Our legal brief for January 2015 provides an update on certainimportant regulatory changes in respect of banking, e‑commerce and employment; and presents a short summary of new regulations effective from early 2015.
1. Detailed procedures for foreign investors to acquire shares of Vietnam’s credit institutions
In an effort to facilitate banks restructuring in Vietnam, the State Bank of Vietnam (“SBV”) promulgated Circular № 38/2014/TT-NHNN dated 8 December 2014 (“Circular 38”) providing formalities and procedures for the implementation of Decree 01/2014/ND-CP dated 3 January 2014 on the acquisition of shares of joint-stock credit institutions by foreign investors (“Decree 01”). Circular 38 will become effective on 1 February 2015. As a result Circular 07/2007/TT-NHNN dated 29 November 2007 of the SBV providing guidance on the implementation of Decree 69/2007/ND-CP of the Government on the acquisition of the shares of joint-stock credit institutions by a foreign investor and Article 10 of Circular 24/2011/TT-NHNN dated 31 August 2011 of the SBV will be repealed.
A foreign investor needs prior approval from the SBV when acquiring shares of a credit institution to hold a percentage of 5% or more of the charter capital of such credit institution or when becoming the strategic foreign investor of such credit institution.
Where the acquisition involves a weak credit institution, the SBV will evaluate the application dossier and seek the Prime Minister’s approval prior to deciding allowing a holding percentage of the foreign investor or strategic foreign investor in a weak credit institution beyond the holding limits set out in in Decree 01.
Circular 38 sets out the principles when preparing the application dossier including the requirement of the official language being Vietnamese. Any application document in a foreign language needs to be consularized..
The regulatory timeframe for the SBV’s consideration of the application is 40 days from the date of receipt of a valid dossier. In respect of the application dossier involving a weak credit institution, within 40 days from the date of receipt of a valid and complete dossier, the SBV should evaluate and submit its proposal to the Prime Minister for final decision. However, there is no compulsory timeline for the Prime Minister to make a decision.
2. E-commerce website: no selling wine, cigarettes, and other restricted goods. Social networks must register as an e-commerce trading floor if involved in certain activities
Circular № 47/2014/TT-BCT dated 5 December 2014 of the Ministry of Industry and Trade (“MOIT”) on the management of e-commerce websites (“Circular 47”) came into force on 20 January 2015.
Under Circular 47, businesses cannot trade restricted goods such as hunting guns, sporting guns, cigarettes, cigars, alcohol, wild animals and plants and other restricted goods on their e-commerce websites. All e‑commerce websites shall be registered online and report/update their operations annually at www.online.gov.vn. Failure to report to the MOIT may cause the cancellation of their registration. Any change to the registered content of e-commerce websites must be notified to the MOIT within seven working days of such change.
Interestingly, Circular 47 requires that all social networks having one of the following activities must register under the form of an e-commerce trading floor: (i) website that allows participants to open booths for display and introduction of goods or services; (ii) website that allows participants to set up branch websites for displaying and introducing goods or services; (iii) website that has a sale and purchase section permitting participants to post news of sale and purchase of goods or services. Circular 47 also specifies that online sellers on social networks must fulfill tax obligations as prescribed by law.
3. Criteria and procedures to obtain work permit exemptions for internal transfer employees
Under the Labor Code, foreign employees who are transferred within a group of enterprises operating in one of 11 lines of services of covered under Vietnam’s commitments to the WTO on services (“Vietnam’s WTO Commitments”) having commercial presence in Vietnam (“Internal Transfer Employees”) are exempted from the requirement to obtain a work permit to work in Vietnam. Such exemption is subject to a confirmation of the Department of Labor, Invalid and Social Affair (“DOLISA”). Yet there had so far been no clear criteria for the labor authorities to determine precisely who is an Internal Transfer Employee. Circular № 41/2014/TT-BCT dated 5 November 2014 of the MOIT (“Circular 41”) sets out the criteria.
The conditions for a foreign employee to be eligible for the work permit exemption as an Internal Transfer Employee include:
- Such employee being a manager, an executive or a technical expert;
- The foreign employer having established a commercial presence in Vietnam and operating in one of 11 service industries under Vietnam’s WTO Commitments;
- Such employee having been employed by the foreign company at least 12 months prior to internal relocating to Vietnam.
In order to receive such exemption, the employer must submit an application dossier requesting a work permit exemption to the DOLISA. If the DOLISA is unsure about whether the foreign employee is qualified to be exempted by the work permit requirement, the DOLISA should seek the MOIT’s opinion who must reply within three working days from the date of receipt of the request from DOLISA. Where the employer does not agree with the DOLISA’s response, the employer may request confirmation directly from the MOIT.
Circular 41 came into effect on 22 December 2014.
4. Significant laws effective from 1 January 2015
On 1 January 2015 several significant new laws on tax, environment and enterprises became effective, included the ones below:
- New Amended Tax Law № 71/2014/QH13 dated 26 November 2014 that brings many changes to the Vietnamese tax policies. Please refer to our DFDL Tax update January 2015 for more information.
- Law on Environment Protection 2014 № 55/2014/QH13 dated 23 June 2014 that adds compliance requirements applicable to businesses in relation to the protection of the environment. Under the new law, an environment impact assessment is required for all investment projects which (i) are subject to the approval of the National Assembly, the Government or the Prime Minister, or (ii) involve wildlife sanctuaries, national parks, historical-cultural monuments, world heritage sites, biosphere reserves or classified beauty spots or (iii) may cause a negative impact to the environment.
- Law on bankruptcy 2014 № 51/2014/QH13 dated 19 June 2014. Under the new law, creditors, employees and the enterprise itself can request the start of bankruptcy procedures of an enterprise that is ‘insolvent’ (i.e. that fails to meet any of its payment obligations within three months from the due date). Within three working days from the date of receiving a valid petition for commencement of bankruptcy procedure by the people’s court, the insolvent enterprise or cooperative and the creditor filing such petition shall have the right to have a written request sent to the people’s court in order for the parties to negotiate for withdrawal of the petition. The people’s court shall determine the time of negotiation but it must not more than 20 days from the date of receiving the valid petition for commencement of bankruptcy procedure. A transaction of an insolvent enterprise or cooperative which was conducted within the six months prior to the date when the people’s court issued a decision to commence the bankruptcy procedure shall be deemed invalid if it falls into one of the following cases:
- The transaction is related to asset assignment which is not at market price;
- Conversion of an unsecured debt into a debt secured or partly secured by the assets of the enterprise or cooperative;
- Payment or setoff which benefits a creditor in respect of a debt that has not yet become due or with a sum that is larger than a debt which has become due;
- Donation of assets;
- The transaction is outside the purpose of the business operations of the enterprise or cooperative;
- Other transactions for the purpose of disposing of the assets of the enterprise or co-operative.
- Law on employment № 38/2013/QH13 dated 16 November 2013. Under this new law, regardless of the number of employees, the employer shall contribute to the compulsory unemployment insurance scheme for its employees. Previously, employers were exempted from this if there were fewer than 10 employees.