind of document issued by competent authorities of countries or territories participating in the Scheme on APEC business travel card to their business people in order to facilitate their travels to conduct business cooperation, commercial, investment or service activities; to participate in conferences and seminars; or for other economic purposes in countries and territories within APEC participating in the Scheme. ABTC holders, when entering or departing from countries or territories stated in their ABTC, need not obtain visas of such countries or territories.
The ABTC shall be valid for entry and exit only when they are produced by their holders together with valid passports without applying for a visa, no need to follow the immigration procedures and multiple entry and exit in the country / region participating in ABTC program, including: Australia, Brunei, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Papua New Guinea, Peru, Philippines, Singapore, Taiwan, Thailand and Vietnam.
Upon each entry or exit, ABTC holders shall be issued by participating countries or territories certificates of permitted stay for a duration provided for by such countries or territories, usually up to 60-90 days at a time, for example: the duration of stay with ABTC in Australia is 90 days, Hong Kong is 60 days, Singapore is 60 days, Japan is 90 days …
The ABTC shall be valid for five years since the date of issue and shall not be extended; In case of expiration, the new one shall be issued.
As such, is it difficult to apply for ABTC and what are the common obstacles when making an application for ABTC for Vietnamese businessmen who are working at enterprises legally established in Ho Chi Minh City?
Firstly, regarding the subjects to whom ABTCs are granted, according to the provisions of Clause 3, Article 1 of Decision No. 54/2015/QD-TTg, Vietnamese businessmen are working at enterprises legally established under Vietnamese law. They will be able to apply for the ABTC, namely the owners of private enterprises, Chairman of the Board of Members, members of the Board of Members, President of the Board of Directors, members of Board of Directors, general directors or directors of companies; President of the Board of Directors, members of Board of Directors, directors or general directors of cooperatives or joint cooperatives; Chief accountants, managers from enterprises; heads of enterprises’ branches and other similar titles.
Secondly, regarding the conditions for Vietnamese businessmen to be granted ABTCs, the Ho Chi Minh City People’s Committee previously issued Decision No. 05/2014/QD-UBND providing for the composition of documents and conditions for applying for permission to use the ABTC in Ho Chi Minh City. Currently, this Decision has been abolished under Decision No. 41/2016/QD-UBND and expires on October 19th, 2016. However, up to now, the People’s Committee has not issued any Decision on conditions and guidelines for the ABTC dossier. This leads to difficulties in applying for this procedure. Therefore, at present, there are still two perspectives of views between the competent state agencies receiving and submitting the dossier to the People’s Committee for consideration and permission to use the ABTC.
- Currently, there has not been any regulation on conditions for applying for the ABTC, Therefore, the conditions under Decision 05/2014/ D-UBND will still be applied to consider and allow the use of ABTC cards as follows.
- Have popular passports remaining unexpired for at least three years since the submission of request for issuance of ABTC;
- Currently work in businesses as prescribed in Article 2 hereof and involved in activities of cooperation, trading, investment and services with partners from APEC economies participating in ABTC;
- Work in businesses under employment contracts, receive decision on appointment and take part in social insurance according to the law provisions;
- As a person from 18 years of age with his/her civil acts not restricted or lost;
- As owners, limited partners or work under employment contracts (Unlimited term contracts) for at least 12 months before the submission of request for issuance of ABTC;
- Have regular demands for short business trips to APEC economies for contracting or carrying out business undertakings;
- Work in businesses with revenues at least VND 10 billion/year or total import, export quota equivalent to VND 10 billion in a most recent year.
- Currently, Decision 05/2014/QD-UBND has expired. Therefore, if an enterprise wishes to apply for an ABTC which only need to submit a written request to the People’s Committee and the receiving agencies assigned by the People’s Committee. These agencies will summarize the request of the enterprise, and the opinions of the relevant agencies to submit to the People’s Committee for consideration, decision which may not impose any requirements or conditions on entrepreneurs and businesses.
Thirdly, regarding the procedures and difficulties in carrying out the procedures for applying for the ABTC. Currently, the work of receiving and advising the permission of Vietnamese businessmen to use the ABTC in Ho Chi Minh City is carried out by Department of Planning and Investment, Southern Urban Zone Management Board, Processing, Exporting And Industrial Zone Management Boards, High-Tech Park Management Boards, Northwestern Urban Area Management Boards and Thu Thiem New Urban Area Investment and Construction Project Management Boards in coordination with agencies such as the Department of Industry and Trade, City Police, Social Insurance, Department of Taxation, Customs Department, Department of Labor – Invalids and Social Affairs, and other related departments, agencies closely review the law observance situation of enterprises and individuals applying for the ABTC, report the results to the People’s Committee for consideration and decision.
Therefore, businesses need to pay attention to abide by laws on business, investment, trade, tax, customs, labor and social insurance as well as the provisions on the use of the ABTC, specifically, City Police will require Vietnamese businessmen to submit the curriculum vitae and certificate of enterprise registration of the company which Vietnamese businessmen are working, the Social Insurance, Department of Taxation, Customs Department will check and require businesses to comply with the relevant laws …
For the procedures, there must be two phases in order to be granted the ABTC:
- Stage 1: Obtain the written consent of City People’s Committee for ABTC use. Enterprises will submit 02 sets of dossiers as prescribed to the receiving agency, the processing time is within 10 working days from the date of receiving the complete dossiers. If the dossier is not eligible as prescribed, it will be returned to the business after 07 working days. However, in reality this time will be extended longer than prescribed. Depending on the compliance with the law of the enterprise which Vietnamese businessmen are working and the receiving agency must send an official letter to seek opinions of relevant departments and agencies, after receiving the consent of all these agencies, the receiving agency will synthesize and submit to the People’s Committee for consideration and decision.
- Stage 2: Apply for ABTC. Enterprises will submit 01 sets of documents as prescribed at the Immigration Department – Ministry of Public Security. According to the regulation, the processing time is within 21 working days from the date of receipt of a complete dossier. However, this time depends on the response of the member countries participating in the APEC issuance program, so it may take longer than the law.
- Law on Vietnamese Nationality 2008, amendment on 2014;
- Law on Housing 2014;
- Decree No. 138/2006 ND-CP Detailing The Implementation Of The Civil Code’s Provisions On Civil Relations Involving Foreign Elements;
- Decree No. 70/2014/ ND-CP Detailing The Implementation Of Several Provisions Of The Ordinance And The Amended Ordinance On The Foreign Exchange.
I. Legal Issues When Vietnamese Citizen Own They Foreign Real Estate
1| Regulations on Vietnamese Citizen’s foreign real estate ownership
Vietnamese legal system does not contain any provisions nor regulations prohibiting the possession of foreign real estate. However, one of many important points of owning foreign real estate is how to transfer, exchange domestic currencies to abroad for the purpose of purchasing and owning foreign real estate.
Law on foreign exchange in Vietnam and especially clause 2 article 7 of Decree 70/2014/ND-CP regulated that Vietnamese Citizen have their right to transfer currencies/foreign currencies abroad for many different purpose, whereas included point d, đ, e and g are:
d) on purpose of transferring allowances for relatives who in abroad;
đ) on purpose of transferring inheritance currencies to the heirs who in abroad;
e) on purpose of transferring currencies under circumstance of foreign settlement;
g) on purpose of one-way transferring for other legitimate needs.
It could be seen that Vietnamese legal system does not prohibit Vietnamese Citizen from transferring currencies to own foreign real estate. Especially in point g, it is conceivable that currencies transferring/ foreign currencies on purpose of purchasing house or real estate is “other legitimate needs”. However, it should be noted that the transferring of currencies on purpose of purchasing and owning foreign real estate must be consistent with the above purposes.
Pursuant to clause 2 article 7 Decree 70/2014/ND-CP regulated that Vietnamese Citizen have their right to transfer currencies/foreign currencies abroad, depend on specific purposes, the Organization in charge of transferring and exchanging shall request the senders a number of specific papers and documents. Under specific circumstance of foreign settlement, the transferring and exchanging Organization shall require the following documents to conduct the transferring and exchanging activities:
- Documents of foreign competent authority which authorizing the settlement or document proving the permanent residence abroad (residence card, residence visa, …);
- Household registration in Vietnam and a copy of the passport of the person who is in progress of settlement;
- Documents proving the origin of the foreign currencies to be transferred abroad.
The reality situation has the following ways to apply for purchasing and owning foreign real estate:
- The first way, is to operate through the method of establishing enterprise, investment where Vietnamese Citizen want to purchase and own foreign real estate. This method is understood as applying for a foreign investment procedure at Ministry of Planning and Investment, then using this investment license to transfer money to foreign countries to purchase real estate. However, this method has some disadvantages that are managed by the Ministry of Planning and Investment. In addition, this foreign exchange activity can only be performed with a bank account which is registered with State Bank and the currencies amount must be in accordance with the investment capital amount by the investment certificate. However, this way is not really appropriate and accurate as prescribed by law.
- Second way, by having a relative of a nationality who wants to settle in the name of purchasing real estate, then carry out foreign exchange in the form of a pension to relatives abroad, transferring currencies to the foreign beneficiary and then use that amount of currencies to purchase real estate. The downside of this is it depend on abroad relatives and sometimes not everyone can meet these conditions.
However, it is important to understand that Vietnamese legal system only covers domestic issues. Regarding the possession of foreign real estate, Vietnamese legal system does not prohibit nor support nor protect the above matter. In addition, this issue is also depending on the country where Vietnamese Citizen want to purchase and own foreign real estate.
II. Legal Issues Of Vietnamese Citizen And Foreign Settlement
1| How is the foreign settlement prescribed by law?
According to the provisions of Vietnamese legal system regarding Nationality and Settlement, a Vietnamese Citizen in their settlement in foreign country is not prohibited by law but must comply with the provisions related to Nationality and Settlement.
Pursuant to clause 3 article 3 Decree 138/2006/ND-CP, “Overseas Vietnamese” means Vietnamese nationals who are residing and working permanently in foreign countries. And clause 1 article 27 of Law on Vietnamese Nationality 2008, “A Vietnamese Citizen who files an application for renunciation of Vietnamese nationality to accquire a foreign nationality may be permitted to renounce Vietnamese nationality”
It could be understood that the foreign settlement would not make the Citizen Nationality invalid. If a Vietnamese Citizen settles down and wishes to natualize a foreign country in the place where that Citizen is in settlement, the Citizen shall proceed with the procedure for renunciation of Vietnamese nationality and naturalization of the country where that Citizen is in settlement.
In order to conduct foreign settlement, a dossier must include:
- Residence visa
- Invitation to the country document
Please keep in mind that the above dossier is a basic request, depend on the reality situation and the requirements of the consulate of the country where Vietnamese Citizen wants to make settlement, the components of documents may be specified or different.
Vietnamese Citizen settles in foreign must comply both Vietnamese law in accordance with the principle of Nationality and the regulations in the country where the Citizen settles.
Pursuant to article 4 of Law on Vietnamese Nationality 2008, Vietnamese government only recognize Vietnamese Citizen have only on nationality as Vietnamese nationality. The current law does not regulate that Vietnamese nationals with dual nationality are prohibited acts but only do not recognize, therefore, depend on the practical situation of the host country, citizen should consider whether retention dual nationality or not.
Vietnamese Citizen in foreign settlement do not directly lose their Vietnamese nationality. Vietnamese nationality will only be lost in the circumstance that Vietnamese Citizen conducts a procedure to relinquish Vietnamese Nationality (aggressive) or be deporived of Vietnamese nationality (passive). However, not all Vietnamese Citizen can carry out the procedure to relinquish Vietnamese nationality. The following cases are not allowed to carry out procedures for relinquishing Vietnamese nationality under clauses 2, 3 and 4 article 27 of Law on Vietnamese Nationality 2008:
“2. A person applying for renunciation of Vietnamese nationality may not renounce Vietnamese nationality if hhe/she falls into any of the following cases:
- Owning tax debts to the State or having a property obligation toward an agency, organization or individual in Vietnam;
- Being examined for penal liability;
- Serving a Vietnamese court’s judgement enforcement;
- Being kept in detention pending judgment enforcement;
- Serving a decision on application of the administrative handling measure of confinement to an education establishment, a medical treatment establishment or a reformatory.
3. A person applying for renunciation of Vietnamese nationality may not renounce Vietnamese nationality if such renunciation is detrimental to Vietname’s national interests.
4. Cadres, civil servants and those who are serving in Vietnamese people’s armed forces may not renounce Vietnamese nationality.
In short, the Vietnamese Government does not prohibit foreign real estate ownership or foreign settlement. However, in each specific circumstances, the identification of options for fulfilling these need is relatively complicated as it relates to not only Vietnamese legal system but also the laws of country where Vietnamese Citizen intend to own the real estate or set settlement.
According to the development trend, the establishment of the company is becoming increasingly simple, the owner just needs to provide a copy of the ID card/passport and fill out a number of sample records that can be established by the enterprise. But conversely, when considering each legal issue with serious research, the enterprise must comply with various legal regulations.
According to the regulations of Article 35 of the Law on Enterprises 2014, shareholders/contributing partners can agree on the assets used to make capital contribution to establish the company is Vietnam Dong, convertible foreign currencies, gold, value of rights to use land, value of intellectual property rights, technologies, technical secrets, and other assets that can be assessed in VND. Other assets that can be assessed in cash can be part or all of the shares/stakes that the shareholders/contributing partners owning are in another company. When making capital contribution to establishment of enterprises by shares/stakes, enterprises need to take note of the following issues:
1| Shareholders/contributing partners must obtain approval from shareholders/other contributing partners about the use of their stakes to contribute capital to another enterprise. Specifically as the following:
- Assets used to make capital contribution as shares in the Joint-Stock Company: Although the Law on Enterprises 2014 has not yet regulated conditions for shareholders to use their shares to contribute capital to another enterprise. However, it is understandable that this activity is seen as a transfer of shares and is subject to the regulations of Article 126 of the Law on Enterprises 2014. Details are as the following:
Shareholders are freely to use their shares to contribute capital to establish another enterprise without the approval of the General Meeting of Shareholders, except in the cases mentioned in Clause 3 Article 119 of the Law on Enterprises 2014 and the cases in which shares is restricted from transfer prescribed by the company’s Charter.
Clause 3 Article 119 of the Law on Enterprises 2014 specified within 03 years from the issuance date of the Certificate of Business registration, founding shareholders are permitted to use their shares only to contribute capital to establish another enterprise if approved by the General Meeting of Shareholders. In this case, shareholders intended to use shares to contribute capital to establish another enterprise do not have the right to vote on this. Please note that this restriction does not apply to shares that the founding shareholders have added after registering for the enterprise and shares that the founding shareholders of the transferring to others is not the founding shareholders of the company.
- Assets contributed is the stakes in the Limited Liability Company: similarly, the Law on Enterprises 2014 has not yet regulations that the contributing partners use their stakes to establish another enterprise. The application in accordance with Article 53 of the Law on Enterprises 2014 for this case is not suitable, specifically the contributing partners must sell part of its contribution to other contributing partners and if the other members do not purchase, then transferred to another person with the same conditions. Therefore, in order to be legally, contributing capital to establish another enterprise with this stakes should be approved by the Board of members and members who use the stakes to capital contribution do not have the right to vote.
2|The result of this capital contribution is that the newly established enterprise will be the owner of the shares/stakes that the shareholders/contributing partners of the newly established enterprise used to make capital contribution into the enterprise. Please note that capital contribution activities by shares/stakes do not create a cross-capital ownership in enterprises.
3|Within 90 days from the issuance date of the Certificate of Business registration, shareholders/contributing partners must complete the capital contribution to the newly established enterprise. The capital contribution is completed when:
- Assets contributed is the shares in the Joint-Stock Company: the newly established enterprise is noted as a share owner in the Shareholders Register of the enterprise with shares used to make capital contribution;
- Assets contributed is the stakes in the Limited Liability Company: the newly established enterprise is noted as a contributing partners of the Certificate of Business registration of the enterprise has the stakes used to make capital contribution.
4| Valuation of assets: Assets contributed upon the enterprise establishment must be unanimously assessed by members or founding shareholders, or assessed by a professional valuation organization. If assets are assessed by a professional valuation organization, the value of contributed assessed must be concurred with by the majority of members or founding shareholders. If a contributed asset is assessed at a higher value than its true value at the time of contribution, the members or founding shareholders shall contribute an additional amount which is equal to the difference between the assessed value and true value when the valuation is done; and are jointly responsible for the damage caused by deliberate assessment of assets higher values than their actual values.
A number of legal issues of capital contribution by shares/stakes are not clearly regulated in the Law on Enterprises 2014 or other legal documents such as the above analysis, which make it difficult for shareholders/contributing partners to their ownership.