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NEWS & LEGAL UPDATES

[Legal Updates] Updating the new Decree No. 37/2020/ND-CP to include small- and medium-sized businesses from accessing investment incentives

1| Updating the new Decree No. 37/2020/ND-CP of the Government to expand the list of business lines eligible for investment incentives under the Law on Support for Small and Medium Enterprises

On March 30th, 2020, the Government promulgated Decree No. 37/2020/NĐ-CP to amend the list of business lines eligible for investment incentives attached to Decree No. 118/2015/ND-CP detailing and guiding the implementation of Law on Investment (“Decree 118”), which takes effect on May 15th, 2020, in which adding the following 04 business lines to the list of business lines eligible for investment incentives:

  • Business investment in the distribution chain of products of small and medium-sized enterprises (“SMEs”);
  • Investment in business of incubating SMEs;
  • Business investment in technical facilities to support SMEs;
  • Business investment in a common working area for small and medium-sized startups.

Accordingly, foreign investors taking business investment in Vietnam in 04 business lines as mentioned above will be eligible for investment incentives from May 15th, 2020, namely:

  • Under the Law on Support for Small and Medium Enterprises, support measures for SMEs in general may include of assistance in the credit assessment; assistance in the tax and accounting regimes; assistance in production areas; assistance in terms of technologies; assistance in access to information, counselling and legal fields; and assistance in human resource development.
  • Regarding incubators, technical facilities, coworking areas, and business investment enterprises and organizations joining the distribution chain of products manufactured in Vietnam having at least 80% of members that are SMEs are entitled to more investment incentives, in which:
    • Remission of land rental, land use fees and the non – agricultural land use tax in accordance with regulations of law;
    • Remission of corporate income tax for a limited period of time in accordance with regulations of law on corporate income tax; and
    • Micro-enterprises and small enterprises will be given priority during contractor selection in accordance with regulations of law on bidding.

2| National Office of Intellectual Property (“NOIP”) issues the Notification on assistance for international registration of patents for individuals

In the scope of the Intellectual Property Development Program from 2016 to 2020, on May 15th, 2020, NOIP had issued Notification No. 5360/SHTT-NĐHT on recording the subjects entitled to support on international registration by the NOIP and the contents to be supported, namely:

Regarding subjects to be supported

Individuals who are Vietnamese being the application owner satisfies the following requirements:

  • Being eligible for patent protection requirements;
  • Being applicable in production and business activities;
  • Having not yet been received fund from the State Budget for international patent registration; and
  • Submited patent applications at the NOIP in the period from August 15th, 2019 to May 15th, 2020.

Regarding the contents to be supported

  • Consulting, guiding the general procedures, regulations and documents for submitting an international registration application for patent;
  • Adjusting the document description when submitting in the international phase and translate such Description into English;
  • Preparing documents, filling in the form as prescribed by law;
  • Industrial property representation fee in Vietnam; and
  • Submitting the patent registration to the International Registration of Patents according to the Patent Cooperation Treaty (PCT) in the international phrase.

Support fund

Support 70% of the total fund for submitting patent applications in the form of PCT filing in the international phase (maximum VND 60 million / solution). The remaining funding shall be borne by the individual participating.

Download Legal Updates as a PDF here.

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[Hanbook] Cross-Border M&A Activities In Vietnam: A Glance In Hospitality Sector

Thanks to a qualified and reasonable human resource, a high urbanization rate as well as a strategic location in the center of Southeast Asia, Vietnam is becoming well-known as a manufacturing hub, growing consumer market and access to a vast marketplace. All these attributes make investing in Vietnam interesting. Correspondingly, the Vietnamese M&A market has grown at an impressive rate in terms of both the numbers of transactions and the deal value, especially in the hospitality sector.

By our experience and evaluation in the progress of advisory for the clients who are the tourism real estate development and operating companies in Vietnam, one of the trends and also is the preferred choice of many current investors and especially foreign investors, they would choose the investment options through M&A implementation in many different ways and methods to carry out investment activities in tourism real estate project in Vietnam.

This handbook will summarize some brief information and legal framework related to a M&A deal in the hospitality sector.

See more handbook as a PDF here.

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[Legal Updates] The Decision promulgated by The Prime Minister on the implementation of assistance policies for people affected by Covid-19 pandemic

1| The Decision promulgated by The Prime Minister on the implementation of assistance policies for people affected by Covid-19 pandemic

On April 24th, 2020 the Prime Minister promulgated the Decision No. 15/2020/QĐ-TTg on implementation of assistance policies for people affected by Covid-19 pandemic (hereinafter referred to as “Decision 15“), which specifies the contents of the Resolution No. 42/NQ-CP to help people affected by Covid-19 pandemic (hereinafter referred to as “Resolution 42“), in which:

  • Regulating six categories to be applied financial assistance policies, including: (1) Impacted employees; (2) Impacted employers; (3) Household businesses with revenue under 100 million VND per year; (4) People with meritorious service to the country; (5) Social protection beneficiaries; and (6) Poor and near-poor households according to the national poverty standards.
  • Stating the financial assistance amount and procedures to help employees and employers affected by Covid-19 pandemic with the following main contents:

Incentives for employees

(1) Financial assistance of VND 1.800.000 per month

  • Employees whose labor contract is temporarily suspended or have to take unpaid leave for a month or above because their employers are not making any revenue or do not have adequate funds to pay wages due to the impact Covid-19 pandemic. The assistance duration is applicable for a maximum period of up to three months beginning from April 01st, 2020.
  • Dossiers and procedures for implementation are prescribed in Decision 15, accordingly:
    • The enterprise shall compile a list of employees whose labor contract is temporarily suspended or has to take unpaid leave; and request the internal trade union (if any) and the social insurance authority to verify the list.
    • After the social insurance authority send the enterprise confirmations of the employees’ participation in social insurance according to Clause 2 Article 1 of the Decision 15/2020 (within 03 working days), the enterprise shall submit the application to the People’s Committee of the district where the enterprise is headquartered.

(2) Financial assistance of VND 1.000.000 per month

  • Employees whose labor contract and employment contract are terminated but are not eligible for unemployment allowance or that work without a labor contract and have lost their jobs.
  • For implementation procedure, employees submit the application form provided in the Appendix hereof to People’s Committee of the commune. For the employees working without a labor contract and having lost their jobs, the duration for submitting is after the 15th every month.
  • The employee who has a permanent residence in one province and temporary residence in another may claim assistance in either province and obtain a confirmation that he/she has not claimed assistance in the other province from the People’s Committee of the commune in the latter province.

Incentives for employers

  • Employers that have been affected by Covid-19 and have already paid at least 50 percent of salary for work suspension to their employees according to Paragraph 3 Article 98 of the Labor Code from April to June 2020 can borrow a loan with zero percent interest, collateral-free from the Vietnam Bank for Social Policies for a maximum term period of 12 months in order to pay the unpaid wage and disbursed monthly to pay the suspended employees. The lending rate up to 50 percent of total region-based minimum wages of individual suspended employees over the actual period of wage payment but not exceeding 3 months.
  • For the implementation procedures, by the 5th every month, employers that wish to obtain the loan shall submit the application to the People’s Committee of the district where the branch, representative office, business location or residence (for household business and individual business) is located.

2| The State Bank of Vietnam (“SBV”) submitted the Prime Minister the Decision on implementation of a pilot project on Mobile Money for approval

At the Meeting between the Prime Minister and the business community on May 09th, 2020, the Governor of the SBV Le Minh Hung said that the SBV submitted the Prime Minister the Decision on implementation of pilot project of utilizing telecommunication accounts to make small payments (Mobile Money). Previously, the State Bank of Viet Nam built the Draft Decree amending Decree No. 101/2012/ND-CP of the Government on non-cash payments (Hereinafter referred to as “Amending Draft Decree” and posted it publicly to take wide comments from people, businesses, with the following main contents regarding to Mobile Money:

  • Mobile money is defined as electronic money issued by an intermediary payment service provider providing telecommunications services and identifying customers through a mobile subscriber database. Based on this definition, Mobile Money is a combination of cryptocurrencies and using a mobile technical platform to make financial transactions, using a mobile subscriber database to identify customers.

Differ from two types of prepaid cards and digital wallets, Mobile Money is issued by intermediary telecommunications service providers (such as VNPT, Viettel, MobiFone) and may not be connected with bank account, mainly for making payment transactions, money transfers with small transaction value.

  • The Ministry of Information and Communications and SBV are expected to license Mobile Money deployments in June this year. Accordingly, all three big telecommunications service providers, Viettel, MobiFone and VNPT, said that they also have prepared projects to submit to the relevant state authorities after the Prime Minister officially agrees to allow the Mobile Money deployments.

Download Legal Updates as a PDF here. 

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ARTICLES

Investment through nominee structure in Vietnam

To quickly engage in the business in Vietnam, some foreign investors (“Foreign Investor”) are considering the implementation of the investment through nominee structure as follows:

(1) Firstly, a Vietnamese partner of the foreign investor, under an agreement between such Vietnamese partner and the foreign investor, shall establish a local company under the name of the Vietnamese partner (“Local Company”) in order for such Local Company to carry out the business in Vietnam.

(2) Then, the Foreign Investor shall acquire 100% shares/capital contribution in the Local Company in order to be the sole owner of the Local Company replacing the Vietnamese partner (“Acquisition”).

With our practical experience in advising similar cases, there may be some notable legal issues and potential legal implications and conditions occurring from the process of conducting the above steps (1) and (2) in Vietnam applied to the Local Company and the Foreign Investor, such as specific business conditions, licensing procedures, taxation matters, money remittance, foreign exchange, and so on.

1.1. About procedures

  • Step 1: The Vietnamese partner shall establish the Local Company (Establishment).
  • Step 2: The Foreign Investor shall extend a fund to the Vietnamese partner/the Local Company, in the form of a foreign loan (Funding).
  • Step 3: The Local Company shall register the foreign loan from the Foreign Investor (when the loan is made between the Foreign Investor and the Local Company with the term of 1 year or more, if applicable) (Registration of Loan).
  • Step 4: The Foreign Investor shall acquire 100% capital contribution/share in the Local Company from the Vietnamese partner to be the sole owner of the Local Company (Acquisition).

1.2. About legal implications

(a) Establishment

– Assuming that there is one individual Vietnamese partner, the Local Company is likely to be incorporated under the form of a limited liability company with one member. For the establishment and operation of the Local Company under the form of a limited liability company with one member, the Vietnamese partner is required to conduct the below procedures step-by-step: 

(i) Applying for an Enterprise Registration Certificate (ERC) 

  • The Vietnamese partner shall submit a dossier to the local licensing authority to apply for an ERC to set up the Local Company.
  • Statutory timeline: 03 working days from the receipt date of a valid and complete dossier by the local licensing authority.

(ii) Initially tax declaring 

  • The Vietnamese partner shall directly or authorize a third party to liaise with the local tax department for the initial tax declaration.
  • Deadline: Last day of the calendar month in which the Local Company comes into operation.

– After completing the said procedures for the Local Company establishment, during the course of operation, the Local Company shall be required to strictly comply with the Vietnamese corporate regulations such as: labour, management, fire fighting and fire preventing, environment protection, taxation, periodical reporting, etc. Besides, for the purpose of maintaining the stable operation of the Local Company, the Local Company shall need to pay the costs, fees relevant to the Local Company’s operational activities (e.g. recruiting and employing employees, paying taxes applicable to enterprise, etc.).

– Within 90 days from the establishment date of the Local Company under the ERC, the Vietnamese Partner shall be required to be contribute the registered capital of the Local Company in full upon the Local Company’s establishment. Since the Foreign Investor shall acquire the capital/share in the Local Company, to facilitate the acquisition, it is recommended that the Local Company registers to engage in the business line(s), which the Foreign Investor is fully permitted to own 100% of its capital as provided in the WTO Commitments and the local laws of Vietnam.

– By law, the Vietnamese partner, as the current company’s owner, shall be entitled to regulate and decide all material corporate matters relating the Local Company, including but not limited to: deciding development investment projects, sale and purchase of assets, taking or granting company’s loans, and other rights prescribed in law and the company’s charter.[1] Provided the large power of the company’s owner as prescribed by law, for the Foreign Investor’s interest, the parties may enter into a business co-operation agreement or nominee agreement (“Master Agreement”) with call & put option arrangement (“Capital Option”). In addition, the Foreign Investor shall step-by-step exercise the Capital Option to buy out all capital contribution of the Vietnamese partner in order to physically and legally control and fully own the Local Company. Upon the exercise completion of the Capital Option, the Local Company shall become a foreign-invested company.

– To avoid the risk that the Vietnamese partner may take inappropriate actions against the benefits of the Foreign Investor and/or the Local Company, by reaching an agreement with the Vietnamese partner in the Master Agreement, the Foreign Investor may consider arranging an appointed person as the General Director/Director cum the legal representative of the Local Company to legally manage the daily operation of the Company.[2]

(b) Funding

  • For the purpose of offering a fund for Vietnamese partner to establish the Local Company and to enable the Local Company to arrange the business activities, the Foreign Investor and the Local Company/the Vietnamese partner can have an arrangement on cash flow (if the Vietnamese partner could not arrange his/herself) as a nominee/loan agreement.[3]
  • Upon the Acquisition by the Foreign Investor, the loan provided by the Foreign Investor may be offset against the transfer price payable by the Foreign Investor in relation to the share/capital contribution transfer in the below step of Acquisition under the agreement of the parties in the Master Agreement.

(c) Registration of Loan

  • Accordingly, if the loan is made between the Foreign Investor and the Local Company, such loan transaction shall be treated as a foreign loan of a Vietnam-based enterprise and may be subject to registration procedures at the State Bank of Vietnam (“SBV”) if the loan term is from 1 year or more.[4] In addition, the loan must be wired to the foreign loan borrowing and repaying account of the Local Company.[5]

(d) Acquisition

– Upon the entry into of a share/capital contribution purchase and sale agreement (“Capital Purchase Agreement”) between the Vietnamese partner and the Foreign Investor and the completion of the registration for changing shareholding structure of the Local Company, the Foreign Investor may become the sole owner of the Local Company replacing the Vietnamese partner.

– As the Local Company is an existing and operating company before the Acquisition, despite a short operational period only from the incorporation date to the date of the Acquisition, there may still be outstanding legal compliance and financial matters that the Foreign Investor should verify via legal and/or financial due diligence process.

– For the Acquisition, the Foreign Investor and the Vietnamese Partner are required to conduct the below procedures step-by-step:

(i) Obtaining an approval letter for the Acquisition (“Approval Letter”)

  • By law, the Acquisition of 100% capital in the Local Company requires the obtainment of an Approval Letter for such Acquisition.[6] The Foreign Investor and the Local Company shall have to prepare and submit an application dossier to the local licensing authority for the same paper.
  • Statutory timeline: 15 days from the receipt date of a valid and complete dossier by the local licensing authority.[7]

(ii) Applying for an amended Enterprise Registration Certificate (“Amended ERC”)

  • Upon obtaining the Approval Letter as aforesaid, the Local Company shall submit a dossier to the local licensing authority to apply for an amended ERC recording the Acquisition and the Foreign Investor as the new owner of the Local Company.
  • Statutory timeline: 03 working days from the receipt date of a valid and complete dossier by the local licensing authority.[8]

1.3. About tax implications

  • Upon the Acquisition, the Vietnamese partner, as the party receiving income from the Acquisition (if any), may be subject to personal income tax (PIT) at the rate of 20% levied on the taxable income arising from the Acquisition.[9]

 

[1] Article 75 of the Law on Enterprises

[2] Article 81.2 of the Law on Enterprises

[3] The Foreign Investor should carefully consider this option and require the Local Company and/or the Vietnamese partner to pledge its/their assets (such as capital contribution/shares in the Local Company) as a security for the loan.

[4] Article 9 of Circular No. 03/2016/TT-NHNN dated 26 February 2016 of the SBV on providing several instructions on foreign exchange administration in respect of enterprise’s foreign borrowing and foreign debt repayment of enterprises (Circular 03)

[5] Article 24.3 of Circular 03

[6] Article 26.1 of the Law on Investment

[7] Article 26.3(b) of the Law on Investment

[8] Article 27.2 of the Law on Enterprises

[9] Article 21.2 and Article 23 of the Law on PIT

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National Office of Intellectual Property (“NOIP”) issues the Notification on assistance for international registration of patents for individuals

In the scope of the Intellectual Property Development Program from 2016 to 2020, on May 15th, 2020, NOIP had issued Notification No. 5360/SHTT-NĐHT on recording the subjects entitled to support on international registration by the NOIP and the contents to be supported, namely:

Regarding subjects to be supported

Individuals who are Vietnamese being the application owner satisfies the following requirements:

  • Being eligible for patent protection requirements;
  • Being applicable in production and business activities;
  • Having not yet been received fund from the State Budget for international patent registration; and
  • Submited patent applications at the NOIP in the period from August 15th, 2019 to May 15th, 2020.

Regarding the contents to be supported

  • Consulting, guiding the general procedures, regulations and documents for submitting an international registration application for patent;
  • Adjusting the document description when submitting in the international phase and translate such Description into English;
  • Preparing documents, filling in the form as prescribed by law;
  • Industrial property representation fee in Vietnam; and
  • Submitting the patent registration to the International Registration of Patents according to the Patent Cooperation Treaty (PCT) in the international phrase.

Support fund

Support 70% of the total fund for submitting patent applications in the form of PCT filing in the international phase (maximum VND 60 million / solution). The remaining funding shall be borne by the individual participating.

Read more...

Updating the new Decree No. 37/2020/ND-CP to include small- and medium-sized businesses from accessing investment incentives

On March 30th, 2020, the Government promulgated Decree No. 37/2020/NĐ-CP to amend the list of business lines eligible for investment incentives attached to Decree No. 118/2015/ND-CP detailing and guiding the implementation of Law on Investment (“Decree 118”), which takes effect on May 15th, 2020, in which adding the following 04 business lines to the list of business lines eligible for investment incentives:

  • Business investment in the distribution chain of products of small and medium-sized enterprises (“SMEs”);
  • Investment in business of incubating SMEs;
  • Business investment in technical facilities to support SMEs;
  • Business investment in a common working area for small and medium-sized startups.

Accordingly, foreign investors taking business investment in Vietnam in 04 business lines as mentioned above will be eligible for investment incentives from May 15th, 2020, namely:

  • Under the Law on Support for Small and Medium Enterprises, support measures for SMEs in general may include of assistance in the credit assessment; assistance in the tax and accounting regimes; assistance in production areas; assistance in terms of technologies; assistance in access to information, counseling and legal fields; and assistance in human resource development.
  • Regarding incubators, technical facilities, coworking areas, and business investment enterprises and organizations joining the distribution chain of products manufactured in Vietnam having at least 80% of members that are SMEs are entitled to more investment incentives, in which:
    • Remission of land rental, land use fees and the non – agricultural land use tax in accordance with regulations of law;
    • Remission of corporate income tax for a limited period of time in accordance with regulations of law on corporate income tax; and
    • Micro-enterprises and small enterprises will be given priority during contractor selection in accordance with regulations of law on bidding.
Read more...