Business line(s) of a technology provider of a ride-hailing application in Vietnam (part 2)

Business line(s) of a technology provider of a ride-hailing application in Vietnam (part 2)

In the previous article, we already had an overview on the ride-hailing market and several new and notable related regulations on a technology provider of ride-hailing applications. Accordingly, a technology provider of ride-hailing applications is entitled to opt for either being a transport business organization or being the business of providing a software application to assist with connection in transport (“Transport Software Organization”) based on its business activities. The clear difference between a transport business organization and a Transport Software Organization is that the Transport Software Organization shall possess the 02 following constituent elements: (i) Not directly coordinating automobile or driver; and (ii) Not deciding transport costs.

For more information and knowledge on those elements, please see the link of the previous article: What is the way for technology providers of a ride-hailing application in Vietnam? (Part 1).

In this week, we will find out more detail the business activities of a Transport Software Organization based on the definition provided by the laws. 

In most cases, the operation of any existing ride-hailing application in Vietnam shall be as follows:

(i) At first, the user of the ride-hailing application (the “passenger”) registers an account and accepts to comply with all regulations and policies provided by the application owner. This step is also applied to the drivers, in which the drivers not only have to register an account but shall meet several requirements imposed by the laws and the owner.

(ii) By the account granted by the owner, the passenger can create a request for transportation via the application, while the driver can conduct such transport request from the passenger. 

(iii) The fees for the transport will be paid fully by the passenger. The owner is entitled to earn a commission for being an intermediary. The rest will come to the driver’s pocket.

Please bear in mind that the Transport Software Organization shall be not allowed to analyze the transport request to select an appropriate vehicle or driver in conformity with the request of the passenger or to decide transport costs during all the implementation of the above transport transaction between drivers and passengers.

Therefore, based on the above description of the operation of a ride-hailing application, one thing for sure is that the business activities of a provider of a ride-hailing application shall relate to the e-commerce activity. As the provider of ride-hailing application plays a role of an intermediary to permit passengers and drivers to reach transport transactions, such being an electronic intermediary shall be deemed to be an e-commerce trading floor application under the laws of Vietnam.

As you may have heard/read, according to the law of Vietnam, any business activity shall be required to register a business line(s) corresponding to such business activity. Therefore, the provider of a ride-hailing application shall need to register an appropriate business line(s) corresponding to being an e-commerce marketplace application.

According to the laws of Vietnam, e-commerce activity means conducting part or the whole of the process of commercial activity by electronic means connected to the Internet, mobile telecommunications network or other open networks. It is quite paradoxical that although the laws of Vietnam clearly provide the definition of e-commerce activity, there is no corresponding business line(s) to e-commerce activity under the laws.

Therefore, for the purpose of conducting e-commerce activity, an enterprise shall need to analyze its business activity in more detail and depth. In essence, e-commerce activity is commercial activities based on electronic means which are results of computer and software programming activity. Therefore, e-commerce activity clearly is comprised of computer and software programming activity and commercial activity.

  • In terms of computer and software programming activity:

Any organization creates, designs and uses a program not for sales, but for the purpose of providing services to enable the provision of customers’ services or products, such business activity shall be classified as computer and software programming activities. There is business line(s) corresponding to this kind of activity under the laws of Vietnam. Moreover, the computer and software programming activities are also listed in the list of services opening to foreign investors. Specifically, the services involving consultancy services on development and implementation of software CPC No. 842 are committed by the Vietnamese Government to open for foreign-invested companies without any restriction under the WTO Commitments of Vietnam.

Therefore, the provider of a ride-hailing application shall need to register the appropriate business line(s) corresponding to computer and software programming activities under the laws of Vietnam (and the WTO commitments of Vietnam in case of foreign investors).

  • In terms of commercial activity:

According to the law of Vietnam, commercial activities mean activities for the purpose of generating profits, including: sale and purchase of goods, provision of services, investment, commercial promotion and other activities for the profit purpose. Accordingly, the definition of commercial activity is quite wide and ambiguous as any activity with the aim of generating profits may be deemed to be a commercial activity. Therefore, in order to register a business line(s) for commercial activity, it is necessary to determine the commercial activity in a more detailed and specific way. For example, business activities of e-commerce trading floors in retail or online retailers shall involve in retail trading activities. Accordingly, Amazon, Shoppee, or other e-commerce trading floors shall need to register at least 02 main business lines, which are the business line of computer and software programming activity and business line(s) corresponding to retail trading activities.

As explained earlier, a provider of a ride-hailing application shall involve in e-commerce activity. In the present case, e-commerce activity shall be comprised of at least 02 main activities, which are computer and software programming activity and the commercial activity that is determined to be varied depending on the owners’ determination on their business activities. For some existing cases of a provider of a ride-hailing application in Vietnam, some register the commercial activity as an activity of web portals, while some register the commercial activity as support service activities. However, there is one common thing between these registrations, regardless of the difference in the determination among the application owners on their own business activity. It is that such activity shall be registered with the detailed explanation written as “e-commerce services”. It seems to appear that the authority in charge of enterprise registration does not put too strict in the name of the business line of the commercial activity, provide that the detailed explanation of such commercial activity covers the description words of its nature. In this case, the nature of activities of providing a ride-hailing application is activities of providing e-commerce services related to transportation. 

In conclusion, for the purpose of conducting the activities of providing a ride-hailing application in Vietnam, the technology provider of a ride-hailing application shall need to register at least 02 main business lines corresponding to the activity of computer and software programming and the commercial activity that could be determined at the discretion of the owner as long as covering the detailed explanation written as “e-commerce services”.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.