Indochina Law Quarterly
In this issue, you will find reports on a number of important legal and economic developments in Laos, Cambodia, and Vietnam from January to June 2016. The deluge, not the dearth, of new legal developments lead to this combined Spring and Summer versions of our “Quarterly” for only the second time in its two-decade plus history. We hope you will understand.
In Cambodia, there have been significant adjustments to tax law and administration, as well as a new Law on Telecommunications. In Laos, local language labelling rules has been adopted, as well as a new, comprehensive competition law to deal with unfair trade practices, merger controls and common anti-competitive restraints of trade.
In Vietnam, even while the Government redoubled its efforts to control red tape and streamline the bureaucracy, the Ministry of Industry and Trade issued new licensing requirements for various steps in the trade and distribution part of the supply chain. Meanwhile, the State Bank issued important new rules overhauling the legal framework for the establishment and operation of non-bank credit institutions, fine tuned the rules on derivatives trading, and clarified the rules governing foreign exchange lending. A long awaited new decree on foreign representative offices and branches was issued, apparently limiting the scope of operation of representative offices with the intention of encouraging foreign traders to move to taxable branches or subsidiaries, but the immediate impact has been muted.
At the same time, the implementing rules for Vietnam’s recently amended Investment Law and Enterprise Law continue to dribble out, having gone through extensive stakeholder consultations. Implementing measures for the Korea-Vietnam Free Trade Agreement, which took effect at the end of 2015, are streamlining the import and export activities of the growing Korean invested electronics industry in Vietnam, even while the more general Law on Import and Export Duties strengthened Vietnam’s remedies in terms of anti-dumping, countervailing duties and safeguards. Other important new developments in the areas ranging from online information security to insurance regulation, investment incentives to employment matters and a new Law on Treaties intended to pave the way for TPP implementation all left plenty of new legal material for the business community to digest. On the other hand, an amended Penal Code, which generated widespread concern with new crimes such as wrongful dismissals and operating a website without a license was recalled for reconsideration by the National Assembly before it entered into effect.
We trust that you will find this issue informative, and would very much appreciate your valuable comments and suggestions to help us to improve this publication.
Fred Burke, Editor
Agriculture Increased agricultural exports a good sign for the Cambodian economy, though tumbling prices troubling for struggling farmers New data from the Cambodian Ministry of Agriculture shows that agricultural exports increased in tonnage by over 20 % last year. This has been brought about by a new trend in increased exports of dried cassava chips. Tonnage of total exports also rose to 4.1 million tons in 2015, an improvement on the 3.4 million tons reported for the previous year. The bulk of these exports are from rice, rubber, and cassava, which is Cambodia’s second most important agricultural crop. Natural rubber and sugarcane exports also rose. A Ministry of Agriculture spokesperson has stated that export increases of cassava are attributable to high Chinese, Thai and Vietnamese demand at the beginning of the year. This demand fell sharply by the end of 2015, drastically reducing prices, which has created a sense of desperation in recent months among cassava farmers, illustrated by the fact that more farmers were selling their cassava despite falling prices. The same spokesperson predicts that price and demand will rise again in 2016, as Chinese demand in particular will rise rapidly. However, while exports continuing to rise is statistically positive, continued exports as prices drop points to disaffection of farmers. Calls for the Cambodian authorities to support farmers by establishing a minimum price floor for agricultural products have persisted. As the government attempts to work more intimately with farmers in an effort to improve their skills and implement tighter phytosanitary controls in compliance with international standards, concerns abound that too much stock is put into statistics and numbers. While increased exports are viewed as a positive sign for the Cambodian economy, a senior advisor to the Supreme National Economic council deems claiming victory to be risky. The risk in emphasizing export numbers is that the government focuses too much on statistical growth figures and not enough on how and if farmers are actually benefitting from the sector’s growth, since, without a price floor, tumbling cassava prices have hampered farmers since demand slipped in the second quarter of 2015. Six local cash crops targeted by Grow Asia to enhance Cambodia’s agricultural sector The Grow Asia program is a multi-stakeholder partnership with the objective of promoting inclusive agricultural growth within the ASEAN member state community and is backed by the World Economic Forum (“WEF”). Grow Asia formally entered into a partnership with Cambodia’s Agriculture Ministry late last year. It is already backed by the World Bank. The group has been lauded by Cambodian Prime Minister Hun Sen for the benefits that Grow Asia brings to farmers, particularly in terms of easing farmers’ access to markets. The group reassembled in Phnom Penh to focus on initiatives aimed at launching working groups between the Cambodian public and private sectors, which includes NGOs. Grow Asia has targeted six Cambodian cash crops that show market potential, which according to Grow Asia’s director of country partnerships are rice, cassava, coconut, palm sugar, pepper and vegetables. Meas Pyseth, the director of the Cambodian Department of International Cooperation under the Ministry of Agriculture, has stated that the collaborative effort of an economically diverse team in making these six crops priorities will have the affect of significantly promoting Cambodia’s agricultural sector. Pyseth has also stated that the importance of effective cooperation remains high while the Ministry of Agriculture’s effectiveness remains limited, though the Ministry has had notable achievements in recent years. 2 Cambodia Citing Grow Asia’s experience in the agricultural industry, Pyseth notes that as long as the group is able to build large networks across the Kingdom, both the domestic market as well as international exports will benefit. Grow Asia’s director has been quoted as saying that Cambodia’s fertile soil represents great market potential for the private sector which can be enhanced greatly by receiving significant investment from multinational corporations. Under this arrangement, companies will be able to commit to purchase agreements and Cambodia as whole will be more able to engage with the region on many levels. Grow Asia, whose purpose is not to provide loans or grants, has stated that their goal in Cambodia is to provide the groundwork that makes it possible and attractive for the government and private stakeholders to engage in long-term strategic cooperation, bringing them together. The Grow Asia initiative in Cambodia has set the goal of reaching 10 million farmers in ASEAN countries with an eye towards profitability at twenty percent by 2020. In addition to Cambodia, Grow Asia is currently active in Indonesia, Myanmar, the Philippines and Vietnam. The group has one hundred member and sixty-five companies. Banking New Circular Enhances Cambodian Banking Capabilities The Circular on the Enhancement of the Implementation of the Law on Negotiable Instruments and Payment Transactions, No. B7-016-002 (NBC) was issued on 11 February 2016 by the National Bank of Cambodia (“NBC”). This Circular’s intended affect is to rationalize and offer guidance on enforcing the Law on Negotiable Instruments and Payment Transactions (“LNIPT”), promulgated on 24 October 2005. The NBC has issued this circular to increase the effectiveness of payment transactions and make negotiable instruments more reliable. This Circular also seeks to be educational and informative, seeking to ensure that workers and staff in banks and financial institutions (“BFIs”) are fully aware of the regulations and to follow them for the sake of both BFIs and the people who use them. This is related mostly to the issuance, use, and payment of cheques. Under this Circular, BFIs are required to issue clear instructions to theirs customers regarding the terms and procedures of correctly issuing and using cheques. Also, the BFIs must record and report back to the NBC within two days in case there is insufficient funds in the relevant account to cover a cheque. BFIs will be subject to penalty if they fail to comply with the rules and procedures outlined in this Circular. Phillip Bank launches collateralfree credit In a recent announcement, as borrowing demands have risen in Cambodia, Singaporebased Phillip Bank has said that Cambodian borrowers that can prove a consistent monthly income will now be able to access lines of credit without putting down collateral. Phillip Bank has recently formed a lending partnership with New Union (Cambodia). Together they intend to tap into the growing demand for borrowing services in Cambodia. In the past, as explained by Han Peng Kwang, general manager of Phillip Bank, while many Cambodians have in fact been able to pay back loans, bank policy has been to heavily restrict borrowers from accessing lines of credit because of strict collateral requirements. These requirements have now been eliminated. Phillip Bank has bound itself to the ability of Cambodian borrowers to make consistent monthly income as well as make regular payments. The bank hopes to capitalize with a collateral-free credit product amid growing demand for borrowing services. Phillip Bank will become the first bank in Cambodia to offer collateral-free lines of credit. While the opportunity for significant capitalization of the market is at hand, Kwang understands the risks as well, adding that in-depth market studies were conducted before making the decision. The bank has set aside USD3 million in capital reserves for lending and intends to provide cash-based loans with a monthly interest rate of 2%. The maximum loan is three times the borrower’s monthly income and starts at USD1,000. In addition, Phillip Bank’s plans to increase its loan budget are dependent on market forces. The bank also hopes to study possibilities in developing lending products beyond those currently used to meet everyday needs. New Union (Cambodia) managing director Poh Wen Yi has stated that the company will collect and analyze credit date supplied by customers in order to ensure that borrowers have the financial capacity to actually make the required monthly payments. This data is essential in ensuring the accuracy of risk analysis. More accurate risks analysis indicates an enhanced ability for lenders Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 3 to grant larger, more significant loans. However, So Phonnary, executive vice president of Acleda Bank, quipped that the new model of collateral-free loans in amounts below USD3,000 would not have a significant impact on Cambodia’s existing multitude of financial products. Lending risk is limited if banks take competent precautions and examine spending behavior. Commerce Vinamilk closes Phnom Penh office For reasons yet unannounced and unspecified, Vietnamese dairy giant Vinamilk closes its representative office in Phnom Penh when its license expired on March 5. Vinamilk obtained an investment license to construct and operate a $23 million manufacturing plant in 2014. This was part of a joint venture with Cambodia’s Angkor Dairy Products Co Ltd. While the reasons remain obscure, the impact of Vinamilk closing down operations in Cambodia will be felt throughout the industry. More details should emerge in the near future regarding Vinamilk’s decision to close and its future in Cambodia. Pestech growing in Cambodia, intends to list subsidiary on CSX Pestech International, a Malaysian power infrastructure provider, has announced intentions to list one of its wholly owned Cambodian subsidiary companies on the local stock exchange. An initial public offering (“IPO”) has been made for Pestech (Cambodia) Ltd (“PCL”), an electrical substation and transmission line construction company, on the Cambodian Securities Exchange (“CSX”). PCL was incorporated in Cambodia in 2010. The move has been made so as to allow Pestech and its subsidiaries to focus exclusively on growing their businesses within their respective local markets. Listing PCL on the CSX will also enable the Pestech subsidiary to gain access to the Cambodian capital market. Pestech has said that it will reveal further details in the second quarter of 2016. Pestech has been growing in the Kingdom since completing its first Cambodian transmission line project in June 2013. The following year Pestech designed, manufactured and installed a 198-kilometer transmission line connecting Phnom Penh and Sihanoukville. Pestech continues to invest in and grow in Cambodia. Construction New instruction issued regarding construction, maintenance and repairs to roads and bridges as well as the repair and improvement of rural infrastructure On 3 May 2016, the Ministry of Rural Development issued Instruction No. 0054/16 on the warranty of construction quality and public safety in the course of construction, maintenance, reparation and improvement of rural infrastructure. The instruction is relevant to institutions under the jurisdiction of the Ministry of Rural Development and private enterprises engaging in construction, maintenance and repairs to roads bridges in addition to rural roads and infrastructure. The objective of the instruction is to provide that government institutions and private enterprises engaging in said activities will be sure not to compound dust issues in the dry season or mud issues in the rainy season. The quality of road construction, maintenance and repair is also a major focus, as the instruction emphasizes detailed contract language pertaining to contracts between relevant entities and the Ministry of Rural Development. The Ministry of Rural Development is responsible for investigating all construction sites under its jurisdiction in an effort to verify and enforce compliance with the instruction. Economy Inflation down significantly as low gas prices remain stable The Cambodian National Bank has stated in its annual report that plummeting gas prices have decidedly slowed inflation. Low inflation in countries exporting goods into Cambodia, along with effective management of the money supply, have also been factors in driving down domestic inflation, according to the report. The inflation rate in 2015 was down 3.9% from 2014 and is sitting at 1.2%. This occurred as average gas prices fell by 23%, from 5,090 riel to 3,900, at the end of last year. As falling gas prices have proven to be a trend in the global economy, the Commerce Ministry has also called on gas companies to lower prices at gas stations. The Ministry has called regular meetings with gas companies to ensure that the low prices lead to savings for consumers. The National Bank Governor has predicted that gas prices will remain stable throughout 2016 due to the global economic trends in which supply is stable but demand is weak. 4 Cambodia Energy Cambodia’s energy distribution gaps provide opportunities to Indian power firms Indian energy firms are actively exploring investment opportunities in the field of electricity generation and distribution, as more than 50 representatives of Indian energy firms attended the opening of the Powering Cambodia conference in Phnom Penh in February. These officials engaged local government officials and stakeholders in the Kingdom’s energy sector to explore investment opportunities in the field of electricity generation and distribution. Cambodia plans to provide electricity to 100% of rural villages by 2020, and expand the electricity grid to the majority of households by 2030. Households in remote villages continue to rely on fuel oil or batteries as electricity distribution infrastructure is not yet developed. These factors lead to a high cost of electricity, impeding rapid economic development, and presents both a challenge and an opportunity for those in the field, as, according to the Indian Ambassador to Cambodia, the Kingdom’s electricity supply is currently dependent on imported energy. While several hydropower stations are expected to come online in the next few years to mitigate some of the reliance on foreign energy, imported fuel and coal are likely to remain as the primary means to power the country for the foreseeable future. Competitive tariffs and favorable foreign investment policies make Cambodia an attractive target for those in the energy business. A 10-megawatt solar park has been proposed by the Cambodian government and they encourage the Independent Power Producers Association of India (“IPPAI”) and Indian companies to invest in the project. While Cambodia looks to expand its power distribution capacity, Indian companies see opportunity in filling the gaps. Environment Mekong River Commission weakening in the face of impending environmental disaster Institutional weakness is compounding fear that environmentally destructive infrastructure projects along the Mekong River, such as dams and water diversion activities, threaten to irreversibly inundate the surrounding ecosystem. Sixty million people as well as thousands of diverse species are in danger. In recent years, the Mekong River Commission (“MRC”) - the international body charged with protection of the river - has increasingly demonstrated an inability to fulfil its mandate. Current and former MRC employees, speaking on the condition of anonymity, have made claims that the MRC has been consistently losing power for years. Significant donors, including Australia, the EU, Denmark, Finland, Germany, the IUCN, Japan, Luxemburg, Sweden, Switzerland, the US, the World Bank and private donors have become embittered by the MRC’s ineffectiveness. Many have withdrawn their monetary support, resulting in the Commission losing more than half of its funds and employees, down from 180 to 90, in recent years. Concurrently, MRC member nations have grown overly frustrated with the multilateral consultation process, with several regarding the process itself as a complete failure. The weakness demonstrated by the MRC has increasingly led to individual member countries’ bypassing the Commission by unilaterally implementing environmentally harmful and controversial projects, namely the Xayaburi, Don Sahong and nine other dams planned in Laos. Researchers say these eleven dams could yield the following consequences: making the Mekong lose up to 65 percent of nutrient deposits in certain localities; completely blocking travel routes of fish, leading to the extinction of at least 10 percent of fish species in Cambodia and Vietnam; fisheries in both countries would produce 50 percent smaller yields; the Tonle Sap would be prevented from flooding which would deal irreparable damage to fish populations and plunge local communities deeper into poverty; and economic damage to Cambodia alone could reach $450 million per year. Yet Laos remains determined to build these dams unilaterally, the precise phenomenon the MRC’s charter was intended to prevent. The MRC, seen by many to have its modern origins in a 1995 document called the Procedures for Notification, Prior Consultation and Agreement (“PNPCA”), has further been weakened by redundant committees. One employee remarked that the 1995 Agreement has “become a joke.” The PNCPA is not regarded as legally binding by the member States. As bankruptcy approaches and crippling weakness makes the Commission untenable, many regard the dissolution or the possibility of being absorbed into another organization as Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 5 inevitable for the MRC. Given the dire state of affairs, reorganizing the Commission to include China and emphasize Myanmar would make sense. As one employee noted, 2,000 years of research and knowledge are at stake as well as the economic well-being and survival of millions. Finance Transparency of MEF Public Services Enhanced Prakas No 1823 SHV.Br.K (MEF) on the Standard of Public Services of the Ministry of Economy and Finance, issued on 25 December 2015, seeks to enhance the effectiveness, transparency and accountability of public services offered by the Ministry of Economy and Finance (“MEF”). Under this Prakas, collecting and providing information is now institutionally now, to be facilitated by the Department of Administration and Finance; service fee information, service duration, and official procedures for filing complaints are among those pieces of information which are intended to be easily accessible. An official list of public services for public dissemination is also to be prepared, compiled and published by the General Secretariat of the MEF. Fishing Cambodian government: snakehead fish farmers now required to register As an eleven year ban on snakehead fish farming was recently lifted in April of this year, the Fisheries Administration, as part of new regulations intended to enhance governance and monitoring over the newlylegal industry, is now requiring snakehead fish farmers to register with the Fisheries Administration. The 2005 ban was enacted by the Ministry of Agriculture as the cage culture of snakehead fish posed a threat to smaller, freshwater fish stocks due to the fishes’ voracious appetites. The Ministry decided to lift the eleven year ban based on the agreement of snakehead fish farmers to not use local fish as feed and instead import feed from neighboring countries or employ other means, such as using animal carcasses. Upon lifting the ban, Agriculture Minister Veng Sohkon signed a new prakas in early June intended to promote the formal incorporation of snakehead fish farmers and the government in order that the farmers be able to receive technical training in environmentally sustainable practices. Farmers greet the notion of technical training with enthusiasm as many are struggling due to the increased cost of local fish feed. The Fisheries Administration reports that farmers who operate 150-square meter enclosures up to 2,000-square meters, or have a maximum capacity to raise 35,000 fish, are now required to formally register with the national government at the Ministry of Agriculture. Fish farms with smaller capacities to raise fish need only register with local authorities. The Fisheries Administration believes that the new regulation will significantly bolster the government’s ability to control snakehead fish farming as well as provide efficient management of that industry. As of now, according to Fisheries Administration data, there remain at least 1,500 unregistered snakehead fish farms currently operating in the Kingdom. Those that have failed to register will not be penalized. However, the Fisheries Administration has stated that if snakehead fish farmers are caught using local small fish to feed snakehead fish they will be fined pursuant to the fisheries law, though they did not specify which articles or fines would be applicable in this situation. This also poses a problem to some fish farmers who run smaller operations. For example, one snakehead fish farmer who raises around 1,000 fish per year explained that importing feed as the legally prescribed method to feed the snakehead fish was not feasible due to the untenably high cost of doing so. This farmer admitted to illegally using baby fish from the river, despite being aware of the illegality of this act. Many farmers in this situation feel they have no choice. At the same time, the Fisheries Administration will urge farmers’ formal participation with the government by offering technical training. The Fisheries Administration believes that if farmers follow the technical training offered to them they will easily be able to produce high quantities of snakehead fish and fulfil market demand. They estimate that, with proper training and guidance, a farm with the capacity to raise 1,000 fish in a 100-square meter enclosure will be able to produce nearly one ton of fish per year to be sold on the market. Investment Cambodia’s stock exchange adds fourth company Cambodia’s incipient stock exchange added another entity to the fold at the end of May, as the country’s largest special economic
zone (“SEZ”) entered the stock exchange, representing the fourth entity to do so, joining Phnom Penh Water Supply Authority, Grand Twins International and the Phnom Penh Autonomous Port on the Cambodia Securities Exchange (“CSX”). Cambodian officials have also spoken openly about the possibility of a corporate bond market opening at the stock exchange in the near future. Sou Socheat, director-general of the Securities and Exchange Commission of Cambodia (“SECC”), used Phnom Penh’s SEZ launch as a chance to elaborate on the prospects of establishing a corporate bond market in the CSX, also stating that the legal framework will be completed this year. Cambodian banks’ high interest rates serve to thwart business opportunities, but a corporate bond market would allow companies to secure debt from private investors CSX’s CEO Hong Suk Hour has stated there are good sings early on, with high trading in the industrial park, which is listed under the trading name PPSP. While it is still too early to speculate about confidence in the new stock, the volume of trading has been encouraging as it indicates there is interest in it, according to Hour, while also stressing a “wait and see” approach. On the first day a total of 24,078 shares were traded. These transactions total more than $17,000. More than 57.8 million shares were issued with the share price closing at 71.1 cents, down 3.02 percent. Phnom Penh SEZ’s initial public offering (“IPO”) raised USD11.6 million and sold all 11,575,000 shares at the issue price of 2,860 riel (USD0.713) each. The firm plans to build a new 53-hectare SEZ in Poipet, Oddar Meanchey province, a locality on the border with Thailand that serves as a trading hub, as well as expand its industrial park in Phnom Penh. The purpose of listing, according to Phnom Penh SEZ chairwoman Lim Chhiv Ho, is to raise capital without borrowing for the planned SEZ in Poipet. Borrowing from Cambodian banks is costly as the development of infrastructure such as roads and sewage would require investment in the land without the prospect of positive returns, making raising capital through the stock exchange without borrowing a more appealing course of action. Long-term confidence in the company has prompted some observers to speculate that interest in the stock will remain high after it rose 5 percent following the IPO. Confidence in the stock is inspired by its association with Japanese companies. Cambodians are interested in commercial partnerships with Japanese companies who are known to have be trustworthy and have high standards. More than half of the companies in Phnom Penh SEZ are Japanese. Labor New Prakas Alters Incentive Bonuses Prakas No 1150 (MEF) on the Incentive Bonus for Collecting Revenue from Public Service Fees by the General Department of the Financial Industry of the Ministry of Economy and Finance, issued on 15 September 2015, empowers the General Department of Financial Industry to withhold certain portions, as a bonus, by deducting from revenue it generates from public services as determined by Prakas No 1149 SHV.Br.K, dated 15 September 2015, on Provision of Public Services of the General Department of Financial Industry of the Ministry of Economy and Finance. Distribution of said bonuses is as follows: 50% of administrative service fees are to be paid to the national budget, 49% to the General Department of Financial Industry and 1% to the General Department of State Property and Non-Tax Revenue. New Prakas Protects Young Workers Prakas No 467/15 on the Procedures for Recruiting Young Workers in Enterprise and Establishment, dated 20 November 2015, establishes procedures and regulations regarding the recruitment of young workers (defined by Article 177 of the Cambodian Labor Law as workers between the ages of 15- 18) in factories, enterprises and establishments. Young workers may not be recruited for positions that require them to work in dangerous working conditions. Certain forms of child labor have also been prohibited. This Prakas lays out the procedures employers must undergo before recruiting young workers, including: procuring consent of the parents or guardians of the young worker on the employment contract, seeking approval from the Department of Child Labor of the Ministry of Labor and Vocational Training for employment of young workers, and maintaining at the enterprise a recording book that lists the names of young workers. Sanctions pursuant to Chapter 16 of the Cambodian Labor Code will come into effect should employers fail to comply with these procedures. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 7 Training Apprentices Regulations Updated Instruction No 042/15, dated 27 November 2015, on the Implementation of Parkas No 004, dated 5 January 2000, on the Training of Apprentices serves as a reminder to all enterprises covered by Article 1 of the Cambodian Labor Law employing more than 60 workers to conduct annual training of apprentices in accordance with Prakas 004 based on the following quota proportional to the enterprise’s total workforce: (1) 10%, for enterprises that employ between 60 to 200 workers; (2) 8%, for enterprises that employ between 201 to 500 workers; and (3) an additional 4% for every further 500 workers at enterprises that employ more than 501 workers, provided that a maximum of 110 apprentices may be trained by an enterprise in one year. The Ministry of Labor and Vocational Training (“MLVT”) seeks to reinforce Prakas 004 by providing specific instructions including, but not limited to, the following: (1) selection of apprentices, which allows the enterprises to select workers under probationary period or workers required to obtain new skill to be apprentices, (2) the timeline of implementation of apprenticeships, which is from 01 January to 31 October of each calendar year; (3) registration of apprenticeship courses at the MLVT or Department of Labor and Vocational Training; (4) qualification of apprenticeship courses; and (5) internal regulations to govern apprentices. Enterprises that have not fulfilled the obligations of the training of apprentices must make a proposal to the MLVT to pay tax, equal to 1% of the annual salary of the total number of workers employed in the enterprise, in lieu of compliance with apprenticeship obligation. Sanctions pursuant to Chapter 16 of the Cambodian Labor Code will come into effect should employers fail to comply with these procedures. Cambodian Prime Minister appeals to Malaysia to take more Cambodian workers During an official state visit to Malaysia, Cambodian Prime Minister Hun Sen appealed to his Malaysian counterpart, Prime Minister Najib Razak, to accept an influx of Cambodian workers into the country “with a good salary and good working conditions.” Thirty-thousand Cambodians are currently working in Malaysia. Prime Minister Razak was partial to this arrangement, and the media was jubilant particularly in reference to domestic maids. Both countries see the worker exchange as a way to combat regional human trafficking and international terrorism. This new bilateral arrangement comes after a 2011 ban on foreign maids migrating to Malaysia was lifted late in 2015. A Memorandum of Understanding (MoU) was signed between the two countries in December, though the details have yet to be finalized. This MoU would give potential and future maids remedies to combat the kinds of abuses that have been widespread against foreign maids in Malaysia in the past. Officials have added that being legal workers makes it easier for authorities to apply legal recourse against abusers. The bilateral worker agreement is intended to help protect future maids as well as the thousands of Cambodians currently working in Malaysia. However, there has been some domestic backlash against Prime Minister Hun Sen’s bilateral initiative with Malaysia. One Cambodian labor rights group’s executive director has been quoted as being “ashamed” of the prime minister’s comments, making the argument that the Cambodian government should be focused on creating jobs and opportunities domestically rather than requesting that a foreign government recruit labor to be exported out of the country. The criticisms extend to the as-ofyet unfinished MoU, which Malaysia has refused media requests to make public. It has been claimed that legal protection and monitoring mechanisms intended to curb criminal abuse of foreign maids have not yet been put in place, leaving no tangible method to protect Cambodian maids. Critics believe the Malaysian government has no intention of doing so and cite abuse, exploitation, physical violence and debt bondage as widespread issues for foreign workers in Malaysia that have not been ameliorated. New Kram outlines specific provisions on trade unions and employee representation On 17 May 2016, the Cambodian government promulgated Royal Kram No. NS/RKM/1516/007 as the Law on Trade Unions. This purpose of this Kram is to provide and ensure rights and freedoms for enterprises, establishments and persons pursuant to the 1997 Labor Law as well as persons serving in air and maritime transportation services. The Kram also includes provisions regulating the organization and functions of professional organizations, employers and employees. The specific regulations in the Kram pertain to establishing, operating 8 Cambodia and dissolving professional organizations as well as the rights, obligations and legal processes for dispute resolution among employees and employers. Provisions also relate to staff representation, employee unions, termination procedures of specially protected employees and regulations for negotiating collective bargaining agreements. The new Kram represents a significant departure from the 1997 Labor Law in regards to staff representatives’ eligibility. Pursuant to the new law, an employee under 18 years of age with three (3) months of employment time and the ability to read and write Khmer language shall be eligible to apply for a staff representative position. Further, staff representatives are to be nominated for election by a local union or by colleagues. In practice, any professional organization with eight (8) or more employees is now required by law to arrange an election for staff representative positions if said organization has been operational for at least three (3) months. While the new Kram departs from the 1997 Law in specific areas, it also reincorporates the mechanisms and procedures for special protection against termination as laid out in the 1997 Law. These regulations include protecting staff representative candidates, elected staff representatives, union leader candidates and elected union leaders from termination. Under the new Kram local unions are required to submit a list of protected individuals to the Ministry of Labor and Vocational Training as well as to the employer. The Kram also requires union representatives to seek and obtain approval from a given employer before entering the physical area of said enterprise to perform their union duties. The employer may not deny approval to the union representative unless said representative’s presence would disrupt the normal operations of the enterprise. However, this Kram leaves the definition of a local union representative vague and does not specify if union leaders are also subject to this requirement. Union management and administrators who have been duly dismissed shall continue to have the right to physically enter the enterprise temporarily for sixty days following dismissal. This right is forfeited if the individual in question was dismissed for reasons of serious misconduct. The Kram also specifies that retaliation against those who report on violations or provide testimony against an enterprise is prohibited. Breaching this restriction shall result in a monetary fine of up to KHR 5,000,000 (approximately USD1,250). Land Prime Minister assuages concerns over land disputes In a real estate environment in which accusations of land grabbing by the powerful few abound, tensions are high as Cambodian opposition figures have forwarded a plan to create tribunals to adjudicate in land disputes. However, the government maintains that the distribution of land is more than equitable in general, and a land revolution will not and should not occur. Prime Minister Hun Sen has publicly criticized land dispute tribunal plans, calling the opposition’s calls for reform an attempt at land redistribution that could lead to a “class war.” Rights group Licadho estimates that 2.1 million hectares, or one-eighth of Cambodia’s total land mass, is in private business hands. Many local farmers have been displaced with no viable legal means to defend land claims. The situation has been described by the Equitable Cambodia executive director as a crisis, as land dispute resolution mechanisms do not offer good results to the poor and tend to favor corporations. This has led to public anger against private companies, who have been deemed as “land grabbers.” Economic Land Concessions (“ELCs”) have been granted disproportionately to government officials. Government officials defend their position by pointing out that farmers own their land, which differs from some regional neighbors. However, it has been claimed that while farmers do own their own land, ELCs granted to influential individuals have reduced the size of private farmers’ properties to the point of unsustainability. There is not enough land to farm prosperously. Supporters of reform acknowledge that a “land revolution” is unlikely, given the high number of disaffected farmers who have left Cambodia looking for better opportunities as the political battle to create unbiased land dispute tribunals is being fought uphill. New land dispute settlement initiative announced As the sheer number of land disputes rise at an uncontrollable rate in Cambodia, newly appointed Minister of Land Management Chea Sophara has established a working group comprising of 27 four-man Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 9 teams. Their task is to quicken the resolution of such disputes. Each team is to be responsible for helping to resolve three land disputes each, pursuant to a letter issued by the Ministry of Land Management, and report the results to the Ministry. However, Cambodian Secretary of State for the Ministry of Land Management Sarun Rithea continues to insist publicly that the teams’ existences does not indicate that the current mechanisms of dispute resolution are flawed. Civil workers, on the other hand, remain hopeful that the new legal arrangement may lead to more fruitful results. Rights group Adhoc has optimistically expressed that the initiative may bode well for Sophara’s tenure and bring about substantive change, while also stressing that communities and NGOs have crucial roles to play in settling land disputes fairly. Conversely, rights group Equitable Cambodia remains more skeptical, citing the number of committees to resolve the multitude of land disputes that have already been brought into being. Equitable Cambodia maintains that in order to fix the land dispute issue, high level political intervention and mobilized political will are necessary. The creation of these four-man teams does not guarantee this. Since establishing the teams, around 80 people representing families involved in three different land disputes gathered to file petitions with the Ministry of Land Management. Those that showed up claimed to be motivated by Sophara’s new initiative and are hopeful that the land disputes can be equitably settled. The Ministry of Land Management accepted all petitions. As an example of the kind of the land disputes in question, 45 families in Preah Sihanouk province have petitioned the Ministry of Land Management on the grounds that the government stopped people from cultivating their land, while other families from Kampot claim that the government seized their land for military use. While Sophara’s initiative brings hope to the many who hope to solve their land disputes in Cambodia, it is far from a certainty that the status quo will change. Mining New sub-decree reforms mining and mineral resource exploitation licensing policies The Cambodian government issued Sub-Decree No. 72 on 5 May 2016. This sub-decree remains subject to the 2001 Law on Mineral Resources Management and Exploitation. It provides further provisions on the management of mineral resource operations under exploration licenses and industrial mining licenses, management and use of land mineral resource operations under licensing, procedures, processes and conditions regarding exploration and industrial mining licensing and the rights and obligations of licensees. Those who currently possess licenses under existing mining investment agreements are required to file a new application with the Ministry of Mines and Energy, reapply for a new license and/or revise the relevant mining investment agreement within 180 of the date the sub-decree came into effect on 5 May 2016. Upon failure to fulfils these requirements, a given enterprise shall be required to continue mining operations pursuant to the terms and conditions of the existing license until the license expires or is revoked. The sub-decree provides that an exploration license shall be valid for three (3) years, renewable for two (2) additional terms for no longer than two (2) years. Industrial mining licenses shall not exceed twenty-one (21) years but may be renewed for two (2) terms. These additional terms shall not exceed ten (10) years. Mining licenses may be renewed beyond the given terms in exceptional circumstances, though the sub-decree is silent on the criteria which would present such circumstances. Several obligations apply to licensees. Licensees holding an exploration license are required to furnish annual reports to the Ministry of Mines and Energy pertaining to the results and expenses of related mineral resource exploration. Licensees holding an industrial mining license are required to furnish monthly product and sales reports to the Ministry of Mines and Energy. In both instances, failure to comply with regulations may result in the revocation of said licenses. Real Estate New environmentally protected areas announced The Ministry of Environment announced that eighteen (18) natural areas totaling 2,674,503 hectares are now protected in a new special announcement, dated 10 May 2016. Under the jurisdiction of the Ministry of Environment, these natural areas shall be officially preserved under new policies. Provisions include the official involvement of the Ministry of Land Management, 10 Cambodia Urban Planning and Construction. Cooperation between the two ministries will lead to the registration of the protected areas with the latter ministry. Further, the Ministry of Environment shall be responsible for assessing the methodology by which to protect the natural areas and ecosystems. This policy took effect on 10 May 2016. Letter issued to the Municipality of Phnom Penh’s district governors The Phnom Penh Municipality Department of Land Management, Urban Planning and Construction issued a letter to all twelve (12) district governors on 25 May 2016. This Letter addresses all district leaders within the Municipality of Phnom Penh on issues regarding co-ownership of buildings and the transfer of possessory rights to foreigners (excluding the ground floor). District governors shall no longer be authorized to sign transfer letters of possessory rights to foreigners in the event that the co-owned building has been built with the proper construction permit. Taxes & Fees MPWT Now Empowered to Collect Revenue Joint Prakas No 010 SHV .Br.K (MEF) on the Provision of Public Services of the Ministry of Public Works and Transports, issued on 21 January 2016, empowers the Ministry of Public Works and Transports (“MPWT”) to directly collect public service fee revenue in the interest of the national budget. These services are already being provided by the MPWT. This Prakas is to supersede any and all prior legislation that is counter to it. A list of services and fees are provided in an annex to this Prakas. The MPWT is now responsible for publicly disseminating and publishing the new procedures. Accepting complaints at the MPWT is also now compulsory. Ministry of Mines and Energy to Directly Collect Service Revenue Prakas No 1451 (MEF) on the Provision of Public Services and Transitional Fees in Cash by the Ministry of Mines and Energy, implemented on 3 November 2015, empowers the Ministry of Mines and Energy to collect public service and transitional fee revenue in cash in the interest of the national budget. This Prakas also sets out the list of public services provided by the Ministry of Mines and Energy, their corresponding fees and the duration of said services. Under this Prakas, official receipts for payment for public services must be issued by the Ministry of Economy and Finance in accordance with Prakas No 272 SHV.Prk, dated 17 March 2011, on the implementation of payment receipt and instructional circular No 005 SHV, dated 17 March 2011, on management of payment receipt of the Ministry of Economy and Finance. General Department of Public Procurement Granted New Revenue Collection Powers Prakas No 1148 (MEF) on the Provision of Public Services of the General Department of Public Procurement of the Ministry of Economy and Finance, issued on 15 September 2015, empowers the General Department of Public Procurement to collect public service fee revenue in the interest of the national budget. This Prakas also sets out the list of public services provided by the General Department of Public Procurement, their corresponding fees, the duration of said services and validity of services in accordance with the type of public service as scheduled within this Prakas. Service locations belonging to the General Department of Public Procurement must publicly disseminate the new standard of services, including the list of public services and documents related to the provision of public services. A one-stop service center also must be established by the General Department of Public Procurement to service customers and receive complaints. Revised Cambodian Tax Regimes The Law on Financial Management of 2016, promulgated on the 17 December 2015 (Royal Kram No. NS/RK/1215/016) represents significant change in terms of the abolishment of the Estimated Regime of Taxation and a restructure of the SelfAssessed Regime (Real Regime). Concurrently, the Ministry of Economy and Finance has sought to clarify the changes brought about by the Law mentioned above by issuing a Prakas on 25 December 2015. This Prakas outlines the Classification of Taxpayers in the Self-Assessed Regime (MoEF No. 1819 MEF.P.) summarized below: Article 4 of the Law on Taxation was amended, the effect of which was to abolish the Simplified and Estimated Tax Regimes in Cambodia, leaving the Real Regime as the only remaining tax regime in Cambodia. The Real Regime of Taxation now comprises of small, medium and large taxpayers: • Small taxpayers are Sole Proprietorships or Partnerships that: Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 11 a. Have annual taxable turnover from Khmer Riel (“KHR”) 250 million (USD62,500) to KHR700 million (USD175,000); b. Have taxable turnover, in any period of three consecutive calendar months (within this tax year), exceeding 60 million KHR (USD15,000); c. Expected taxable turnover of 60 million KHR (USD15,000) or more in the next three consecutive months; d. Participate in any bidding, quotation or survey for the supply of goods and services including duties. • Medium taxpayers include: a. Enterprises that have annual turnover from KHR700 million (USD175,000) to KHR2,000 million (USD500,000); b. Enterprises that have been incorporated as legal entities; c. Sub-national government institutions, associations, and non-governmental organizations. • Large taxpayers include: a. Enterprises that have annual turnover over KH2,000 million (USD500,000); b. Branch of a foreign companies; c. Enterprises registered as a Qualified Investment Project (“QIP”) as approved by the Council for the Development of Cambodia; d. Government Institutions, foreign diplomatic and consular missions, international organizations and agencies. The previous Estimated Regime of Taxation has been effectively replaced by the Small Taxpayer category under the reformed Real Regime of Taxation. Sole proprietors making in excess of USD5,000 per month, on average, are now subject to VAT, file monthly and annual tax returns, collect and pay certain withholding taxes and be subject to tax audits. This represents a significant change in that previously, these sole proprietors had the option to negotiate their taxes upfront with the tax officer. Those whose turnover does not exceed USD5,000 will not be required to pay tax. This applies only to sole proprietors. On the other hand, all registered companies and legal entities are required to register as medium taxpayers even if their annual turnover is less than USD175,000 per year. If the legal entity is a branch or has obtained QIP status, it must register as a large taxpayer. Small, medium and large taxpayers are all required to undertake the following: • File and pay monthly and annual tax returns and payments including: - Tax on salary and tax on fringe benefit; - Value added tax; - Withholding taxes; - Prepayment of Tax on Profit; - Annual Tax on profit returns. • Be subjected to tax audits; • Comply with taxpayer obligations as set out in the tax regulations including recordkeeping and associated documentation. Tax Policy Transparency Enhance by New Prakas Prakas No 1470 (MEF), or the Law on Rules and Procedures of Resolving Tax Claims at the General Department of Taxation of the Ministry of Economy and Finance was passed on 6 November 2015. Transparency, honesty, fairness, and punctuality in resolving tax claims of taxpayers and withholding agents are sought to be achieved with the passing of this Prakas. This Prakas aims to determine rules and procedures for submitting and resolving claims of taxpayers and withholding agents with the General Department of Taxation of the Ministry of Economy and Finance. Claimants are now entitled to submit a claim to the General Director of the General Department of Taxation. Those wishing to dispute a tax determination, tax redetermination, demand of tax debts, tax decision or other rule of the General Department of Taxation may now do so within 30 working days from the date of receiving notice of a decision or other rule of the General Department of Taxation. Financial Lease Sector Gets a Boost from Regulations Outlined in New Prakas Prakas No 1704 (MEF), or the Tax Mechanism for Operation of Financial Leases, was passed on 9 December 2015, outlining tax compliance and reporting obligations of the lessor and the lessee in relation to VAT, tax on profit, minimum tax, and other elements. With the goal in mind of promoting and developing the financial lease sector, this Prakas seeks 12 Cambodia to determine the tax mechanism for operation of financial leases. Certain requirements and restrictions have been put in place in regards to property subject to a lease, ownership of the property by the lessor, duration of the lease period, and limitations on the lease amount as a proportion of the value of the property. Cambodian tax mechanisms tightened, increasing tax revenue is the goal In December, the General Department of Taxation issued a new prakas (government proclamation) seeking to tighten a previously flexible scheme that minimized the tax obligations of small and medium enterprises. This prakas aims to hasten tax audits and the appeals process. With the new prakas, compliance to established timeframes will be strictly enforced. The new policy involves a window of 30 working days to respond to a reassessed tax obligation with a protest letter, failing which it will deemed that the taxpayer has accepted the reassessment. After receiving a protest letter, the tax department is expected to respond within 60 days, but is under no obligation to do so. Tax arrears are now required to be paid upfront, whereas in the past payment could be delayed under protest. In practice, if a business receives a notice of tax debt, regardless of its viability, the recipient is required to pay. If the business is then successful in protesting the tax department, a refund will be paid. It has been speculated that the new prakas will do wonders for the efficiency of the system. It is intended to rapidly clear numerous outstanding cases and rationalize the tax dispute process. Though the number of taxpayers in the real regime has increased following the abolition of the estimated regime, many taxpayers bound to the new system will be small enterprises with relatively uncomplicated business operations. In such an environment, disputes will be settled more quickly and easily. Cambodia hopes to continue the trend of improving tax efficiency. The first ten months of 2015 saw the tax department collect over $1 billion, an increase of 24 % compared to 2014. Officials hope the new prakas will contribute to the continuation and enhancement of this trend. MoU christens new tax payment center In June the Cambodian Ministry of Economy and Finance and Cambodian Public Bank Plc. signed a memorandum of understanding (MoU). This MoU has led to Cambodian Public Bank Plc. becoming the Ministry’s prime tax collecting institution nationwide, representing a major milestone for the bank since its founding 24 years ago. According to Economy and Finance Ministry Secretary of State Chu Kimleng, the MoU will increase tax collection efficiency as it offers more choice and convenience for taxpayers and also serves to strengthen the relationship between the government and the private sector. Collaboration between the two entities, he said, also points to development and progress in Cambodian tax administration reform. He added that the partnership will allow more collection agents to work in services already provided by existing partners Acleda and Canadia Bank, which will in turn increase the capabilities of public services while also helping to combat corruption by providing more transparency, which helps to build trust with taxpayers. The Economy and Finance Ministry is confident in Cambodian Public Bank Plc.’s capabilities as one can point to its track record and indicators pertaining to the success of well-established infrastructure and technical support as well as long-term experience in responsibly conducting the collection of Phnom Penh’s electricity accounts. Improvements to the bank’s services are also in the works, as the option of paying taxes through internet banking is planned to be made available in the near future. New prakas on VAT promulgated Prakas No. 495 was promulgated on 6 April 2016 regarding the implementation of VAT on the supply of unprocessed agricultural produce. This Prakas aims to support and promote existing policies on the export of rice while also lessening expenses pertaining to the consumption of unprocessed agricultural produce. Pursuant to this Prakas, unprocessed agricultural produce is now a nontaxable supply for VAT purposes. Pursuant to the Prakas, unprocessed agricultural produce is defined to include root, tuber, trunk, skin, fruit and flower of seeds harvested. Supply definitively includes a real regime taxpayer in Cambodia pertaining to sale, own use, making a gift or supplying at below retail price and import of unprocessed agricultural produce. New sub-decree adjusts export tax rates on rubber tonnage The Cambodian government promulgated Sub-Decree No. 35 RNKr. BK on 4 March 2016. The sub-decree pertains to the Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 13 export tax rubber “unit bases.” The provisions adjust these unit bases in several ways. Namely, exporters shall be exempt from export tax if the value of the export tax base is below USD1,000 per ton. Further, if the tax base is from USD1,000 to USD2,000, export tax shall be USD50 per ton, USD150 per ton for an export tax base of USD2,000 to USD3,000, USD200 per ton for USD3,000 to USD4,000 and USD300 per ton if the value of the export tax exceeds USD4,000. Adjusted export taxes crystalized by this sub-decree came into effect on 1 March 2016. Telecommunications Promulgation of the Law on Telecommunications Royal Kram No NS/RKM/1215/017, or the Law on Telecommunications which was passed on 17 December 2015, was promulgated at the beginning of March. This law intends to adapt the existing legal framework to the current demands of social and economic development needs. It is also intended to encourage telecommunications development within the private sector. This Kram seeks to build a legal framework by which the efficiency of infrastructure, facilities, and the provisions of telecommunications services is maximized. Telecommunications operators and persons involved in the telecommunications sector are required to complete the new formalities in compliance with the Kram within one year of it entering into force. They must apply with the Telecommunication Regulator of Cambodia (“TRC”) in order to gain authorization, certification and/or licensing. Only those persons and entities that have been properly authorized by the TRC may legally conduct telecommunications operator services. Effectiveness, safety, quality and reliability of Cambodian telecommunications have been questionable to this point. The issues of management competence, the proper use of infrastructure and networks, quality standards of service, telecommunications equipment, universal access, a national telecommunications numbering plan, electronic addresses, rules of telecommunications service pricing, fair and legal competition, and the rights of telecommunications operators and users have all been objects of this Kram’s intended purpose. The TRC is responsible to carry out most duties in enforcing and upholding this Kram. The TRC is to have autonomy in administrative and regulatory matters and will be independent from telecommunications operators. The Ministry of Posts and Telecommunications (“MPTC”) is to be responsible for the physical infrastructure necessary to carry out the vision of the Kram. Trade US official says Cambodia could potentially join the TPP During a three-day visit to Cambodia in June, US Under Secretary of State Catherine Novelli met with senior Cambodian leaders in Phnom Penh. Several issues were under discussion, including deforestation, the business climate for investment, energy and technology. The possibility of Cambodia joining the controversial US-led TransPacific Partnership (“TPP”) trade agreement with Pacific Rim states was also raised during the meetings. Joining the TPP would allow Cambodia to connect to a market of 1.5 billion people. Novelli cited strong economic relations between the two countries, as the US and Cambodia currently have $3 billion in bilateral trade and the US is Cambodia’s top trading partner. Novelli met with the Cambodian Minister of Agriculture, the Minister of Environment, a top telecommunications official, journalists and techsector entrepreneurs, further commenting that the US would like to enhance its already existing strong economic relationship with Cambodia by bringing it “to the next level.” From the perspective of the US, Cambodia needs to do more to ensure political stability so as to provide for a healthy business climate that encourages investment. Hun Sen’s government needs to be mire vigilant on this front, according to Novelli. She added that Cambodia needs to be a place that is reliably open to business and stable. Novelli also noted that the architects of the TPP always intended and planned to expand the list of member countries. Involving Cambodia is dependent on first having all the initial member countries approve and implement the TPP. Domestically, some business leaders have been saying that officials in Phnom Penh must do more to attract foreign investment. The Cambodia ICT Federation, a trade group consisting of the Kingdom’s top telecommunications and information technology entrepreneurs, point out that Cambodia’s lack of trained and qualified employees represents a significant impediment to attracting foreign investors. 14 Cambodia Others have called for educational institutions to be more accommodating to commercial and technical trends in the market by providing more relevant education, particularly by offering training that emphasizes human resources. As a final issue, Novelli also visited areas that have been damaged by illegal logging. This issue needs to be confronted before Cambodia will be considered to ascend to the TPP, though Novelli states that Cambodia’s environmental minister has demonstrated an impressive commitment to combatting the issue. Sources: http://www.dfdlmekong.com http://www.phnompenhpost.com http://world.einnews.com/ https://www.cambodiadaily.com/ http://www.khmertimeskh.com/Administration Laos sets target to obtain upper middle income country status by 2030 In January, during the 10th Congress of the Lao People’s Revolutionary Party, Prime Minister Thongsing Thammavong announced objectives for Laos to achieve upper middle income country status by 2030, with the Gross National Income (“GNI”) per capita projected to increase fivefold to USD7,351 when compared to 2015. Currently, the benchmark for reaching this classification is having a GNI per capita of USD6,500–USD20,100. These targets are discussed in a draft of the 15-year Vision (2016-2030) and 10-year Strategy (2016-2025) on socio-economic development, which was presented at the Congress. At the Congress, the Prime Minister also discussed the following goals on the way to achieving upper middle income country status by 2030: • By 2020: Graduate from least developed country status with the poverty rate falling to less than 10%; • By 2025: Have political stability in the country and GDP growth of a minimum of 7.5%, and having poverty rates reduced to no more than 5%. Development strategies approved During the government’s monthly meeting for January, the government approved a document set regarding future development, which includes the following: • The National Strategy on Human Resources until 2025; • The National Action Plan on Development for 2016-2020; • The Strategy on Rural Development and Poverty Reduction for 2016-2020; and • The Vision for Development over the next 15 years. Additionally, at the meeting, the government also permitted the enactment of the Socio-Economic Development Plan for 2014-15 and discussed the final year of enacting the seventh Five-Year National Socio-Economic Development Plan. Newly amended National Constitution addresses state powers and leadership roles According to the Chairman of the National Assembly’s (“NA”) Law Committee, Dr. Davone Vangvichit, the newly amended National Constitution, which was approved at the end of 2015, has provided some changes and clarification on the rights and duties of state powers and the roles of head leaders. Role of the NA Under the new Constitution, the NA is considered to be the top state power, which has the mandate to elect/remove the President and Vice President, upon the proposal of the NA’s Standing Committee, as well as to elect/remove the Prime Minister, President of the People’s Supreme Court, Head of the People’s Supreme Prosecutor and the President of the State Inspection Authorities, upon the proposal of the country’s President. Role of President The President is considered to be the Head of State, upholding the nation’s constitution and law, and can serve a maximum of two consecutive terms. The President has the authority to select/ remove deputy prime ministers and government members after NA approval, as well as to approve promotion/removal of military officers ranked as brigadier general or higher, upon the Prime Minister’s proposal. Role of Prime Minister The Prime Minister is considered to be the Head of Government, and has the authority to select/ remove the Mayor of Vientiane and provincial-level governments upon the approval of provinciallevel People’s Assemblies, which was previously under the scope of the President. Additionally, the Prime Minister has the authority LAOS 16 Laos to select/place/remove deputy ministers and deputy heads of ministry equivalent organizations and directors general of ministry departments. Streamlining administration via restructuring of ministries and creation of new mandates In order to improve on efficiency, the Lao government has streamlined commissions and committees within current ministries. Such changes include the following: • The Lao National Committee for Special Economic Zones (“NCSEZ”) is now within the scope of the Ministry of Planning and Investment (formerly within the scope of the Prime Minister’s Office); • The National Leading Committee for Rural Development and Poverty Eradication (“NLCRDPE”) is now within the scope of the Ministry of Agriculture and Forestry (formerly within scope of the Prime Minister’s Office); • The Party Central Committee’s Office has replaced the NLCRDPE as the entity responsible for political grassroot building affairs; • The National Commission for Drug Control and Supervision is now within the scope of the Ministry of Public Security; • The National Committee for Business Improvement is now within the scope of the Ministry of Finance (formerly within the scope of the Prime Minister’s Office). In addition to the above changes, certain state bodies with new mandates have been merged in order to prevent overlap between different departments, as follows: • The Ministry of Agriculture and Forestry is now completely responsible for overseeing all types of forests and related matters (the Ministry of Natural Resources and Environment was formerly accountable for certain matters in this sector); • The Ministry of Energy and Mines is now completely responsible for overseeing all mining-related matters (the Ministry of Natural Resources and Environment was formerly accountable for certain matters in this sector); • The Ministry of Finance is now completely responsible for land tax collection; • The Ministry of Labor and Social Welfare is now responsible for clearance of unexploded ordnance (“UXO”) (which was formerly under the scope of the NLCRDPE); • The Ministry of Home Affairs is now completely accountable for the Three-Build Devolution Directive. National Assembly approves socio-economic development plan In April 2016, the National Assembly of Laos approved the aims promulgated in Prime Minister Thongloun Sisoulith’s 8th Five-Year Socio-Economic Development Plan (2016-2020), the 10-Year Socio-Economic Development Strategy (2016-2025), and the Vision 2030. Under the plan, the government is aiming for the GDP to rise by least 7.5% each year over the next decade, culminating to four times the GDP in 2015. The plan also addresses specific sectors and details their respective expected average increases as follows: • Forestry and Agriculture – 3.2% • Service Sector – 8.9% • Industry – 9.3% Overall, these plans were proposed in order to facilitate the reduction of Lao’s poverty rate to 10% or less of the population by 2020 and then to 5% or less by 2025. The country strives to no longer have Least Developed Country status by 2020 and obtain upper middle income country status by 2030. Stricter measures for revenue collection At the Lao government’s monthly meeting in May, the Deputy Prime Minister and the Minister of Finance announced that the Ministry of Finance will fast-rack the use of modern technology and equipment in revenue collection in order to address issues regarding loopholes and revenue leaks. According to the Deputy Prime Minister, it is the government’s prerogative that revenue must be fully and accurately collected for the last three months of the current fiscal year until the end of September, and over the next three months until the end of December, which will serve as a transition as the government will be shifting the commencement of the next fiscal year to January instead of October. The assembly approved the government’s proposal to reduce the 2015-16 fiscal year budget revenue collection over the past six months that fell below expectations. The target has been lowered from 26.159 trillion kip to 23.7 trillion kip, while budget expenditure has been trimmed from 31.946 trillion kip to 31.118 trillion kip. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 17 The Ministry has taken some measures to address these issues, such as: • conducting weekly and monthly reviews and monitoring to oversee revenue collection, particularly looking at significant revenue generating sources like main border crossings and taxes. • having precautionary measures to prevent ghost projects by augmenting cooperation between relevant bodies in carrying out proper inspections before allocating project budgets, in light of previous reports stated that there has been over 60 ghost projects that accumulated in 785.8 billion kip in government funds. Anti-Corruption Government inspection reports a 242 billion kip loss due to issues with corruption On 25 February 2016 at the annual meeting of the Inspection Committee of the Ministry of Information, Culture and Tourism, the Inspection Committee of the Party Central Committee and the Government Inspection Authority (“Inspection Authorities”) released a report of the results of a government inspection on corruption. In the report, it was revealed that 242 billion kip was lost in assets due to corruption in 2015 and now 95 officials are being sanctioned, with only 10.2 billion kip having been recovered. Acts of corruption include embezzlement of state assets, giving and receiving of bribes, creating fake documents, such as certifying construction and design standard for personal benefit, as well as general abuse of power to obtain assets from the states and from individuals. Of the 95 disciplined officials, 62 were based in Oudomxay province, 11 were workers at the Ministry of Finance, and 22 worked in state banks. The Inspection Authorities also investigated state expenditure and revenue collection in 303 targeted bodies within 11 ministries and state organizations, and in the country’s capital and provinces, finding that 3,034.3 billion kip has been lost, with only 467.59 billion kip being able to be recovered. Aviation Plan to implement ASEAN’s Single Aviation Market in Laos From 28-31 March 20116, the 33rd ASEAN Air Transport Working Group (“ATWG”) meeting was held in Vientiane. Key issues in the meeting included economic frameworks for airlines and plants to implement ASEAN’s Single Aviation Market. Led by Vanpheng Chanthaphone, the Director of the Civil Aviation Department, the meeting’s participants included representatives from airlines from ASEAN member countries, the U.S., and Japan. During the meeting, Laos announced that the four international airports of Wattay, Luang Prabang, Savannakhet and Pakse will be used to facilitate the execution of both the ASEAN’s Single Aviation Market as well as the ASEAN Air Transport Agreement. Additional agenda items for the meeting including reviewing the transport strategy plan for 2016- 2025, the short-term plan for 2016- 2017, aviation paths in the ASEAN region. During the meeting, attendees also presented on reports regarding the open skies policy in the ASEAN region with dialogue partner countries including ASEAN-China, ASEAN-Japan, ASEAN-EU, and ASEAN-Republic of Korea, ASEANIndia, ASEAN-Hong Kong, ASEANUSA and ASEAN-Russia. Banking & Finance Precautionary steps to be taken to combat “ghost” projects The Finance Ministry’s Inspection Department released a report that stated that over 785.8 billion kip from state funds had been used on 60 ghosts projects, i.e., projects that do not actually exist but that have received and spent funds. Of this amount, the government has only been able to recover 246.5 billion kip as of last year. According to the report, the ghost projects were located in Luang Namtha province (29 projects), Oudomxay province (26 ghost projects), Xekong province (3 projects), and Attapeu province (2 projects). Deputy Prime Minister and Finance Minister, Somdy Duangdy, has called for the Ministry of Planning and Investment, Ministry of Finance, their provincial departments and the entities owning the projects to strengthen coordination and verify the existence of planned projects, as well as for the Government Inspection Authority to deal with the ghost projects that have been reported. Previously, the Inspection Committee of the Party Central Committee and the Government Inspection Authority released a report last year that revealed that corruption and fraud have led to the misuse of 242 billion kip in government funding. With regards 18 Laos to this matter, 95 officials were cited as being implicated and were penalized accordingly. Commerce Lao language required in labeling of products On 16 December 2015, the Ministry of Industry and Commerce issued Ordinance No. 2501/MoIC.DDT, on product labeling in the Lao language. Under this Ordinance, all products, regardless of being domestically manufactured or imported, must have labels in the Lao language before being distributed. Sellers and suppliers must cooperate to provide labels in the Lao language in cases where products were manufactured or imported before the effective date of this Ordinance. In particular, labels must include the following in the Lao language: product type/category; trademark, which as been registered by the manufacture and importer; address of producer/import for distribution as well as the country of origin; and price, quantity, weight, quality, mass, ingredients, direction of use, warnings, date of manufacture, and date of expiry. This Ordinance was issued in order to augment Law No. 02/NA on Consumer Protection, dated 20 June 2010. Specifically, this Ordinance calls for the use of Lao language on labels in order to help improve consumer understanding of products before purchase. This Ordinance took effect on 8 January 2016. Competition New Competition Law Law No. 60/NA on Business Competition, which was passed by the National Assembly on 14 July 2015, took effect on 9 December 2015 (“Competition Law”). The Competition Law provides on principles and procedures regarding the management of business competition and seeks to confront unfair trade practices, prevent agreements that inhibit business competition, as well as combat the abuse of market power and mergers. In particular, the Competition Allow delegates roles and duties among institutions, such as investigations and regulatory enforcement on competition violations being under the scope of the Business Competition Control Commission (“Commission”) and its secretariat (“BCC Secretariat”). The Commission is the principal regulatory authority under the Competition Law and is selected by the Prime Minister. The Commission oversees various issues related to business competition, while the BCC Secretariat’s scope of duties include hearing complaints, investigate and create reports. The Competition Law addresses the notion of “unfair trade practices” and defines it as the following actions by companies: misleading conduct; breach of business confidentiality; coercion; defamation; impeding another enterprise; false advertising; inequitable sales promotions; discrimination by associations; and other relevant conduct in related laws and regulations. Additionally, the Competition Law addresses the notion of “agreements to limit business competition” and deems it to mean agreements between businesses intended to decrease, misrepresent and/or impede competition. However, the Competition Law does provide on certain exemptions that may be considered by the authorities, such as agreements that are used to lead to technological and academic advancement, ameliorate goods and services, or augment the competition of small and medium sized enterprises. Other areas that the Competition Law details and defines are market control, monopolies and merger controls, which include enterprise mergers, business acquisitions and joint ventures. Under the Competition Law, penalties regarding violations may include being educated, alerted, disciplined, fined or liable for civil damages, being criminally prosecuted, or leading to the suspension or revoking of enterprise registration certificates. Consumer Protection MoIC establishes hotline for consumer protection On 7 June 2016, the Domestic Trade Department of the Ministry of Industry and Commerce (“MoIC”) launched hotline 1510 for consumer protection. The ceremony for the launch was coordinated by H.E. Mme. Khemmani Pholsena, Minister of Industry and Commerce, and Mr. Ernst Hustaedt, GIZ Country Director of Lao PDR, and was attended by 70 representatives from the public and private sectors. The establishment of such hotline aims to fulfil an obligation under the ASEAN framework. The hotline is formed in order to aid in the enforcement of the Law on Consumer Protection. Under this Law, consumers have the right to report or claim for solutions and compensation when provided with products and services that do not satisfy quality standards and that may impact health or property. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 19 With this hotline, consumers would be able to report on consumer protection issues to relevant government agencies. With the existence of such hotline, the MoIC aims to further motivate manufacturers and business operators to ensure quality, standards and safety of products and services. Customs New form for Certificate of Origin under the ASEANAustralia New Zealand Free Trade Area On 13 January 2016, the Ministry of Industry and Commerce issued Notification No. 0075/MoIC.DIMEX. CO.002 on the Promulgation of the new form for Certificate of Origin under the ASEAN-Australia New Zealand Free Trade Area (“Certificate of Origin under AANZ”). This Notification is in accordance with the agreement of the ASEAN-Australia-New Zealand Sub-Committee on Rules of Origin. Additionally, this Notification is targeted to competent bodies responsible for Certificate of Origin, including Provincial and Vientiane Capital Department of Industry and Commerce, Executive Board of Special Economic Zone and Specific Economic Zone, National Chamber of Commerce and Industry, as well as entrepreneurs in general. In particular, revisions have been made to the Certificate of Origin form in order to provide clarity on product origin/destination in order to comply with the Rules of Origin and facilitate inspection. As of 1 April 2016, only the new AANZ form will be valid. Though the new form was released on 1 October 2015, the old AANZ form was still valid for use until 31 March 2016. Export of finished wood and semi-finished wood On 7 January 2016, the Ministry of Finance issued Notification No. 2572/CD on administering the export of finished wood and semi-finished wood. In particular, this Notification is issued to international customs borders and customs inspection units in the country’s capital and provinces. This Notification aims to streamline customs procedures, in conjunction with the Ministry of Industry and Commerce’s Ordinance No. 2156/MoIC. DIMEX, dated 19 October 2015, on the same matter. Under this Notification, special royalties are exempt for all exports of finished wood products but are still applied to semifinished products. As part of the simplification of customs procedures, exported wood products no longer need to be issued documents/transfer notes by customs authorities at international checkpoints and also do not need to undergo inspection. Economy World Bank projects 7% growth for Lao’s economy The World Bank released its update of the Lao Economic Monitor 2016 and announced its projections of 7% growth for Lao’s economy during the current year. Previously, Lao experienced 7% economic growth last year and 7.5% growth the year before. For 2016, the World Bank attributed such progress to increases in power generation (projected to increase by 30% over last year), services and construction. According to the World Bank, the growth of ASEAN integration will lead to additional opportunities, particularly in transport, trade, value chains and tourism, which will continue throughout the next two years. Sally Burningham, the World Country Manager for Laos, stated that, “With its growing economy, the government can take steps to improve Laos’ business environment and attract investment to create quality non-farm jobs and raise wages, while strengthening overall competitiveness.” However, the following issues may harbour risks regarding Lao’s economic growth: economic slowdown in other Asian nations, such as China and Thailand, and vulnerability from depending on natural resource exports and foreign direct investment. In addition, the report stated that Lao’s poverty rate has decreased to 23.39%, but that it is still a major issue of concern. Keomanivone Phimmahasay, an economist at the World Bank for Laos, stated that “households that recently escaped from poverty are still at risk of falling back into poverty because they live close to the red mark of poverty. Most farmers rely on rainwater for their agriculture productivity; if they suffer from climate change they will be in trouble and will be back in poverty”, yet also cited that “more usage of alternative and modern technologies in agriculture will also boost job recruitment and poverty reduction because people will move to other areas with higher wages.” 20 Laos ASEAN approval various financial-monetary cooperation matters On 4 April 2016, the ASEAN Finance Ministers’ Meeting and Central Bank Governors’ Meeting was held in Vientiane, with ministers and central bank governors from ASEAN member states in attendance. During the meeting, the attendees approved several significant matters regarding how to execute the vision of the ASEAN Economic Community vision, as well as the ASEAN financial and monetary frameworks. The issues discussed at this meeting addressed financial liberation, capital accounts, capital market development, the ASEAN payment system, access to financial services, and the banking integration framework. Specifically, during the meeting, approval was given to the following: • Content of action plans on strategic integration from 2016- 2025 • Creating of a committee responsible for studying integration among banking institutions in ASEAN. • Schedules of activities of the ASEAN insurance group and the funding access group. • Selection of committee cochairs within the financemonetary integration framework, set to commence work in June 2016. • Selection of administrative officials for the ASEAN+3 Macroeconomic Research Office • The annual budget plan and indicator standards for economic evaluation of member countries with regards to ASEAN+3 cooperation. Energy Korea-Lao joint venture in bioethanol fuel On 4 March 2016, the Lao State Fuel Co signed a joint venture agreement with the TN Energy Co, which is a South Korea-based entity, to create Lao K-Tech Co, a joint venture between the two companies. Lao K-Tech Co will be used to produce Power Gasoline (“PG”), which is a type of bioethanol fuel, to sell in Laos. In terms of allocation of roles and responsibilities, Lao State Fuel Co is set for selecting locations and storage and finding markets for selling the product, while TN Energy is investing funds. Thus far, TN Energy has provided USD34 million to this project and hopes to have 1.2 million liters of PG manufactured within one month of the project commencing operations. Under the agreement, Lao State Fuel Co and TN Energy Co are to cooperate in surveying locations for cultivating the raw materials to produce PG, i.e., cassava and sugarcane. For Lao K-Tech Co., 40% of its raw materials will come from this cooperation, while the other 60% will be purchased from local farmers. Additionally, for the manufacturing of PG, Lao K-Tech will import Rod, a multifunctional additive, from South Korea. In 2013, TN Energy Co previously executed a pilot project in Lao to produce 500 liters, which met national standards. TN Energy Co had imported ethanol, naphtha and Rod for this pilot. Lao’s electricity exports to neighboring countries is set to increase With regards to electricity, Laos aims to begin exporting to Myanmar and to increase its exports to Vietnam. Currently, Thailand is the main recipient of Lao’s electricity exports. At the 10th Party Congress, Party Secretary of the Ministry of Energy and Mines ,Dr. Khammany Inthirath, reported that Laos will start to export electricity to Myanmar this year, anticipated at an installed capacity of about 300 megawatts (MW). With regards to electricity exports to Vietnam, the Director General of Ministry of Energy and Mines’ Energy Policy and Planning Department, Dr Daovong Phonekeo, announced that Laos will start to utilize the newly built power plant, Xekaman 1, in Attapeu province. As reported by VNS, Vietnam has needed to import electricity from other countries in the region due to increased needs from socio-economic development. As reported by Dr Khammany, in the previous year, Laos has constructed 38 power plants, the total cost of which is valued at over 81.7 trillion kip (USD10 billion), with a total installed capacity of 6,265MW. In 2017, four more hydropower plants are expected to be constructed in southern Laos. These aforementioned power plans are able to generate 33,315 million kWh of electricity annually; and some 20.4 percent of the power generated is consumed in Laos while 79.6 percent is exported. Additionally, with regards to regional energy, Laos is encouraging the advancement of energy integration under the ASEAN Power Grid (“APG”), which aims to link countries with surplus power generation capacity to those who face a deficit, with the target to connect 10 ASEAN nations by 2020. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 21 USD10 million solar power project in Borikhamxay Province In 26 March 2016, JBK Electronics, a Lao company, signed an agreement with GK Energy, a French company, regarding a solar energy project to be built on a 10 ha land plot located in Bolikhan district, Borikhamxay Province. The project is valued at USD10 million. The project consists of the creation of solar power facilities, to commence in 2017, as well as the creation of a training center for locals regarding vocational and technological skills and knowledge. Study of five rivers regarding potential hydropower projects On 5 April 2016, the Chalernsub Group has signed an MOU with the Borikhamxay Provincial Planning and Investment Department to conduct feasibility studies on potential small-scale hydropower projects in the province. Specifically, the Chalernsub Group is looking into these following five rivers: Nam Thouy in Thaphabath District, Nam Chuan in Viengthong District, as well as Nam Pan, Nam Yala, and Nam Cham in Xaychamphone District. The feasibility studies will include economic and environmental impact assessments, and are expected to be finished in a year and a half. Upon the completion of these studies, and if they yield favorable results, the proposed projects are planned to commence building immediately. The proposed building projects for each river will have 15-megawatt installed generation capacity. Proposed alterations to electric charging policy In response to public complaints about excessive charges on power bills, Electricite du Laos (“EDL”) has proposed that the Ministry of Energy and Mines consider altering the rates for electric charges. Currently there are three rates of power, for which the pricing is as follows: • For 0-25 kwh, 348 kip per kwh; • For 26-150 kwh, 414 kip per kwh; and • For 151 kwh and more, 999 kip per kwh. According to Sisavath Thiravong, EDL’s Director General, this purpose of this policy is to render electricity more affordable, particularly to low and middleincome families as pricing will be adjusted on electricity use. Other recent developments regarding the electricity sector is the creating of an ad hoc committee instituted by the Ministry of Energy and Mines to conduct inspections on electricity-related over changes, as well as an order from Prime Minister Thongloun Sisoulith for investigations into electric bill printing errors which may have been the cause of the overcharges. Food Safety Raising Lao’s food standards to ASEAN levels On 19 May 2016, Ministry of Agriculture and Forestry signed a Memorandum of Understanding with Deutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ) GmbH for their backing to facilitate the application of ASEAN food standards in Laos in order to develop quality food exports as well as for the health benefit of Lao citizens. This project is part of the “Standards in the Southeast Asian Food Trade” (“SAFT”) project and is sponsored by the German Federal Ministry for Economic Cooperation and Development in order to spread international and ASEAN-wide standards of Good Agricultural Practices in ASEAN. SAFT commands funding of EUR2.5 million, and also operates in Cambodia, Indonesia, Myanmar and the Philippines. The MoU provides on the follow three areas: 1. Links between markets will be promoted via integrated publicprivate partnerships with private enterprises on the application of food standards, workshops on food standards and food safety training for enterprises, as well as taking part in regional/ international exhibitions/trade fairs. 2. Capacity development of public inspectors. 3. Policy support in developing a Good Agricultural Practices roadmap and strategy, as well as platforms of exchange between the public and private sectors. Immigration Legalization of foreign workers in Champassak In March, government authorities for the province of Champassak announced that it will begin registering foreigners and providing them with temporary work visas in order to control the growing number of undocumented workers. The Champassak Labor and Social Welfare Department reports that there are currently over 2,000 foreign workers in the province, many of which are from Vietnam and China. With the issuance of the temporary work visa, workers are required to pay fees of 300,000 kip for three months, or 1 million kip for on year. 22 Laos Passport extensions no longer permitted The Ministry of Foreign Affairs’ Consulate Department has proclaimed that starting as of 15 February 2016, it will no longer permit the extension of expired passports, and instead will require all officials and citizens to apply for new passports. Passports that were issued between 2008 and 2012 have faced problems with having sub-standard barcodes that were unreadable for immigration officials in certain countries, which has prompted for this call for applying for new passports. The Consulate Department is also looking into the use of e-passports for Lao citizens to facilitate travel. Import/Export & Customs Electronic Certificate of Origin issuing system is established in Laos On 29 April 2016, the Ministry of Industry and Commerce (“MoIC”) established the Electronic Certificate of Origin Issuing System (“e-CO”), which was developed by Cyberia IT Consulting Company after being chosen by the Challenge Facility Fund and TDF II Project. The e-CO system’s main aims are to ease the submission process for applying for a Certificate of Origin under trade preferential agreements that Lao PDR in terms of time and cost. Through this system, exporters may declare documents online through the website, www.ecolao. gov.la, and no longer are required to visit the Certificate of Origin’s Authorizer Office as was the situation before. According to Mme. Bansaty Thepphavong, Director-General of Department of Import and Export, the e-CO system reduces the time for the approval of the application profess from 3 days, as per the previous certification system, to now being less than one day. At first, the e-CO system will undergo a pilot phase offered at the Department of Import and Export for six months. After a successful pilot phase, the e-CO system will be available in provinces, Chamber of Commerce and Industry in Vientiane and provinces, Special Economic Zone, Specific Economic Zones throughout the country. Revisions on application for import and export licenses On 10 March 2016, the Ministry of Industry and Commerce issued Notification No. 0472/MoIC. DIMEX on the usage of revised applications for import and export licenses, dated 10 March 2016. One of the aims of this Notification is to make the use of applications consistent throughout the country, promote regulatory conformity and reduce the time and paperwork associated with these procedures. With regards to import and export licenses, currently both the old system (purchasing applications from the Industry and Commerce Sector) and the new system (download the application via Lao PDR Trade Portal website) can be used interchangeable while the country transitions to using electronic licenses. Once applications are completed, they must be submitted, along with an application fee) to the Industry and Commerce Sector for its decision on approval. The validity of revised applications for import and export license started on 1 April 2016. New ban on timber exports The Lao government has issued a prime ministerial order banning the export of various tree species, timber products and ornamental plants in order to reduce illegal wood shipments outside the country. Under law, there are three types of designations for forests in Lao: protected, reserved, and production forests. Only production forests are permitted to be used for logging purposes. However, in reality, illegal logging happens in all three designations, with illegal timber exports to countries like Vietnam and China have become an increasing problem The scope of the ban covers the following: log, timber, partiallyprocessed wood, tree roots, root balls, tree branches, dried trees and ornamental plants. In particular, the following points are addressed: banning the export of logs, timber, processed wood, roots, branches, and trees from natural forests as well as logs the previous government had recently approved for export. Additionally, this new regulation provides that all types of wood must be turned into finished products before being exported, as per the Ministry of Industry and Commerce’s standards. This regulation also prohibits the import of wood and non-timber forest products into Laos for export to third countries. In addition to providing on timber exports, this prime ministerial order provides in development projects, e.g., when areas for new roads, hydropower plants, mining projects, etc., are to be carved out, the relevant sectors must make a survey on the impact of trees of this location. Such survey will be Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 23 incorporated into the government’s annual logging quota. Upon discovery of amounts exceeding the approved quota or that logging has occurred in areas that have not approves, the perpetrators of these violations will be subject to fines and penalties, and confiscation of lumber. EU prohibits imported vegetables from Laos. The Ministry of Agriculture and Forestry has announced that the European Union has now prohibited the Lao import of basil (Ocimum spp), Mexican coriander (Eryngium spp), peppers (Capsicum spp) and cha plu (Piper spp), citing failure to satisfy safety standards. Previously to the ban, the EU had issued 130 warnings to the Lao government regarding this matter for the last four years. In particular, such vegetable imports originating from Laos were found to have certain diseases and chemical substances beyond the prescribed safety level. In fear of the EU potentially widening their ban to other farm products which would negatively impact the country’s revenue, the Ministry of Agriculture and Forestry has provided the following instructions to the relevant authorities: • Provincial-level departments, government bodies and sectors must cooperate to improve agricultural quality to meet safety standards. • Relevant authorities must cease the issuance of quality guarantee certificates to parties that have received warnings from the EU, until the agricultural quality satisfies EU standards. • District agriculture and forestry offices and planting divisions must disseminate the EU’s conditions and criteria to agribusiness operators and exporters. • Provincial departments to review the inspection systems of their officials and agribusiness operators towards improving inspection mechanisms and reporting the results to the ministry by next month. • Inspectors that are found to be guilty of “loose inspection” with regards to the products in question will be subject to penalty. Industry Phu Bia Mining’s operations earns USD50 million for Laos in 2015 In Laos, Phu Bia Mining (“PBM”), in which the Government owns a 10% share, has two operations that have generated USD50 million for Laos in the previous year in spite of low metal prices in the previous year. Since 2003, PBM has contributed over USD460 million to the country’s national budget. According to Chanpheng Bounnaphol, PGM’s chairperson, new annual production records were set at Phu Kham with 78,449 tonnes of copper in concentrate produced, and at Ban Houayxai with 221,616 ounces of gold and 1,664,242 ounces of silver produced. PBM’s revenue consists of royalties, import service fees, personal income tax, concession fees and dividends. Additionally, the company was able to minimize expenditures by moving from an expatriate workforce to a more local workforce, now with 91% Lao employees as part of PGM’s localization plan. Information Technology Lao language to be used online On 18 February 2016, the Ministry of Posts and Telecommunications and the Internet Corporation for Assigned Names and Numbers (“ICANN”) held a joint workshop on the Development of Lao Internationalized Domain Names for the Root Zone, in order to gain local feedback on the validation of Lao domain names. Upon ICANN approval, the Lao language may be able to used online and in domain name systems (.la) by halfway through 2016. ICANN is working with local ministries to technical issues to define the standard for Lao script label generation rules for the root zone. This is in line with ICANN’s Internationalized Top Level Domain Names Program which encourages internet users to have domain names in their native language. Having been established for six years, this program now covers 37 countries and territories. According to Director General of the Ministry’s Planning and Investment Cooperation Department, Mr. Phoukong Chithoublok, “Information technology plays an important role in our lives, especially among internet users. According to reports, some 3.2 billion people use the internet worldwide. In Lao, internet users have increased steadily, up from just 5 percent of the population in 2010 to 21 percent in 2015.
Investment Vietnamese company invests USD1 billion in SEZ in Vientiane The Vietnamese company, Long Thanh Golf Investment and Trade Joint Stock Company, is investing over USD1 billion into the creation of the Long ThanhVientiane Specific Economic Zone (“SEZ”), which will be located in Dongphosy village, Hardxayfong district, Vientiane. This SEZ will consist of 560 ha and was given a land concession term of 99 years. Of the pledged USD1 billion, Long Thanh has provided 700 billion kip (approximately USD86 million) to the project so far. This project completed its first phase from 2009-2012, where it cleared land for infrastructure and constructed a golf course, driving range, office building, restaurant and parking lot. Currently, in its second phase, the project is constructing an additional nine holes to the golf course, as well and constructing housing. To date, this is the first investment project by a Vietnamese company in an SEZ in Laos and has created over 700 jobs for both countries, and is projected to create 1,000 more. Currently Laos has six SEZs total. Labor Labor shortages plague garment sector Within the Lao garment sector, the number of laborers is currently 26,000, which is a decrease by 2,000 when compared to last year. Such labor declines has been experienced in this sector for the past four years. Factors cited as contributing to the shortage including labor migration to other countries in the region, as well as competition from other sectors for laborers, such as construction, service and processing. According to Saybandith Rasaphone, the President of Lao Garment Industry Association, “Labor shortages in the garment industry poses severe impacts on investment in the industry thus reducing the export of garment products even though purchase demand is increased.” The Lao Garment Industry Association has begun implementing measures to address the issue, such as raising the minimum wage and social welfare benefits for garment laborers and hosting trainings on garment production-related skill development. In addition to the labor shortage, the Lao garment sector has also experienced a 7.25% reduction in exports in 2015 compared to 2014. Land Compensation pledged for displaced land/property owners impacted by the Laos-China railway In January, the Deputy Minister of Public Works and Transport, Lattanamany Khounnivong, announced that under Prime Ministerial Decree No. 135 issued on 25 May 2009 (“Decree No. 135”), compensation will be paid to land/ property owners displaced by the Laos-China railway project. According to Lattanamany, a mediation team has been set up to deal with compensation issues. The investment costs for the railway project is 38.7 billion yuan (USD6.04 billion). Specifically, a plus-three policy would be used to determine compensation, based on the following considerations: • Decree No. 135 being used as a regulatory basis, which also details the compensation for each category of property, such as houses, other types of buildings and land; • Actual estimation of the value of the property; and • Negotiations with the people affected. With regards to the railway project, which passes through many cities and provinces, an estimated total area of 3,058 hectares is needed for the railway and its associated facilities. Logistics Laos progressing in the logistics sector According to the Director General of Transport Department, Viengsavath Siphandone, Laos is progressing in the logistics arena and aims to connect the nations in the region. To achieve this target, the government has issued strategic development plans on various areas of logistical improvement, such as setting Laos up to be a transport hub for Southeast Asia. Additionally, the government has created a substantial budget for the development and amelioration of logistics infrastructure to connect with other Southeast Asian nations. Other key developments illustrating the government’s commitment to logistics are the number of bilateral agreements, such as with Cambodia, Vietnam and Thailand, and contracts, such as the Laos-Vietnam-Thailand, Laos-Vietnam-Cambodia, the Great Mekong Sub-Regional CrossBorder Transport Agreement (“GMS CBTA”) and the Asean Framework Agreement, that have Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 25 been signed between Laos and other nations in the region. According to Viengsavath, “In actual implementation, we only practice bilateral agreements of transport contracts; the majority of them are related to renting transportation vehicles from neighboring countries, due to the fact that Lao transportation vehicles lack the capability to transport long distances to the sea ports of neighboring countries. Previous development and improvement of infrastructure, especially roads, bridges, seaports, and so on, has aimed to facilitate transportation, travelling and trade only to some extent; it still does not endorse and guarantee such a policy of transforming Laos completely from a landlocked to be a landlinked country.” However, one issue that Laos faces is that it may only receive minor benefits yet will still be burdened with obligatory national budget spending to support transportation infrastructure since Laos is in the situation of having the logistics infrastructure in place without actually performing logistics services, unlike its neighboring countries which already have logistics operators. The Strategic Development Plan for Transportation and Logistics, which was approved by the government in the previous year, addresses these concerns. Additionally, Laos is also a member of United Nations Economic and Social Commission for Asia Pacific (“UNESCAP”) for Dry Ports. Accordingly, the following locations have been delegated to be international logistics parks in the country: Huoayxai in Bokeo, Nateuy in Luang Namtha, Xay in Oudomxay, Luang Prabang province, Thanalaeng in Vientiane, Lak Xao in Borikhamxay, Thakhaek in Khammuan, Xeno in Savannakhet, and Vangtao in Champassak. Poverty USD30 million loan from World Bank for Laos to combat poverty According to the Poverty Reduction Fund of Laos, Sally Burningham, the World Bank Country Manager for Laos, announced that the World Bank approved to provide a low interest loan of USD30 million (more than 243.2 billion kip) to fight poverty in the country. Recently, the Swiss Agency for Development and Cooperation also agreed to provide a grant of USD16 million (more than 129.7 billion kip) for efforts to alleviate poverty. The Lao government will contribute another USD6 million (more than 48.6 billion kip) bringing total funding from the three sources to USD52 million, which will be utilized to fund the Poverty Reduction Fund’s Phase III from 2017-2020. According to Somsanith Souvannalath, the Deputy Minister and Vice Chairman of the National Leading Committee for Rural Development and Poverty Eradication (“NLCRDPE”), this committee will be merged with the Ministry of Agricultural and Forestry, and renamed as the “Ministry of Agriculture, Forestry and Poverty Eradication”. Phase II of the Poverty Reduction Fund provided benefits to 683,000 people in 1,300 villages through over 1,426 projects, which cost more than 300 billion kip. Such projects include constructing/ repairing 711 clean water systems, 63 irrigation systems and reservoirs, 10 community markets, 386 schools, 45 bridges and 18 small-scale electricity networks, and 225 roads (totaling approximately 1,228 km). Tax Revised legislation on vehicle excise tax On 1 December 2015, the Ministry of Finance issued Guidance No. 4050/MoF on executing a pilot project on the application of vehicle excise tax on all types of vehicles in the calculation, collection, or provision of tax exemptions regarding import/ export, manufacturing and assembly within the country. This Guidance is issued in order to implement Resolution No. 0137/PC by the National Assembly Standing Committee on the vehicle excise tax pilot project. The Guidance provides details on the following: the basis for calculating vehicle excise tax, excise tax declaration, excise tax handover, and calculation methods regarding imported and domestically manufactured parts and spare parts. This Guidance nullifies Notifications No. 2320/MoF and No. 0325/MoF, dated 22 December 2003 and 15 February 2010 respectfully, as well as other relevant policies regarding prices for importing vehicles being used as a base for customs and tax calculation. Telecommunications Conditions for foreign media operating in Laos A new Prime Ministerial Decree took effect on 14 January 2016, which provides on conditions for the guidelines to regulate the management and overseeing of the collection of information and reporting done by foreign media 26 Laos organizations, embassies and international organizations in Laos. Under the new Decree, the content of foreign media reports are subject to review by the relevant Lao authorities before being broadcasted or printed. Additionally, such reports are required to promote bilateral and multilateral relations and cooperation. For foreign embassies and international organizations: before issuing any publication, the content of such publications is subject to review by the Ministry of Foreign Affairs; before publishing material in the country’s media, it is required to obtain permission from the Ministry of Foreign Affairs along with the Ministry of Information, Culture and Tourism. Additionally, the new Decree provides that foreign media organizations must set up an office in Laos within three months after having an application approved by the government. If foreign reporters do not have an office in the country but need to file a story, they must apply for permission from the Ministry of Foreign Affairs at least 15 working days in advance. Other requirements under the Decree include: (i) reporters that are with a foreign delegation must submit their names and work plan to the Ministry of Foreign Affairs at least three days in advance; and (ii) foreign reporters must possess a press card issued by the Ministry of Foreign Affairs. Transportation Study on viability of a new LaosVietnam railway Funded by a USD3 million ODA grant from the Korea International Co-Operation (“KOICA”), a feasibility study is being embarked from December 2015 to December 2017 that will examine the feasibility of a railway between Vientiane, Laos, to Vung Ang, Vietnam. The railway is planned to be 550km long and is part of an overarching master plan on augmenting the railway capacity of Laos and Vietnam. The Vietnamese portion of the line, which will be in the central Ha Tinh Province, is expected to be 119km long. The three phases of the feasibility study entails an initial survey of the project (six months), the actual feasibility study itself (one year), and finalization of the study (six months). Sources: http://www.kplnet.net http://www.laotradeportal.gov.la http://laovoices.com http://www.na.gov.la http://www.nationmultimedia.com/ http://www.vientianetimes.com http://vietnamnews.vn
Administration Function and organization of agencies attached to the Government On 01 February 2016, the Government issued Decree No. 10/2016/ND-CP on agencies attached to the Government. Accordingly, agencies attached to the Government shall (i) be established by the Government; (ii) support state management activities carried out by the Government; and (iii) provide important public services, for which the Government’s direct management is required. Agencies attached to the Government are under the inspection and management of the Government and related Ministries. Regarding the organizational structure, this Decree stipulates the following: • The organizational structure of an agency attached to the Government shall include (i) Departments, (ii) Offices and (iii) other affiliated non-business organizations (if available). • Agencies attached to the Government shall work with a final say. • The heads of agencies attached to the Government shall (i) issue Policies on work, information, agencies’ reports and (ii) lead, monitor the implementation of such policies. The head of these agencies are not entitled to issue legislative documents. This Decree took effect on 20 March 2016. Approval of the National Action Program on production and sustainable consumption by 2020, with a vision towards 2030 On 11 January 2016, the Prime Minister issued Decision No. 76/QD-TTg on the approval of the National Action Program on production and sustainable consumption by 2020, with a vision towards 2030 (“Decision No. 76”). Decision No. 76 aims to ensure that economic development is promptly and efficiently contributing to environmental protection, poverty elimination and economic restructuring. General objectives of this Decision include changing production and consumption models for efficient use of resources and energy; increasing the use of renewable energy and eco-friendly products; and reducing and re-using waste while maintaining environmental sustainability. Specifically, the Decision sets out the objectives in accordance with the 2016 to 2020 Plan and the 2021 to 2030 Plan. The 2016 to 2020 Plan advocates for enterprises to initiate reforms so as to reach a clean energy usage rate of 60% to 70% and energy saving rate of 50%; raise green and environmentally friendly industry and waste recycling to 42% to 45% of the GDP; reduce the use of non-biodegradable bags by 65% and 50% at supermarkets and markets, respectively; seek to ensure that 90% of plastic waste, paper, waste oil, steel, and iron are recycled and 85% of solid waste is to be recycled, reused or used to produce organic fertilizer; 75% of non-hazardous industrial waste is to be recycled and reused; 50% of construction waste is recovered to recycle and reuse. The 2021 to 2030 plan calls for the implementation of synchronous activities to promote production and sustainable consumption; models and practices in production and sustainable consumption are popular and widely used in the community and among various enterprises. The basic and overall objective is to convert the current production and consumption model to a more sustainable one. The Annex provides a list of the prioritized actions to implement the National Action Program on Production and Sustainable Consumption by 2020, with a vision towards 2030. This Decision took effect upon signing. 28 Vietnam Forms of investment supervision and evaluation reports On 18 December 2015, the Ministry of Planning and Investment issued Circular No. 22/2015/TT-BKHDT regulating on forms of investment supervision and evaluation reports. Accordingly, the specific forms thereof are attached with this Circular and consist of 17 forms, which are divided into 06 groups:1 • Forms of biannual and annual supervision and evaluation reports on overall investment (Form No. 1); • Forms of supervision and evaluation reports on investment projects using State capital (Form No. 2, 3, 4, 5, 6); • Forms of supervision and evaluation reports on PPP (public-private partnership) investment projects (Form No. 7, 8, 9, 10); • Forms of supervision and evaluation reports on investment projects using other capital (Form No. 11, 12, 13, 14); • Forms of reports on the disbursement situation of public investment capital (Form No. 15, 16); • Forms of supervision reports on investment of the public (Form No. 17). This Circular took effect upon signing and replaced Circular No. 13/2010/TT-BKHDT. Guidance on projects of national significance On 25 December 2015, the Government issued Decree No. 131/2015/ND-CP specifying guidance on projects of national significance (“Decree No. 131”). This Decree addresses the 1 Article 2, Circular No. 22/2015/TTBKHDT. operation and organization of the State Assessment Council; documentation and procedure for application for assessment and contents of assessment of projects of national significance; hiring of inspection consultants, and costs of assessment and inspection of projects of national significance. Decree No. 131 regulates the process, procedure for and elements of assessment of investment policies for projects of national significance financed by public investment capital; projects of national significance financed by state funds other than public investment capital; projects of national significance that are not financed by state capital; outward investment projects of national significance; and assessment of amendments to projects of national significance prescribed in Article 40.4 of the Law on Investment. Decree No. 131 took effect on 15 February 2016 and repealed Decree No. 03/2013/ND-CP dated 4 January 2013 giving guidance on Resolution No. 49/2010/QH12 for the National Assembly dated 19 June 2010 on projects and works of national importance to be submitted to the National Assembly for investment policy decisions. Decision approving the General Strategy on International Integration On 07 January 2016, the Prime Minister issued Decision No. 40/ QD-TTg, approving the General Strategy on International Integration up to 2020, with a vision to 2030. Accordingly, Vietnam aims to achieve the following goals: • Continue to open its market while simultaneously improving internal economic strength and avoiding over-reliance on foreign resources. Vietnam will try to catch up with the economic development pace of ASEAN-6. Notably, regarding economic integration levels, Vietnam will try to achieve the same level as ASEAN-6 in 2020, ASEAN-4 in 2025 and by 2030, Vietnam will become one of ASEAN’s leading economies; • Ensure political tranquility and enhance the country’s position in the international market. By 2030, the country aims to become one of the key military forces in ASEAN; • Focus on the development of human resources, ensuring the worldwide recognition of the country’s image in 2030. This Decision took effect upon signing. Decree on citizen identification On 31 December 2015, the Government issued Decree No. 137/2015/ND-CP detailing a number of articles and implementation measures of the Law on Citizen Identification. Accordingly, Vietnamese citizens (i) aged 14 years or older and (ii) who have been registered for permanent residence are eligible for the issuance of a citizen identity card. Personal identification numbers are provided for Vietnamese citizens upon their birth registration. To access the national population database, organizations and individuals (except for the management authority of the national population database and individuals seeking for their own personal information as required by administrative procedures) must acquire approval of the management authority of the national population database. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 29 Such approval is issued within 05 working days from the date the request for access was received. This Decree took effect on 15 February 2016 and replaced Decree No. 90/2010/ND-CP on the national population database. Circular providing for management, provision and use of topographic and cartographic data and information On 12 November 2015, the Ministry of Natural Resources and Environment issued Circular No. 48/2015/TT-BTNMT on the management, provision and use of topographic and cartographic data and information. This Circular specifies types of information, measurement data and maps that need to be submitted to the Department of Survey and Mapping of Vietnam and also provides the procedures to submit such information and data. Circular No. 48 took effect on 30 December 2015 and repealed Circular No. 03/2007/TT-BTNMT dated 15 February 2007, providing guidance on the management, provision and use of topographic and cartographic data and information. Decree on the implementation of the Law on Civil Status On 15 November 2015, the Government issued Decree No. 123/2015/ND-CP detailing a number of articles and measures for implementation of the Law on Civil Status (“Decree No. 123”). This Decree stipulates the submission process for civil registration dossiers, as well as the contents for registration dossiers for birth, death and marriage. Decree No. 123 also provides regulations on opening, closing and storing civil status books. This Decree took effect on 1 January 2016 and repealed Decree No. 77/2001/ND-CP; Decree No. 158/2005/ND-CP; Articles 1 and 3 of Decree No. 06/2012/ND-CP; Articles 3, 5 and 44 of Decree No. 24/2013/ND-CP; and also repealed and amended some parts of Decree No. 126/2014/ND-CP. Law on Children promulgated On 5 April 2016, the National Assembly promulgated Law No. 102/2016/QH13 (“Law No. 102”) providing regulations on child protection as well as the rights, duties and responsibilities of authorities, parents/guardians and children. This Law includes 106 articles divided into seven (7) chapters, namely: (i) general provisions; (ii) children’s rights and duties; (iii) childcare and education; (iv) child protection; (v) the legal participation of children in children-related issues; (vi) the duties of authorities, organizations, educational institutions, families and individuals in ensuring that children’s rights are upheld; and (vii) implementing provisions. The Law on Children stipulates strict and detailed regulations in order to ensure maximum protection, care and education for children. First and foremost, this Law provides that children’s voices must be heard in regards to childrelated matters not only in family or social environments but also in the legislative process. Children can also exercise their rights to participate in children-relating issues. Further, the Law recognizes more children’s rights and duties. Among twenty-two (22) children’s rights stipulated, there are some notable ones, such as: the right to life (Art. 12); the right to freedom of belief and religion (Art. 19); the right to inviolability of private life (Art. 21); and the right to receive alternative care and be adopted (Art. 24), among others. Children’s obligations and duties are also specified in terms of social and family environments with the notable responsibility of children to look after themselves and do no intentional harm to their bodies being emphasized (Art. 41). Last but not least, this Law dedicates a substantial amount of its content to the issue of child protection and divides the issue into four (4) major matters: (i) three (3) levels of child protection and operational responsibility (this matter stipulates further responsibilities from other entities in order to protect children, most noteworthy are the Government’s “Children Hotline”, the Court’s responsibility to isolate children from parents/guardians who fail to exercise their duty of child protection, and the relevant competent authorities in protecting children on the internet); (ii) children protection service providers; (iii) alternative care; and (iv) child protection in legal proceedings. The Law on Children takes effect on 1 June 2017 and replaces the Law on Children Protection, Care and Education. More suspected violators now eligible for temporary custody On 17 March 2016, the Government issued Decree 17/2016/ND-CP (“Decree No. 17”) amending and supplementing a number of articles of Decree No. 112/2013/ND-CP (“Decree No. 112”) regulating administrative procedures and sanction of deportation, as well as lawful measures in regards to temporary 30 Vietnam custody and escorted transfer of suspected violators. Management procedures of foreign violators of Vietnamese laws pending the completion of the deportation process are also addressed by this Decree. Decree No. 17 amends Decree 112, Article 11 regarding the administrative procedure for taking suspected violators into temporary custody. Temporary custody is applied when it is necessary to immediately prevent or stop smuggling or illegal crossborder transportation of goods in cases where there are indications that the violators will escape, are capable of destroying evidence and/or the physical means by which the violation was carried out, or are otherwise capable of hindering the investigation and/ or the procedural measures necessary to deal with the violation, detailed as follows: • Importing or exporting prohibited or temporarily suspended goods under the law; • Importing or exporting goods on the list of goods subject to import and export conditions without an import or export license or documents issued by the competent State agency with jurisdiction over regulation of such goods; • Importing or exporting goods without passing through a regulated border gate, without conducting customs procedures as required by law or falsely declaring the quantity or type of goods when conducting customs procedures; • Importing or exporting goods without invoices or documents attached as required by law, or with illegal documents attached; • Importing goods required by law to have an import stamp but do not bear such a stamp, or with a false or expired stamp; • Conducting cross-border business or business from a non-tariff area to a domestic area or vice-versa contrary to law, where the violation is not at the level justifying criminal liability; • Transporting goods crossborder or from a non-tariff area to a domestic area or vice-versa contrary to law; and • Other cases as stipulated by law. Pursuant to an amendment in Article 12, Regional Coast Guard Commander replaces the regional commanding officer of the Coast Guard as one of the persons having authority to issue a decision on temporary custody. Decree No. 17 took effect on 2 May 2016 and repeals provisions under Articles 3.1, 11 and 12 of Decree No. 112. The Plan to implement the Memorandum of Understanding between Vietnam and Malaysia has been approved The Prime Minister signed Decision No. 422/QD/TTg (“Decision No. 422”) on 18 March 2016 approving the Plan to implement the Memorandum of Understanding between the Government of the Socialist Republic of Vietnam and the Government of Malaysia on the Employment of Workers (the “Memorandum”). The Plan aims to implement the Memorandum pro-actively, timely, effectively and in a manner corresponding with the Constitution, laws and socioeconomic conditions of Vietnam. The Ministry of Labor, Invalids and Social Affairs, as well as other relevant ministries, agencies and localities will be responsible for organizing the implementation of the Plan. Cooperation between the two countries is to be enhanced via information exchange mechanisms and meetings. The primary content of the Memorandum will be publicized on mass media to raise awareness for the benefit of organizations, enterprises and workers as pertaining to compliance of the laws of the two countries and the provisions stipulated in the Memorandum. Vietnamese enterprises sending workers to Malaysia will be instructed to comply with the Memorandum. These enterprises are also to be responsible for managing workers in accordance with the Law on Vietnamese Guest Workers. A Vietnamese working group will be established for the purpose of coordinating with Malaysian authorities in implementing the Memorandum. Decision No. 422 took effect upon signing date. New Circular promulgated regulating the procedures for issuing, changing and re-issuing citizen identification cards On 4 March 2016, the Ministry of Public Security issued Circular No. 11/2016/TT-BCA regulating the procedures for issuing, changing and re-issuing citizen identification cards. In the dossier acceptance phase, citizens applying for issuing, changing and/or re-issuing citizen identification cards (the “applicants”) are to personally fill out the declaration form. The provided information will be compared with the national Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 31 population database to confirm authenticity. In the information acceptance phase, the old identification cards (if any) will be recalled or have a corner clipped off. Applicants’ fingerprints, a description of their appearance, and a photographic portrait will be collected. A receipt for the information and appointment note will be given to the applicant. Applicants shall pay a fee as regulated by law. In case an applicant’s identification card is lost or damaged beyond the ability to clarify the relevant information or when a person with authority requests confirmation of a citizen’s information, the information of the applicant in question will be looked up for confirmation via the citizen identification database. Relevant officials can only look up identification information within their authority. Applicants’ dossiers will be processed and qualified applicants will be submitted to the National Citizen’s Identification Center; unqualified applicants will receive a written notice. Circular No. 11/2016/TT-BCA took effect on 20 April 2016 and replaces Circular No. 07/2014/TTBCA. New Circular promulgated guiding on the rates, regime of collection, remittance, management and use of inspection charges for means of fire fighting and prevention On 3 March 2016, the Ministry of Finance issued Circular No. 42/2016/TT-BTC (“Circular No. 42”) guiding on the rates, regime of collection, remittance, management and use of inspection charges pertaining to the means of fire fighting and prevention. Organizations and individuals applying with the competent authorities to inspect the means of fire fighting and prevention are required to pay inspection charges at the rates stipulated in Circular No. 42. Other fees arising from the inspection will be paid by such organizations and individuals in accordance with the law. Fire fighting and prevention police and other authorized organizations are entities entitled to collect inspection charges. The inspection charges for means of fire fighting and prevention are to be regarded as state budget collection. Collecting organizations can withhold 90% of the collected amounts. The other 10% will be submitted to the state budget. Circular No. 42 took effect on 20 April 2016. Principle on asset distribution upon separation from marriage The Supreme People’s Court, the Supreme People’s Procuracy and the Ministry of Justice together issued Joint Circular No. 01/2016/ TTLT-TANDTC-VKSNDTC-BTP on 6 January 2016 to provide guidance on a number of articles of the Law on Marriage and Family Matters (the “Circular”). Under the Circular, spouses upon divorce shall agree on all matters including assets distribution. Where there is no reached agreement between the spouses, the asset distribution is to be submitted to the Court at their request, and the Court will distribute the assets evenly, taking into consideration the situation of each spouse and the contribution of each in the creation, maintenance and development of the shared asset. The Court will also determine whose default is responsible for the case. The Circular also addresses the following significant points: • The spouse that encounters difficulties after the divorce will be entitled to more assets than the other spouse or will be given priority to possess the type of assets that can assure his/her ongoing living conditions, all subject to the actual situation of such spouses and their family; • The spouse who has made more contributions to the shared assets will be entitled to more upon the distribution of assets; • The spouse who has his/her left job to stay home to take care of their children will be deemed as generating the same income as the other spouse who was working for that period of time; and • Where the husband commits acts of family violence, adultery or dissipation upon the divorce, the Court will take into account the element of default to protect the legitimate rights and interests of the wife and their adolescent children. This Circular took effect on 1 March 2016. Industrial and trading development planning The Ministry of Trade and Industry issued Circular No. 50/2015/ TT-BCT dated 28 December 2015 providing for the development plan on industry and trade. Accordingly, depending on the type and scale , development planning stage is set for the minimum period of 10 years and minimum visions from 5-10 years. The Ministry of Industry and Trade is responsible for preparing the development plan for the scale of above 5000 m3 , whereas the provincial-level People’s 32 Vietnam Committee is responsible for the scale below 5000 m3 . The establishment, evaluation, approval, announcement and management process for the development plan are all stipulated in this Circular. This Circular took effect on 15 February 2016 and replaced Decision No. 55/2008/QD-BCT and Circular No. 17/2010/TT-BCT. Law on Information Access promulgated On 6 April 2016, the National Assembly promulgated Law No. 104/2016/QH13 (“Law No. 104”) on Information Access. The Law ensures that every citizen has equal rights to access full and accurate information created by governmental agencies. However, Article 3 stipulates that access to information can be restricted in certain circumstances in the interests of national defense, national security, social order and safety, social ethics and public health. The right to access information must not violate national interests, the legal rights and interests of other persons, agencies or organizations. Article 6 specifies types of information deemed as national secrets and information that could potentially become harmful if accessed. Article 7 provides that information relating to business, personal and family secrets can only be accessed with approvals from the respective owners of such information unless the head of the relevant governmental agency decides to disclose such information to protect public health and interests in accordance with the relevant laws. Citizens’ rights and obligations relating to information access are stipulated in Article 8. Governmental agencies have the responsibility to provide information which they and/ or relevant entities create as specified in Article 9. According to Article 11, prohibited activities include: • Deliberately providing incomplete or misleading information, delaying to provide information and destroying or forging information; • Providing or using information to oppose the State, damage unity policies and/or encourage violence; • Providing or using information to harm one’s honor, dignity, reputation, encourage gender discrimination or damage assets of individuals, agencies or organizations; and • Preventing, threatening or bullying persons who request or provide information. Violations shall be handled based on the nature and seriousness of the violation in question and may result in criminal liability. Information can be accessed freely, unless otherwise stipulated by other laws. The cost of printing, copying and sending information is regulated by the Minister of Finance. Article 17 regulates information that must be publicized, which includes legal documents, information on projects and investments, annual financial reports, information related to public health and interests as well as the contact information of governmental agencies. Legal forms of publication are regulated by Article 18. Information shall be publicized in the most appropriate and practical forms as to ensure citizens’ right of access. The time to publicize information varies for each field in accordance with the relevant laws. Otherwise, the information shall be publicized no later than five (5) days after being created. Articles 19, 20 and 21 provide regulations on the publication of information on electronic information portals, websites, mass media, gazettes and public postings. The responsibilities of the relevant agencies regarding correcting information and re-publication of corrected information are specified in Article 22. Chapter III of the Law specifies the types of information to be provided upon request, the forms of requesting information, the forms of providing requested information, acceptance, handling and refusal of information requests as well as procedures and formalities for providing information to the offices of governmental agencies through electronic networks, mail or facsimile services as well as the handling of incorrect information. To guarantee citizens’ rights to access information, many measures are provided along with the responsibilities of governmental agencies at all levels. This Law takes effect on 1 July 2018. Key tasks and solutions to improve the national business environment and raise national competitiveness Resolution No. 19-2016/NQ-CP on key tasks and solutions to improve the national business environment and raise national competitiveness during the period of 2016-2017, with orientation towards 2020, was Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 33 issued by the Government on 28 April 2016. The main components for improving the national business environment and competitiveness include: 1. Indicators of business environment quality should be at least equal to the average of the ASEAN-4 group countries’ as follows: • Focus on the assessment criteria of the World Bank and the World Economic Forum, maintenance of achievements, aims focused on increasing the assessment points of every indicator; • Simplify and repeal inappropriate administrative procedures to ensure an annual minimum reduction of 10% of the costs for complying with administrative procedures; • Achieve the average level of ASEAN–4 countries on tax administrative procedure reform based on three indicators: tax refunds, risk management in tax inspection and timeliness and results in the handling of tax complaints; • Reduce the time for issuance of construction permits and other relevant procedures to seventy-seven (77) days or fewer; reduce the time for registering ownership and use of property to fourteen (14) days or fewer; reduce the time for obtaining customs clearance to ten (10) days or fewer for exports and twelve (12) days or fewer for imports; achieve a rank in the top 30 countries for credit access; reduce the time for settling contractual disputes to 200 days or fewer; and reduce the time for resolving enterprise bankruptcy to twenty-four (24) months or fewer; • Minimize paperwork, reduce time and costs for import and export procedures; change the basic management and inspection methods; and • Create a system supporting start-up businesses and a business and investment environment, which is favorable, stable, and creative for start-up businesses. 2. By 2017, Vietnam aims to achieve the average level of the ASEAN-4 in regards to a few key indicators regarding competiveness under the group of efficiency raising index: • Effectiveness of the competition policy (top 50 countries); limiting non-tariff barriers (top 40); completion of the competition policy and improve the efficiency of the goods market while improving and ensuring fair competition; • Flexibility of wages (top 60) and the ability to retain and attract talent (top 40); • Availability of financial services (top 50); • Significant development of the land use right market, including the primary and secondary markets. 3. By 2020, Vietnam aims to achieve a national business environment and competiveness level equal to the average level of the ASEAN-3 by further improving some international practice indicators. Specific responsibilities are given to ministers, leaders of ministerial-level agencies and chairpersons of the People’s Committees of provinces and centrally-run cities to realize the targets of Resolution No. 19-2016/ NQ-CP. New circular guiding the management regime of the state budget On 5 April 2016, the Government issued Decree No. 24/2016/ND-CP (“Decree No. 24”) regulating the management regime of the State budget. This Decree prescribes principles of management vis-à- vis the State budget, management of the State budget operations as applicable to the State Treasury system, and powers and responsibilities of State agencies and those agencies’ relevant undertakings. Notable provisions are outlined below: Pursuant to this Decree, percentages of the State budget which are designated as temporarily available shall be utilized for the following purposes (in descending order of priority): • Advance payment to the central authority’s budget; • Advance payment to the provincial authorities’ budgets; • Term deposits in commercial banks having a high safety level as classified by the State Bank of Vietnam; and • Term purchases of Government bonds. Further, if the State budget falls into a temporary deficit, the resolutions to be issued in accordance with this Decree shall be as follows: • Issuance of State Treasury bills to compensate for the temporary deficit; and 34 Vietnam • Withdrawal of term deposits in commercial banks. In regards to risk management applicable to the management regime of the State budget, Decree No. 24 prescribes resolutions as follows: • Stipulating the limit of advance payments to (i) the central authority’s budget and (ii) provincial authorities’ budgets; • Stipulating the limit applicable to (i) term deposits in commercial banks and (ii) term purchases of Government bonds. This Decree takes effect on 1 January 2017. New ordinance on market management Ordinance No. 11/2016/UBTVQH13 was issued by the Standing Committee of the National Assembly on 8 March 2016 providing for market management. The Ordinance set forth detailed regulations on the functions and organization of market management agencies and their inspection and examination activities. The functions of the market management force include prevention, fighting against and handling acts of trading smuggled goods; production and business of counterfeit goods, prohibited goods, goods without clear origin; violations as to intellectual property rights; violations as to regulations on quality, measurement, price and food safety; and violations as to regulations on consumer interest protection. Market management civil servants are not permitted to hinder the lawful circulation of goods circulation and the provision of trading and services by organizations and individuals on the market; or to threaten, buy off, and deceive organizations and individuals during the examination and specialized inspection or handling of administrative violations. An inspection must be based on a written decision of the competent agency. An extraordinary inspection decision is issued only with the following basis: Having information on legal violations or any signs of legal violations; having an inspection proposal of the servant implementing the mission; having a written request of the competent state management agency. The time-limit for an inspection at inspected location may not exceed 3 working days (or 5 working days for complicated cases) from the date of issuance of the inspection decision. Organizations and individuals have the right to refuse the inspection in cases where they have a foundation that the inspection is not consistent with the regulations of this Ordinance and relevant laws. They also have the right to request public rectification, apology and compensation in cases where they have a foundation that the inspection is unlawful causing damages to the reputation and/or assets. This Ordinance takes effect on 1 September 2016. Management and use of official development assistance Decree No. 16/2016/ND-CP (“Decree No. 16”) was issued by the Government on 16 March 2016 on management and use of official development assistance (“ODA”) and concessional loans granted by foreign sponsors. Under Decree No. 16, the following areas shall be prioritized in receiving official development assistance: • Assistance in execution of socio-economic infrastructure programs and projects; • Assistance in studies into the formulation of socioeconomic development policies and improvement of state management institutions; • Assistance in RGW development of human resources, scientific research and technological development; • Assistance in environmental protection, responseS to climate change and green growth; • Use of state investment in Public Private Partnership (“PPP”) projects; and • Other prioritized fields decided by the Prime Minister. Procedures for management and use of ODA or concessional loan include: • Raising ODA or concessional loans; • Drafting, assessing, issuing the decision on investment guidelines for the program/ project; • Drafting, assessing, issuing the decision on investment in the program/project; • Concluding the international treaty or agreement on ODA or concessional loans; • Managing the execution of the program/project; and • Completing, transferring the results of the program/project. Decree No. 16 provides for basic rules for the state management Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 35 of ODA and concessional loans, specifically: • ODA and concessional loans belong to the State budget and are to be used for the socioeconomic development of Vietnam, and must be reflected in State budget as prescribed by law; • The Government shall unify the state management of ODA and concessional loans to ensure effective use of capital and solvency, decentralization associated with responsibilities, power, managerial capability of Ministries, regulatory bodies, and local governments. Besides that, cooperation in management and supervision of relevant agencies according to applicable laws shall also be monitored; • Ensure openness and transparency; raise accountability in terms of policies, procedures for raising, managing, and using ODA and concessional loans among industries, sectors, and stakeholders; and • Prevent and deal with corruption, losses, and wastefulness in management and use of ODA and concessional loans in accordance with law. • In terms of the power to approve program/project instrument and decision on investment in the program/project, the Prime Minister has the power to approve the instrument and decision on investment of the following programs/projects: • National target programs, projects of national importance whose decisions on investment guidelines have been issued by the National Assembly; • Target programs whose decisions on investment guidelines have been issued by the Government; • Programs associated to policy frameworks; programs and projects in the area of national defense, security, religion that already have decisions on investment guidelines. The head of a governing body has the power to approve the instrument and decision on investment of the programs and projects other than those specified above. Depending on the scale, nature, and conditions for execution of the program/project, capacity for program/project management, regulations on management of ODA and concessional loans of foreign sponsors, the investmentdecision-making person shall decide on any of the following methods for program/project management: • Establishing a specialized project management board or a local project management board to manage the programs and projects and their components within the same sector or administrative division. • Employing an operating project management board to manage a new program/project. • Establishing a project management board to manage a large-scale program/project, a program/project applying advanced technologies or related to national defense and security, a program/project with special capital sources or management model that need a project management board, a program/project that requires the establishment of a project management board under an international treaty or agreement on ODA or concessional loan. • Project owners shall employ capable persons to manage and execute small-scale projects and projects participated by the community. • Hiring consultants to be in charge of management responsibilities of special program/projects. In this case, the project owner shall sign a consultancy contract with a consultant or advisory organization capable of program/project management as prescribed by effective regulations of law to perform all or some of program/project management tasks. Amended, replaced and repealed administrative procedures in the field of tax administration On 15 April 2016, the Ministry of Finance issued Decision No. 832/QD-BTC promulgating amended, replaced and repealed administrative procedures in the field of tax administration under the Ministry of Finance’s management. This Decision promulgates four amended and replaced administrative procedures and two repealed administrative procedures. This Decision took effect on 20 November 2015. Decision approving the National Strategy on Crime Prevention and Control during 2016-2025, with orientations toward 2030 On 14 April 2016, the Prime Minister issued Decision No. 623/ QD-TTg approving the National Strategy on crime prevention and control during 2016-2025, with orientation toward 2030. There 36 Vietnam are 15 proposed plans on crime prevention. This Decision took effect upon the signing date. Decision promulgating new/ amended, supplemented/ repealed or unchanged administrative procedures under the Ministry of Information and Communications’ management. On 30 March 2016, the Ministry of Information and Communication issued Decision No. 453/QDBTTTT promulgating new/ amended, supplemented/repealed or unchanged administrative procedures under the Ministry of Information and Communications’ management. This Decision took effect upon the signing date. Regular Government meeting held in April 2016, new resolution passed in May On 9 May 2016, the Government issued Resolution No. 33/NQ-CP discussing and approving a number of important initiatives. In terms of businesses and the economy, the Government laid out several key objectives including improving the business climate and raising national competitiveness. Accordingly, the Government has requested that the State Bank of Vietnam stabilize interest rates, reduce loan interest rates, control and supervise weak commercial banks and concentrate credit into the manufacturing and business sectors, specifically agriculture, medium and small sized enterprises and science and technology enterprises. The Government has also asked the Ministry of Industry and Trade to further commercialize and expand the export sector, particularly in terms of the seafood industry. Increase in sanctions on administrative violations in the state management of prices, charges, fees and invoices sectors The Government promulgated Decree No. 49/2016/ND-CP amending and supplementing a number of articles of Decree No. 109/2013/ND-CP, while adding new administrative penalties and reinforcing previous sanctions applying to violations regarding the state management of prices, charges, fees and invoices. Regarding regulations on the sanctioning of administrative violations in the price sector Decree No. 49 supplements Decree No. 109/2013/ND-CP with remedial measures regarding acts of failing to comply with the price determined by the competent agencies. The Decree also provides on regulatory violations on the following: declaration and registration of goods and services prices; construction, and the establishment, retrieval and use of price database and national price database. Decree No. 49 also provides amendments regarding the sanction of a leader for incompetence as pertaining to specialized price inspection teams, raising the fines for acts of failure to list or unclearly list prices causing confusion for customers from VND500,000 to VND1 million from sanction of caution, and raises the fine for this violation up to VND3 million in the event of multiple violations or recidivism. Regarding regulations on the sanctioning of administrative violations in the charges and fees sector Decree No. 49/2016/ND-CP elaborated on the sanctions regarding acts violating the following: • Regulations regarding the publication of the charge and fee collection regime; fines have been increased from VND1-3 million up to VND5 million; • Regulations on charge and fee levels, while simultaneously applying additional sanctions such as deprivation of license use rights or suspension of operations; and • Other sanctions. Regarding regulations on sanctioning administrative violations in the invoice management sector Decree No. 49 supplements Decree No. 109/2013/ND-CP by adding to and elaborating on the following violations: • The act of ordering to print invoices when the competent tax authority has already issued written notice that organizations and/or enterprises do not fully meet the conditions to order printed invoices, a violation which shall incur a fine of between VND2 million to VND4 million; and • The act of violating regulations on issuing invoices and using invoices for the sale of goods and/or services provisions. Decree No. 49 amends the penalties for the act of ordering printed invoices without a written contract by reducing the fine level from VND5 million to VND1.5 million, while simultaneously increasing twofold the fine for acts Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 37 of losing or damaging the issued invoices. The Decree additionally considers competence in the form of an administrative violation sanction in terms of the President of the People’s Committee in the invoice management sector, as well as others. This Decree takes effect on 1 August 2016. Specification of functions, duties, powers and structure of the Office of the People’s Committees of provinces and cities under the administration of the central government On 27 May 2016, the Government promulgated Decree No. 48/2016/ ND-CP detailing the functions, duties, powers, organizational structure and payroll regulations of the Office of the People’s Committees of provinces and cities under the administration of the central government. Pursuant to Decree No. 46, the main duties of the Office of the People’s Committees of provinces and cities under the administration of the central government are as follows: • Supporting the People’s Committee, the Permanent People’s Committee and Boards of People’s Committees to generate working programs and working plans monthly, quarterly, biannually and annually; and • Supporting the Permanent People’s Committee, Vice Chairperson and Chairperson in managing the common issues of the People’s Committees at the provincial level, harmonizing and coordinating the actions of the Boards of the People’s Committees at the provincial level and ensure that the regulations of the People’s Committee, the Permanent People’s Committee and the Boards of People’s Committees at the provincial level are properly followed. Under Decree No. 46, the Office of the People’s Committee of provinces and cities under the administration of the central government, is assigned the duty of advising and serving the Boards of the People’s Committees and the Permanent People’s Committee in drafting reports, resolutions and proposals while supervising the process of replying to complaints, as well as other duties. Decree No. 46 states that the Office of the People’s Committee of provinces and cities under the administration of the central government shall have two (2) departments: the General Office and the Office of Administration, Organization and Management. This Decree takes effect on 15 July 2016. Coordination to strengthen the online enterprise registration system in Hanoi On 9 June 2016, pursuant to Resolution No. 36a/NQ-CP promulgated by the Government on 14 October 2015, the People’s Committee of Hanoi issued Official Letter No. 2967/UBND on coordinating to strengthen the online enterprise registration system in Hanoi. According to Official Letter No. 2967, the Hanoi Department of Taxation shall be responsible for researching the use of e-receipts for charges or fees incurred during the enterprise registration process. Concurrently, the Ministry of Finance shall be responsible for researching the exemption and deduction of enterprise registration fees for enterprises which submit online registration as follows: • Exemption of registration fees for all enterprises which register online from 15 June 2016 to 31 December 2016; • Deduction of 50% of enterprise registration fees for all enterprises which register online from 1 January 2017 to 31 December 2017; and • From 1 January 2018 onwards, enterprise registration fees shall be collected pursuant to regulations. Official Letter No. 2967 also requests that investment registration agencies (including the Management Board of Industrial Park and Export Processing Zone of Hanoi, the Department of Planning and Investment, and the Management Board of Hoa Lac Hi-tech Zone) support investors and enterprises to submit online enterprise registration dossiers through the National Enterprise Registration System, which are also applicable to dossiers that are jointly implemented by investment registration agencies. Automotive Policy New incentives for domestic automobile industry On 04 February 2016, the Prime Minister issued Decision No. 229/ QD-TTg on the implementation of the Master Plan on Vietnam’s Automobile Industry Development until 2025, with a vision towards 2035. Accordingly: • Domestic investment projects that (i) manufacture automobile parts or (ii) assemble automobiles and special-use 38 Vietnam vehicles shall be given access to loans from the Vietnam Development Bank. • Enterprises manufacturing automobiles of priority, including (i) trucks or passenger cars with 10 seats or more, (ii) passenger cars with up to nine seats and (iii) special-use vehicles will be supported in trade promotion activities under the National Trade Promotion Program. • Enterprises importing goods to create fixed assets for (i) automobile parts manufacturing projects; and (ii) automobile manufacturing or assembling projects in industrial parks, economic zones or high-tech parks shall enjoy import duty incentives under the laws on investment and laws on import and export duty. • Large-scale projects that annually manufacture or assemble over 50,000 automobiles of priority, or manufacture engine parts, gearboxes and gear assemblies will be entitled to corporate income tax or land rental incentives on a case-by-case basis. This Decision took effect upon signing date. Selection procedures of units operating in fixed transport routes by automobiles On 31 December 2015, the Ministry of Transport issued Circular No. 92/2015/TT-BGTVT on the selection procedures of automobile units operating in fixed transport routes. This Circular consists of 08 Chapters and 31 Articles. Accordingly, the selection plan of automobile units operating in fixed transport routes consists of the following contents: (i) transport route; (ii) departure time; (iii) receiving date and location for the application dossier of the unit operating in the transport route; (iv) due date for receiving the application dossier; (v) opening date and location for the application dossier of the unit operating in the transport route; and (vi) the evaluation criteria on the capability and business conditions in accordance with Annex 1 and Annex 2 of this Circular.2 Upon the evaluation of all received application dossiers, the selected automobile unit for operating in fixed transport routes shall be determined if that unit meets all requirements as follows: (i) having a valid application dossier; (ii) satisfying the capacity and business conditions; (iii) achieving the required technical scores; and (iv) being ranked among the list of applying units.3 In addition, the selection results, after being ratified by the Department of Transportation,4 shall be publicized on that Department of Transportation’s official website and sent to all the application units. Accordingly, the selection results include: (i) name of the selected unit; (ii) operating departure time; (iii) operating fixed transport route; (iv) operating term of the route; (v) other issues (optional); and (vi) list of application units that was rejected and the reasons of rejection.5 This Circular took effect on 01 March 2016. 2 Article 8, Circular 92/2015/TT-BGTVT 3 Article 19, Circular 92/2015/TT-BGTVT 4 Article 20.1, Circular 92/2015/TT-BGTVT 5 Article 21.2, Circular 92/2015/TT-BGTVT Aviation Circular on offences in aviation transport operations On 31 December 2015, the Ministry of Transport issued Circular No. 85/2015/TT-BGTVT stipulating responsibilities for dealing with offences in aviation transport operations. Accordingly, in addition to the current administrative enforcement methods in aviation transport operations, enterprises shall be listed in the “List of Enterprises Failing to Conform to Responsibilities Regarding Aviation Transport Operation” upon the third-time notice of the same violation issued by the Civil Aviation Authority of Vietnam (“CAA”). This List is published on the CAA’s official website. Enterprises’ names are withdrawn from this List once they fully execute the CAA’s requests in the notice of violation. This Circular took effect on 01 March 2016. Management of flight operations Decree No. 125/2015/ND-CP dated 04 December 2015 on the organization and use of airspace; flight permits; coordinated management of civil and military flight operations; management of flight operations and airports. In particular, this Decree shortens the timeline for submitting applications to be granted or to amend flight permits as follows: • At least ten (10) days before the scheduled flight for regular flights. • At least seven (7) days before the scheduled flight in the following cases: - Flight testing, performances, demonstrations, and training; Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 39 - Flights for activities related to scientific research, the national economy, culture, sports, and tourism; - Flights of foreign military aircrafts engaged in civil operations in Vietnam. • At least seven (7) days before the scheduled flight in the following cases: - Special foreign flights carrying guests of the Party and the State and their escort(s) or preparation flights; other special foreign flights and their escort(s) or preparation flights; - Chartered or additional international flights to or from Vietnam; - Flights made by foreign aircrafts in civil service other than the cases specified in Clause 2 of this Article. • At least three (3) working days before the intended date of flight in the following cases: - Non-scheduled flights across Vietnamese airspace or making technical landings in Vietnam; - Flights made under decisions of Vietnamese courts or competent state agencies; - Flights made under aircraft charter, purchase or sale contracts; - Flights transitioning to an international airfield; - Flights to meet private needs of agencies, organizations or individuals; - Flights for humanitarian purposes; - Other general aviation flights. This Decree took effect on 26 January 2016 and replaced Decree No. 94/2007/ND-CP. Banking & Finance Settlement of completed projects using state capital On 18 January 2016, the Ministry of Finance issued Circular No. 09/2016/TT-BTC on the financial settlement of completed projects using state capital (“Circular No. 09”). This Circular regulates the settlement of component projects and sub-projects; independent work; investment projects using ODA and preferential loans; specialized investment projects, etc. This Circular provides on the verification of the following: settlement of completed projects for which the settlement report has been audited; the legal documents of the project; investment capital source for implementation; investment costs detailing each item of expense arising compared with the approved estimates, regulations and standards and norms of the state; the debt situation of the project; and the quantity and value of assets created through investment. Circular No. 09 took effect on 05 March 2016 and repealed Circular No. 19/2011/TT-BTC on settlement of completed projects using state capital and Circular No. 04/2014/ TT-BTC on the verification of the settlement of completed projects using state capital. Guidance on interest rate support On 6 January 2016, the Ministry of Finance issued Circular No. 02/2016/TT-BTC guiding interest rate support applicable to borrowing individuals or organizations at credit institutions for implementing investment projects in facilities and infrastructure investments regarding public transport by bus under Decision No. 13/2015/ QD-TTg (“Circular No. 02”). This Circular details the principles on support, the conditions to receive support, the support levels, the terms and the methods to apply for support. Circular No. 02 took effect on 20 January 2016. Guidance for mortgage of assets to secure loans guaranteed by the Government On 19 January 2016, the Ministry of Finance issued Circular No. 10/2016/TT-BTC providing guidance on the mortgage of assets to secure loans guaranteed by the Government. This Circular provides on the registration of securities transactions, as well as the reporting regulations and responsibilities of the parties with respect to the registration of securities transactions for collateral for loans guaranteed by the Government. This Circular provides template forms for mortgage agreements and attached appendixes. Mortgage of property for loans guaranteed by the Government must be conducted with all properties raised from the loans through mortgage agreements and the attached appendixes. Furthermore, mortgage agreements must be registered at NRAST, unless otherwise provided by law. Circular No. 10 took effect on 10 March 2016. Subsidies in the fishing sector On 20 January 2016, the Ministry of Finance issued Circular No. 13/2016/TT-BTC to amend and supplement Circular No. 114/2014/ 40 Vietnam TT-BTC dated 20 August 2014 on subsidies in the fishing sector. The Circular stipulates the following: • For the first 12 months from the disbursement date of the first loan, vessel owners shall be waived from (i) paying interest; and (ii) paying the original debt under Article 1.4 of Decree No. 89/2015/ND-CP. In this case, the subsidy rate shall be 7% per year. • From the second year of the credit agreement, the subsidy rate is equal to the difference between (i) the interest rate of the lending commercial bank; and (ii) the interest rate payable by the vessel owners under Article 1.3 of Decree No. 89/2015/ND-CP. If the interest rate of the State Bank of Vietnam is lower than 7% per year, the interest rate used in the above formulas to calculate subsidy shall be determined by the State Bank of Vietnam. This Circular took effect on 04 March 2016. Amendments to policies regulating state-run credit institutions that are maintaining credit balances at the Vietnam Bank for Social Policies Circular No. 41/2015/TT-NHNN dated 31 December 2015 amends and supplements some articles of Circular No. 23/2013/TTNHNN regulating state-run credit institutions that are maintaining credit balances at the Vietnam Bank for Social Policies (“VBSP”). Circular No. 41 provides that staterun credit institutions execute deposit maintenance regulations pursuant to the agreements on time deposits and the annexes signed by the VBSP. The Monetary Policy Department plays a pivotal role in resolving arising issues related to the maintenance of the credit balances of state-run credit institutions in the VBSP during the implementation of this Circular. Under the Monetary Policy Department, the Credit Department coordinates to supervise the maintaining of credit balances at the VBSP, while the Banking Inspection and Supervision Department is in charge of reviewing, inspecting, and supervising the implementation of this Circular and handling violations in accordance with the law. This Circular took effect on 01 January 2016. Management of gold business activities Circular No. 38/2015/TTNHNN dated 31 December 2015 (“Circular No. 38”) on amending and supplementing a number of articles in Circular No. 16/2012/ TT-NHNN which provides guidance on Decree No. 24/2012/ND-CP on the management of gold business activities. In particular, Circular No. 38 makes the following amendments and supplements: • With regards to conditions on granting gold material import licences with respect to the manufacture of gold jewelry and fine arts, Circular No. 38 supplements that enterprises must not have committed any regulatory violations regarding gold during the 12 (twelve) consecutive months before requesting a license. • In the application dossiers for being granted a Certificate of Eligibility for the manufacture of gold jewelry and fine arts, Circular No. 38 supplements that proposal plans must implement applicable standards and labelling in line with laws on gold jewelry and fine arts quality control. • Additionally, this Circular supplements the provisions regarding adjusting dossiers for the following: the Certificate of Eligibility for the manufacture of gold jewelry and fine arts; licenses for trading gold bars; applications for being granted a license for the temporary import of gold material in order to re-export products for an enterprise having a contract with a foreign party processing gold jewelry and art crafts; gold trading licences; and termination of gold trading and manufacturing. • Application dossiers for being granted licenses for trading gold bars must now include the list of registered locations for the gold bars businesses (i.e., head office, branches, business locations). This Circular took effect on 15 February 2016, and rescinded Clause 1 Article 4 of Circular 16/2012/TT-NHNN. Amending and supplementing a number of legal documents of the SBV and providing for the components of files with certified copies of papers and documents On 22 December 2015, the State Bank of Vietnam (“SBV”) issued Circular No. 29/2015/TT-NHNN on amending and supplementing a number of legal documents of the SBV and providing for the components of files with certified copies of papers and documents. Under this Circular, amendments and supplements have been made to the following: Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 41 • Circular No. 07/2001/TT-NHNN guiding the implementation of regulations on the management of currencies of bordering countries in the border regions and border-gate economic zones of Vietnam; • Circular No. 17/2013/TT-NHNN guiding foreign exchange control with regard to the issuance of international bonds by enterprises that are not guaranteed by the government; • Circular No. 34/2013/TTNHNN stipulating the issuance of promissory notes, bills, deposited certificates, and domestic bonds of credit institutions and branches of foreign banks; • Circular No. 36/2013/TT-NHNN providing for the opening and use of foreign currency accounts for direct outbound investment; • Circular No. 37/2013/TT-NHNN guiding foreign exchange control against offshore loans and collection of guaranteed debts from non-residents; • Circular No. 15/2014/TT-NHNN guiding the management of foreign exchange for the business of prize-winning electronic games for foreigners; • Circular No. 18/2014/TT-NHNN providing guidelines on the importation of goods under the SBV’s management. This Circular took effect on 08 February 2016. Licensing, organization and operation of non-banking credit institutions On 25 December 2015, the State Bank of Vietnam (“SBV”) issued Circular No. 30/2015/TT-NHNN on the issuance of licenses and the organization and operation for non-banking credit institutions (“Circular No. 30”). Circular No. 30 details the conditions, procedures, and contents of application dossiers for the establishment of non-banking credit institutions; organization and management of such institutions; and operation of finance companies and financial leasing companies. Circular No. 30 provides that a non-banking credit institution can be established and organized as (i) a joint stock company; (ii) a single member limited liability company (“SMLLC”); or (iii) a multiple member limited liability company (“MMLLC”). Specifically, for a joint stock company, an organization and individual will contribute capital to establish the company and become its shareholders. For an SMLLC, the owner must be a Vietnamese commercial bank. For an MMLLC, both a Vietnamese commercial bank and a Vietnamese enterprise must contribute capital to establish the company (in which, the bank must own at least 30% of total charter capital of the non-banking credit institution). Under Circular No. 30, there are certain conditions that must be met in order to be granted a license to establish non-banking credit institutions as regulated in the Law on Credit Institutions and further requirements for founding shareholders as individuals and organizations. The licensing procedures are as follows: • The Preparatory Committee of the non-banking credit institution must prepare an application dossier to be issued a license as prescribed in this Circular, which must be delivered to the SBV by post or in person; • Within 30 days of the date of receipt of the dossier, the SBV shall issue a written notice to the Preparatory Committee acknowledging the application for consideration and approval in principle. In case the application is inadequate, the SBV will issue a written request to the preparatory committee for supplements; • Within 90 days of the date of the SBV confirmation notice, the SBV shall issue a written approval in principle for the establishment of a non-banking credit institution. Otherwise, the SBV will issue a written notice specifying the reasons for disapproval; • Within 60 days of the date of receipt of the written approval in principle, the preparatory committee must prepare and supplement documents; • Within 05 working days of the date of receipt of the valid dossier, the SBV shall issue a written confirmation of receipt of the supplements; • Within 30 days of the date of receipt of the valid dossier, the SBV shall issue a license for the establishment of a non-banking credit institution. Circular No. 30 provides more detailed regulations on the operation of finance and financial leasing companies as prescribed in the Law on Credit Institutions and Decree No. 39/2014/ND-CP, including conditions to perform factoring and issue credit cards; conditions to perform financial leasing activities and standards for financial leasing agreements involving financial leasing companies. 42 Vietnam Circular No. 30 also provides all required model forms for the issuance of license to establish a non-banking credit institution, including: i. Annex 1: Written request for issuance of a license for the establishment and operation of non-banking credit institutions ii. Annex 2: Curriculum vitae iii. Annex 3: List of contributed shareholders (members) of nonbanking credit institutions iv. Annex 4a: Share purchase form for an individual v. Annex 4b: Share purchase form for an organization vi. Annex 5: List of related persons vii. Annex 6: List of information on the history of credit relations of the individual viii.Annex 7: List of information on the history of credit relations of the organization ix. Annex 8: Report of financial capability to contribute capital in non-banking credit institutions or organizations other than commercial banks. x. Annex 9a: License for the establishment and operation of a general finance company xi. Annex 9b: License for the establishment and operation of a factoring finance company xii. Annex 9c: License for the establishment and operation of a consumer credit company xiii.Annex 9d: License for the establishment and operation of a financial leasing company This Circular took effect on 8 February 2016 and repealed Circular 06/2002/TT-NHNN (except Article 20), Circular 06/2005/TTNHNN (except Articles 14 and 38), Decision No. 40/2007/QD-NHNN, Circular No. 05/2006/TT-NHNN, Circular No. 07/2006/TT-NHNN, Circular No. 02/2007/TT-NHNN, Decision No. 731/2004/QD-NHNN, and Articles 5, 6, and 7 of Circular No. 24/2011/TT-NHNN. Decision on central exchange rate between VND and USD, cross rate between VND and other foreign currencies On 31 December 2015, the SBV issued Decision No. 2730/QDNHNN promulgating the central exchange rate between VND and USD and the cross rate between VND and other foreign currencies. In this Decision, the central exchange rate between VND and USD is deemed to be the average transaction rate in the interbank foreign currency market between VND and USD. The central exchange rate between VND and USD is the basis for credit institutions and foreign banks’ branches which are licensed to do business and provide foreign exchange services to determine the USD/VND rate for sale and purchase. This Decision took effect on 4 January 2016. Decision on the 2016 interest rates of commercial banks applied for housing support loans On 30 December 2015, the State Bank of Vietnam issued Decision No. 2645/QD-NHNN on the interest rates of commercial banks applied for outstanding debts of housing support loans under Circular No. 11/2013/TT-NHNN and Circular No. 32/2014/TT-NHNN. Accordingly, the interest rate for outstanding debts of housing support loans shall be 5% per year. This Decision took effect on 1 January 2016 and repealed Decision No. 2788/QD-NHNN dated 29 December 2014. Prudential ratios in the operations of microeconomic institutions On 31 December 2015, the State Bank of Vietnam issued Circular No. 33/2015/TT-NHNN, regulating on prudential ratios applied for microeconomic institutions. Accordingly, microeconomic institutions are required to maintain (i) the minimum capital adequacy ratio of 10% and (ii) the minimum solvency ratio of 20%. This Circular took effect on 1 March 2016 and replaced Circular No. 07/2009/TT-NHNN dated 17 April 2009. Limits and prudential ratios in the operations of the People’s Credit Funds Under Circular No. 32/2015/TTNHNN dated 31 December 2015 of the State Bank of Vietnam, People’s Credit Funds are required to maintain the following limits and prudential ratios: • Ratio of capital adequacy shall be no less than 8%; • Short-term funds, which are used for medium and long-term loans, shall not exceed 30%; • Business loans for each customer shall not exceed 15% the equity capital of the People’s Credit Funds. This Circular took effect on 1 March 2016 and replaced Decision No. 1328/2005/QD-NHNN dated 06 September 2005 and Article 37.3 of Circular No. 04/2015/TT-NHNN dated 31 March 2015 of the State Bank of Vietnam. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 43 Provision of foreign currency receipt and payment services On 31 December 2015, the State Bank of Vietnam issued Circular No. 34/2015/TT-NHNN guiding the provision of foreign currency receipt and payment services. This Circular covers (i) direct reception and payment of foreign currencies and (ii) receipt and payment of foreign currencies carried out by agents of economic organizations, foreign banks and credit institutions. According to this Circular, besides credit institutions and foreign banks, economic organizations can also provide services for the receipt and payment of foreign currencies. To supply such services, economic organizations are required to establish one foreign currency account for each type of foreign currency. To receive written approval for the direct receipt and payment of foreign currencies, economic organizations are required to (i) be established under Vietnamese law; (ii) possess facilities needed for the receipt and payment of foreign currencies; (iii) establish contractual relations with a foreign party regarding the supply of foreign currencies services; and (iv) possess a scheme on the execution of such services. Written approval shall be revoked if credit institutions and economic organizations (i) remain inactive for 12 months from the issuance date of the approval; (ii) cease operations or produce no sales in 12 consecutive months from the issuance date of the approval; (iii) file a request for the termination of foreign currencies reception and payment activities to the State Bank of Vietnam; and (iv) fall into the revocation cases under the Law on Administrative Penalties. This Circular took effect on 1 March 2016 and replaced Circular No. 02/2000/TT-NHNN, Decision 472/2000/QD-NHNN, Decision No. 878/2002/QD-NHNN, and Articles 4 and 12 of Circular No. 25/2011/ TT-NHNN. Restructuring procedures for credit institutions On 31 December 2015, the State Bank of Vietnam issued Circular No. 36/2015/TT-NHNN on restructuring credit institutions. This Circular deals with the restructuring of credit institutions in the forms of acquisition, consolidation or conversion of business types of credit institutions. This Circular provides the following conditions for restructuring: • Acquisition and consolidation: credit institutions undergoing acquisition and consolidation must (i) fall into cases of banned economic concentration, except for cases of exemption from banned economic concentration as prescribed in the Law on Competition; (ii) have a project for acquisition or consolidation as prescribed in this Circular which is approved by the competent body of the credit institutions engaging in acquisition or consolidation; and (iii) the post-acquisition credit institution or the consolidated credit institution must comply with regulations on reserves requirement, capital holding rates, share rates and conditions for banking activities; • Conversion of business types of credit institutions: credit institutions that are converting their business type to be limited liability companies or joint stock companies must have a project for the conversion of business type. The Circular also stipulates detailed requirements for shareholders, founding shareholders, share purchasers of the converted credit institutions. The Circular provides guidance on the operation scope of the restructured credit institution as follows: • The operation scope of a postacquisition credit institution shall include activities of the acquiring credit institution; • The operation scope of a consolidated credit institution shall include activities of the consolidating credit institutions; • The operation scope of a converted credit institution shall include activities of the credit institution that existed before the conversion. This Circular took effect on 01 March 2016. Information safety in banking operations On 28 December 2015, the State Bank of Vietnam issued Circular No. 31/2015/TT-NHNN regulating on the assurance of safety and security of information systems in banking operations. This Circular is applied for (i) the State Bank of Vietnam; (ii) credit institutions (except for the People’s Credit Funds with total asset of below VND 10 billion and microfinance institutions); (iii) foreign bank branches; and (iv) providers of payment intermediary services (all of which are henceforth referred to as “institutional units”). This Circular requires institutional units to establish their own regulations on information safety and securities, which must be updated on an annual basis. 44 Vietnam For institutional units, data centers must meet the following requirements: • Entrance/exit doors of the centers must have 24/7 security guards and use at least 02 distinct types of security keys (i.e., mechanical keys, cards, ciphering codes, biometric security codes). • Areas for installation of important information technology equipment must be put under 24/7 guard and surveillance. • Data centers must have at least (i) 01 power source supplied by the power transmission grid and (ii) 01 power source supplied by the power generator. • Data centers must have an air conditioning system to ensure continuous operations, a lightning protection system and a surge protection device, an automatic fire alarming and firefighting system, a technical floor system or electrification insulating layer, a surveillance camera and data storage system which has capacity for storing data within at least 100 days, a temperature and humidity monitoring and controlling system., and an entry and exit logbook. This Circular took effect on 1 March 2016 and replaced Circular No. 01/2011/TT-NHNN dated 21 February 2011 of the State Bank of Vietnam. Statistical reports on credit institutions On 31 December 2015, the State Bank of Vietnam (“SBV”) issued Circular No. 35/2015/TT-NHNN regulating on statistical reports applicable to credit institutions and branches of foreign banks (“credit institutions”). This Circular outlines the two following types of statistical reports: • Electronic reports: An electronic report means a report that is converted into electronic data file and transmitted via a network or information carrier. Most reports are required to be sent electronically, including, but not limited to, reports on outstanding credit, sales of credit extension, bad debts, bond investment, interest rates, reciprocal deals. • Credit institutions (except for foreign bank branches that are not the contact points of their banking system in Vietnam) are required to have their networks connected with the Information Technology Administration (“ITA”). By having its information transmission network connected with affiliates of the SBV, the ITA can get access to reports of credit institutions archived in the statistical database system of the SBV. • Written report: A written report means a paper report that shall strictly comply with the regulated form and bear a signature and stamp of the competent person of the reporting unit, its compiler and controller. Written reports are acceptable only when those reports are (i) required by branches of the SBV and (ii) made in forms that are not provided in the Annex of this Circular. Upon receiving notice from the ITA regarding mistakes in sent reports, credit institutions are liable to (i) immediately revise and re-send the corrected statistical reports to the SBV and (ii) submit an explanation for the cause of such mistakes, the form of which is provided by the ITA. This Circular takes effect on 01 January 2017 and repeals Circular No. 31/2013/TT-NHNN. New detailed guidelines on derivatives and the derivatives market On 19 January 2016, the Ministry of Finance issued Circular No. 11/2016/TT-BTC providing guidelines on numerous provisions of Decree No. 42/2015/NDCP dated 05 May 2015, which stipulates on derivatives and the derivatives market, with some notable points. Accordingly, this Circular addresses certain criteria in which the Stock Exchange has the right to temporarily stop the trading of one or a number of certain derivatives or temporarily stop derivative trading in the whole market, as follows:6 • It is unable to determine the value of underlying assets because the underlying market stops its trading; • The underlying securities are temporarily suspended from trading; • In the case of force majeure, such as an act of God, fire or technical problems occurring in the trading system, clearing system or settlement system; • Other cases as prescribed in the rules of the Stock Exchange. In respect to derivatives trading, this Circular imposes on the investor to open a derivative trading account with the trading member and a margin account with the appointed clearing member. If the investor who is also a derivative trading member has 6 Article 5.2, Circular No. 11/2016/TT-BTC. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 45 opened a basic securities trading account at a securities company, the investor can use the said securities trading account to trade in derivatives after having a margin account opened with the appointed clearing member.7 In addition, this Circular also sets out requirements that a securities trading organization must meet in order to successfully produce a Certificate of Satisfying Conditions for Derivatives Trading granted by the State Securities Committee of Vietnam. The requirements thereof include:8 • Securities trading organizations must satisfy all conditions as set forth in Article 4.1 of this Decree; • All provisions are set up as prescribed and the organization has not incurred losses within the last two (02) years; at least 220% of the working capital ratio has been continuously achieved within the last twelve (12) months ahead of the month of application for Certificate of Satisfying Conditions for Derivatives Trading; • Financial statements of the latest financial year have been audited and financial statements of the last have been controlled by an accredited auditing organization. The auditor’s opinion on these financial statements must be the absolute approval without any exception or note. This Decree takes effect on 01 July 2016. 7 Article 6.1, Circular No. 11/2016/TTBTC. 8 Article 10.1, Circular No. 11/2016/TTBTC. Regulations on open market operations On 31 December 2015, the State Bank of Vietnam (“SBV”) issued Circular No. 42/2015/TT-NHNN regulating on open market operations. Under this Circular, a credit institution or foreign bank branch (except for microfinance institutions and People’s Credit Funds) shall be recognized as a member of those entities carrying out open market operations when meeting the following requirements: (i) having an a VND payment account at the SBV; and (ii) being granted a bank code by the SBV.9 A member shall lose its membership status if it is merged, consolidated, divided, dissolved or becomes bankrupt (in this case, the member automatically loses its membership status), or if its payment account by VND at the SBV is shut down and the SBV sends a written announcement on the termination of its membership status.10 Open market operations shall be performed through the mode of auction by volume or auction by interest rate. The SBV shall choose the suitable mode of auction on the basis of administrative targets of the monetary policy in each period.11 Before the auction of open market operations, the Operations Department under the SBV shall notify members of the purchase or sale of valuable papers, including some notable contents, namely: date/mode of auction, mode of appraisal and mode of purchase 9 Article 5, Circular 42/2015/TT-NHNN 10 Article 7.1, Circular 42/2015/TT-NHNN 11 Article 14, Circular 42/2015/TT-NHNN or sale, etc.12 Based on this notice, members shall submit the bidding application registering for the purchase or sale of valuable papers. The bidding application must include:13 • Types of valuable paper to be purchased or sold; • The term of the valuable paper; • The volume of valuable papers to be purchased or sold at the cost of payment or at par value; • Offered interest rate of each type of valuable paper to be purchased or sold (in case of auction by interest rate); • Issuing date of valuable paper (in case where the member sells); • Interest payment method of valuable papers (in case where the credit institution sells valuable paper, of which the interest is periodically paid); • Maturity date of valuable paper (in case the member sells); • Remaining term of valuable paper (in case the member sells); • Mode of purchase or sale; • Purchase or sale period of valuable paper (number of days); • Issuing interest rate of valuable paper in the primary market (in case the member sells). In the auction day, the Operations Department under the SBV shall announce the auction result to each member participating to the auction. The announcement consists of the following primary information: (i) auction date; (ii) winning volume; (iii) losing volume; 12 Article 15, Circular 42/2015/TT-NHNN 13 Article 16, Circular 42/2015/TT-NHNN 46 Vietnam (iv) date of re-purchase/re-sale (in case of purchase/sale with term); (v) winning interest rate; (vi) payment amount.14 This Circular takes effect on 30 April 2016. Guidance on concessional loans for implementation of social housing policies On 9 December 2015, the State Bank of Vietnam issued Circular No. 25/2015/TT-NHNN on concessional loans for the implementation of social housing policies. This Circular provides the conditions and procedures for acquiring loans to implement projects of purchase, lease and/or lease purchase of social housing pursuant to Decree No.100/2015/ ND-CP. Borrowers of concessional loans may include enterprises, cooperatives, households and individuals, and must meet the conditions stipulated in Decree No. 100/2015/ND-CP. Additionally, the loan interest rates shall not exceed 50% of the average interest rate of banks at the same time. The levels of loans are as follows: • Construction of social houses for lease: maximum level shall be 80% of total project investment and shall not exceed 80% of loan collateral. • Construction of social houses for lease purchase, for sale: maximum level shall be 70% of total project investment and shall not exceed 70% of loan collateral. • Purchase, lease or lease purchase of social houses: maximum level shall be 80% of the contract for purchase, lease, and lease purchase of houses. 14 Article 20.1, Circular 42/2015/TT-NHNN. • Construction or renovation of houses: maximum level shall be 70% of cost shall estimates and not exceed 70% of loan collateral. This Circular took effect on 10 December 2015. Provision of foreign-currency loans by credit institutions and foreign bank’s branches to resident borrowers Circular No. 24/2015/TT-NHNN dated 08 December 2015 on the provision of foreign-currency loans by credit institutions and foreign bank’s branches to resident borrowers. Credit institutions shall consider granting foreign currency loans in the following circumstances: • Short-term, medium-term and long-term loans, in order to ensure that the borrower will have sufficient foreign currency revenue from production or business to repay the loan and make offshore payments for the import of goods and services; • Short-term loans to primary petroleum import enterprises allocated by the Ministry of Industry and Trade with annual petroleum import quotas to make offshore payments for said imports, when the borrower does not have sufficient foreign currency from production or business revenue to repay the loan; • Short-term loans granted to meet domestic enterprises’ demands for short-term capital to serve the purpose of implementing their plans to manufacture and/or trade goods exported through Vietnam’s border checkpoints when borrowers’ foreign currency derived from the export turnover is sufficient to repay such loans; on receipt of loans disbursed by credit institutions, borrowers shall sell such borrowed foreign currency to the lending credit institutions in the form of a foreign-exchange spot transaction, unless the loans borrowers are used by the borrowers to make payments in which foreign currency is compulsory as stipulated by laws. This provision shall be implemented until the end of 31 March 2016; • Loans for offshore investment in projects or works of national importance where the investment policy has been approved by the National Assembly, Government or Prime Minister and for which the Ministry of Planning and Investment has issued an offshore investment certificate. Where borrowers have enough foreign currency revenues to repay loans, such borrowers shall pay the loan principal and interest by the currency that they borrow. If the borrowers repay debts by another foreign currency, they shall be bound to the agreement between the credit institutions and borrowers in accordance with relevant laws. In the case where the borrower’s late repayment in foreign currency is caused by unexpected events such as borrower’s deferred collection of foreign-currency operating revenues, borrower’s inadequacy of foreign currency earned from production and business activities or other legal revenues to repay loans after being inspected and confirmed in writing by the lending credit institution, the lending credit institution shall sell foreign currency to the borrower for the borrower to repay the loan, and the borrower shall commit to Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 47 resell such foreign currency back to the lending credit institution when earning enough foreign currency from their business operations. This Circular took effect on 01 January 2016 and replaced Circular No. 43/2014/TT-NHNN. Amendment of regulations on reserve requirements Circular No. 23/2015/TT-NHNN dated 04 December 2015 amending and supplementing a number of articles of Decree No. 581/2003/ QD-NHNN dated09 June 2003 of the State Bank Governor promulgating the regulation on compulsory reserves applicable to credit institutions. Credit institutions and branches of foreign banks established and operating under the Law on Credit Institutions are under the scope of Compulsory Reserve Regulations. The State Bank Governor will oversee the compulsory-reserve rate applicable to each type of credit institution and each type of deposit in each period as well as the interest rate applicable to compulsory reserves, compulsory reserve surplus for each type of credit institution and each type of deposit in each period. Additionally, the State Bank Governor shall consider reducing the required reserve ratio to the minimum level of 0% for credit institutions under special control. Where credit institutions are placed under an approved re-structuring plan or are implementing the re-structuring of poor credit institutions as requested, the State Bank Governor shall consider and decide to reduce the compulsory-reserve rates applicable to such credit institutions. This Circular took effect on 28 January 2016. Implementation of payment by reserved land for investors taking part in build-transfer (“BT”) investment Projects The Ministry of Finance issued Circular No. 183/2015/TT-BTC dated 17 November 2015 on guiding the implementation of payment by reserved land for investors taking part in BT investment projects as regulated in Decision No. 23/2015/ QD-TTg. Under this Circular, determination of reserved land payment value is as follows: • With respect to reserved land payment in Articles 3.1 and 3.2 of this Circular, reserved land payment value is comprised of the land use fees and lump sum payment of the land rent for the entire lease term; • With respect to reserved land in Article 3.3 of this Circular, reserved land payment value is the value of the land use rights and value of reassessment of assets on the land; • Reserved land payment value shall not be changed from the determination date, unless there is an approval letter granting the adjustment of land use planning and construction planning which leads to a change of reserved land payment value. • Real reserved land payment value is the adjusted value pursuant to the annex of the BT contract. This Circular took effect on 01 January 2016. Guidelines on public offerings, stock swaps, issuance of additional stocks, repurchase of stocks, sale of treasury stocks and tender offers Issued on 26 October 2015, Circular No. 162/2015/TT-BTC provides guidelines on public offerings, swapping stocks for shares or contributed capital, issuance of additional stocks, repurchase of stocks, sale of treasury stocks and tender offers (“Circular No. 162”). In order for a company to register a public offering, the following documents are required: • application letter for the public offering; • the company’s prospectus; • the charter of the company; • decisions from the company’s General Meeting of Shareholders approving the plans for issuing stocks and for using funds raised from the public offering, as well as to launch the stocks in an organized securities market in one year; • financial statements from the last two years; • guarantee commitment (if any) and contracts between guaranteed organisations (if any); • decisions from the Board of Directors approving the documents for registering the public offering; • confirmation documents of relevant individuals or organizations (if any) to the State Security Commission of Vietnam; • in the case of using capital for real estate investment, trade, development, the following are required: legal documents of 48 Vietnam land use rights, investment certificates, information on ground clearance and compensation, approvals of plans and particulars of the use of funds raised from the offering. If funds raised contribute to investments in ore mining and infrastructure projects, the documents must include written approvals of such projects by competent governmental authorities; • reports on the use of funding from the latest offering which was confirmed by an authorized audit organization; • written confirmation from the bank regarding the escrow account opened for receipt of payments for stocks sold in the offering; • evidences of the offering organization’s business lines and its foreign shareholders’ information (if any); and • consultancy contract with the securities company (if any). Condition for the issuance of additional stock in public companies and the repurchase and sale of treasury stock If a public company, as a parent company, repurchases stocks with finances from the share capital surplus, development investment fund and other funds, then such financial resources shall be subject to the parent company’s financial report. Provision and utilization of cheques Circular No. 22/2015/TT-NHNN was issued by the Governor of the State Bank of Vietnam (“SBV”) on 20 November 2016 providing for the provision and utilization of cheques. The Circular stipulates the provision and utilization of cheques, including: substances of cheques and cheque drawing, cheque book ordering, transfer and collection of cheques, cheque clearing guarantee, cheque presentation and payment, resolution of loss and damage of cheques. Substances of cheques Circular No. 22 provides that the substances of cheques are provided under Article 58 of the Law on Negotiable Instruments. A cheque must be made on the blank cheque form supplied by a drawee. In the case where a cheque is made on a blank cheque form that was not supplied by the drawee, the drawee may refuse to settle such cheque. Elements on cheques must be clearly printed or written with fountain or ball-point pens. They cannot be written in pencil or red ink, and cannot be modified or erased. Cheques must be written in Vietnamese. For cheques involving foreign elements, foreign languages may be used as agreed upon by the involved parties. Cheque-supplying organizations shall be responsible for verifying the information of first-time requestors for blank cheques at the National Credit Information Center before supplying cheques to such persons. Cheque guarantees The guarantor is only entitled to cancel cheque guarantees in the cases where the cheques fail to contain sufficient information as provided under Article 6 of Circular No. 22/2015/TT-NHNN. The guarantor is obliged to pay the guaranteed amount if the guarantee fails to perform or fully perform its payment obligation when the cheque becomes due. The guarantor, after fulfilling the guaranty obligation, may take up rights of the guarantee as to the persons related to the cheque, enforce the security assets and request the guarantee, the drawer and the related persons to perform the obligation to pay the guaranty amount it has paid. Circular No. 22/2015/TT-NHNN took effect on 12 January 2016. Circular on implementation of credit policies for fisheries development On 16 November 2015, the State Bank of Vietnam issued Circular No. 21/2015/TT-NHNN amending and supplementing Circular No. 22/2014/TT-NHNN on guiding the implementation of credit policies under Decree No. 67/2014/NDCP regarding some certain on fisheries development. This Circular took effect on 25 November 2015. Vietnam’s New Circular on Foreign Exchange Management in respect of Foreign Loans applied to Enterprises On 26 February 2016, the State Bank of Vietnam (“SBV”) issued Circular No. 03/2016/TT-NHNN providing instructions on foreign exchange management in respect of the borrowing and repayment of foreign loans applied to enterprises (“Circular No. 03”). Circular No. 03 takes effect on 15 April 2016 and replaces Circulars No. 0915 and No. 2516. 15 Circular No. 09/2004/TT-NHNN guiding foreign loan and loan repayment by enterprises (“Circular No. 09”). 16 Circular No. 25/2014/TT-NHNN guiding the procedures for registration of, and registration of charge in, enterprise’s foreign loan without government guarantee (“Circular No. 25”). Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 49 Some key developments under Circular No. 03 are as follows: 1. Foreign loans in the form of the provision of goods or services with deferred payment are not subject to requirements on registration of loans or of changes to loans with the SBV Under Circular No. 03, foreign loans without government guarantees that are subject to registration with the SBV include: • Medium and long-term foreign loans; • Renewed short-term loans which have more than 01 (one) year of maturity term; • Short-term loans which are not covered by any loan renewal contract but still have outstanding principal 01 (one) full year after the date of first fund withdrawal, except to the extent that the borrower has already fulfilled their debt obligations within a permitted duration of 10 (ten) days after a full 01 (one) year from the date of first fund withdrawal The terms of loans are determined as being from the scheduled date of first fund withdrawal to the scheduled date of the final debt repayment. Foreign loans in the form of the provisions of goods or services with deferred payment are not subject to registration requirements with the SBV anymore. 2. Online registration of foreign loans and of changes to foreign loans Borrower may choose to declare information on the registration of foreign loans or of changes to foreign loans, and to report the status of foreign loans online via certain websites (i.e., www.qlnhsbv.cic.org.vn) or via conventional forms offline. Under Circular No. 03, the SBV encourages borrowers to utilize online declaration. 3. Entities which are subject to registration requirements for foreign loans and changes to foreign loans Borrowers which are subject to registration requirements for foreign loans and changes to foreign loans include the following: • Borrowers signing foreign loan agreements with nonresident lenders and receiving direct disbursement in cash therefrom; • Credit institutions and foreign bank branches that are entrusted by non-resident lenders to provide loans; • Debtors based on debt instruments issued to nonresidents; and • Lessees under financial lease contracts with non-residents. 4. Registration dossiers for loans Documents which are required in the registration dossier for a loan include the following: • Application for registration of loan; • Copies (certified by the borrower) of legal dossiers of the borrower and the loan user (in case the borrower is not the loan user); • Copies (certified by the borrower) of the documents providing the loan purpose; • Copies and Vietnamese translations (certified by the borrower) of the foreign loan agreement and agreement (if any) on extension of term loan; or drawdown notice enclosed with the facility agreement; • Copies and Vietnamese translations (certified by the borrower) of the guarantee documents if the loan is guaranteed; • Copy (certified by the borrower) of a competent authority’s written approval (if applicable); • Certification of the bank providing payment services in certain cases; • Documents to verify the demand and purpose of foreign loan (if the loan is in VND); and • Report regarding the compliance with the SBV’s regulations on limitation of credit extension and prudential ratios of the credit institution or foreign bank branch (if applicable). Regarding the documents to verify the loan purpose for the mid-term or long-term loans, Circular No. 03 provides that the borrower will provide production and business plans for investment projects to be funded with the foreign loans, approved by a competent authority; except in case where the investment projects have obtained investment registration certificates with a clear determination of investment fund volume. 5. Nullification/voiding of written confirmation of registration of foreign loans or of changes to foreign loans The SBV’s written confirmation of registration of foreign loans or of changes to foreign loans will automatically become null and void where the borrower fails to implement fund withdrawal and register changes to the plan for loan fund withdrawal for over 06 (six) months after the last date of the fund withdrawal term. The borrower is liable to re-register the foreign loan within 30 days 50 Vietnam from the date of written agreement between the parties on continuing of foreign loan. 6. Fund disbursement and transfer of money for loan repayment Additionally, Circular No. 03 supplements regulations regarding fund disbursement and transfer of money for loan repayment. In the case where disbursement or loan repayment is carried out through the account of a non-resident third party, the parties must provide on such content in the loan agreement. Deposit and use of valuable papers at the State Bank of Vietnam On 15 April 2016, the State Bank of Vietnam issued Circular No. 04/2016/TT-NHNN on deposits and the use of valuable papers at the State Bank of Vietnam. Circular No. 04 details the opening of depository accounts of valuable papers, use of valuable papers in professional monetary markets, and valuable papers transactions between members (which are credit institutions, foreign bank branches and other organizations pursuant to decisions of Governor of the State Bank of Vietnam). This Circular took effect on 1 June 2016 and repealed Decision No. 1022/2004/QD-NHNN dated 17 August 2004, on the issuance of the regulation on the custody of valuable paper at the State Bank of Vietnam and Decision No. 42/2006/ QD-NHNN of 28 August 2006, on the amendment and supplement of several articles of Decision No. 1022/2004/QD-NHNN. Foreign exchange management applicable to foreign loans and foreign loan repayment by enterprises On 15 April 2016, the State Bank of Vietnam issued Circular No. 05/2016/TT-NHNN (“Circular No. 05”) amending and supplementing a number of articles of Circular No. 03/2016/TT-NHNN (“Circular No. 03”) guiding certain details in regards to foreign exchange management applicable to foreign loans and foreign loan repayment by enterprises. In general, Circular No. 05 does not provide any significant change to provisions under Circular No. 03. Circular No. 05. Significant provisions under Circular No. 5 include: i. Supplementing provisions regarding definition and method of determining of foreign loans in the form of the provision of goods or services with deferred payment; ii. Amending provision on accounts used for foreign loans and loan repayment applied to the borrower who is a directly foreign-invested enterprise. For short-term loans, the borrower may now use a direct investment account or another account; iii. Removing the specific requirements on the dossier for remittance for repayment of foreign loans in the form of deferred payment for import of goods. In such case, the borrower must submit the dossier subject to the requirements of the bank; and iv. Clarifying that payments for the debts incurred from short-term foreign loans in the form of the provision of goods or services with deferred payment shall not be required to carry out through accounts used for foreign loans and loans repayment. This Circular took effect on 15 April 2016. Credit institutions are allowed to perform the services of asset preservation and leasing of cabinets and safe boxes On 26 February 2016, the State Bank of Vietnam issued Circular 02/2016/TT-NHNN on the service of asset preservation and leasing of credit institution cabinets and safe boxes. Accordingly, credit institutions are allowed to implement the services of asset preservation and leasing of cabinets and safe boxes when their licenses of establishment and operation contains these business lines and they must have internal regulations and rules on the performance of such services. After signing contracts with customers, credit institutions shall hand over the cabinet and safe box keys to customers. Each drawer and safe box must have least a lock for the customer, and such lock must have only two keys to be kept by the customer. Where the customer only gets one key, the back-up key must be sealed by the customer in the witness of the credit institution and must be kept at the credit institution. In particular, the customer is entitled to request the credit institution to return the preserved assets or to terminate the cabinet and/or safe box leasing contract at any time but must notify in advance in a reasonable period of time as agreed upon in the contract. At the same time, the credit institution is also entitled to ask the customer to take back the preserved assets at any time, but must also notify Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 51 in advance in a reasonable time period. Regarding preservation and leasing fees, the Circular states that the credit institutions must set out and publicly post the asset preservation fees and cabinet and safe box leasing fees at their headquarters, or branches and transaction offices performing the services of asset preservation and/ or cabinet and safe box leasing. This Circular took effect on 9 April 2016. Offshore medium and long-term loans must be registered with the State Bank of Vietnam On 26 February 2016, the State Bank of Vietnam (“SBV”) issued Circular No. 03/2016/TT-NHNN guiding certain regulations on foreign exchange control over the borrowing and repayment of offshore loans by an enterprise. Under the provisions of this Circular, when borrowing an offshore medium and/or longterm loan, a short-term loan that is extended with the total duration of a loan over one (1) year or a short-term loan without a contract extension but still having a principal balance for a time of one (1) year from the date of the first withdrawal, the borrower must register with the SBV unless it completes the loan repayment within ten (10) days from the time of one (1) year point. The declaration of registered information, the registration of changes and the report on loan performance can be done online (using websites) or in traditional form (not using websites). A borrower can change the selection from traditional form to online form. When a borrower has changed from traditional form to online form, said borrower will not be able to change back to traditional form. When changing any content related to the loan referred to in the SBV’s written certification of offshore loan registration, the borrower must register such changes with the SBV. Where the withdrawal plan, debt repayment plan or the actual transfer fee changes within ten (10) days compared to the withdrawal plan, repayment or transfer fee previously certified by the SBV, the borrower has the responsibility to notify in writing the bank supplying the account service to implement the withdrawal and the debt repayment as per the changed plan without registering such a change with the loan with the SBV. Furthermore, this Circular also specifies the following matters: • Procedure for registration of and registration for change of offshore loans of enterprises not guaranteed by the Government; • Opening and using bank account(s) for borrowing and repaying offshore loans with permitted credit institutions in Vietnam; • Withdrawal, repayment and other money transfers relating to the performance of offshore loans; • Foreign exchange management applicable to transactions relating to guarantees for offshore loans; • Providing, using and managing information on a management website for borrowing and repaying offshore loans not guaranteed by the Government; • The regime of statistic reporting on borrowing and repaying offshore loans by enterprises not guaranteed by the Government; • Other notable matters. This Circular took effect on 15 April 2016 and replaced Circular No. 09/2004/TT-NHNN, dated 21 December 2004, and Circular No. 25/2014/TT-NHNN, dated 15 September 2014. More specific guidance on lending policies for the development of supporting industries According to Circular No. 01/2016/ TT-NHNN, dated 4 February 2016, of the State Bank of Vietnam guiding lending policies for the development of supporting industries, credit institutions and branches of foreign banks will apply its short-term lending rate in Vietnam Dong for short-term capital loan serving projects producing supporting industrial products which are on the list of priorities; this lending rate must not exceed the maximum shortterm lending rate in Vietnam Dong applied to customers borrowing loans to meet capital requirements of serving a number of industries and economic sectors decided by the Governor of the State Bank of Vietnam from time to time. Small and medium sized enterprises borrowing funds from credit institutions on the basis of a credit guarantee organization in favor of small and medium sized enterprises as prescribed for the purposes of investing in the projects producing supporting industrial products on the priority list as stated above shall be entitled to and subject to the consideration of the credit institution and loans equivalent to 70% of the investment capital as the maximum amount when satisfying conditions set forth 52 Vietnam in Article 12.2(a) of Decree No. 111/2015/ND-CP, dated 3 November 2015, in addition to the incentives as per the preferential lending policy provided under Article 3.1 of this Circular. A borrower has the responsibility to provide complete and truthful information as well as documents relating to the loan and is responsible for the accuracy of the information and documents provided to credit institutions or foreign bank branches. At the same time, the loan must be used properly and the principal and interest must be fully repaid in a timely manner under the signed contract. The borrower must fully perform the undertakings in the credit agreement and relevant regulations. This Circular took effect on 22 February 2016. Change in limits and prudential ratios in the operation of credit institutions The State Bank of Vietnam issued Circular No. 06/2016/TT-NHNN amending and supplementing a number of articles of Circular No. 36/2014/TT-NHNN on prescribing limits and prudential ratios pertaining to the operation of credit institutions and foreign bank branches. Circular No. 06 provides amendments and supplements to Articles 3, 11, 12, 14, 15, 16, 17, and 21 of Circular No. 36. The contents of the amendments and supplements are as follows: • Raising the ratio of purchase of and investment in government bonds to short-term capital sources from 15% to 35% as applicable to foreign bank branches and from 15% to 25% as applicable to state commercial banks; • Short-term capital sources used for providing medium and long-term loans to credit institutions and foreign banks’ branches shall be reduced under a conformable schedule to control liquidity risks, secure the operational safety of credit institutions and foreign bank branches from domestic or overseas changes; • Revising regulations on the risk index of receivables on real estate business in by increasing it from 150% to 200% applied as applied since 1 January 2017; and • This Circular also amends and supplements regulations on the interpretation of terms and guides some regulations in detail as well as guides on the way to determine ratios, forms and transferable regulations applicable to several prudential ratios. This Circular takes effect on 1 July 2016. Change in regulations on the purchase, sale and handling of non-performing loans The State Bank of Vietnam issued Circular No. 08/2016/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN providing for regulations in purchasing, selling and handling non-performing loans by Vietnamese credit institutions with the Vietnam Asset Management Company (“VAMC”). Circular No. 08/2016/TT-NHNN supplements Circular No. 19/2013/ TT-NHNN by implementing the following: • Article 15a on the extension of time limit for special bonds; • Article 17b on the forms, order and procedure for requesting a time limit extension of for special bonds; and • Article 35a on the sale of nonperforming loans that were acquired at market value. Circular No. 08 also provides amendments and supplementations to other Articles in Circular No. 19/2013/TT-NHNN, specifically: • Article 27 on the regulations for restructuring bad debts bought; • Article 28 on the adjustments of interest rates of bad debts bought with the VAMC; • Article 29 on the exemption, reduction of fines, fees and overdue interests of bad debts bought with special bonds; • Article 30 on the measures for restructuring repayment deadlines for bad debts bought with special bonds; and • Article 34 on the regulations for selling bad debts bought. This Circular takes effect on 1 August 2016 and abolishes Clauses 16 to 21, 24, 25 and 32 of Article 1 and Clause 2 of Article 2 in Circular No. 14/2015/TT-NHNN. Change in regulations on cooperative banks On 17 June 2016, the State Bank of Vietnam issued Circular No. 09/2016/TT-NHNN amending and supplementing a number of articles in Circular No. 31/2012/ TT-NHNN providing for cooperative banks. Accordingly, Circular No. 09 amends Article 41 of Circular No. 31/2012/TT-NHNN regarding the functions of People’s Credit Funds and simplifying the procedure for receiving and lending money. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 53 Circular No. 09 also provides amendments on Clause 3 Article 46 regarding the responsibilities of banks’ inspecting and supervising agencies. This Circular takes effect on 15 August 2016. Commerce New Decree on Representative Offices and Branches of Foreign Merchants in Vietnam On 25 January 2016, the Government issued Decree No. 07/2016/ND-CP (“Decree No. 07”) which takes effect on 10 March 2016 and will replace Decree No. 72/2006/ND-CP on detailing the Commercial Law (“Decree No. 72”) with respect to representative offices (“RO”) and branches of foreign merchants in Vietnam. The most notable changes provided in Decree No. 07 are as follows: 1. Limitation to the nationality of foreign merchants: A foreign merchant is permitted to establish an RO/branch in Vietnam in accordance with Vietnam’s commitments in international treaties of which Vietnam is a member. If the foreign merchant does not belong to a country or territory participating in an international treaty of which Vietnam is a member, establishment of the RO/branch requires an approval from the ministry level. This may cause difficulties for foreign merchants that are from countries or territories which are not a member of the treaties of which Vietnam is a member. 2. Narrowing the scope of activities of ROs: Decree No. 07 narrows down the scope of activities of ROs. Previously, under Decree No. 72, ROs were permitted to perform the activity of “monitoring and speeding up the performance of the contracts signed between the foreign merchant and the Vietnamese partners or which or related to Vietnam market”. However, Decree No. 07 removes this activity from the permissible scope of activities for ROs. In practice and going forward, it remains to be seen as to what extent this will impact the activities of ROs. 3. Transition provision for ROs licensed under Decree No. 72: Decree No. 07 provides that ROs which were issued with a license for establishment in accordance with regulations prior to the effective date of Decree No. 07 may continue their operation until the end of the term of their issued licenses. Nonetheless, there remains a concern as to what extent already licensed ROs would be permitted to continue conducting activities which are provided in their licenses but have been since removed by Decree No. 07. 4. Authorization from the head of the RO/branch when absent from Vietnam: Decree No. 07 does not specifically require that the head of the RO/branch must permanently reside in Vietnam. However, in the case of being outside of Vietnam, the head of the RO/branch must authorize another person in writing to act on his/her behalf. If the head of the RO/branch is outside of Vietnam for more than 30 days without having an authorized representative, the foreign merchant must appoint another head of the RO/branch. 5. Other notable changes: Whereas Decree No. 72 requires various statutory post-licensing formalities within 45 days from the date of the RO license (e.g., notice of operation, press announcement), Decree No. 07 has omitted these requirements. In addition, under Decree No. 07, the deadline for submitting an application for the issuance/ amendment/re-issuance of an RO license has been extended, while the timeline for the authorities to issue their decision after receiving the application has been shortened. Also, the annual report of the RO/branch will be made by post. Circular guiding enterprise registration On 01 December 2015, the Ministry of Planning and Investment issued Circular No. 20/2015/TT-BKHDT guiding enterprise registration (“Circular No. 20”). Circular No. 20 specifies Decree No. 78/2015/ND-CP of the Government on enterprise registration in regards to the following required documentation: • Enterprise registration dossiers in the case where the enterprise promulgates a decision in the form of absentee voting; • Notification and information pertaining to changes in status of founding shareholders and foreign shareholders; • Registration of the operation of affiliates, representative offices, and business locations; • Termination of divided, consolidated, and merged companies; • Grant of enterprise registration certificates as replacements for the business registration content in Investment Permits, Investment Certificates or legal equivalent papers; 54 Vietnam • Cases in which change of enterprise registration information is not registered. Circular No. 20/2015/ND-CP took effect on 15 January 2016, superseding Circular No. 01/2013/ TT-BKHDT on the same matter. Circular on state capital investment in enterprises, and the management and use of state capital and assets in enterprises On 31 December 2015, the Ministry of Finance issued Circular No. 219/2015/TT-BTC guiding some contents of Decree No. 91/2015/ ND-CP dated 13 October 2015 of the Government on state capital investment in enterprises, and the management and use of state capital and assets in enterprises (“Circular No. 219”). Circular No. 219 regulates the assignment of capital investments out of enterprises as follows: • With respect to the assignment of capital in multi-member limited liability companies: i. In case the state requests the company to repurchase its stake or assigns its stake to other members of the company, the sale/assignment will be conducted at an agreed price; and ii. In case the state assigns its stake to individuals or organizations which are not members of the company, the sale/assignment will be conducted by a public auction or direct agreement. • With respect to the assignment of capital in joint-stock companies, the agreed price of assigning listed shares must meet the following requirements: i. be within the trading price range of securities code on the transfer day; and ii. not be lower than the book value of the listed company, based on the division of the equity capital for the charter capital at the transfer time. Circular No. 219 took effect on 15 February 2016 and repealed Circular No. 220/2013/TT-BTC guiding the implementation of Decree No. 71/2013/ND-CP of the Government on state capital investment in enterprises and financial management over enterprises of which the State holds 100% of the charter capital. New Decree on Offshore Indirect Investment On 31 December 2015, the Government promulgated Decree No. 135/2015/ND-CP on offshore indirect investment (“Decree No. 135”). Decree No. 135 took effect on 15 February 2016. This Decree details offshore investment in the forms of purchase and sale of securities, other valuable papers or making investments via overseas securities investment funds or other intermediary financial institutions. Investors 1. Investors as individuals The Ordinance on Foreign Exchange has recognized the right of individual residents to do offshore indirect investment if allowed if it is done so in compliance with the requirements as provided by the State Bank of Vietnam (“SBV”). However, so far, the SBV has yet to issue any regulation regarding this matter. Therefore, it has been impossible for individuals to realize such rights, except for in such cases where shares were obtained without transferring money out of Vietnam under an offshore company’s share award plan as approved by the SBV on a case by case basis. Decree No. 135 now repeats the regulation of the Ordinance and confirms that an individual investor with Vietnamese nationality may perform offshore indirect investment only in the form of participation in plans of awarded shares issued offshore of foreign entities for employees in Vietnam. However, we still need to wait for a Circular to be issued by the SBV on procedure, process, contents and implementation of share award plans, and participation of employees. 2. Investors as organizations The offshore indirect investment of economic organizations will be performed by 02 methods, namely, (i) proprietary trading of offshore indirect investment and (ii) entrusted offshore indirect investment. Proprietary trading entities and entrusted entities can perform offshore indirect investment in the following forms: • Direct purchase and sale of securities and other valuable papers offshore. • Investment through sale and purchase of certificates of securities investment funds offshore, and entrusting investment to other intermediary financial institutions offshore. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 55 2.1 Proprietary Trading Only the following entities are allowed to perform proprietary offshore indirect investment: 1. Security companies and fund management companies; 2. Securities investment funds through fund management companies, securities investment companies; 3. Insurance business enterprises; 4. Commercial banks; 5. General finance companies; and 6. State Capital Investment Corporation In order to perform offshore indirect investment, proprietary trading entities must obtain an Offshore Indirect Investment Registration Certificate (“OIIRC”) issued by the Ministry of Finance (“MOF”) for securities companies, fund management companies, insurance business enterprises; or the OIIRC issued by the SBV for commercial banks, and general finance companies; or the Approval Letter issued by the MOF for securities investment funds and securities investment companies. 2.2 Entrusted Investment Economic organizations may only perform offshore indirect investment in the form of entrusted investment. Under Decree No. 135, economic organizations may entrust offshore indirect investment to (i) fund management companies and (ii) commercial banks. In order to receive entrustment of offshore indirect investment, entrusted entities must obtain an Entrusted Offshore Indirect Investment Registration Certificate issued by the MOF for fund management companies or a similar certificate issued by the SBV for commercial banks. Investment tools The SBV will detail the types of and criteria for selection of investment tools in foreign countries in each period. Investors may only make offshore indirect investment via the investment tools specified by the SBV. Proprietary trading entities and entrusted entities being commercial banks and general finance companies can only perform proprietary trading, receive investment entrustment of bonds and other tools on the monetary market specified by the SBV. Capital sources for offshore indirect investment Proprietary trading entities (except for commercial banks and general finance companies) can use their self-available foreign currency in accounts and foreign currency purchased from credit institutions or foreign bank branches permitted to provide foreign exchange services in Vietnam to perform offshore indirect investment. Entrusting entities (except for commercial banks and general finance companies) can only use their self-available foreign currency in accounts for performance of offshore indirect investment in the form of entrustment to entrusted entities. Commercial banks and general finance companies balance their foreign currency sources to perform offshore indirect investment on the basis of ensuring compliance with provisions on foreign currency status, and prudential ratios and limits in banking activities. Investors are not permitted to use domestic or overseas loans in foreign currencies, loans in Vietnam Dong from credit institutions and/or foreign banks’ branches to purchase foreign currencies for offshore indirect investment. However, the above requirements will not apply to the offshore indirect investment of economic organizations of which the State owns at least 65% of charter capital and indirect investment projects with a value of VND800 billion or more. Such investments will be subject to separate regulations issued by the Prime Minister. In addition, this Decree also regulates other important contents with respect to conditions for proprietary trading, entrusting and entrusted offshore indirect investment, annual total of limits of offshore indirect investment, proprietary trading limits, entrusted limits, etc. Guidance on the Law on Public Investment On 31 December 2015, the Government issued Decree No. 136/2015/ND-CP (“Decree No. 136”) on guiding the implementation of a number of articles of Law No. 49/2014/QH13 on Public Investment passed by the National Assembly on 18 June 2014. This Decree contains 6 Chapters and 69 Provisions, guiding on the following matters: 1. Classification of programs and public investment projects. 2. Formulation, appraisal and decision-making of investment policy for public programs, and projects from Groups A, B, C. 56 Vietnam 3. Formulation, appraisal and decision-making for public programs, and projects from Groups A, B, C. 4. Adjustment of programs and public investment projects. 5. Management of public investment programs that have no construction components. Public investment projects shall be classified based on the location, importance, sector, etc., of such project. If a given project has several components that encompass different sectors, the project shall be classified as pursuant to the sectors and fields having the largest capital proportion. The Decree provides detailed guidance for criterial adjustment regarding increases in the price index in which the total capital investment of the projects shall be considered when the annual CPI increases more than 30% in comparison with 2015 for the first adjustment. Subsequent adjustments shall be based on the CPI of the previous adjusted year. Decree No. 136 classifies 07 programs for the scope of public investment, which are as follows: 1. National target programs; 2. Target programs financed by the central budget; 3. Investment programs wholly financed by balanced funds of local budgets, municipal bonds, retained revenues for investment not yet included in local budget balances and other legitimate local funds; 4. Target programs using national and government bonds; 5. Investment programs using ODA loans and/or concessional loans of foreign donors; 6. State investment development credit program; 7. Investment programs using retained revenues not yet included in state budget balances. The program evaluating time limit for public investment projects provided that agencies receive fully and validly the dossiers shall be: • National target program: not in excess of 40 days; • Target program: not in excess of 30 days; • Group A project: not in excess of 40 days; • Group B project: not in excess of 30 days ; • Group C project: not in excess of 20 days, The evaluation time for public investments having construction components shall be conducted pursuant to the Law on Construction. The time limit for internal evaluations at ministries in both the central and local levels shall be decided by the head of the ministry in question, or the President of the provincial-level People’s Committee. Annex I of the Decree details the criteria for assessment and classification of public investment projects. Annex II of the Decree provides a format for pre-feasibility study reports and investment policy proposal reports. This Decree took effect on 15 February 2016. Guidelines on investment sectors and the content of feasibility study reports in respect to investment projects under the form of public-private partnerships (“PPP”) in the field of transport On 31 December 2015, the Ministry of Transport issued Circular No. 86/2015/TT-BGTVT detailing guidelines on investment sectors and the content of feasibility study reports in respect to investment projects under the form of PPP in the field of transport. Investment sectors in the field of transport in accordance with this Circular include: (i) investment in building infrastructure conducive to transport; and (ii) investment in the operation and exploitation of transport infrastructure.17 The required content for feasibility study reports in respect to investment projects as set forth in this Circular are as follows:18 • Names of the project, the competent authorities, the project preparation entities or the proposing investors; • Location of the project and land use area (if any); • Project scale and major technical standards; • Total investment capital and total investment rates (specify State’s support funds, if any); • Type of project contract and term of the contract thereof (including the expected progress for commencing the project, as well as its operation and exploitation time); • Financial targets of the project (input and output). 17 Articles 4 and 5, Circular 86/2015/TTBGTVT. 18 Article 21, Circular No. 86/2015/TTBGTVT. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 57 This Circular took effect on 15 February 2016. Decree issued to provide guidelines for implementing certain articles under the Law on Investment On 12 November 2015, the Government issued Decree No. 118/2015/ND-CP (“Decree No. 118”) providing guidelines for implementing certain articles under the Law on Investment. Decree No. 118 addresses the following main points: Conditions applicable to foreign investors This Decree stipulates the conditions applicable to foreign investors. Accordingly, foreign investors which are subject to international treaties providing different regulations on investment conditions may choose which treaties to be applied to them. Additionally, investors from countries which are not members of the World Trade Organization (“WTO”) will receive the same treatment as those from WTOmember countries. For industries or services not yet committed or not provided for under Vietnam’s WTO Commitments on Services and other investment international treaties, and for which Vietnamese law has not set forth investment conditions applicable to foreign investors, the Investment Registry shall seek opinions from the Ministry of Planning and Investment and the relevant agencies for consideration and decision-making. For projects that are subject to the issuance of investment policy decisions, the competent State authority shall not review contents that have been previously appraised and approved by other competent State authorities. For investment activities carried out in Vietnam, the investor being a Vietnamese citizen and having foreign nationality is entitled to select the applicable investment conditions and investment procedures as applicable to a domestic investor or a foreign investor. Investment Registration Procedures Foreign investors must implement an online declaration of information about their investment projects on the National Foreign Investment Information System, and must also concurrently submit the application for the issuance and/or amendment of their investment registration certificates to the Investment Registry within 15 days from the date of the online declaration. Foreign investors are not requested to supplement other documents apart from those required under the Investment Law and this Decree. The Investment Registry shall provide only one written notice to the Investor of all requests for amendment and/ or supplement of investment registration documents within 5 working days from the date of fully receiving documents. When investing in the form of capital contribution and/ or purchase of shares and/or capital contribution portions, foreign investors are not required to carry out the procedures for issuing an Investment Registration Certificate. Economic organizations in which a foreign investor contributes capital, purchases shares and/ or capital contribution portions are not required to carry out the procedures for issuing/amending the Investment Registration Certificate or investment decisions/strategies with respect to the investment projects which have been implemented before the time at which the foreign investor has contributed capital or purchased shares/capital contribution portions. This Decree also provides clarification on ownership of charter capital for foreign investors in forms of contributing capital and buying shares of economic organizations. Specifically, (1) increasing foreign ownership from less than 51% to 51% or more; and (2) increasing the charter capital ownership proportion of a foreign investor who already owns 51% or more of the charter capital in the economic organization are all subject to registration procedures for the capital contribution or purchase of shares/capital contribution. Termination and Transfer of Projects For projects having an investment registration certificate/business registration certificate, the Investment Registry may decide to terminate the project without revoking the investment registration certificate/business registration certificate, which would remain valid. The Investment Registry may also terminate a project if the project stops operating for a period of 12 months and the investor or its legal representative cannot be reached. Procedures and dossier requirements for transferring projects are also provided in this Decree. Incentives and other provisions For investment projects not provided for under Article 17.2 of this Decree, investors may selfdetermine investment incentives and conduct the procedures for 58 Vietnam investment incentive entitlement at the relevant authority for the application of investment incentives. Economic organizations carrying out investment projects must send project status reports online (on a monthly, quarterly or yearly basis) through the National System of Investment Information. Decree No. 118 also provides that the charter capital of the economic organization established by a foreign investor for project implementation does not necessarily equal to the project’s capital investment. In the case of dissolution, temporary suspension or seal sample notification, enterprises are not required to carry out the procedures for converting the investment license, the investment registration certificate/ business registration certificate or equivalent legal documents into an enterprise registration certificate. This Decree took effect on 27 December, 2015 and replaced Decree No. 108/2006/ND-CP dated 22 September 2006. Additionally, the following documents shall be abolished accordingly: (i) List of areas eligible for corporate income tax incentives promulgated together with Decree No. 218/2013/ND-CP dated 26 December 2013; (ii) List of business lines eligible for import duty incentives promulgated together with Decree No. 87/2010/ ND-CP dated 13 August 2010; and (iii) Article 19.4 and the “List of administrative divisions eligible for land rent incentives” in Article 19.3 of Decree No. 46/2014/ND-CP dated 15 May 2014. Amendments and supplementations to regulations on the transformation of wholly state-owned enterprises into joint-stock companies The Government has promulgated Decree No. 116/2015/ND-CP dated 11 November 2015 amending and supplementing a number of articles under Decree No. 59/2011/ ND-CP on the transformation of wholly state-owned into joint-stock companies. Notable changes are as follows: a. Supplemented provisions on reserves for warranties for products, goods, construction or installation works, from the time of determining valuation enterprises to the time of officially transforming into a joint stock company (for contracts signed and the time for warranties is still valid). Accordingly, an equitized company shall be deducted and retained at a joint stock company according to contracts signed to implement the warranties of products, goods, construction or installation works. The equitized company shall set up the detailed list of each kind of products, goods, construction or installation works together with the equitization dossier. When the time for warranties is expired, if the provision still remains, the balance shall be submitted to the Enterprise Reorganization Assistance Fund within 30 days of the expiration date as stated in the contract. b. Amendment of the time limit for financial statements at the time of enterprise registration. The equitized enterprise shall have completed the financial statement at the time of enterprise registration, have this financial statement audited, request that the tax office examine its tax settlement, conduct the settlement to determine the value of the state capital portion at the time of official transformation into a joint-stock company and identify further financial problems to be settled. The aforementioned act must be completed within 60 days of the initial granting of the Certificate of Enterprise Registration (previous time limit was 30 days). c. Supplemented provision on preferential policies towards employees of equitized enterprises Accordingly, if an equitized enterprise has carried out necessary procedures according to the equitization plan approved by a competent authority but fails to carry out the IPO within 90 days from the day on which the decision on approval for equitization plan is issued, then the enterprise may sell shares to its employees and trade unions at a price equivalent to 60% of the reserve price in the equitization plan approved by a competent authority. This Decree took effect on 11 November 2015. Circular detailing the contents of investment in the form of private-public-partnerships under the management of the Ministry of Industry and Trade On 30 October 2015, the Ministry of Industry and Trade issued Circular No. 38/2015/TT-BCT, dated 30 October 2015, detailing the contents of investment in the form of private-public-partnerships (“PPP”) under the management of the Ministry of Industry and Trade (“Circular No. 38”). Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 59 Circular No. 38 listed various investment fields under the management of the Ministry of Industry and Trade, namely, electricity plants, commercial infrastructure and other projects as regulated in Decree No. 15/2015/ND-CP on investment in the form of PPP. This Circular regulated requirements for a project to be conducted in the form of PPP, an application dossier, evaluation and approval of project proposals for projects proposed by the Ministry of Industry and Trade and Investors. Circular No. 38 stipulated the process to choose investors, as well as the process to make, evaluate and approve feasibility research reports. Decision on supporting the interest rates after investment for enterprises in Hanoi in 2015 On 19 November 2015, the People’s Committee of Hanoi issued Decision No. 6277/QD-UBND on supporting the interest rates after investment for enterprises in Hanoi in 2015. Hanoi’s budget will support interest rates after investment for medium and longterm loans in VND for enterprises having a head office in Hanoi and performing investment projects in Hanoi. This Decision took effect on 19 November 2015. List of areas entitled to the prioritized assistance and criteria for selection of subjects entitled to the prioritized assistance of the development fund for small and mediumsized enterprises On 28 October 2015, the Ministry of Planning and Investment issued Circular No. 13/2015/TT-BKHDT on issuing the list of areas entitled to the prioritized assistance and criteria for selection of subjects entitled to the prioritized assistance of the development fund for small and medium-sized enterprises (“SME Development Fund”). Accordingly, prioritized loans shall be given to enterprises which are undertaking investment projects, business plans and production plans under one of the economic sectors classified in accordance with the System of Economic Branches of Vietnam as outlined in Decision No. 10/2007/QD-TTg of the Prime Minister, dated 23 January 2007, which includes: a. Agriculture, forestry and fisheries; b. Manufacturing and processing industry; c. Water supply, management and treatment of waste and wastewater. Additionally, enterprises are required to meet the following conditions in order to obtain capital from the fund, including: 1. Fulfils criteria for small and medium-sized enterprises specified in Article 3 of this Circular. 2. Demonstrate investment projects, business plans and production plans that follow the specifications outlined in Article 5 of this Circular; 3. Meets the conditions specified in Article 7 of Decision No. 601/ QD-TTg. In addition, this Circular also stipulates the criteria for selecting subjects entitled to the SME Development Fund’s prioritized assistance, criteria for identifying small and medium-sized enterprises, and the responsibilities of the SME Development Fund. This Circular took effect on 13 December 2015. Circular detailing the criteria for selecting contractors On 26 October 2015, the Ministry of Planning and Investment issued Circular No. 10/2015/TTBKHDT detailing the criteria for selecting contractors. Accordingly, each procurement must have a specific method of contractor selection pursuant to the regulations as laid out by the Law on Bidding, also raising questions of domestic or international application, short-listing, and online contractor selection. Provisions of explanations are required for international biddings but not for competitive biddings. Contractor selection methods other than competitive bidding are not valid without satisfying all conditions prescribed by the Law on Bidding. This Circular took effect on 10 December 2015 and replaced Circular No. 02/2009/TT-BKH. Circular on issuing documentation for the implementation of offshore investment On 23 October 2015, the Ministry of Planning and Investment issued Circular No. 09/2015/TT-BKHDT on issuing documentation for the implementation of offshore investment. Under the Circular, there are several forms for outward investment, which include: the application for issuance of an outward investment registration certificate, proposals for outward investment projects, the application for adjustments to outward investment registration certificates, notification of overseas investment operations, etc. 60 Vietnam This Circular took effect on 8 November 2015 and repealed Decision No. 1175/2007/QDBKHDT. Construction Reports on the evaluation of bid dossiers On 21 December 2015, the Ministry of Planning and Investment issued Circular No. 23/2015/TT-BKHDT on reports evaluating bid dossiers. This Circular provides the forms for reporting on the evaluation of bid dossiers applicable to each bid package, including on: procurement, construction and instalment; providing consultant services; providing nonconsultant services; performing pre-qualification; packages under projects using official development assistance capital, and concessional loans. It will take 45 days for a domestic bid and 60 days for an international bid to complete the evaluation process on bid dossiers. Circular No. 23 took effect on 15 February 2016 and repealed Circular No. 09/2010/TT-BKH dated 21 April 2010 detailing the reports on the evaluation of bid dossiers applicable to procurement, construction and installation bid packages and Circular No. 15/2010/TT-BKH dated 29 June 2010 providing on reports on the evaluation of bid dossiers applicable to consultant services bid packages. Guidance on the orders and procedures for the mortgage and foreclosure of assets of housing construction projects and housing to be formed in the future Circular No. 26/2015/TT-NHNN dated 09 December 2015 was issued on providing guidance on the orders and procedures for the mortgage and foreclosure of assets of housing construction projects and housing to be formed in the future. Two significant principles for mortgaging an investment project for housing construction projects or houses to be planned for the future are: • Developers that have already mortgaged housing to be formed in the future as part of their housing construction projects, are only permitted to then mortgage the remaining part of such projects after excluding the aforementioned mortgaged housing to be formed in the future. • Where an asset right relating to a housing construction project or to housing to be formed in the future has already been mortgaged, and such asset is within the category permitted by law to be mortgaged, then such housing construction project or such housing to be planned for the future will not be permitted to be mortgaged in accordance with the provisions of this Circular. A housing construction project which has been permitted to be mortgaged to borrow capital as prescribed in this Circular means one of the projects prescribed in Article 17.2 of Law No. 65/2014/ QH13 dated 25 November 2014 on Housing, which includes the following: • Projects for building or renovating an independent housing or housing estate; • Projects for building residential area synchronized with technical and social infrastructure in the rural areas; • Projects for building urban areas or projects using multipurpose land which have residential land plots; • Projects for building works for both residential and business purposes. This Circular took effect on 10 December 2015. Circular providing for management, use and protection of topographic construction work On 12 November 2015, the Ministry of Natural Resources and Environment issued Circular No. 49/2015/TT-BTNMT on the management, use and protection of topographic construction work. This Circular provides for the responsibilities of the competent authorities in managing, using and protecting topographic construction work, including the managing body for topographic construction work, related organizations and individuals, landlords, owners, provinciallevel People’s Committees, the Department of Natural Resources and Environment, and the Department of Survey and Mapping of Vietnam This Circular took effect on 30 December 2015 and repealed Decision No. 16/2005/QD-BTNMT, dated 16 December 2005 on management, use and protection of topographic construction work. Circular providing for management of construction quality and maintenance of detached houses On 30 October 2015, the Ministry of Construction issued Circular No. 05/2015/TT-BXD providing for management of construction quality and maintenance of detached houses. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 61 Accordingly, for housing with fewer than 7 floors, the house owner may conduct the construction survey himself/herself or hire an eligible individual/organization to do it. If the house owner decides to do it himself/herself, he/she may apply to undertake any of the following methods: direct inspection via a manually dug hole to determine the thickness and quality of ground layers and to determine the expected ground layer for laying the foundation; referring to geological survey figures for the work, and methods for treating the foundation of adjacent and neighboring work; referring to geological survey figures of the work provided by competent agencies/organizations. For housing with a total construction floor area smaller than 250 m2 or having fewer than 3 floors or having a height of under 12 m, the owner may create the design and organize construction himself/herself. For housing having equal to or more than 3 floors but fewer than 7 floors, the design must be put forward by an eligible organization/individual and the construction shall be carried out by an organization/individual having experience in construction of similar projects. For housing having 7 floors or more, the design must be put forward by an eligible organization/ individual and must be appraised pursuant to regulations in Decree No. 59/2015/ND-CP, dated 18 June 2015, by the Government on construction project management; the construction must be carried out by an eligible organization pursuant to regulations. This Circular took effect on 1 January 2016 and replaced Circular No. 10/2014/TT-BXD. Classification of various forms of construction work and guiding its application in activities regarding the management of construction investment Circular No. 03/2016/TT-BXD (“Circular No. 03”), dated 10 March 2016, of the Ministry of Construction, provides regulations on the classification of construction work and guides its application in activities regarding the management of construction investment. Circular No. 03 has five (5) articles which set out the principles and applications of construction work classification and two (2) appendixes which classify specific types of construction work. Most notably, when a construction investment project constitutes a sole independent construction project or is one of various independent primary construction projects, its class will be determined by capacity, scale and importance as stipulated in Appendix 1 of this Circular, or structure, scale and type as stipulated in Appendix 2 of the Circular. When a construction investment project has a main production line or main building complex, its class will be decided by its capacity, scale and importance. Other circumstances will be regulated by specific laws. Circular No. 03 took effect on 15 May 2016, superseding Article 7, Appendix 1 of Circular No. 10/2013/ TT-BXD and Clauses 4 and 6 of Article 1 of Circular No. 09/2014/ TT-BXD Management and use of apartment buildings The Ministry of Construction issued Circular No. 02/2016/ TT-BXD on 15 February 2016 to set forth regulations on the management and use of apartment buildings (“Circular”). This Circular applies to residential apartment buildings and complexes under the Housing Law. Specifically under the Circular, apartment owners can either purchase or rent parking lots within the limit set for each apartment based on the mutual agreement among the apartment purchasers. The ownership of parking lots can be transferred, but only to other apartment owners or investors. This Circular took effect on 2 April 2016 and renders Decision No. 08/2008/QD-BXD and Circular No. 05/2014/TT-BXD as no longer in effect. Energy Circular on project development, Avoided Cost Tariffs (“ACT”) and standardized power purchase agreements for biomass power projects On 09 December 2015, the Ministry of Industry and Trade issued Circular No. 44/2015/TT-BCT providing for project development, ACT and standardized power purchase agreements for biomass power projects (“Circular No. 44”). Pursuant to Circular No. 44, project owners can only invest in biomass power projects under the biomass energy development and utilization plan and/or the power industry development plan. The contents of biomass power investment projects are set up in accordance with the current regulations on the management of construction investment. For biomass power projects whose investment is diverged into various stages, the project owner is responsible for setting up the investment projects according to 62 Vietnam each phase of the project. If the expected time for when the project commences deviates more than six months compared to the timeline set in the plan on the development and utilization of biomass power, the project owner is responsible for reporting it to the provinciallevel People’s Committee and the General Department of Energy, under the Ministry of Industry and Trade. Additionally, the contents of biomass projects, which are pursuant to the laws and regulations on the management of work construction investment, have been supplemented, such as regarding impact assessment of option(s) for the connection of a biomass power project to the regional power system, and the costs/technical plan(s)/option(s) for dismantling and managing biomass power plant equipment upon project completion. Circular No. 44 took effect on 25 January 2016. Approval of Vietnam’s Strategy on Renewable Energy Development up to 2030, with a vision towards 2050 Decision No. 2068/QD-TTg dated 25 November 2015 on approving Vietnam’s Strategy on Renewable Energy Development up to 2030, with a vision towards 2050. The Decision aims to prioritize the rapid development of the fields of renewable energy with large resources and good commercial prospects, such as wind power, solar power, and biomass power; taking necessary measures to expand the market demand and simultaneously increasing international cooperation to transfer equipment fabrication industry technology; acquiring and mastering technologies, improving equipment manufacturing capabilities and competitiveness in the renewable energy field to meet the sustainability and stability of market demand, facilitating the development of large scale projects for the renewable energy industry. The strategic objectives are: • To mitigate greenhouse gas emissionsof energy activities compared with the normal development plan: around 5% by 2020; around 25% by 2030 and around 45% by 2050. • To decrease imported fuels for the purpose of energy: reduction of around 40 million tons of coal and 3.7 tons of oil products by 2030; reduction of around 150 million tons of coal and 10.5 million of oil products by 2050. • To increase total renewable energy sources for production, use around 25 million tons of TOE (i.e., ton of oil equivalent) by 2015 to around 37 million TOE by 2020, around 62 million TOE by 2030 and 138 million TOE by 2050. • To increase the power output produced by renewable energy from around 58 billion kWh in 2015 up to around 101 billion kWh by 2020, around 186 billion kWh by 2030 and around 452 billion kWh by 2050. The percentage of produced power from renewable energy in the total power of the country shall increase from around 35% by 2015 to around 38% by 2020, to around 32% by 2030 and around 43% by 2050. • To increase the absorption area of water heating units from solar energy from around 3 million m2 by 2015 to around 8 million m2 by 2020, provide 1.1 million TOE; around 22 million m2 by 2030, 3.1 million TOE and up to around 41 million m2 by 2050 and 6 million TOE. To increase the percentage of households having equipment using solar energy (water heating units, solar cookers, heaters and air coolers, water distillers, etc.) from around 4.3% in 2015 to around 12% by 2020, around 36% by 2030 and around 50% by 2050. • To increase the scale of biogas technology use within the scope of the building volume from around 4 million m3 in 2015 to around 8 million m3 by 2020; around 60 million m3 by 2030 and around 100 million m3 by 2050. • To convert the use of traditional biomass energy in cooking in households, industries and with local handicraft manufacturers from traditional cookers that perform at a low level to advanced biomass energy converting equipment that perform at a high level; bring the percentage of households using advanced cookers that perform at a high level from the negligible percentage currently at around 30% in 2020; around 60% by 2025 and from 2030, most households in rural areas shall use cookers with high performance and sanitation standards. • To increase the biofuel output from around 150,000 TOE in 2015 to around 800,000 TOE, meeting around 5% of fuel demand of transportation industry by 2020; around 3.7 million TOE meeting around 13% of fuel demand of transportation industry by 2030; by 2050, the biofuel output shall reach 10.5 million TOE, meeting around 25% of fuel demand of transportation industry. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 63 • To promote the development of renewable energy technology and industries, build a renewable energy industry system, bring the value percentage of equipment domestically manufactured in the field of renewable energy to 30% by 2020 and up to 60% by 2020 and ensure to meet domestic demand by 2050 with one sector for export to other countries in the region and in the world. Moreover, the Decision asserts the development plan in terms of hydropower, biomass energy, wind power and solar energy so as to minimize the adverse environmental impact as follows: • Firstly, develop traditional hydropower sources to contribute to the socioeconomic development of localities; provide on-thespot power sourcing and improve power supply safety. The electric power produced from hydropower sources shall increase from around 56 billionkWh in 2015 to around 90 billion kWh by 2020 and around 96 billion kWh from 2030. The capacity of storage hydropower source shall reach 2.400 MW by 2030 and around 8,000 MW by 2050. • Secondly, prioritize the use of biomass energy for power production, biogas, biomass pellet directly used as fuel and liquid biological fuel. To improve the percentage of use of waste of industrial and agricultural trees for energy purposes from around 45% in 2015 to 50% by 2020, around 60% by 2030 and around 70% by 2050. The total biomass energy used shall increase from around 14.4 million TOE in 2015 to around 16.2 million TOE by 2020; around 32.2 TOE by 2030 and 62.5 million TOE by 2050. Thirdly, prioritize the development of wind power on land; conduct research o develop offshore wind power sources and over the continental shelf after 2030. The power output produced from wind power shall increase from around 180 million kWh in 2015 to around 2.5 billion kWh by 2020, around 16 billion kWh by 2030, and around 53 billion kWh by 2050; bring the percentage of power produced from wind power in the total production power from a negligible 2015 rate around 1.0% by 2020, around 2.7% by 2030 and around 5.0% by 2050. Fourthly, develop solar power for the national electricity system and border areas, islands and remote areas which have not been supplied with power from the national electricity source. The electrical power produced from solar energy shall increase from around 10 million kWh in 2015 to around 1.4 billion kWh by 2020, around 35.4 billion kWh in 2030, and around 210 billion kWh by 2050; bring the percentage of power produced from solar power in the total power production from the negligible 2015 rate to around 0.5% by 2020, around 6% by 2030 and around 20% by 2050. This Decision took effect upon signing. Decree on gas business Decree No. 19/2016/ND-CP was issued by the Government on 22 March 2016 providing regulations on gas business. This Decree applies to traders specified in the Law on Commerce and entities engaging in gas business, specifically: Focal-point gas merchants; LPG general agents; LPG agents; Traders doing business in leasing gas depots and ports; and Traders doing business in gas transportation service. Gas importers, producing and processing entities whose products serve their own interests and not sold on the market according to the registration with the Ministry of Industry and Trade shall not be governed by this Decree. The Decree provides a number of conditions for gas importers and exporters, including, among others, that they must: • own/jointly own or enter an agreement on leasing wharves of Vietnamese ports for at least 05 years; • own/jointly own or enter into an agreement for leasing storehouses with the total storage tanker capacity of at least 3,000 m3 for LPG for at least 01 year, 60,000 m3 for LNG for at least 5 years and 200,000 m3 for CNG for at least 5 years. • own a quantity of LPG bottles (excluding mini-sized LPG bottles) that are eligible for being used on the market with the total capacity of at least 3,930,000 liters; and • own LPG bottling stations with a Certificate of Eligibility or a contract for LPG bottling with other LPG wholesalers; and have their own LPG bottling stations available after 02 years from the date of issue of the Certificate of Eligibility for LPG import/export. • have a distribution channel available, including: bottled 64 Vietnam LPG shops or LPG distribution stations or LPG filling stations for vehicles that are certified as eligible or industrial customers; and at least 40 LPG general agents or agents that meet the requirements stipulated by this Decree. There are a number of Certificates of Eligibility for gas business, namely: • Certificate of Eligibility for LPG/ LNG/CNG import/export; • Certificate of Eligibility for LPG/ LNG/CNG distribution; • Certificate of Eligibility for LPG bottling; • Certificate of Eligibility for LPG/ CNG/LPG filling up vehicles; • Certificate of Eligibility for LPG/ LNG/CNG distribution; • Certificate of Eligibility for LPG general agent; • Certificate of Eligibility for LPG agent; • Certificate of Eligibility for trading LPG to bottled LPG shops. In terms of procedures for granting Certificates of Eligibility: • The trader shall submit 01 application for the Certificate of Eligibility to the competent State authority directly or by post. Documents requested to be included in an application: (i) application form for the Certificate of Eligibility using the prescribed form; (ii) a copy of certificate of enterprise/ collective/household business registration; and (iii) Documents as proof of satisfying requirements set forth in Chapter II of this Decree. • Where the application is invalid, the competent State authority shall request the applicant to complete the application in writing within 07 working days from the date of receipt. • Within 30 working days from the date of receipt of the valid application, the competent State authority shall review, appraise and grant the Certificate of Eligibility to the applicant. In case of rejection, the competent State authority shall send the applicant a written notice in which reasons for rejection shall be specified. • The Certificate of Eligibility shall be valid for 05 years from the date of issuance. • Where the LPG agent that obtained the Certificate of Eligibility has only 01 bottled LPG shop or 01 LPG distribution station or 01 LPG filling station for vehicles shall be exempted from the application for the new Certificate of Eligibility for LPG agent. • Any applicant granted the Certificate of Eligibility shall be subject to fees and charges as prescribed by law. This Decree took effect on 15 May 2016. Liquid Petroleum Gas (LPG) business On 10 May 2016, the Ministry of Industry and Trade issued Circular No. 03/2016/TT-BCT providing further details on Decree No. 19/2016/ND-CP by the Government on the gas industry. Every LPG agency agreement shall include the principles of voluntarism and equality in writing. LPG agency agreements must include: i. The name, address, and TIN of the LPG agent and principal, types of agents, quantities, categories and quality of LPG as well as selling prices and purchases prices, management and exchange for LPG bottles, commissions, agency costs, methods of payment and date of payment. ii. Responsibilities of both parties for the quality and quantity of LPG, quality control and joint liabilities for the quality and quantity of LPG sold by their LPG supply chains of the LPG wholesaler or LPG general agents, and commitments states in the agency agreement. LPG agency agreements shall be valid for at least twelve (12) months. LPG selling prices: i. Every LPG wholesaler has the right to decide the wholesale prices and retail prices within their distribution channel; ii. LPG businesses’ facilities of the LPG general agent shall publish LPG selling prices and comply with the selling prices scheduled under the regulations of the LPG wholesaler. iii. The retail price is considered as the basis for calculating the agency cost and commission for LPG agents under the administration of the LPG wholesaler. Application for Certificates of Eligibility for LPG/LNG/CNG imports and exports: i. The applications for Certificates of Eligibility for LPG/LNG/CNG imports and exports using Annex 03 enclosed herewith; and ii. Copies of an Enterprise Registration Certificate; and iii. Proof of the availability of wharves that are owned, Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 65 jointly owned or leased by the applicant, as well as copies of the Certificate of Storage Tank Inspection and proof that the available storage tank is owned, jointly owned or leased by the applicant. Other LPG/LNG/CNG import and export traders must submit supplemental documents according to items 4 and 5 of Article 7 of Circular No. 03/2016/ TT-BCT. The Circular took effect on 15 May 2016. Enterprise Using retail invoices Official Letter No. 1695/TCT-QLN, dated 22 April 2016, provides regulations regarding the use of retail invoices. According to the Official Letter, enterprises can still use retail invoices in the event that a coercive method of announcing that invoices are invalid is applied against them and if the following criteria are met: • They submit a written request for using such invoices; • The purposes of such use are for paying workers’ wages or ensuring normal operation of production and business activities; and • They have a written commitment on paying total taxes arising from the retail invoices and a part of tax debts equal to at least 15% of the turnover on the used invoices. This Official Letter took effect on 22 April 2016. Approving the “National Project on Supporting the Start-up Ecosystem for New Innovative Enterprises until the year 2025” On 18 May 2016, the Prime Minister signed Decision No. 844/QĐ-TTg approving the “National Project on Supporting the Start-up Ecosystem for New Innovative Enterprises until the year 2025.” This Decision emphasizes the roles of the administration, ranging from the relevant ministries, departments, local authorities, etc., in encouraging the development of start-ups. The Prime Minister asserted that the aim of the Decision is to support the development of the start-up ecosystem by utilizing intellectual property, technology, and business models. The Decision also calls for the completion of a comprehensive legal system that will assist new enterprises while setting specific goals of supporting 800 projects, 200 start-ups including 50 ones that successfully appeal for funds, and M&A cases, all amounting to VND1 trillion. Furthermore, the Decision includes specific guidelines on administrative support for new enterprises, as follows: • Establish a national portal providing information regarding technology, innovation, intellectual property, etc., and a local centre dedicated to start-ups and new innovative enterprises. • Develop and purchase educational programs as well as the necessary facilities to advance talents for innovative enterprises. Utilize media to promote successful start-ups and innovative enterprises. • Connect Vietnamese enterprises with the start-up networks of neighboring countries and around the world. • Encourage the use of funding from the Government, relevant ministries, and provincial and local-level authorities for the development of science and technology projects. • Research and propose new laws as well as provisions to the existing legal documents in order to support the start-up ecosystem. This Decision also emphasizes the role of ministries in establishing appropriate regulations, providing assistance with funding and the process of lending and investing in innovative start-ups enterprises, and reporting such progress to the Prime Minister. The Decision took effect upon signing. Enhancing the inspection and supervision of handling legal violations in multi-level sale activities On 9 March 2016, the Ministry of Industry and Trade issued Directive No. 02/CT-BCT on enhancing the inspection and supervision of handling legal violations in multilevel sale activities. For state management of multilevel sale activities, the Industry and Trade Departments of provinces and centrally-run cities shall increase management, inspection and monitoring of local multi-level sale activities and cooperate with relevant local agencies to discover and handle any legal violation in multilevel sale activities in a timely manner. The Departments shall also instruct local multi-level enterprises to comply with the provisions of the relevant laws, 66 Vietnam raise individuals’ and enterprises’ awareness regarding multi-level sales in general and the laws regulating multi-level sales in particular, offer training sessions for officials and publicize contact phone numbers for reporting illegal multi-level sales activities. The Vietnam Competition Authority, Market Management Department and media belonging to the Ministry of Industry and Trade are responsible for reviewing the provisions of laws on multi-level sales for improvement, handling violations, training officials and educating enterprises and the citizenry in general on multi-level sales and raising awareness pertaining to multi-level sales. Directive No. 02/CT-BCT took effect on the signing date. Exchange of information on Enterprise Registration and Tax The Ministry of Planning and Investment and the Ministry of Finance together issued Joint Circular No. 01/2016/TTLTBKHDT-BTC on 23 February 2016 to provide guidance on the exchange of enterprise information between the National Registration Business System and the Tax System (the “Circular”). Under the Circular, exchanged enterprise information includes information on the registration for the establishment of an enterprise and its directly governed units, information on registration for amendments to the aforementioned enterprise registration, information on the operation status of an enterprise and its directly governed units, information on the taxpayer’s breach of tax law and corporate management, and information on an enterprise’s financial statements. With respect to annual financial statements, the tax authorities are to receive such statements from enterprises of all kinds, then upload the statements to the Financial Reporting System and then have such statements transmitted on a monthly basis to the National System for Enterprise Registration. Information exchange between the National Registration Business System and the Tax System excludes circumstances where enterprise registration is granted according to the provisional process under Article 12 of Decree No. 78/2015/ND-CP and where state-owned corporations are converted into single member limited liability companies and joint stock companies. This Circular took effect on 15 April 2016. Determination on whether enterprises’ names violate industrial property rights On 5 April 2016, Ministry of Science and Technology together with Ministry of Planning and Investment issued Joint Circular No. 05/2016/TTLT-BKHCN-BKHĐT. This Joint Circular regulates the grounds for determining enterprises’ names that infringe industrial property rights and remedies; procedures for changing enterprises’ names, elimination of infringing elements in enterprises’ names, revoking enterprise registration certificates of companies whose names infringe the industrial property rights. This Joint Circular took effect on 20 May 2016. Resolutions on enterprise development policy through 2020 On 16 May 2016, the Government issued Resolution No. 35/NQ-CP focusing on private enterprises and emphasizing their role as a driving force for economic competitiveness and autonomy. The resolution proposes reducing the number of fees for enterprises, such as those readjusting renting land use charges, altering land use purpose fees and other fees encountered by enterprises including toll fees, BOT fees, etc. In terms of taxation, the Government suggests: i. Reducing corporate income tax for small and medium sized enterprises; ii. Balancing income from transferring real estate with income from business production; and iii. Reducing 50% of personal income tax for individuals working in the advanced technology sector and individuals working in the application of advanced technology in agriculture and the agricultural processing industry. The Resolution took effect upon signing. Action plan to improve the business environment and promote national competitiveness The Ministry of Labor, Invalids and Social Affairs promulgated Decision No. 726/QD-LDTBXH regarding the issuance of an action plan on the implementation of Resolution No. 19/2016/NQ-CP on key tasks and solutions to improve the business environment and raise national competitiveness Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 67 during 2016-2017 with a vision towards 2020 and Resolution No. 35/NQ-CP, dated 16 May 2016, on support for and development of enterprises through 2020. According to Decision No. 726, the main targets of the action plan are: • Creating the most favorable conditions for enterprises in their relevant production and business activities; • Ensuring enterprises’ business rights, rights to equally access resources and business opportunities, reducing time and costs of administrative procedures for labor control and in regards to people who make contributions to society; • Ensuring that the interests of business, labor and society are harmonized; and • Participating in improving the business environment and raising national competitiveness. The targets shall be accomplished by contributions from different departments and agencies, including the Department of Employment, the Department of Overseas Labor Management and the General Department of Vocational Training, among others. Each Department, Agency and unit shall have to complete different missions and targets assigned in the action plan. Fourth Draft of the Law on small and medium enterprises support The Government released the fourth Draft of the Law on small and medium enterprises support (“Draft law”) on 30 May 2016. The Draft law proposes amendments and supplementations for the following: The list of business lines with special conditions The amendments include the removal of duplicates and unnecessary business lines as well as clarifications pertaining to many others. Regulations and procedures for investment The Draft law proposes changes in procedures for evaluating and approving evaluation reports on environmental impact and procedures and dossiers for assessing the need to use land, among other provisions. Other relevant regulations to improve the business environment and promote national competitiveness. The Draft law suggests adding new suitable policies from Decision No. 19/NQ-CP 2014, 2015, and 2016, and Decision No. 35/NQ-CP, dated 16 June 2016, into law. The draft also proposes to change the solution of withdrawing an Enterprise Registration Certificate in the Law on Managing Tax with the sanction of ceasing production and business activities of enterprises until said enterprise has performed all of their tax obligations. The Draft law is expected to be submitted to the National Assembly No. XIV, which will be held in July 2016. Environment PIT policy for environmental protection activities Circular No. 212/2015/TT-BTC dated 31 December 2015 guiding personal income tax (“PIT”) policy for environmental protection activities as stipulated in Decree No. 19/2015/ND-CP detailing the implementation of certain articles of the Law on Environmental Protection. Tax rate incentives Enterprises conducting environmental protection activities are eligible for tax incentives. The tax rate is 10% for new investment projects for 15 years. If the project has significant capacity or hightech elements, the duration of the tax rate incentive could be extended but cannot exceed 30 years upon the decision of the Prime Minister based on the proposal of the Minister of Finance. When the private sector is involved pursuant to the decision of the Prime Minister, tax rate incentives shall be applied to the income arising from such involvement. Tax exemption and reduction Income from enterprises is taxexempted for four years, with reduced tax rates of 50% for the following nine years. This Circular took effect after 45 days from the signing date and replaced Circular No. 230/2009/ TT-BTC dated 8 December 2009 on incentives and supports for environmental protection activities. Environmental protection fees applicable to mining activities The Government issued Decree No. 12/2016/ND-CP on 19 February 2016 setting forth the environmental protection fees applicable to mineral mining. Specifically, the Decree prescribes that the fees applicable to crude oil stand at VND100,000 per ton, the fees applicable to natural gas and coal gas are VND50 per cubic meter, and the fees for associated gas are at VND35 per cubic meter. With regards to aluminum and bauxite, environmental protection fees have been reduced to between VND10,000 and VND30,000 per ton. However, for ordinary construction 68 Vietnam stone, the environmental protection fees have been increased from between VND500 and VND3,000 per cubic meter to VND1,000 to VND5,000 per cubic meter. With respect to other minerals, the following environmental protection fees remain unchanged: VND40,000 to VND60,000 per ton applicable to iron, rare earth and chromite ores; and VND50,000 to VND70,000 per ton applicable to ores of titan and precious stones such as diamonds, rubies, sapphires, black opal, dumortierite quartz, etc. The rate applicable to salvage mining is 60% of the abovementioned mining fees. Additionally, there are no fees applicable to scooped soils eliminated during the mining up to end of 2017. This Decree took effect on 1 May 2016 and replaced Decree No. 74/2011/ND-CP dated 28 May 2011. New guidelines on environmental protection of mineral exploitation On 29 April 2016, the Ministry of Finance issued Circular No. 66/2016/TT-BTC providing guidelines for the implementation of Decree No. 12/2016/ND-CP on environmental protection of mineral exploitation. The Circular provides the function to calculate charges pertaining to mineral exploitation as follows: F = [(Q1 x f1) + (Q2 x f2)] x K The annotations for the above are as follows: • F is the periodic environmental protection charge that needs to be paid; • Q1 is the volume of soil excavated in that period (m3 ); • Q2 is the volume of minerals exploited in that period (m3 or tons); • f1 is the fee level for the volume of soil excavated (VND200/m3 ); • f2 is the respective fee level for each different type of mineral; and • K is the fee factor calculated based on mining type, including: - Exposed mining (including excavation by water power) (K = 1.05); - Underground mining and other types of mining (K = 1). In the event of granite exploitation, the individuals or organizations responsible shall have to pay environment protection charges as specified in Decree No. 12/2016/ ND-CP depending on the function of the granite. The organization responsible for collecting the environmental protection charge is also responsible for publicly providing the volume of minerals mined, soil excavated and the environmental protection fees each organization has paid in the previous year on mass media. This Circular took effect on 13 June 2016 and replaced Circular No. 158/2011/TT-BTC. Health Circular on food safety inspections pertaining to the manufacture and sale of food under the Ministry of Health On 01 December 2015, the Ministry of Health (“MOH”) issued Circular No. 48/2015/TT-BYT providing for food safety inspections in pertaining to the manufacture and sale of food (“Circular No. 48”). Accordingly, Circular No. 48 regulates (i) the responsibility, content and formality of food safety inspections, and (ii) procedural orders and process of inspection results. The following agencies have the authority to inspect food safety: the Vietnam Food Administration, provincial-level Health Departments and Food Agencies, district-level People’s Committees and Health Divisions, communelevel People’s Committees and health centers. Specific authority and responsibility of those agencies are pursuant to Article 69 of the Food Safety Law. Contents of inspection are separated between the inspection objects, namely food manufacturers and businesses and street food establishments. Regarding the inspection formality, inspections are divided into two types: periodical inspection and surprise inspection. Periodical inspections are conducted pursuant to the respective annual inspection plan, in a regulated frequency and the inspecting agency must inform the inspected objects at least one (01) day before the inspection. In contrast, surprise inspection can be conducted without a prior notice (i) if there is a sign of food safety infringement; (ii) at the request of higher level agencies; (iii) on the warning of national, foreign or international organizations related to food safety; and (iv) following the feedback of individuals and organizations related to food safety. Procedures of inspection and process of inspection results are specifically regulated in Circular No. 48. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 69 Circular No. 48 took effect on 15 January 2016. Decision on health insurance inspection On 1 December 2015, Vietnam Social Insurance issued Decision No. 1456/QD-BHXH on the process of health insurance inspection. Decision No. 1456 focuses on inspection of the list, price list of drugs, medical supplies and medical services, providing medical services according to Joint-Venture Agreement, etc. This Decision also regulates the process of inspection of expenses of medical examinations and treatment with health insurance; health insurance inspection processes during medical examinations, in treatment facilities and at the residence or the patient’s place of work. Decision No. 1456 took effect on 1 January 2016, and repealed Decision No. 466/BHXH-QD dated 19 April 2011. Conditions for herbal ingredient trading The Ministry of Health issued Circular No. 03/2016/TT-BYT setting forth conditions for herbal ingredient trading. Specifically under the Circular, exporters, importers, wholesalers, retailers and providers of herbal ingredient preservation services must be issued with a Certificate of Eligibility for Business in Medications which covers herbal ingredient trading. Apart from such Certificate, entities engaged in herbal ingredient trading must satisfy certain other conditions as well, such as: i. Herbal ingredient retailers must have a fixed location of at least 25 square meters, display and preservation areas, protection equipment for the medications, qualified staff, including at least one pharmacy assistant, and must provide regular professional training to its staff. ii. Herbal ingredient importers must meet requirements for “Good Storage Practices. In the case where the importer is not yet eligible for directly importing herbal ingredients, it must enter into a trust agreement with an eligible entity whose name must be reflected on the import order, etc. This Circular took effect on 6 March 2016. Law on Pharmacy promulgated On 6 April 2016, the National Assembly promulgated Law No. 105/2016/QH13 on Pharmacy (“Law No. 105”) to replace Law No. 34/2005/QH11 on Pharmacy (“Law No. 34”). In comparison with Law No. 34, Law No. 105 has a wider governing scope and more subjects of application, which also include governmental policies on pharmacy and pharmaceutical industry development, pharmacy practice, conducting pharmaceutical business, quality management for drug and drug ingredients and drug price management. The responsibilities and authority of pharmaceutical associations are specified in Article 5 of Law No. 105. Selling clinical trial drugs, retailing vaccines, altering drug expiry dates, advertising drugs before the advertised content is verified by competent agencies and distributing or selling drugs which are expired, improperly stored, recalled or have unclear origin are all prohibited under Article 6. Chapter II of Law No. 105 is dedicated to governmental policies on pharmacy and pharmaceutical industry development. The policies aim to: • Ensure the provision of enough quality drugs at reasonable prices in a timely manner to prevent and treat diseases; • Offer preferential treatment for investment in manufacturing drugs; prioritize domestic drugs and ingredients for purchase; • Offer preferential procedures in applying for circulation and import certificates for certain types of drugs; • Invest public funds and other resources for developing the manufacturing capacity of prioritized pharmaceutical products; • Facilitate the development of traditional medicines, cultivation of herbs and export of cultivated herbs; • Protect secrets of traditional medicines, offer reasonable treatment for donors of valuable traditional medicine prescriptions; • Encourage technology transfers and develop distribution networks, particularly in remote areas; and • Enhance human resource quality in the pharmaceutical industry. Relevant agencies’ responsibilities pertaining to the development of the pharmaceutical industry are also specified in this chapter. Law No. 105 specifies the working positions which require a practice certificate as well 70 Vietnam as procedures for issuance, reissuance, and amendment of practice certificates. Further detailed requirements for people professionally responsible for pharmaceutical issues and people responsible for the quality of drug ingredients and manufacturing facilities are supplemented with a focus on experience. Detailed definitions for each form of pharmaceutical business and facility are provided in Chapter IV along with requirements attached to each criterion for each of those. Pharmacovigilance, which Law No. 34 is silent on, is provided in Article 77 of Law No. 105. Accordingly, patients, doctors, retailers, manufacturers and registration agencies have the responsibility to monitor, detect and report adverse drug reactions, counterfeit drugs and low quality or ineffective drugs. Chapter IX regulates clinical pharmacy operations and planning as well as the rights and obligations of people practicing in clinical pharmacy as well as governmental policies on clinical pharmacy. Usage, preparation, manufacturing and security measures for radioactive drugs represent new content in Chapter X. The phases, dossiers and procedures of clinical and bioequivalence trials, principles and authority for approving clinical and bioequivalence trials are supplemented in Law No. 105. The Law also regulates the standard and assay for packaging which comes into contact with the drug, as well as raw materials for drug production. Drug price management is emphasized in Law No. 105 with detailed measures. The responsibilities of managing drug prices are delegated to specific state agencies such as the Ministry of Health, the Ministry of Finance, the Ministry of Industry and Trade, provincial-level People’s Committees, drug bidders, etc. Law No. 105 takes effect on 1 January 2017 and replaces Law No. 34. Bidding for supply of drugs for public health facilities On 11 May 2016, the Ministry of Health issued Circular No. 11/2016/ TT-BYT (“Circular”) providing on bidding for the supply of drugs to public health facilities. According to the Circular, competitive offering will be applied when the procurement value does not exceed VND5 billion. Direct procurement will apply upon the satisfaction of the following conditions: the contractor has won through competitive bidding or selective bidding and has previously signed a contract agreeing to implement the bidding; the current procurement contains similar drugs and the scale is no larger than 130% of the previously signed bidding package; the unit price of the medicines in the bidding package cannot exceed the unit price of drugs in the previous bidding, and must correspond with the unit price announced when reaching contract agreement; the time between the signing of the bidding and the approval of the results from direct procurement must be under 12 months. The single-stage two-envelop procedures shall be applied to drug procurement through competitive bidding or selective bidding whose value exceed VND10 billion, and to drug procurement whose value does not exceed VND10 billion through competitive bidding or selective bidding, but both quality and prices have to be taken into account. The Circular took effect on 1 July 2016 and replaced Joint Circular No. 01/2012/TTLT-BYT-BTC, Joint Circular No. 36/2013/TTLT-BYTBTC, Circular No. 37/2013/TT-BYT, and Circular No. 31/2014/TT-BYT. Immigration Vietnam to issue one-year multiple-entry visas to U.S. citizens After lobbying efforts from the U.S. business community, on 04 April 2016, President Tran Dai Quang presented a statement recommending that the National Assembly (NA) ratifies the Diplomatic Note on 12 month Visa Granting between Vietnam and the United States of America. On 09 April 2016, with the majority vote, the NA ratified this Diplomatic Note. With regards to the Vietnamese government, this measure aims to reciprocate the U.S.’s favorable immigration policy for Vietnam whereby Vietnamese citizens are allowed to apply for one-year multiple-entry business and/or tourism visas. Upon the Diplomatic Note’s ratification, U.S. citizens may apply for the following types of oneyear multiple-entry visas: VR for applicants who visit relatives or enter Vietnam for other personal purposes; DL for tourism; HN for conference/seminar attendants; and DN for business. Under the Law on the Entry, Exit, Transit, and Residence of Foreigners in Vietnam, the maximum term for DL and HN visas are three months, while the maximum stay for foreigners holding VR visas is six months only. However, Vietnam reserves Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 71 the right to change the term of visa and/or the number of entries on the case-by-case basis in accordance with Vietnamese law. This new regulation will help facilitate and promote travel by U.S. citizens to Vietnam and enable U.S. citizens to stay in Vietnam for longer. Consequently, this is expected to boost trade and commercial ties between the two countries. U.S. enterprises and other companies having their employees being U.S. citizens coming to Vietnam should keep updated on the implementation of this measure in order to promptly reap maximum benefits from this policy. Required documents clarified for border gate entry and exit The Ministry of National Defense has promulgated Circular No. 09/2016/TT-BQP, dated 3 February 2016, detailing and guiding the implementation of a number of articles of Decree No. 112/2014/ ND-CP of the Government providing for the management of land border gates. This Circular details and guides a number of contents concerning (i) defining the nature of land border gates; (ii) samples of signs, signboards and bulletin boards at land border gates; (iii) control barrier systems at land border gates; (iv) arrangement of control lines at land border gates in case of epidemics, (v) papers required from immigrants going through border gates and open ways, and others. Under this Circular, a Vietnamese citizen entering or exiting an international border gate and/ or main gate (bilateral border gate) must have one of the following papers: (i) a diplomatic passport, official passport or common passport (collectively referred to as “passport”), or (ii) a crew passport, a border travel document, a travel document for immigration purposes, a travel document for immigration at border areas, a travel document for repatriation, an identification card or a citizen’s identification card (with respect to Vietnamese citizens at the border of VietnamLaos, Vietnam-Cambodia), or (iii) other proper papers for exit and entry in accordance with the provisions of Vietnamese law or international treaties to which the Socialist Republic of Vietnam is a member. A Vietnamese citizen who enters and exits through a side border gate must have one of the following documents: a border travel document, a travel document for immigration purposes, a travel document for immigration at border areas, a travel document for repatriation, a travel document, an identification card, a citizen identification card (for the Vietnam border residents in border areas of Vietnam-Laos, Vietnam-Cambodia) or other papers suitable for entry and exit under Vietnamese law or international treaties to which the Socialist Republic of Vietnam is a member. For foreigners, this Circular provides that a citizen of a third country who enters and exits through an international border must have a passport or a paper valid for international travel and a visa issued by a competent State agency of Vietnam (unless he/ she has a visa exemption under international treaties to which the Socialist Republic of Vietnam is a member, or he/she is unilaterally granted a visa exemption by Vietnam or as otherwise prescribed under the Vietnamese law on visa exemption). Foreigners who are citizens of neighboring countries entering and exiting through international border gates and/or main gates (bilateral gates) must have one of the following papers: the papers mentioned above, a border travel document, an identification card (for residents at the border of Laos or Cambodia), a border certificate (for residents at the border of Laos) or other immigration papers under the provisions of Vietnamese law or international treaties which Vietnam has signed with bordering countries. This Circular took effect on 19 March 2016 and replaced Circular No. 181/2005/TT-BQP, dated 17 November 2005, and repeals Article 1 of Circular No. 90/2011/ TT-BQP, dated 30 June 2011. Import / Export & Customs Promulgation of the special preferential import tariff schedule under the Vietnam– Korea Free Trade Agreement for the period of 2015-2018 On 16 December 2015, the Ministry of Finance issued Circular No. 201/2015/TT-BTC on the promulgation of the special preferential import tariff schedule under the Vietnam–Korea Free Trade Agreement for the period of 2015-2018 (“Circular No. 201”). Accordingly, in order for special import tariff rates (“VKFTA”) to be applied, goods must fulfil the following requirements: • Listed in the Schedule attached with Circular No. 201; • Imported from Korea into Vietnam; • Directly transported from Korea into Vietnam pursuant to the regulations of the Ministry of Industry and Trade; and 72 Vietnam • Meet the rules of origin regulated by the VietnamKorea Free Trade Agreement and possess the KV Certificate of Origin pursuant to the regulations of the Ministry of Industry and Trade. Circular No. 201 also regulates the conditions on applying special preferential tariff rates for (i) goods from non-tariff areas and (ii) goods manufactured at the Kaesong Industry Zone, reimported into Korea and exported into Vietnam. Circular No. 201 took effect on 20 December 2015. Decision on procedures of granting import licenses online with respect to certain goods on the National Single Window system On 19 January 2016, the Ministry of Industry and Trade issued Decision No. 280/QD-BCT on the procedures of granting import licenses online with respect to some goods administered by the Ministry of Industry and Trade. Pursuant to the Procedures attached with the Decision, the granting of licenses online shall apply to (i) ozone-depleting chemicals, and (ii) motorbikes with high engine displacement. The procedures for requesting a license are as follows: • Step 1: Create an account on the Vietnam National Single Window website at the address, https:// vnsw.gov.vn/. • Step 2: Fill in and send the dossier which includes available forms on the website and required documents and/or vouchers in electronic format through the Internet. • Step 3: The Ex-import Agency notifies whether a license will be granted after 5 working days from the receipt of the valid dossier. The Decision took effect on 01 February 2016 Circular on selling duty-free goods On 25 December 2015, the Ministry of Finance issued Circular No. 207/2015/TT-BTC amending and supplementing Circular No. 148/2013/TT-BTC dated 25 October 2013 together with Decision No. 24/2009/QD-TTg dated 17 February 2009 and Decision No. 44/2013/QDTTg dated 19 July 2013. This Circular amends some regulations on the responsibilities of Customs Sub-Departments in managing and doing business in duty-free goods. Circular No. 207 supplements regulations on the responsibilities of the customs authority, particularly for selling dutyfree goods to customers on international flights coming into Vietnam. The customs authority must supervise all goods which are loaded on carts and issue a Letter of Delivered/Received Goods as prescribed in Annex 1 of this Circular. Responsibilities include supervising carts, supervising remaining goods from international flights, and checking and confirming money and foreign currency amounts. The Customs authority must stop business activities if duty-free shops do not fulfil all regulatory requirements. When selling goods, vendors must request that the buyer (excepting flight attendants and airline crew) present his/her passport and boarding pass, while also inputting the following information into the computer: a. full name of the seller according to the passport/laissez-passer; b. passport/laissez-passer number; c. the flight number and flight date on the boarding pass; d. the names and units of goods must be consistent with those on the import declaration; and e. quantity and value If an outgoing passenger buys duty-free goods with a total value over the limit on the currency used for buying, the buyer shall present a paper proving the origins of the currency as prescribed by the State Bank of Vietnam, and include 01 photocopy of the paper proving its origins. Circular No. 207 took effect on 10 February 2016. Import quota applied for raw tobacco On 5 January 2016, the Ministry of Industry and Trade issued Circular No. 01/2016/TT-BCT on the import quota applied for raw tobacco. Accordingly, the import quota on raw tobacco under HS Code No. 2401 in 2016 shall be 48,620 tons. However, this quota is not applied for ASEAN member states. This Circular is effective from 5 January 2016 until 31 December 2016. Registration procedures for the List of Imported Goods and the List of Temporarily Imported then Re-Exported Goods of Foreign Contractors in the Construction Sector On 30 December 2015, the Ministry of Industry and Trade (“MOIT”) issued Circular No. 52/2015/ TT-BTC detailing on registration procedure of the List of Imported Goods, Temporarily Imported then Re-Exported Goods of Foreign Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 73 Contractors in the Construction Sector. Accordingly, foreign contractors can choose between two means of registration: • Direct registration with the MOIT or registration by post: Dossiers required for this means of registration include the (i) registration form; (ii) List of Imported Goods or List of Temporarily Imported then Reexported Goods; (iii) agreements between foreign contractors and the investors/project owners, if the foreign contractor registered the function of the imported goods as “for construction”; and (iv) the foreign contractor’s operational license in the construction sector. The MOIT will issue its approval within 05 working days from the date it received the complete dossiers. • Electronic registration: To execute this means of registration, foreign investors are required to register for (i) the use of digital signatures under Vietnamese law; and (ii) the use of an account in the MOIT’s online system. Similar to the procedure of registration by post, approval will be granted within 05 days from the receiving date of complete dossiers. This Circular took effect on 12 February 2016 and repealed Circular No. 15/2011/TT-BTC dated 30 March 2011. Clarification of numerous regulations on customs procedures, supervision and inspection, as well as on export tax, import tax, and tax administration applied to exported and imported goods On 8 December 2015, the Ministry of Finance issued Official Letter No. 18195/BTC-TCHQ to units which are under the purview of the General Department of Customs, clarifying Circular No. 38/2015/TT-BTC on customs procedures, customs supervision and inspection, export tax, import tax, and tax administration applied to exported and imported goods. The notable provisions should be as follows: With respect to imports which are sea transport vehicles, the declarant can choose either to carry out the procedures for bringing in such vehicles first and then the importing procedures or both procedures at the same time.19 Upon declaration of goods transported under the customs’ supervision as in Articles 50 and 51 of the Circular, the owners of the container freight station and air logistics services must be customs agents in accordance with Article 5.5 of Decree No. 08/2015/ND-CP.20 The location commencing customs procedures for goods delivered to and dispatched from free trade zones within border economic zones for the purpose of warranty and repair shall be the customs department in charge of the respective free trade zone.21 Circular guiding the export and import of used information technology products On 29 October 2015, the Ministry of Information and Communication issued Circular No. 31/2015/TTBTTTT guiding a number of articles of Decree No. 187/2013/ND-CP applicable to the export and import of used information technology products. 19 Article 1, Official Letter No. 18195/BTCTCHQ. 20 Article 2, Official Letter No. 18195/BTCTCHQ. 21 Article 5, Official Letter No. 18195/BTCTCHQ. Accordingly, formulation principles for the list of products banned from import shall be based on the List of Products and the HS Codes under the export tariff and preferential import tariff, as well as according to the development of information technology and other legal provisions for the specific period of time. Further, the Ministry of Information and Communications shall consider permitting the import of articles on the List for Scientific Research (including being the target of scientific research; being samples for the design, as well as research and development of products and testing in production activities). Recycling and repair of used information technology products on the List of Products Banned from Import for Foreign Traders shall meet the requirements stipulated by Government Decree No. 187/2013/ND-CP, dated 20 November 2013. This Circular took effect on 15 December 2015 and replaced Circular No. 11/2012/TT-BTTTT. Circular providing for provisions regarding the import of medical equipment On 12 October 2015, the Ministry of Health issued Circular No. 30/2015/TT-BYT (“Circular No. 30”) providing for provisions regarding the import of medical equipment. Accordingly, the issue of obtaining an import permit for medical equipment (“import permit”) only applies to imported medical equipment that is included in the List specified in this Circular. Medical equipment not included in the permissible List may be imported without an import permit but must still provide a dossier to trace its origin and determine the 74 Vietnam quality management of the medical equipment as prescribed by law. In addition, authorization, dossiers and procedures for the issuance and modification of import permits are also stipulated in this Circular. Modification of content of an import permit is allowed in cases where the import permit is still valid but its content have changed. However, the duration of an import permit may not be modified. This Circular took effect on 30 November 2015. Law on Export and Import Duties 2016 On 06 April 2016, the National Assembly passed Law on Export and Import duties 2016, which shall take effect on 1 September 2016. As one of the four key issues of customs modernization, Law on Export and Import Duties 2016 is expected to establish a more competitive business environment in Vietnam under the context of accelerating roadmap for duty elimination following Vietnam’s commitments in international trade treaties. To such extent, the new law supplements new regulations on customs duty, duty exemptions and time limits for duty payment. Certain key developments under Law on Export and Import duties 2016 are as follows: 1. Duty exemption applicable to a larger number of imports and exports The new Law grants duty exemption to 23 types of goods, which is significantly higher than those under the current regulations. In particular, pursuant to Law on Export and Import duties 2016, notable additional goods under such exemption include: • Raw material, supplies and accessories imported for export production under contract manufacturing, which are currently entitled to 275-day duty deferral; • Goods for temporary import/ export for following purposes: - Machines and equipment for repairing marine vessels and airplanes: Under current regulations, only spare parts and accessories of temporary import/export are entitled to duty exemption. The new Law expands duty exemption to also cover the machines and equipment of temporary import/exports; - Temporary imports/exports for repair and warranty; - Goods for trading business of temporary import/export (bank guarantee or deposit required); • Fertilizer, pesticide which have not been domestically produced, subject to necessity appraisal of line ministries; • Goods for non-commercial purpose including: samples, photos, films, alternative models for samples, advertising publication in small quantities; • Goods are not domestically produced, which are imported directly for educational purposes. Law on Export and Import duties 2016 also eliminates exemption for imports as fixed assets of investment projects of official development assistance (ODA) capital sources; 2. Duty refund in the event of wrong declaration Under the current regulations, wrong declaration may be entitled to duty refund if such wrong declaration is conducted within 365 days from the date of detection. This regulation accommodates the possibility of refunding the overpaid duty if such wrong declaration is detected within 365 days since the customs declaration. Nonetheless, the new Law has abolished this regulation. As such, taxpayers will no longer have chance to claim the overpaid duty if such mistakes are made by themselves. 3. Time limits for duty payment Privileged enterprises (under Authorized Economic Operators Scheme) are entitled to a grace period of up to 40 days in comparison with other taxpayers. As such, instead of paying duties before goods release, privileged enterprises may make payment no later than the 10th day of the month following the month of goods release or clearance. 4. Anti-dumping duty, countervailing duty, safeguard duty The new law supplements a Chapter to clarify application of the above-mentioned duties. The Ministry of Industry and Trade is the decision maker, and Ministry of Finance decides relating protocols, including declaration, collection, payment, refund of such duties. Countervailing duty and antidumping duty shall be applied for up to five years from effective date. For safeguard duty, the duration will not exceed four years inclusive of the temporary period . Where necessary, these periods may be extended. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 75 Law on Import and Export Duties promulgated On 6 April 2016, the National Assembly promulgated Law No. 107/2016/QH13 on Import and Export Duties (“Law No. 107”) to replace Law No. 45/2005/QH11 on Import and Export Duties (“Law No. 45”). According to Law No. 107, domestically exported or imported goods as well as goods exported and imported by enterprises exercising their right to export, import, or distribute are taxable. Article 3 of Law No. 107 stipulates a more detailed list defining taxpayers, which includes: • Owners of imported/exported goods; • Authorized exporters and importers; • Persons entering and leaving Vietnam carrying exports or imports, as well as those sending or receiving goods through Vietnam’s border gates; • Authorized persons guaranteeing and paying tax on behalf of taxpayers; • Citizens buying and transporting goods within the tax-free limit resale area at the borders; • Persons owning duty-free imports and exports which become taxable later; and • Other entities provided by the laws. The ordinary tax rates shall be increased from 70% to 150% per the preferential rates. The principles for issuing tax tariffs and tax rates are specified in Article 10 as summarized below: • Encouraging the import of raw materials in high demand domestically; focusing on the development of high technology, source technology, energysaving and environmental protection technology; • Complying with Vietnam’s socioeconomic development orientation and commitments to export and import duties codified in international treaties to which Vietnam is a signatory; • Contributing to the stabilization of the market and state budget revenues; • Being simple and transparent as well as facilitating tax payment and tax procedures; and • Applying uniform tax rates for goods with the same nature, composition, use and technical features; the rates of import duties decline from finished products to raw materials and vice versa for export duties. To protect domestic production, Chapter III of Law No. 107 specifies conditions and application principles of anti-dumping duties, countervailing duties and safeguard duties. The Ministry of Industry and Trade decides on the application of such duties while the Ministry of Finance regulates the declaration, collection, payment and refunds of such duties. The National Assembly decides the application of other safeguard measures when necessary. The list of goods entitled to duty exemption in Article 16 is expanded with new items, such as: • Goods within the duty-free limit for people entering or leaving the country and goods imported for sale at duty-free shops; • Duty-free goods as provided in international treaties to which Vietnam is a signatory; • Goods with eligible duties or with a value lower than the minimum threshold; • Raw materials, supplies and components imported to process exports, finished products imported to be used in domestically assembled processed products and processed products for export; • Raw materials, supplies and components imported to produce exports or to be used in preferential projects; • Small quantities of noncommercial goods like samples, photos, films, sample models and promotional publications; • Seeds, certain species of animals, fertilizers and pesticides allowed to be imported by the competent authorities; • Certain items for shipbuilding projects or facilities of preferential lines and industries; • Machinery, equipment, raw materials, supplies, components, parts and spare parts for money printing and minting; • Raw materials, supplies and components required for manufacturing information technology products, digital content and software; • Goods imported or exported for the purpose of environmental protection; • Imports for education, scientific research, technology development, technology incubation development, incubation of science and technology enterprises and technology innovation; and 76 Vietnam • Imports and exports for ensuring social security, disaster relief, plague relief, and other special circumstances. Law No. 107 takes effect on 1 September 2016. Circumstances that enable the importation of used information technology products listed under import prohibition On 6 May 2016, the Prime Minister issued Decision No. 18/2016/QDTTg regulating the circumstances, conditions, criteria and procedures under which the importation of goods shown on the list of used information technology products under import prohibition may be considered and approved for importing. i. Necessary circumstances for approving prohibited products to be imported include the following: • Used information technology goods that are relocated as means of production within one single organization; • Used information technology goods that are imported to create devices that control, operate and inspect activities in one or all parts of a system or production line; • Used information technology goods that are imported as a direct part of software production, businesses outsourcing through informational technology and/or data processing devices for foreign partners; • Used specialized information technology products that are imported; • Expired information technology goods which are being re-imported after being repaired overseas repair; and • Refurbished goods or components of a production that are imported to replace or repair those being used domestically. ii. Authority to permit importation of products under the import prohibition list belongs to the following authorities: • The Minister of Information and Technology shall have the authority to approve the importation of products under the import prohibition list pursuant to the circumstances as defined in Article 4 of this Decision; and • The Prime Minister shall determine the importation of products under the import prohibition list outside of the circumstances defined in Article 4 of this Decision. iii. Procedures of approval for importation of products under the import prohibition list: • An application for importation of products under the import prohibition list shall be sent by post or by hand to the office of the Ministry of Information and Communications; • If the importer provides insufficient or invalid documentation, the Ministry of Information and Communications shall, in three (3) working days, notify the importer of its demand for supplementations in writing; and • Within five (5) working days upon its receipt of full and valid documents, the Ministry of Information and Communication shall grant approval in writing; if the application is rejected, the Ministry of Information and Communication shall provide its reasoning and rationale in writing. This Decision took effect on 1 July 2016. Stricter sanctions on administrative violations and coercive implementation of administrative decisions in the customs sector On 26 May 2016, the Government promulgated Decree No. 45/2016/ND-CP, amending and supplementing a number of articles in Decree No. 127/2013/ ND-CP regarding sanctions on administrative violations and coercive implementation of administrative decisions in the customs sector. Firstly, Decree No. 45 provides amendments and supplements to Article 4 with specific forms of sanctions that apply when individuals or organizations commit administrative violations in the customs sector. Decree No. 45 also provides for additional penalties, such as confiscating material evidence along with normal sanctions depending on the characteristics and level of the administrative violation in question, as well as methods to remedy the consequences that apply along with the sanctions and additional penalties. Decree No. 45 also provides amendments and supplements to Article 5 regarding the circumstances in which sanctions of administrative violations in the customs sector do not apply, Article 6 regarding sanctions on violations pertaining to the deadline to declare tax records as well as customs procedures and Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 77 Article 10 regarding sanctions on administrative violations pertaining to customs checks and inspection regulations, as well as others. Decree No. 45 further provides supplementation to Article 16 in Article 16a, specifying sanctions pertaining to violating import management and/or export procedures at harbors, warehouses and dumps. Article 19 of Decree No. 127 is supplemented by Articles 19a and 19b, specifying the authority of Borderland Security and the Coast Guard. This Decree takes effect on 1 August 2016. Industry Organization and operation of inspection activities in the field of industry and trade On 14 December 2015, the Ministry of Industry and Trade issued Decree No. 127/2015/ND-CP providing for the organization and operation of inspection activities in the field of industry and trade (“Decree No. 127”). Under this Decree, state inspection agencies and specialized inspection agencies are responsible for conducting inspection activities in the field of industry and trade. State inspection agencies encompass inspectorates from the Ministry of Industry and Trade and the Departments of Industry and Trade. Specialized inspection agencies encompass the General Department of Energy, the Market Surveillance Agency, the Chemicals Agency, the Industrial Safety Techniques and Environment Agency, the Electricity Regulatory Authority, the Trade Promotion Agency, the E-Commerce and Information Technology Agency, the Competition Authority, and local-level Market Surveillance Agencies. There are two categories with regards to the operation of inspection activities in the field of industry and trade: (i) administrative inspection and (ii) specialized inspection. Administrative inspection applies to agencies, organizations and individuals that are specifically under the management of the Ministry of Industry and Trade and the Departments of Industry and Trade, where specialized inspection applies to agencies, organizations and individuals who have to comply with the laws under the authority of the Ministry and Departments of Industry and Trade. Pursuant to Decree No. 127, a case inspected under the Ministry or Departments of Industry and Trade can be re-inspected if it meets certain regulated conditions. Decree No. 127 took effect on 01 February 2016, superseding Decree No. 117/2006/ND-CP dated 09 October 2006 and Decree No. 103/2004/ND-CP. Incentive certification and verification of projects for the manufacture of ancillary products on the List of Prioritized Ancillary Products On 30 December 2015, the Ministry of Industry and Trade issued Circular No. 55/2015/TT-BTC on regulating procedures for incentive certification and verification of projects for manufacturing ancillary products on the List of Prioritized Ancillary Products. Ancillary products, as defined under this Circular, are materials, components and accessories utilized for the production of finished products. To request for incentives, individuals and organizations producing ancillary products are required to submit dossiers, which include (i) the Request Form for Confirmation of Incentives; (ii) Certificate of Business/ Enterprise Registration; (iii) project description; (iv) documents evidencing the commitment on environmental protection, and (v) Certificate of Conformity to Technical Standards, issued by the European Committee for Standardization.
The authority in charge of receiving such dossiers and confirming incentives is (i) the competent local authority where the projects are carried out (for SMEs); or (ii) the Ministry of Industry and Trade (for organizations other than SMEs). Notice on the confirmation of incentives is issued within 30 working days from the receiving date of complete dossier, This Circular took effect on 1 January 2016. Circular on issuing the list of domestically produced machines, equipment, replacement accessories, specialized transport vehicles, raw materials, materials and semi-finished products On 17 November 2015, the Ministry of Planning and Investment issued Circular No. 14/2015/TT-BKHDT on issuing the list of domestically produced machines, equipment, replacement accessories, specialized transport vehicles, raw materials, materials and semifinished products. This Circular took effect on 01 January 2016 and repealed Circular No. 04/2012/TT-BKHDT. 78 Vietnam Development of supporting industries On 3 November 2015, the Government issued Decree No. 111/2015/ND-CP on the development of supporting industries. This Decree includes a list of prioritized supporting products (“List”). Accordingly, organizations and individuals participating in the field of research and development of supporting products that fall under the List shall receive assistance from funds for research, development and training, as well as aid of up to 50% funding from the State for projects of trial support industrial production. In addition, these projects will benefit from tax incentives. Projects for construction of development and research facilities pertaining to ancillary production shall receive land given or leased out by the State as stipulated in the regulations of the Law on Land; funding of up to 50% of the investment in research equipment and facilities from the supporting industries development programs may be provided. Further, this Decree also addresses issues regarding applications and transfer, human resource development, and international cooperation in the supporting industries. This Decree took effect on 1 January 2016 and replaced Decision No. 12/2011/QD-TTg and Decision No. 1483/QD-TTg, dated 26 August 2011. Information Technology New Online Information Security Law On 19 November 2015, the National Assembly issued the Law on Online Information Security (LOIS), which became effective on 1 July 2016. The LOIS includes: • Obligations to monitor the security of online information systems; • A broad definition of “information conflict and requirements for the monitoring and prevention of same; • New controls on the production and distribution of civil cipher products; and, • A separate section on protection of personal information. 1. Service suppliers on the Internet tasked with reporting and coordination responsibilities for information safety The LOIS requires that service suppliers on the Internet, when requested, coordinate with competent state authorities to prevent and handle any online information security threats that originate from their Internet resources or customers, and to work to ensure the safety and stability of server systems that use Vietnam’s national domain name (.vn).22 2. Protected personal information and correction/deletion rights defined The LOIS defines “personal information broadly as “personally identifiable information. The LOIS restates and emphasizes the notification, consent and data correction requirements for personal information under current Vietnamese privacyrelated laws. However, the LOIS does grant entities some flexibility to delay updating, amending or deleting personal information in certain cases - for example, due to technical reasons or 22 Article 12.1. other reasons. In such cases, the LOIS requires entities to apply “appropriate measures to safeguard personal information and to inform the data subject of any delay. The LOIS does not, however, define the nature of these “appropriate measures. The LOIS provides that the “handling of personal information for the purpose of ensuring national defense and security, social order and safety, or serving non-commercial needs will be governed by other relevant laws and regulations.23 3. Permits required for civil cipher product trading The LOIS defines “civil cipher products as documents, or equipment, that use cryptographic techniques and operations to ensure the security and/or veracity of information that is not state secret information. Civil cipher products are categorized as a subset of “information safety products.24 The LOIS allows private enterprises to trade in civil cipher products with a “civil cipher trading permit granted by the Government Cipher Committee.25 It is unclear, however, whether production of civil cipher products requires any special permit/ approval from the authority. 4. Permits required for online information safety service providers and traders of online information safety products The LOIS sets forth a nonexhaustive list of online information safety service and product classifications, which includes, among others:26 23 Article 16.5. 24 Article 41.2(a). 25 Article 31. 26 Article 41.2. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 79 Online information safety service: a. Service of inspecting, assessing information safety on the Internet; b. Information security service without using civil cipher; c. Civil cipher service; d. Digital signature verification service; e. Service on consultancy of online information safety; f. Service of monitoring online information safety; g. Service of responding to online information safety incidents; h. Back-up data service; i. Anti-online attack service; j. Other online information safety services. Online information safety products: a. Civil cipher products; b. Products for inspecting, assessment of online information safety; c. Products for monitoring online information safety; d. Products for anti-attack, antipenetration online; e. Other online information safety products. Except for services (a), (b), (c) and (d) and product (a) above, entities are allowed to trade in the other information safety products, services after they are granted an “online information safety product/ service supplying permit. Entities providing services (a) or (b) must obtain a license for providing the service of inspecting, assessing information safety on the Internet, or a license for providing information security services without using civil cipher methods, respectively. Entities providing service (c) and product (a) will need to obtain “civil cipher trading permit (see Section 3 above). Entities providing service (d) will be subject to separate regulations on digital signature services.27 Circular on the management and use of digital signatures, digital certificates and digital signature certification services of the SBV On 18 December 2015, the State Bank of Vietnam (“SBV”) issued Circular No. 28/2015/TT-NHNN providing for the management and use of digital signatures, digital certificates and digital signature certification services of the SBV (“Circular No. 28”). Circular No. 28 applies to (i) the constituent agencies of the SBV, credit institutions, branches of foreign banks, and the State Treasury; and (ii) other organizations using the SBV’s digital signature certification services in digital transactions organized by the SBV. Regarding the registration of digital certificates, the digital signature certification service provider must grant a digital certificate to the subscriber within 5 days from the receipt date of the valid dossier. The valid term of the digital certificate is suggested by the subscriber, but cannot exceed 5 years after the validation of the digital certificate. Regarding the renewal of digital certificates, the request for renewing the validation term must be sent to the digital signature certification service provider no later than 10 days before the end of the validation term. On such request, the service provider will renew the validation term for the digital certificate within 5 working 27 Articles 41 and 42. days from the receipt date of the request. Particularly, the digital signature certification service provider has the responsibility of publicizing, updating and maintaining the list of digital certificates which are valid, suspended or revoked on the SBV’s website on a basis of 24 hours a day/7 days per week. Circular No. 28 took effect on 01 February 2016, superseding Circular No. 12/2011/TT-NHNN providing for the same matter. Management of e-commerce mobile apps The Ministry of Trade and Industry issued Circular No. 59/2015/ TT-BCT dated 31 December 2015 providing for the management of e-commerce service applications. Accordingly, traders and organizations using mobile applications, including for the sale and provision of e-commerce services, only need to apply for registration with the Ministry of Trade and Industry as prescribed by law. Traders and organizations only need to apply once even if the mobile application has different versions. In the case where a mobile application possesses the function of online payment, then the traders, organizations and individuals selling online must set up a mechanism for clients to review the information for each payment before making transactions. The application dossier and procedures for mobile applications are also provided in this Circular. For mobile applications set up and operated before 31 March 2016, they shall be registered as prescribed by this Circular within 60 days since the effective date of this Circular. 80 Vietnam This Circular took effect on 31 December 2015. Insurance New Circular Guiding Compulsory Social Insurance On 29 December 2015, the Ministry of Labor, Invalids and Social Affair (“MOLISA”) issued Circular No. 59/2015/TT-BLDTBXH (“Circular No. 59”) guiding the implementation of a number of articles of the Law on Social Insurance on compulsory social insurance. Circular No. 59 will take effect on 15 February 2016 and supersede previous circulars on the same issues. Circular No. 59 gives detailed guidance on all aspects of compulsory social insurance, including the regimes on (i) sickness; (ii) pregnancy; (iii) retirement and (iv) death, but in this alert we focus on a few new important issues. Confirmation of salary used as the basis to calculate social insurance premiums Circular No. 59 confirms the salary components taken into account for the purpose of calculating social insurance premiums, as below: • From 1 January 2016 to 31 December 2017: salary used as the basis to calculate social insurance premiums includes base salary and salary allowances; and • From 1 January 2018 onwards: salary used as the basis to calculate social insurance premiums includes base salary, salary allowances and other supplemental payments. Furthermore, Circular No. 59 provides examples on what constitutes a salary allowance. Accordingly, salary allowances include positional allowances; responsibility allowances; allowances for performing heavy, hazardous and dangerous jobs; seniority allowances; regional allowances; mobility allowances; retention allowances; and other similar allowances. Salary used as the basis to calculate social insurance premiums does not include bonuses as defined in Article 103 of the Labor Code,28 initiative bonuses; meal expenses between shifts; subsidies towards expenses for petrol, telephone, transportation, housing, childcare, raising children; allowances for employees having a death in the family, employees having a marriage in the family, employees’ birthdays; subsidies for employees facing difficulties due to their labor accidents and occupational diseases; and other allowances and benefits. New limited access to sickness allowances covered by the Social Insurance Fund Circular No. 59 provides new regulations disentitling some ill employees from sickness benefits covered by Social Insurance Fund. These cases include: • Employees who are in poor health due to self-inflicted injuries or illnesses, or due to the use of alcohol or illegal drugs. • Employees who receive their first medical treatment for injuries or illnesses arising from labor accidents or occupational diseases. The cost of this first treatment must be paid by the employer, which is also 28 Article 103 of the Labor Code states that “bonus is a sum of money which the employer grants the employee based on annual production and business results and at the level at which the employee has completed his or her work”. responsible for paying the employees’ salary and relevant expenses over this time. • Employees who become sick or are injured in an accident while taking annual leave, fully paid personal leave, unpaid personal leave and maternity leave. Entitlement to sickness allowances may change each month Coverage from the Social Insurance Fund for sick employees remains at 75% of the salary of the previous month used as the basis to calculate contributions to social insurance premiums. Previous regulations also set coverage at this rate, but now an employee’s actual entitlement to sickness allowances may change from month to month if the salary used as the basis to calculate social insurance premiums changes. This is because under new regulations, the salary used as the basis to calculate social insurance premiums includes a number of allowances and other supplemental payments which may change from time to time. Adoptive parents of a child under six months old only receive a lump sum payment from Social Insurance Fund when they do not take leave Under the Social Insurance Law, employees adopting a child under six months old are entitled to maternity allowances (monthly salary and a lump sum payment) from the Social Insurance Fund until the adopted child reaches six months old. Circular 59 explicitly states that such allowances only apply if the adoptive parents take leave to care for the adopted child. If they do not take leave, they will not receive monthly allowances, but will only receive a lump sum which is equal to two months’ general minimum wage. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 81 Decree on voluntary social insurance On 29 December 2012, the Government issued Decree No. 134/2015/ ND-CP detailing a number of articles of the Law on Social Insurance with respect to voluntary social insurance. Accordingly, people registering for voluntary social insurance must be (i) Vietnamese citizens aged 15 years or older and (ii) are not covered by compulsory social insurance. Voluntary social insurance comprises of: i. Retirement allowance: Monthly retirement allowance = Monthly retirement allowance rate x Average monthly income on which social insurance premiums are based ii. Survivorship allowance: If someone covered by voluntary social insurance is declared to be legally deceased, the people in charge of the funeral will receive an allowance that is equal to ten times the basic salary of the deceased person. Regarding the method of premium payment, persons covered by voluntary social insurance may choose to pay on a monthly, quarterly, biannual and annual basis. The monthly premium payment is 22% of the average monthly salary of the person covered by voluntary social insurance. This Decree took effect on 15 February 2016 and repealed Decree No. 190/2007/ND-CP and Decree No. 134/2008/ND-CP. Decree guiding compulsory social insurance Decree No. 115/2015/ND-CP (“Decree No. 115”) was issued by the Government on 11 November 2015 providing guidance on a number of articles of the Law on Social Insurance regarding compulsory social insurance. Decree No. 115 provides guidance on the Law on Social Insurance in terms of compulsory social insurance applied to officials, civil servants and Vietnamese employees working under labor contracts. Decree No. 115 details the benefits available for female employees being surrogate mothers and intended mothers. Monthly pension as prescribed in Article 56 of the Law on Social Insurance: 1. The monthly pension of an employee equals his/her monthly pension rate multiplied by (x) the average monthly salary as the basis for social insurance payment. 2. The monthly pension rate of an employee who fully satisfies the conditions for pension prescribed in Article 54 of the Law on Social Insurance shall be determined as follows: a. From 1 January 2016 until 1 January 2018, each retired employee shall be entitled to a monthly pension rate of 45% equivalent to 15 years of social insurance payment, which shall have 2% added for male employees and 3% for female employees, for each additional year of social insurance payment, provided that the maximum rate is 75%. b. From 1 January 2018, each retired female employee shall be entitled to a monthly pension rate that is the equivalent to 45% of 15 years of social insurance payment, which shall have 2% added for each additional year of social insurance payment, provided that the maximum rate is 75%. c. From 1 January 2018, each retired male employee shall be entitled to a monthly pension rate that is equivalent to 45% of the social insurance payment for the number of years as detailed in the table below, which shall have 2% added for each additional year of social insurance payment, provided that the maximum rate is 75%. Retired year Number of years of social insurance payment corresponding to the pension rate of 45% 2018 16 years 2019 17 years 2020 18 years 2021 19 years From 2022 20 years Monthly salary as the basis for compulsory social insurance payment For each employee who pays social insurance premiums according to the salary regime by the employer, his/her monthly salary as the basis for social insurance payment prescribed in Clause 2, Article 89 of the Law on Social insurance shall be determined as follows: 1. From 1 January 2016 to 31 December 2017, the monthly salary as the basis for social insurance payment will be the salary plus salary-based 82 Vietnam allowance mentioned in the labor contract as prescribed in the labor law. 2. From 1 January 2016 to 31 December 2017, the monthly salary as the basis for social insurance payment will be the salary plus salary-based allowance mentioned in the labor contract as prescribed in the labor law. This Decree took effect on 1 January 2016 and replaced Decree No. 152/2006/ND-CP; Decree No. 83/2008/ND-CP; Decree No. 122/2008/ND-CP; and Decision No. 107/2007/QD-TTg. Vietnam’s New Circular on Universal Life Insurance Products Provided by Life Insurers Recent developments Effective from 1 June 2016, Circular No. 5229 makes some amendments to the rules on universal life insurance products provided by life insurers. Circular No. 52 particularly amends the previous regulations enacted on 23 November 2007 under Decision No. 9630 (the “Previous Rules”). Circular No. 52 ameliorates certain conditions for insurance agents selling universal life insurance products for life insurers, which is aimed to help life insurers to expand their distribution channels. It also provides for new guidelines on setting up professional operation reserves. 29 Circular No. 52/2016/TT-BTC of the Ministry of Finance dated 1 March 2016 guiding the implementation of universal life insurance products (“Circular No. 52”). 30 Decision No. 96/2007/QD-BTC of the MOF dated 23 November 2007 on the regulations for implementation of universal life insurance products (“Decision No. 96”). Specific amendments under Circular No. 52 a. Requirements of insurance agents Under the Previous Rules, for a life insurer to sell universal life insurance products, its insurance agents must have at least six (6) months of experience as life insurance agents, or two (2) years working experience in finance, banking or insurance, or have a college degree or higher in finance, banking or insurance. Circular No. 52 eases this requirement by reducing the six (6) consecutive months of experience to three (3) as life insurance agent, and reducing the two (2) years of working in such field to one (1) year. In terms of required training period for agents, under the Previous Rules, insurance agents must be trained intensively for at least 24 hours on the sales of the universal life insurance products. However, Circular No. 52 also modifies this requirement by removing the minimum training time of 24 hours and only requires that the insurance agents must be trained and certified by their insurers for completion of the training on this type of products. Accordingly, under Circular No. 52, the requirements for insurance agents to be permitted to sell universal life insurance products will comprise of: • Have not violated the law on the operation of insurance agents and the rules on insurance agent occupational ethics; • Have been trained on universal life insurance products and have been issued training completion certificates; and • Have at least three (3) months of experience as life insurance agents, or one (1) year working experience in finance, banking or insurance, or have a college degree or higher in finance, banking or insurance. b. Setting up of professional operation reserves Circular No. 52 provides for new guidelines on the setting up of professional operation insurance reserve by life insurers, specifically: For insurance risk reserve, it is either (i) the reserve calculated by unearned premium method or (ii) the reserve calculated by cash flow method, whichever is larger, and used to cover all future expenses throughout the term of the policy. In this regard, Circular No. 52 clarifies further that the reserve calculated by unearned premium method is equal to 100% of collected risk insurance premiums of the universal life insurance policies. For professional operation reserve for the universal life linking portion, Circular No. 52 provides that it can be implemented according to either (a) surrender value, or (b) account value, of the universal life insurance policy. Under the Previous Rules, only the surrender value of the policy in the universal life fund is used. In addition, Circular No. 52 requires that: • the insurers are responsible for assessing and selecting their method for professional operation reserve for the universal life linking portion, ensuring their completion of the responsibilities which have been committed under the insurance policies; and • during a fiscal year, the insurers are not permitted to change their method and the basis Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 83 for the professional operation reserve for the universal life linking portion. If a change is proposed for the next fiscal year, the insurers must ensure that the reserve is higher than the previous year and the insurer must obtain an approval letter from the Ministry of Finance before the proposed change is effected. Calculation of late interest payments and collection of overdue insurance fees Official letter No. 1379/BHXH-BT, dated 20 April 2016, of Vietnam Social Insurance provides guidance on the calculation of late interest payment, collection of overdue social insurance premiums, health insurance premiums, unemployment insurance premiums and a collection of voluntary social insurance premiums. Most notably, this Official Letter provides formulas for the calculation of late payment and overdue insurance totals starting from 1 January 2016. This Official Letter took effect on 20 April 2016. Contributions of Insurance and Payment Methods The Ministry of Finance issued Circular No. 20/2016/TT-BTC on 3 February 2016 providing guidance for implementing the financial management mechanism and management fee regarding social insurance (“SI”), health insurance (“HI”) and unemployment insurance (“UI”). Under the Circular, the Social Insurance Authority will retroactively collect and compound interest on SI, HI and UI in the following circumstances: i. Such payment has been circumvented; ii. Not all statutory contributions have been paid; iii. Statutory contributions have not been paid in full; iv. Insurance contributions that received payments that are less than the required amounts; and v. The misappropriation thereof since 1 January 2016 has been discovered by the Social Insurance Authority or other competent authorities. Additionally, for the circumvention period before 1 January 2016, the late payment rate for 2016 shall be applied. For the circumvention period from 1 January 2016 onwards, the late payment rate of that particular year shall be applied. The Social Insurance Authority requests that enterprises which have outstanding unemployment insurance as at end of 2014 must pay the entirety of such amount as the State Budget will not subsidy the unemployment insurance fund in this case. The provincial-level Social Insurance Authority could apply the current method for paying monthly pension, SI and unemployment allowances, but must have such method switched to payment via the State public service organization when the year 2016 comes to an end. This Circular took effect on 20 March 2016 and applies starting from the budgeting year of 2016. Provisions on investment activities conducted with social insurance, health insurance and unemployment insurance funds On 28 April 2016, the Government promulgated Decree No. 30/2016/ ND-CP (“Decree No. 30”) detailing investment activities conducted with social insurance, health insurance and unemployment insurance funds (“insurance funds”). The investment principles in Article 3 of Decree No. 30 state that investment activities conducted with insurance funds must be transparent, safe, effective and able to recover capital. Insurance funds shall be invested in the following order of priority: • Purchasing Government bonds; • Making loans to the state budget with loan terms decided by the Vietnam Social Insurance and the Ministry of Finance but shall not exceed ten (10) years; • Depositing and purchasing bonds, bills of exchange, bills of credit and certificates of deposit issued by commercial banks with good quality of operation according to the credit rating of the State Bank of Vietnam; the deposit term shall not exceed three (3) years; • Making loans to the Vietnam Development Bank and the Vietnam Bank for Social Policies under the form of purchase of Government-guaranteed bonds issued by these banks; and • Investing in key projects under the Prime Minister’s Decisions; the investment duration shall not exceed five (5) years. The last two forms of investment shall be only applicable to the unemployment insurance fund; 84 Vietnam investment amounts shall not exceed 20% of the balance of the unemployment insurance fund of the previous year. The Management Board of Vietnam Social Security decides and assumes responsibility before the Government regarding investment forms and structures of insurance funds based on the recommendations of the General Director of Vietnam Social Insurance. All annual incomes derived from investment operations and profits arising from deposit accounts shall be partly used for the establishment of a risk reserve fund and the rest shall be allocated to the funds on pro rata basis. Decree No. 30 took effect on 16 June 2016 and repealed Circular No. 113/2012/TT-BTC and Article 9 of Decree No. 28/2015/ND-CP. Intellectual Property Decree on sanctioning of administrative violations in trade activities, production and trade of counterfeit or prohibited goods and protection of consumer interests On 19 November 2015, the Government issued Decree No. 124/2015/ND-CP amending and supplementing a number of articles of Decree No. 185/2013/ ND-CP on the sanctioning of administrative violations in trade activities and the production and trade of counterfeit or prohibited goods and protection of consumer interests. Representative offices, branches of foreign traders in Vietnam, and representative offices of foreign trade promotion organizations in Vietnam may be subject to the sanctions detailed in this Decree. This Decree includes additional acts of administrative violations with varying fines, such as: the act of restricting or hindering consumers to unilaterally terminate already-signed contracts within 10 days from the signing date of contracts in the case of the business organizations and/ or individuals providing improper or incomplete information; acts of forcing or requiring consumers to pay expenses for termination of already-signed contracts in the case of signing remote-concluded contracts, etc. These acts will be fined at a high level, from VND10 million to VND20 million. In the sector of e-commercial operations, many new violation acts will result in fines of up to VND50 million. Acts of hoarding and speculation of goods, bidding of goods, services and commercial franchises having signs having committed acts of competition restriction shall lead to the application of the regulations on investigation and settlement of violation acts in the competition sector. This Decree took effect on 05 January 2016. Procedures for changing or recovering domain names which violate intellectual property rights Inter-ministerial Circular No. 14/2016/TTLT-BTTTT-BKHCN was issued on 8 June 2016 and provides guidelines for the sequences and procedures for changing and withdrawing domain names containing “.vn” which are in violation of intellectual property rights. According to Inter-ministerial Circular No. 14, forcible measures to change, return or recover domain names containing “.vn” which violate Intellectual Property Rights shall be applicable in following circumstances: 1. The domain name duplicates or is mistakenly similar to subjects under the protection of intellectual property rights and the content of the website with said domain name violates intellectual property rights; and 2. The domain name is used for uploading content which violates intellectual property rights. Inter-ministerial Circular No. 14 also stipulates circumstances in which different remedial measures will be applied, specifically: • Forcible changes of all content violating intellectual property rights shall be applied if a website with domain name “.vn” uploads content violating intellectual property rights causing damage to the reputation of owners of protected trademarks or brands; • Forcible return of domain names shall be applied when websites with said domain names meet all of the following conditions: the domain name duplicates or is mistakenly similar to subjects under the protection of intellectual property rights, the owner of domain name has no legal rights or benefits with the protected trademark or brand and the content of the website with said domain contains information that is damaging to the reputation of the owners of protected trademarks or brands; and • Forcible recovery of domain names shall be applied in the event that the owner of the websites which violate intellectual property rights does not change their violated content or return the domain name after Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 85 thirty (30) days following an administrative sanction decision or the owner does not prevent and/or remove content which violates intellectual property rights on the websites with domain name “.vn”. This Inter-ministerial Circular takes effect on 25 July 2016. International Relations Law on International Treaties promulgated On 9 April 2016, the National Assembly promulgated Law No. 108/2016/QH13 (“Law No. 108”) on International Treaties to replace Law No. 41/2005/QH11 (“Law No. 41”) on the Conclusion and Accession to and Implementation of Treaties. Law No. 108 stipulates that no international treaty shall conflict with the national Constitution. In the event that there is a difference between an international treaty and any legislative document other than the Constitution, the treaty shall prevail. Law No. 108 regulates that when a treaty is promulgated in more than one language, each version shall have equal value unless otherwise stated. In the event that Vietnam reserves, accepts or objects to the reservation(s) of a particular foreign signatory to the treaty, or declares thusly with respect to the multilateral treaty, the submitted dossiers must include a written draft detailing such reservations and a declaration in Vietnamese and a foreign languages for deposit of the treaty. The preparation process, submitted dossiers and negotiating organizations for international treaties are detailed in Law No. 108. Opinions of the National Assembly Standing Committee are required before deciding to sign an international treaty with provisions or resolutions which are different from or in conflict with the National Assembly’s laws or the Committee’s ordinances or resolutions. Summary procedures and foreign affair procedures for entering international treaties are also provided. However, the procedures for negotiation, entrance, approval, amendment, supplementation and extension of an international treaty regarding foreign loans shall be carried out in accordance with the Law on Public Debt Management. Law No. 108 took effect on 1 July 2016. Investment Procedures, content and applications for the assessment of scientific rationales of socioeconomic development plans and technology as applied to investment projects Circular No. 03/2016/TT-BKHCN, dated 30 March 2016, of the Ministry of Science and Technology provides regulations on dossier content, consequences of and procedures for assessing scientific rationales of socioeconomic development plans and technologies applied to investment projects. In particular, this Circular has four (4) chapters with twelve (12) articles identifying: (i) the relevant competent authorities, (ii) a list of necessary documents; (iii) a list of criteria; and (iv) procedures for the assessment of scientific rationales and technologies. Notably, the maximum limitation period for the assessment of scientific rationales is fifteen (15) working days in normal circumstances and thirty (30) working days for further consultation in the event of far-reaching complications significantly impacting the assessment. The maximum limitation period for the assessment of scientific rationales of technologies applied to investment projects is fifteen (15) working days for projects categorized under investment policies or investment decisions, and ten (10) working days for projects granted Investment Certificates but are beyond the scope of investment policies. This Circular took effect on 15 May 2016 and replaced Circular No. 10/2009/TT-BKHCN providing guidance on the same matters. New circular promulgating numerous provisions on PPP projects, relevant expenditures and the process for investor selection On 23 March 2016, the Ministry of Finance issued Circular No. 55/2016/TT-BTC (“Circular No. 55”) regulating numerous provisions regarding financial management of public-private partnership investment projects between the State and private investors (hereinafter referred to as “PPP projects”). Policies pertaining to PPP project expenses and the State process for selecting investors are also regulated by this Circular. Notable regulations under this Circular are as follows: Financial management provisions applicable to PPP projects Pursuant to this Circular, the financial management of PPP projects shall be applicable to the following components: • Expenditures for investment preparation and project execution; 86 Vietnam • Financial plan(s); • Payment of State invested capital for execution of the project; and • Financial statements of the completed project. Annually, the State agency in charge of management of expenditures for the preparation of investment, supervision of project execution and construction quality is required to prepare a detailed report on the project’s expenditures in line with each type of capital source. Such reports must be submitted to a competent authority for approval. The financial plan of a PPP project must clearly and thoroughly specify all legitimate expenses incurred and funds accrued during the preparation, execution and operation of the PPP project in question. State invested capital for the execution of a PPP project must be detailed in the project contract in terms of: (i) supported contents; (ii) exact sources of State invested capital; and (iii) progress of payment. Payment of Stateinvested capital shall only be made after the completed construction is examined and approved to put into use by the relevant competent authority. It is compulsory and incumbent upon the private investors to provide detailed financial statements in regards to completed PPP construction projects. Accordingly, after such aforementioned projects are tested, approved by the competent authority, completed and put into use, the investors must prepare a financial statement regarding the investment capital involved in the construction of such projects. Financial management regulations as applicable to expenditures pertaining to the investor selection process Under this Circular, formal expenditures pertaining to the investor selection process include the following: • Expenditures for prequalification documents, bidding documents and requests for proposals; • Expenditures for appraising prequalification documents, bidding documents and requests for proposals; • Expenditures for evaluating prequalification applications, bid packages and proposals; and • Expenditures for verifying prequalification results and the results of the investor selection process. Accordingly, the management and use of the aforementioned expenditures shall be in conformity with respective regulations under the jurisdiction of the Ministry of Finance, which are prescribed in Circular No. 190/2015/TT-BTC. This Circular took effect on 5 May 2016, replacing Circular No. 166/ TT-BTC of the Ministry of Finance. Procedures for contributing capital, and purchasing shares and contributed capital for foreign investors On 11 May 2016, the Ministry of Planning and Investment issued Official Letter No. 3524/BKHDTPC to respond to the Department of Planning and Investment of Ho Chi Minh City with instructions for foreign investors on contributing capital, and purchasing shares and contributed capital. In the Official Letter, the Ministry gives the following specific guidelines: • In the case where foreign investors contribute capital to, or purchase shares and contributed capital from, organizations whose products and services do not follow Vietnam’s WTO Commitments or that abide by investment conditions that have already expired, such foreign investors are not required to follow the procedures for contributing capital or purchasing shares. Foreign investors of businesses involved in industries that do not have previous conditions with foreign investors and will not increase charter capital are also not required to follow the abovementioned procedures. • If there are changes within the members of the board and shareholders, investors are only required to follow the course of action regarding the changes made between the members and not the procedures for contributing capital and purchasing shares and contributed capital for foreign investors. Implementation of incentives for branches under the Investment Certification granted by the Management Board of Export Processing and Industrial Zones. On 13 April 2016, the Ministry of Finance issued Official Letter No. 5048/BTC-TCT explaining tax incentives for foreign investors and branches by use of Investment Certification, such as GE’s branch in Hai Phong. According to the Official Letter, Government tax incentive policy since 2013 has differed from the Law on Corporate Income Tax and the Law on Investment, in which the Law on Investment encourages tax incentives for investment projects whereas the Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 87 Law on Corporate Income Tax differentiates between different types of investment projects. Based on the Law on Investment, foreign investors investing in Vietnam will enjoy tax incentives in accordance with Vietnamese law in which the tax incentive aligns with policy with regards to the Law on Corporate Tax and specified content within the investment license. From the viewpoint of foreign investors, the investment license and the certificate of investment issued by the Government serve as the foundation on which foreign investors may enjoy tax incentives and fulfil legal duties. Preliminary selection of PPP investment projects The Ministry of Planning and Investment has issued Circular No. 02/2016/TT-BKH, dated 1 March 2016, guiding the preliminary project selection, preparation, appraisal and approval of proposals and feasibility study reports of investment projects in the form of public-private partnership (“PPP”). This Circular guides the preliminary selection of projects, preparation, appraisal and approval of project proposals and preparation, appraisal and approval of feasibility study reports of PPP investment projects within the scope specified in Article 1 of Decree No. 15/2015/ND-CP, dated 14 February 2015, of the Government on investment in the form of PPP. Under the Circular, the process of preliminary selection of projects must satisfy the following conditions: (a) it is aimed at correctly determining infrastructure projects and projects by providing equipment and public services which are invested in and studied in the form of PPP; and b) the project must satisfy the criteria set forth in Article 3.2 of this Circular. The Circular also specifically provides for regulations on preparation, appraisal of and approval for project proposals as set forth under Sections 1 and 2, Chapter III, Decree No. 15/2015/ ND-CP, dated 14 February 2015. The Circular does also set forth the detailed procedures for preparing, appraising and approving feasibility study reports. More particularly, the Circular provides specific guidelines on the preparation and appraisal of PPP project proposals in Schedules I and II, and on the preparation and appraisal of PPP project feasibility study reports in Schedules III and IV. This Circular took effect on 18 April 2016. Labor New Circular on Employment Contracts, Labor Disciplines and Material Liabilities Now in Effect Circular No. 47/2015/TT - BLDTBXH (“Circular No. 47”), issued on 16 November 2015 by the Ministry of Labor, Invalids and Social Affairs to implement Decree No. 05/2015/ND-CP on employment agreements, labor disciplines and material liabilities, took effect on 1 January 2016. In this alert, we note a number of important issues which are regulated in Circular No. 47. Form of authorization letter Circular No. 47 provides a sample of authorization letter in case the person who executes employment contract is not the legal representative of the employer, the head of the agency, unit or organization or the family householder. However, Circular No. 47 is silent on the legal consequences if the form is not used. In addition, Circular No. 47 confirms that such authorized person is only entitled to issue disciplinary decisions in the form of reprimand, but not in other types of disciplinary measures. More guidance on the definition of “salary” Circular No. 47 provides more detailed guidance on how to determine salary components in the concept of “salary”, as defined in the Labor Code 2012. “Salary” or “wage”, which are used interchangeably, is an important concept under Vietnam employment and labor law. The concept of salary is used to determine the calculation method of the insurance contribution premiums by both employer and employee, and various employee benefits including overtime. Traditionally, “salary” essentially only included the base salary and excluded various types of allowances and monetary benefits that companies might have in their compensation structure. However, the concept has been recently evolved. Specifically, Labor Code 2012 defines salary components as including (1) salary level for a specific job or title, (2) salary allowances and (3) other supplementary amounts. In addition, the new Law on Social Insurance, which will also take effect on 1 January 2016, provides, among other major changes, that from 1 January 2016 until 31 December 2017, the “salary” used as the base for social insurance contribution will include both the salary and salary allowances; and from 1 January 2018 onwards, the “salary” used as the base for social insurance contribution will include salary, 88 Vietnam salary allowances, and other supplementary amounts. However, in practice, it may be difficult to distinguish allowances and other supplements from other monetary benefits that employers pay to employees. In this sense, Circular No. 47 provides a list of benefits in cash which will be disregarded from the salary formulation such as bonuses, petrol allowances, mobile allowances, and child care allowances. The salary would also exclude overtime payment, extra payment for night work, payment for paid leave and other public holidays as defined in the Labor Code. Employers’ responsibilities in paying severance and/or jobloss allowances in a merger, consolidation, division, separation of enterprises or transfer of ownership or use rights of assets In the case of employment termination as a consequence of a merger, consolidation, division or separation of enterprises, the surviving employer shall have to pay employees either severance or job-loss allowance, depending on the grounds of termination, for both the periods of employment with the surviving employer and the previous employer. In a transfer of ownership or use rights of assets, the succeeding employer is obliged to amend or supplement the existing contracts or execute new employment contracts with employees. In employment termination after the transfer of ownership or use rights of assets, the succeeding employer shall have to pay employees either severance or job-loss allowance, depending on the grounds of termination, for the period of employment with the succeeding employer, plus the severance allowance for the period of employment with the previous employer. Circular No. 47 also provides examples on how to calculate job-loss and severance allowances. Labor discipline The Circular provides that an employer who has fewer than 10 employees is not required to register the Internal Labor Regulations (“ILRs”) with the labor authority to give the ILRs full effect. In the absence of the written ILRs, the employer in this category may agree with the employees on labor discipline and material liabilities in the employment contracts. New Regulations on Management of Foreigners Working in Vietnam On 03 February 2016, the Government issued Decree No. 11/2016/ND-CP guiding a number of articles of the Labor Code on foreigners working in Vietnam (“Decree No. 11”). Decree No. 11 will take effect on 1 April 2016 and replace Decree No. 102/2013/ ND-CP dated 5 September 2016 guiding a number of articles of the Labor Code on foreigners working in Vietnam (“Decree No. 102”) and Resolution No. 47/NQCP of the Government dated 8 July 2014 (“Resolution No. 47”). The Decree proposes major changes, many of which represent positive developments from the viewpoint of the business community; including changes to the conditions, paperwork, timeline for work permit applications and work permit exemptions. Given the significance of the Decree, we would like to bring to your attention the following major changes that may impact your business. 1. Changes to definition of experts / specialists, managers and executive directors Stricter conditions for experts / specialists (“chuyên gia” in Vietnamese) Under Decree No. 102 and Resolution No. 47, “experts” / “specialists” are defined as people who (i) are certified by a relevant foreign authority/organization as an expert, or (ii) possess a fouryear bachelor degree or above, or (iii) have at least five years of working experience relevant to the job position for which the work permit is applied. Decree No. 11 defines “experts” / “specialists” as those who (i) are certified by a relevant foreign authority/ organization as an expert, or (ii) possess a four-year bachelor degree or above and have at least three years of working experience. Decree No. 11 also provides that the Prime Minister may determine some exceptions for the conditions of an expert. Clearer definitions of managers and executive directors (“nhà quản lý”, “giám đốc điều hành” in Vietnamese) The definition of managers is consistent with that provided in the Law on Enterprises. Accordingly, a “manager” includes (a) the “manager” defined by the Law on Enterprises as the manager of the company or manager of private company, who is either an owner of a private company, a general partner, the Chairperson of the Board of members, a member of the Board of members, the company’s President, the Chairperson of the Board of Directors, a member of the Board of Directors, the Director/General Director, or a person holding another managerial position who is entitled to enter into the company’s transactions on behalf of the company according to the company’s charter, or (b) the head or deputy head of the agency Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 89 or organization. An “executive director” is the head and direct manager of units/ departments of organizations or enterprises. 2. Simplified paperwork Simplified documentation required for a work permit application Under current regulations, the health check certificate can be issued in Vietnam or in a foreign country but this certificate must comply with local law. This certificate must be issued within six months prior to the date the application is submitted. However, Decree No. 11 permits a health check certificate to be issued either in Vietnam or in a foreign country, and this certificate does not need to comply with local law. Moreover, Decree No. 11 provides that the health certificate may be issued 12 months prior to the date the application is submitted rather than six months. Criminal record certificates can either be issued in Vietnam or in a foreign country, instead of the existing requirement where a foreigner must obtain a criminal record check in both his or her home country and Vietnam if the foreigner has resided in Vietnam. Fewer documents required for work permit applications under special circumstances This scheme applies to foreigners who (i) currently have an effective work-permit and plan to work for another employer in the same position; or (ii) currently have an effective work-permit but plan to work in a different position with the same employer; or (iii) have an expired work permit and plan to continue working in the same position for the same employer. Depending on each case, the documents may include a request letter, health check certificate, or a criminal record, etc., but, in general, fewer documents than those required for a normal work permit application are needed. 3. Changes in work permit exemption Defined term of work permit exemption certificate While current regulations are silent on the term of a work permit exemption certificate, Decree No. 11 provides that the term of this certificate will not exceed two years. More cases of work permit exemption Decree No. 11 introduces several new circumstances where a foreigner is exempt from work permit requirements. These cases include: • teachers entering Vietnam to conduct research at international schools under the management of foreign diplomatic missions or international organizations in Vietnam; • teachers who are certified by the Ministry of Education and Training entering Vietnam to teach, or to conduct research at Vietnamese educational organizations; • students who are studying at foreign schools/ institutions entering Vietnam pursuant to an internship contract signed with agencies, organizations or enterprises in Vietnam; • family members of staff of foreign diplomatic missions, after being permitted by the Ministry of Foreign Affairs, except otherwise provided by Vietnam’s international treaties; • foreigners holding diplomatic passports entering Vietnam to work for State agencies, political organizations, or socio-political organizations; and • foreigners entering Vietnam to work as manager, executive director, expert or technician for a period of less than 30 days consecutively and the accumulative period of working in Vietnam in a year does not exceed 90 days. Defined cases where permit exemption certificate not required Decree No. 11 provides that all exempt cases must apply for work permit exemption certificate, except for the following: • foreigners entering Vietnam to work as a manager, executive director, expert or technician for a period of less than 30 days and the accumulative period of working in Vietnam in a year does not exceed 90 days; • foreigners entering Vietnam for a period of less than three months to offer services; • foreigners entering Vietnam to solve urgent cases that cannot be solved by Vietnamese experts and foreign experts already in Vietnam, for a period of less than three months. Prior approval for use of foreign labor not required in some exempt cases Decree No. 11 provides that for the above-mentioned exempt cases where an exemption certificate is not required, filing of prior approval for the use of these foreigners is not required either. Prior approval is also not required for the two other cases: (i) foreign students studying in Vietnam working in Vietnam and (ii) foreign students who are studying at foreign schools/ institutions entering Vietnam pursuant to an internship contract signed 90 Vietnam with agencies, organizations or enterprises in Vietnam. 4. Changes in Timeline A work permit can be issued within seven working days from the date of receipt of all required documents, instead of 10 working days as provided under Decree No. 102. In addition, an application to have a work permit re-issued can now be made from 45 to five days prior to is expiration, rather than only 15 to five days prior to the expiration date (as specified under the current regulations). This will provide foreign workers with more flexibility in applying for the re-issuance of their work permits prior to their expiration. Guidelines on working time and rest time for employees doing seasonal manufacturing work and processing goods under orders On 16 December 2015, the Ministry of Labour, Invalids and Social Affairs issued Circular No. 54/2015/TT-BLDTBXH on guidelines on working time and rest time for employees doing seasonal manufacturing work and processing goods under orders. Accordingly, the Circular regulates the sum of standard working hours and overtime working hours in a day; limitations on the standard working hours and overtime working hours by week and month; and the total number of overtime working hours per employee per year. Regarding the sum of standard working hours and overtime working hours in a day, it must not exceed 12 hours; particularly for employees doing extremely hard, hazardous or dangerous work, a workday must not exceed 9 hours. Limitations on the standard working hours and overtime working hours by week and month are as follows: • The sum of standard working hours and overtime working hours in a week must not exceed 64 hours. Employees doing extremely hard, hazardous or dangerous work must not exceed 48 hours. • The sum of overtime working hours in a month must not exceed 32 hours. Employees doing extremely hard, hazardous or dangerous work must not exceed 24 hours. The total number of overtime working hours per employee per year may not exceed 300 hours. The Circular took effect on 19 February 2016 and replaced Circular No. 33/2011/TT-BLDTBXH. Administrative procedures in the sector of labour, wages, and labour relationships under the administrative scope of the Ministry of Labour, Invalids and Social Affairs On 21 December 2015, the Ministry of Labour, Invalids and Social affairs issued Decision No. 1858/ QD-LDTBXH promulgating the administrative procedures in the sector of labour, wages, and labour relationships under its administration scope. The administrative procedures thereof are categorized into 03 levels of authorities, including: (i) central level; (ii) provincial level; and (iii) the district level; as follows: • Central-level authorities are entitled to: grant/renew employee sub-leasing licences, re-grant employee sub-leasing licences that have been lost, burned or damaged, etc. • Provincial-level authorities are entitled to: notify on changes regarding the headquarters, branches, and representative offices of enterprises operating in employee sub-leasing; report on employee sub-leasing operations; register on labour regulations of enterprises; etc. • The district level authorities are entitled to: submit wage scales, wage tables and employee limits of enterprises; resolve rightbased collective labour disputes. This Decision took effect upon signing. Decision approving the National Program on Labour Safety and Hygiene On 05 January 2016, the Prime Minister issued Decision No. 05/ QD-Ttg to approve the National Program on Labour Safety and Hygiene. The Program sets out a number of goals until 2020, including but not limited to: • 5% decrease in fatal occupational accidents on annual basis; • Medical examinations regarding occupational diseases will be provided for at least 50% of labors in workplaces at risk of common occupational diseases; • Annual increase in 2,000 small and medium-sized enterprises applying basic principles of labor safety and hygiene; • All labors suffering from occupational accidents and diseases shall receive treatment and rehabilitation, under current provisions of the law; • All fatal occupational accidents shall be reported, inspected and handled in accordance with the law. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 91 This Decision took effect on the signing. Decision on promulgating the administrative procedures in the sector of foreign labour management under the management scope of the Ministry of Labour, Invalids and Social Affairs. On 6 November 2015, the Ministry of Labour, Invalids and Social Affairs issued Decision No. 1632/ QD-LDTBXH on promulgating the administrative procedures in the sector of foreign labour management under management scope of the Ministry of LabourInvalids and Social Affairs. This Decision took effect on 6 November 2015. Decree providing for regionbased minimum wage levels for employees of enterprises, cooperative unions, cooperatives, cooperative groups, farms, households, individuals, agencies and organizations employing labour under labour contracts. On 14 November 2015, the Government issued Decree No. 122/2015/ND-CP providing for region-based minimum wage levels for employees of enterprises, cooperative unions, cooperatives, cooperative groups, farms, households, individuals, agencies and organizations employing labour under labour contracts The Government has adjusted the region-based minimum wage to about 12%. Accordingly, from January 01, 2016, the region-based minimum wage levels shall be: • Region I: VND3,500,000/month (increasing VND400,000/month) • Region II: VND3,100,000/month (increasing VND350,000/month) • Region III: VND2,700,000/month (increasing VND300,000/month) • Region IV: VND2,400,000/month (increasing VND250,000/month) This Decree took effect on 01 January 2016 and repealed Decree No. 103/2014/ND-CP, dated 11 November 2014, on regionbased minimum wage levels for employees of enterprises, cooperatives, cooperative groups, farms, households, individuals, agencies and organizations employing labour under labour contracts. Circular on policies applicable to redundant employees in the case of re-arrangement of stateowned single member limited liability companies On 22 October 2015, the Ministry of Labour, Invalids and Social Affairs issued Circular No. 44/2015/TT-BLDTBXH guiding the implementation of a number of articles pursuant to Decree No. 63/2015/ND-CP providing for policies applicable to redundant employees in the case of rearrangement of state-owned single member limited liability companies (“SMLLC”)(“Circular No. 44”). Circular No. 44 required companies to provide employment usage plans and also regulates the responsibilities of companies and of Vietnam Social Insurance. Circular No. 44 took effect on 10 December 2015 and repealed Circular No. 38/2010/TTBLDTBXH, dated 24 December 2010, guiding the implementation a number of articles pursuant to Decree No. 91/2010/ND-CP providing for policies applicable to redundant employees in case of re-arrangement of state-owned SMLLCs. Decision promulgating administrative procedures in the labour safety sector On 16 November 2015, the Ministry of Labour, Invalids and Social Affairs issued Decision No. 1683/ QD-LDTBXH on promulgating administrative procedures in the labour safety sector under the management scope of the Ministry of Labour, Invalids and Social Affairs. This Decision took effect on 16 November 2015. 2016 Labor Inspection Campaign with a Focus on the Construction Sector Following its first labor inspection campaign in 2015 focusing on the garment sector, the Ministry of Labor, Invalids and Social Affairs (“MOLISA”) launched its second labor inspection campaign on 21 March 2016, with a focus on the construction sector. This campaign is in cooperation with the Vietnam General Confederation of Labor (“VGCL”) and the Vietnam Chamber of Commerce and Industry (“VCCI”), and is supported by the International Labor Organization (“ILO”) and the Government of the Netherlands. In Vietnam, construction is considered one of the fastest growing areas for job creation, yet also accounts for the largest number of reported fatal occupational accidents. According to MOLISA, the construction sector accounts for over 30% of occupational accidents and almost 40% of work-related fatalities. Therefore, the Government decided to launch the inspection campaign this year with a focus on the construction sector in order to combat this trend. With the slogan, “Labor law compliance for safe construction 92 Vietnam sites”, the objectives of this 2016 campaign is to improve the awareness of employers, workers and the public on labor laws and occupational safety standards for construction, and boost the inspection visits to at least 630 construction enterprises and construction sites across Vietnam from March to November 2016. This campaign also promotes an integrated approach and calls for participation from labor inspectors, trade unions, employers’ organizations, mass media, and general society. The 2016 campaign will focus on following compliance issues: working and rest time; wages; internal occupational safety and health regulations and trainings; personal protective equipment; arrangement of construction site’s working grounds; use of vehicles, machines, scaffoldings, shelves, electricity and electrical appliances; concrete formworks, steel and concrete; welding; and finishing work. Construction enterprises should review and improve their compliance with labor law, especially with regards to occupational safety and hygiene standards as soon as possible. Illegal Dismissal of Employees to Lead to Three Year Imprisonment Effective from 1 July 2016, the new Penal Code imposes severe penalties on illegal dismissal of employees. This new regulation would make employers confront up with tough decisions in termination of employment contract. Specific regulations under the new Penal Code Pursuant to Article 162, the employers who force employees to resign or issue a wrongful decision on dismissal will be subject to (i) a monetary fine of VND10 - 100 million, (ii) a non-custodial reform of one (1) year, or (iii) an imprisonment of between three (3) months and one (1) year if: • Those employers commit the foregoing acts for their own interests or other personal motivation; and • Those employers’ acts lead to a strike or difficulties of the dismissed/ resigned employee or his/her family. More specifically, a monetary punishment of VND 100 – 200 million or imprisonment of one (1) year to three (3) years will be imposed in case of: • Two (2) employees or more; • Woman who is known to be pregnant; • Woman raising a child of less than twelve (12) month old; or • Causing the resigned/dismissed employee to commit a suicide. Liability for illegal dismissal Legal representative/head of unit, organization/family leader/ person directly using labour (hereinafter referred to as “Head”) executing employment contracts is the only one who can issue decision on labour discipline in all forms including dismissal. Others authorized by the Head to conclude employment contracts can issue decision on labour discipline only in form of reprimand. Therefore, the Head who issue the wrongful decision on dismissal shall be liable for these wrongful decision and charged with the criminal penalties. However, it is legally questionable whether Human Resource staffs or any people who involve in labour discipline procedure are jointly and severally liable for such decisions. New Draft Circular Guiding on Foreigners Working in Vietnam In order to guide the implementation of the Government’s Decree No. 11/2016/ ND-CP on foreigners working in Vietnam, the Ministry of Labor, Invalids and Social Affairs of Vietnam (“MOLISA”) has recently released a Draft Circular (“Draft”). Conditions for “service providers pursuant to a contract” and “persons offering services” Under the Draft, “Service providers pursuant to a contract” are defined as foreigners who (i) have worked for an offshore entity which has not had a commercial presence in Vietnam for at least two (2) years (24 months); and (ii) satisfy the conditions as experts/specialists. Concurrently, “Persons offering services” are foreigners who (i) are not located in Vietnam; (ii) do not receive any remuneration from any source in Vietnam; (iii) participate in activities related to the representation of a service provider as to negotiate the sale of its services as long as these foreigners do not directly sell services of the service provider to the public or participate in providing these services. Work permit withdrawal process The Draft also sets out clearer guidance on the process for work permit withdrawal. Withdrawal due to expiration: • Within fifteen (15) days from the expiration date, the employer is able to withdraw and submit together with a checklist of the withdrawn work permits to the Department of Labor, Invalids and Social Affairs (“DOLISA”). • Within five (5) days from receiving the expired work permits and the relevant Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 93 checklist, the competent authority shall provide a written affirmation of work permit withdrawal for the employer. Withdrawal due to violations of regulations on foreign employees’ management: • To commence the withdrawal process on this basis, there must be written recommendations and a report on violations issued by the competent authorities. • Within ten (10) days from the date of receiving the written recommendations and report on violations, the competent authorities have the right to consider, decide and provide notice to the employer regarding the validity of their attempt to withdraw the given work permit(s); • Within fifteen (15) days from the date of receiving the decision on withdrawal, employers may withdraw the work permits and commence a process identical to the withdrawal due to expiration process. Quarterly report Quarterly, prior to the 5th day of the first month of the next quarter, the employer must submit a report to a competent authority on the using foreign employees situation. On a separate note, this Draft also provides seventeen (17) templates for its implementation. New Draft Circular Guiding on the List of Jobs with Strict Requirements on Occupational Safety and Hygiene The Ministry of Labor, Invalids and Social Affairs (hereinafter referred to as “MOLISA”) has recently revealed on its official website a Draft Circular guiding on the list of jobs with strict requirements on occupational safety and hygiene (“Draft Circular”). Previously, a list of jobs with strict requirements on occupational safety and hygiene has already been issued under Circular No. 27/2013/TT-BLDTBXH by MOLISA (“Circular 27”). The new Draft provides for a new list which is similar to that of Circular 27, including 15 groups of jobs. According to this Draft Circular, in case employees are taking jobs included in the foregoing list, employers must ensure the participation of such employees to occupational and safety hygiene training in accordance with relevant laws and regulations. Notably, this Draft Circular includes a new point, wherein the employer must grant “safety cards” to employees who undertake jobs with strict requirements on occupational safety and hygiene as aforesaid. The procedures and other relevant information in relation to the issuance of such “safety cards” is not specifically regulated under this Draft Circular. New regulations on payment of sickness, maternity, and convalescent allowances via bank accounts of employees in Ho Chi Minh City On 10 March 2016, the Ho Chi Minh City Social Insurance Department issued Official Letter No. 649/BHXH-CD on the payment of sickness, maternity, and convalescent allowances via the bank accounts of employees. In order for employees to receive allowances within the time limit prescribed under law, the Ho Chi Minh City Social Insurance Department has decided to pay sickness, maternity, convalescent allowances, as well as other allowances, via the ATM accounts of employees who are contributing to social insurance in Ho Chi Minh City. Please note the following: employers paying salary via employee bank accounts must provide the employees’ account numbers and the names of banks (including branch names) to the Social Insurance Department where the social insurance premiums are collected. Employers having not yet paid salary via bank accounts must suggest that employees take initiative to open bank accounts and provide the above information to the Social Insurance Department. The Social Insurance Department shall pay total costs for opening the bank accounts if both employers and employees refuse to pay this fee. When recruiting new employees, apart from information required by law, employees must provide employers with information on account numbers and bank names (including branch names) to the Social Insurance Department as a basis for subsequent payment of social insurance allowances. New regulation promulgated to simplify conditions for foreigners to work in foreign language institutions The Prime Minister recently issued Official Dispatch No. 619/TTg-KGVX (“Dispatch No. 619”), dated 12 April 2016, on the implementation of Decree No. 11/2016/ND-CP regarding foreigners working in Vietnam. According to Decree No. 11/2016/ND-CP, experts must have: (i) a university degree (or an equivalent or higher degree); and (ii) at least three (3) years of relevant working experience in order to apply for a work permit in Vietnam. 94 Vietnam However, pursuant to Dispatch No. 619, there is an exception applicable to foreigners entering Vietnam to work in the field of education, specifically. Accordingly, foreigners who satisfy the following conditions shall be allowed to apply for a work permit to work in foreign language institutions and preschool education institutions: i. Those possessing a college degree (or an equivalent or higher degree); and ii. Those who have been trained and educated in the particular field of education in line with their specialty in the aforementioned education institutions. Given the current situation wherein the number of foreign language institutions is increasingly growing in Vietnam, the foregoing regulation may make acquiring a work permit for foreign teachers more easily attainable in the upcoming future. New draft circular released on foreigners working in Vietnam In order to guide the implementation of Government Decree No. 11/2016/ND-CP on foreigners working in Vietnam, the Ministry of Labor, Invalids and Social Affairs of Vietnam (“MOLISA”) has recently released a Draft Circular (“Draft”). Some notable points of the Draft are outlined below: Clarifications regarding “service providers pursuant to a contract” and “persons offering services” Pursuant to the Draft, “service providers pursuant to a contract” are defined as foreigners who (i) have worked for an offshore entity which has not had a commercial presence in Vietnam for at least two (2) years; and (ii) satisfactorily demonstrate their status as experts/specialists. Concurrently, “persons offering services” are foreigners who (i) are not located in Vietnam; (ii) do not receive any remuneration from any source in Vietnam; (iii) participate in activities related to the representation of a service provider as to negotiate the sale of its services as long as these foreigners do not directly sell services of the service provider to the public or participate in providing these services. Work permit withdrawal process for employers The Draft also sets out clearer guidelines on the process of work permit withdrawal. • Withdrawal due to expiration: - Within fifteen (15) days from the expiration date, an employer is able to withdraw and submit the withdrawn work permits together with a relevant checklist to the Department of Labor, Invalids and Social Affairs (“DOLISA”). - Within five (5) days from receiving the expired work permits and the relevant checklist, the competent authority shall provide a written affirmation of work permit withdrawal to the employer. • Withdrawal due to violations of regulations pertaining to foreign employees’ management: - To commence the withdrawal process on this basis, there must be written recommendations and a report on violations issued by the competent authorities. - Within ten (10) days from the date of receiving the written recommendations and report on violations, the competent authorities have the right to consider, decide and provide notice to the employer regarding the validity of their attempt to withdraw the given work permit(s); - Within fifteen (15) days from the date of receiving the decision on withdrawal, employers may withdraw the work permits and commence a process identical to that of withdrawal due to expiration. Quarterly report Quarterly, prior to the fifth day of the first month of the next quarter, the employer must submit a report to a competent authority on the foreign employees’ situation(s). On a separate note, this Draft also provides seventeen (17) templates for its implementation. New basic wage level for cadres, civil servants, public employees and the armed forces. On 26 May 2016, the Government promulgated Decree No. 57/2016/ ND-CP providing a new basic wage level for cadres, civil servants, public employees and the armed forces. The subjects of application for this Decree are: 1. Cadres and civil servants in the Central Government to District levels as specified in Clause 1 and Clause 2 of Article 4, Law No. 22/2008/QH12 on cadres and civil servants; 2. Cadres and civil servants at the borough level as specified in Clause 3 Article 4, Law No. 22/2008/QH12 on cadres and civil servants; Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 95 3. Public employees in public nonbusiness units as specified in Law No. 58/2010/QH12 on public employees; 4. Workers working under labor contracts within a system of wage ratings following Decree No. 204/2004/ND-CP, promulgated on 14 November 2004, regarding the wage system for cadres, civil servants, public employees and the armed forces; 5. Workers working within payroll quotas for organizations whose operational expenditure is provided by the governmental budget as specified in Decree No. 45/2010/ND-CP, promulgated on 21 April 2010, regarding the organization, operation and management of organizations; 6. Officers, professional soldiers, non-commissioned officers, soldiers on duty and workers and defense officials working contracts under the Vietnamese People’s Army; 7. Officers and non-commissioned officers receiving retirement wages, non-commissioned officers and soldiers on duty and police officers under working contracts with the People’s Police; 8. Workers working in important organizations; and 9. Undedicated workers at the borough level, villages and residential quarters. Decree No. 57 stated that from May 2016 onwards, the basic wage will be raised to VND1,210,000 per month. This Decree takes effect on 15 July 2016 and replaces Decree No. 66/2013/ND-CP and Decree No. 17/2015/ND-CP. Providing for labor management, wages and bonuses for employees in 100% state-owned single member limited liability companies. On 13 June 2016 the Government promulgated Decree No. 51/2016/ ND-CP (“Decree No. 51”) providing for labor management, wages and bonuses for employees in 100% state-owned single member limited liability companies, replacing Decree No. 50/2013/NDCP. Decree No. 51 states that enterprises will need to create new Labor Plans annually and must hire and use labor according to such annual plan. Within the plan, the increase in the total amount of workers every year must not exceed 5% of the real amount of workers from the previous year. Parent companies are required to send their Labor Plan to the Ministry of Labor, Invalids and Social Affairs for summarization and supervision. Decree No. 51 also stipulates that in circumstances where there is an excess in the number of workers hired or the hiring was not executed in accordance with the Labor Plan, the General Director or Director shall have to take responsibility in front of the Council members or the Company President; the Council members or Company President are to take responsibility in front of the organization representing the owner, and shall not be eligible to receive any bonus or pay raise and shall have their time until the next pay rise prolonged with reduced wages. Decree No. 51 also provides regulations for determining the implementation of wage funds in Article 6 as well as for wage distribution in Article 7, among others. Decree No. 51 takes effect on 1 August 2016 and replace Decree No. 50/2013/ND-CP. New regulations on wages, remunerations and bonuses for managers of 100% state-owned single member limited liability companies. Decree No. 52/2016/ND-CP (“Decree No. 52”) was issued by the Government on 13 June 2016 providing for wages, remunerations and bonuses for dedicated managers in 100% stateowned single member limited liability companies. This Decree shall replace Decree No. 51/2013/ ND-CP upon taking effect. Decree No. 52 provides regulations on determining and paying wages, remunerations and bonuses for individuals holding the positions of Company President and Chief Director or Director simultaneously. Accordingly, in such circumstances, the individual shall only receive the wage for the highest position. The Decree further provides new regulations on determining planned wage funds and planned remuneration funds in Article 5. In addition, Decree No. 52 stipulates that in cases where realized profit (after excluding all objective factors) exceeds planned profit, each of the dedicated managers shall receive a maximum 1% wage increase for every 1% of excess profits, but the extra profit shall not exceed 20% of the planned average wage. Decree No. 52 takes effect on 1 August 2016 and replace Decree No. 51/2013/ND-CP. 96 Vietnam New regulations on labor, wages, remunerations and bonuses applicable to companies with controlling shares and contributed capital owned by the State. On 13 June 2016, the Government issued Decree No. 53/2016/ND-CP (“Decree No. 53”) on providing for labor, wages, remunerations and bonuses applicable to companies with controlling shares or contributed capital owned by the State. Regarding labor • Companies shall have to build an annual Labor Plan based on their Production Plan, Business Plan and other factors. The hiring of new labor shall be based on the annual Labor Plan; • The annual Labor Plan shall have to be approved by the Board of Directors or Member’s Council before being implemented; and • In circumstances where there is an excess in labor recruitment leading to forced cancellation of contracts or an increase in said enterprise’s costs, the person responsible for recruiting labor shall have to take responsibility in front of the enterprise’s Board of Directors or Member’s Council. Regarding labor wages • For enterprises producing profit, the planned average wage shall be determined based on the change in labor productivity and the implemented wage fund of the previous year. The increase in average wage shall not exceed the increase in average labor productivity; and • For enterprises producing no profit or producing at a loss (apart from objective situations listed in Article 6 of this Decree), the planned average wage shall be determined based on the average wage of the labor contracts and wages for working extra hours. Regarding the wages and remunerations for the companies’ dedicated managers • The planned wage fund for companies’ dedicated managers shall be determined based on the number of dedicated managers within the company and the planned average wage; • Planned average wages for companies’ dedicated managers shall be determined based on the implemented average wages of the previous year and the planned profit of the company under the condition that changes in wage levels must not damage the benefits of workers and companies; and In case the realized profit exceeds planned profit, companies’ dedicated managers shall have their wage increase by 2% for every 1% of excess profits, but wages shall not be higher than the maximum of 20% of the planned average wage. Regarding bonuses and benefits Companies shall determine the bonuses and benefits for employees and companies’ managers based on their annual profit after completing their duties with the government and their respective partners. Decree No. 53 also provides regulations on determining bonus funds and benefits funds in which companies shall not use money from employees’ bonus funds to reward managers. This Decree takes effect on 1 August 2016. Logistics Official Dispatch Issued to Remove Restrictions on Foreign Ownership in the Field of Logistics On 25 February 2016, the People’s Committee of Ho Chi Minh City issued Official Dispatch No. 735/ UBND-DT to remove restrictions on foreign ownership in the field of logistics. Accordingly, the licensing authorities of Ho Chi Minh City (i.e., the Department of Planning and Investment, the Ho Chi Minh City Export Processing and Industrial Zones Authority, the Management Authority for Southern Area Development, Saigon Hi-Tech Park, etc.) can now issue investment registration certificates to 100% foreign-owned enterprises operating in freight transport agency services (CPC 748), in order to be consistent with Vietnam’s WTO Commitments. Other auxiliary services (CPC749) shall be subject to the Prime Minister’s pending instructions. Previously, the People’s Committee of Ho Chi Minh City issued Official Dispatch No. 6613/VP-DT on 18 August 2014 to instruct the licensing authorities of Ho Chi Minh City to suspend the issuance or amendment of investment certificates or investment licenses for 100% foreign-owned enterprises operating in the logistics business until further instruction from the Prime Minister. Penal Code Important Changes under the New Penal Code On 27 November 2015, the National Assembly adopted the new Penal Code (the “New Penal Code”). The New Penal Code was intended to take effect on 1 July 2016 and repeal the current Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 97 Penal Code, which was issued in 1999 and amended in 2009 (the “Current Penal Code”). However, following widespread concerns on multiple issues, the entry into effect was suspended pending reconsideration of some key changes. The New Penal Code brings about significant changes to various aspects of the Current Penal Code, the most notable of which are set forth in the following paragraphs. 1. Enterprises can now be subject to criminal liability for certain crimes While at present, only individuals are subject to criminal sanctions under the Current Penal Code, the New Penal Code introduced a fundamental change to the criminal laws of Vietnam; commercial legal persons can now be subject to criminal liability for certain crimes. Under the new Civil Code, which will take effect on 1 July 2016, commercial legal persons include enterprises and other organizations with a commercial purpose. That being said, criminal sanctions applied to legal persons are not identical to that applied to individuals. In particular, the penalties applied to legal persons are mainly monetary fines, forcible termination or suspension of business, ban from conducting certain business activities and ban from raising capital, for one to three years. The application of criminal liability for enterprises does not preclude the liability of relevant individuals in corresponding enterprises. 2. Removal of “Illegally Conducting Business” offence The controversial offence of “Illegally Conducting Business” is finally removed from the New Penal Code. Unless a business activity violates one of the specific business-related offences of the Penal Code (such as tax evasion, fraud in social insurance, insider trading, etc.), other violations of the law in the business arena will likely lead to administrative sanctions only. However, for credit institutions and branches of foreign banks, among others, the act of conducting operations or business activities without the approval or necessary licenses from competent authorities will be subject to criminal liability under Art. 206. 3. Certain corruption-related offences also apply in private sector The New Penal Code extends the application of certain corruptionrelated offences to those working in the private sector. These offences are (i) embezzlement, (ii) receiving bribe, (iii) giving bribe, and (iv) bribery brokerage. In regards to giving bribe, the New Penal Code also criminalizes the giving of bribe to foreign officials and officials of public international organizations. The general threshold of the amount of consideration to constitute a bribe remains VND2 million (approx. USD95). 4. New offences pertaining to insurance and competition The New Penal Code provides a number of new offences, such as, fraud in insurance business, health insurance and social insurance. For instance, those who use false information to refuse paying insurance may be charged with “Fraud in insurance business”.31 In addition, those who submit false information to claim more insurance benefits may be charged with “social insurance fraud” or “health insurance 31 Article 21. fraud”.32 Notably, employers who fail to fully pay social or health insurance for their employees may be charged with “Evasion of social insurance, health insurance and unemployment insurance payment for its employees”.33 In addition to the ones provided above, a new provision that criminalizes anti-competitive agreements, applicable to individuals and commercial legal persons, is introduced.34 The applicable sanctions for this offence are severe. Specifically, possible penalties for individuals include a fine up to VND3 billion, 5 years imprisonment plus a monetary fine, and ban from holding positions or practicing certain activities up to 5 years. For legal persons, applicable penalties include a fine up to VND5 billion, suspension of business up to 2 years plus a monetary fine, and ban from doing certain businesses or raising capital. Press New Law on the Press promulgated On 5 April 2016, the National Assembly promulgated Law No. 103/2016/QH13 (“Law No. 103”) on the Press. Article 9 of Law No. 103 provides a detailed list of prohibited activities in journalism, such as publishing a criminal accusation before the court reaches a final verdict, publishing information which would adversely affect children’s normal physical and/or mental development, publishing content which would encourage superstition, publishing information on mysterious incidents which would cause 32 Articles 214 and 215. 33 Article 216. 34 Article 217. 98 Vietnam public panic and/or affect public health, social order and safety, and other provisions. Furthermore, preventing the publication of legal press content as well as threatening and/or preventing the legal operations of journalists are also prohibited acts under Law No. 103. These provisions are consistent with the Criminal Code, the Civil Code and many other laws, ensuring practical enforceability. Press agencies which publish prohibited content as laid out in Article 9 will be subject to particularly serious consequences, including revocation of their press operation certificate and certificate for extra publication. Articles 11 and 12 specify citizens’ rights to freedom of speech and freedom of the press. Particularly, citizens have the right to create press articles, provide information to the press, give feedback on information from the press, question information presented by the press, collaborate with press agencies to produce, print and publish printed press materials, contribute opinions, criticize, make suggestions, make complaints and denounce the press against organizations sponsored by the Party, Government agencies, socio-political organizations, political-social-professional organizations, social organizations, socio-professional organizations and other organizations and individuals. Article 14 provides that the entities qualified to establish science magazines include university education institutions in accordance with the Law on Education, science research and technology development organizations organized in the form of academies and institutes in accordance with the Law on Science and Technology and hospitals at the provincial level or higher. Law No. 103 deems press agencies as income-generating administration agencies and stipulates their legal incomes in Article 21. Many articles in Law No. 103 highlight professional ethics as a requirement for journalism. Serious consequences resulting from breaching professional ethics shall lead to the revocation of press cards as stipulated in Article 28. The Vietnam Journalists Association has the duty of issuing and organizing the implementation of the provisions on professional ethics which journalists are obliged to comply with. Article 37 allows press agencies to cooperate with other press agencies, legal persons and individuals with registered businesses related to cooperating fields in accordance with the law. The maximum duration allowed for cooperating programs is limited to 30% for audio and visual channels serving necessary political, informative and/or propaganda purposes. The cooperating content must comply with the laws of Vietnam and the leaders of the press agencies are legally responsible for all cooperating activities in the field of press in accordance with the law. In addition to the provisions of the current Laws on the Press, Article 38 of Law No. 103 specifies the responsibility of relevant agencies, organizations and persons to provide information to the press and the information which they are permitted to refuse to provide. Press agencies and journalists have rights and obligations to refuse to reveal the identities of those who provide information unless there are written requests from the Procurator of the People’s Procuracy and/or the Chief Justice of the People’s Court at the provincial level or higher, and if the information is essential for investigating or adjudicating on particularly serious crimes. The People’s Procuracy and the Chief Justice of the People’s Court at the provincial level or higher are obliged to organize protection for the providers of information when their identities are revealed. Detailed regulations on content correction can be found in Article 42, which provides specific content correction guidelines for press types. Electronic press, in addition to publishing corrections and apologies, is required to remove inaccurate content. Other press agencies and electronic websites re-publishing the inaccurate content also have to re-publish corrections and apologies. Law No. 103 codifies provisions and Government decrees and supplements new provisions to govern press operations. Particularly, the new provisions stipulate Governmental policies on developing the press, changes in press agency of management agencies, cooperative operations between Vietnam and foreign press agencies as well as foreign press operations, representative agencies and organizations in Vietnam and content protection of audio, visual and electronic press organizations. Law No. 103 takes effect on 1 January 2017 and replaces the previous Law on the Press dated 28 December 1989 and Law No. 12/1999/QH10. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 99 Real Estate Formulation, management and use of information systems for the housing and real estate market On 12 November 2015, the Government issued Decree No. 117/2015/ND-CP (“Decree No. 117”) on the establishment, management and use of information systems regarding the housing and real estate market (“information systems”). This Decree also provides on the responsibility and authority of agencies, organizations, and individuals in the establishment, management and use of information systems. Decree No. 117 provides a list of related forms in its appendix. Under this Decree, information systems comprise of the following: (i) databases on the housing and real estate market; (ii) information technology infrastructure regarding the housing and real estate market; and (iii) management and operation software systems. Databases on the housing and the real estate market may be used via the internet; electronic information pages prescribed by management agencies; specialized networks; by request; and by contracts between management agencies and data users as prescribed. Prohibited acts and methods of handling violations in the establishment, management and use of information systems Decree No. 117 prohibits the following acts: (a) supplying information not as prescribed in this Decree; (b) falsifying, damaging and losing information and data about the housing and real estate market; (c) illegally seizing, destroying and/or damaging information and data about the housing and real estate market; (d) exploiting and using information about the housing and real estate market in opposition to provisions set out in this Decree and other legal provisions; and (e) obstructing the exploitation and use of information about the housing and real estate market. With regards to the handling of violations, agencies, organizations, and individuals who have committed the aforementioned regulatory breaches, depending on nature and severity of the violations, shall be disciplined and will face penalties for administrative violations35 or be liable for criminal prosecution according to law. Responsibility of real estate trading floor, real estate organisations and investors Under Decree No. 117, real estate trading floors, real estate organizations and investors shall provide information about transaction amounts and prices on a monthly basis. Investors must provide the following information on a quarterly basis: the number of projects and developments; the number of individual types of real estate products of such projects; and demands for individual types of real estate products according to statistics and forecasts to the Department of Construction. This Decree took effect on 1 January 2016. 35 Decree 121/2013/ND-CP dated 09 October 2013 of the Government on regulations on sanction of administrative violation in construction activities; realestate business; operation, production and business of building materials; management of technical infrastructure; management of housing and office development. Regulations on the development and management of social housing The Government issued Decree No. 100/2015/ND-CP on 20 October 2015 on the development and management of social housing. Accordingly, principles for determination of land areas for social housing development shall be decided by the provincial-level People’s Committees in respect to local demand. Land area and information about the areas for social housing development must be publicly posted on the web portal or the People’s Committee and housing authority of the province in accordance with regulations of the laws on land and housing. The repurposing of adjacent garden land and other agricultural land for social housing development by organizations shall be decided by the People’s Committee of the province; for land of households and individuals, the People’s Committee of the relevant district shall decide. The use of land for social housing development must comply with urban planning, landuse planning, and planning for rural residential areas as approved by the competent authority, and the license for construction issued by a competent authority. If social housing takes the form of apartment buildings, the apartments must be designed and built in accordance with construction standards and regulations; the area of each apartment is to be from 25m² to 70m² and conformable with the construction planning approved by a competent authority. If social houses are row houses, the area of each apartment must not exceed 70m² and land use ratio must comply with the construction 100 Vietnam plan as approved by a competent authority. In addition, this Decree also regulates principles for granting loans, purchases, leases, or lease purchases of social housing and incentives for investors in social housing projects. This Decree took effect on 10 December 2015, replacing Decree No. 188/2013/ND-CP. Renovation and reconstruction of condominiums The Government issued Decree No. 101/2015/ND-CP, dated 20 October 2015 on renovation and reconstruction of condominiums. The application and procedure for approval for a renovation/ reconstruction project shall comply with the regulations of the laws on investment, housing and other relevant laws. The development, appraisal, approval and adjustment to planning in the areas of renovation and reconstruction of apartment buildings shall comply with regulations of laws on urban planning and laws on construction. When a real estate enterprise acts as the investor of a renovation/ reconstruction investment project, it may obtain funds from: a. The equity of the investor; b. Capital from capital contribution, investment cooperation, business cooperation, joint-ventures and associations of organizations, households and individuals; c. Payments for apartment lease/ rent and/or purchase of off-theplan housing in the remaining area (after relocation) and business areas (if any) within the scope of the project; d. Loans granted by credit institutions and financial institutions operating in Vietnam; e. Loans granted by housing development funds and other local funding. In case an owner receiving a new apartment must pay for the difference in area, he/she shall be entitled to take loans from a credit institution, a financial institution in Vietnam, a housing development fund, and/or other funding of the locality (if any) under regulations of laws on credit and laws on finance. This Decree took effect on 10 December 2015 and replaced Resolution No. 34/2007/NQ-CP. Registration fee for land purchased by auction On 5 May 2016, the General Department of Taxation issued Official Letter No. 1871/TCTCS to answer questions on the registration fees applicable to land use rights purchased via auction. According to Official Letter No. 1871, for houses bought under lawful auction, the price for calculating the registration fee will be the actual auction winning price written on the sale invoice. In of the event that the actual auction winning price cannot be determined, the local Department of Taxation may cooperate with the local People’s Committee and direct the authorities to determine the auction winning price of each parcel of land in order to calculate the registration fee. Science & Technology Regulations on the importation of used machines, equipment and technology lines The Ministry of Science and Technology issued Circular No. 23/2015/TT-BKHCN on 13 November 2015 providing regulations on the importation of used machines, equipment and technology lines. Accordingly, used equipment may be imported if it satisfies the following criteria a. Its age does not exceed 10 years; b. It is manufactured in accordance with National Technical Regulations (“QCVN”) or the Standards of Vietnam (“TCVN”) or the standards of G7 countries with regard to safety, energy efficiency, and environmental protection. In regards to used equipment of investment projects, the following requirements must be met: a. The project is subject to issuance of a decision on investment policies; b. The project is subject to issuance of an investment registration certificate, regardless of a decision on investment policies. If necessary, competent authorities may seek opinions from an agency that is conversant with the technology of the used equipment before deciding the investment policies or issuing the investment registration certificate. This Circular also stipulates on documentation as well as procedures for importing and inspecting used equipment. This Circular takes effect on 1 July 2016 and replaces Circular No. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 101 20/2014/TT-BKHCN, Notification No. 2527/TB-BKHCN, dated 6 September 2012. Detailed guidelines on the sanctioning of administrative violations in scientific and technological activities and technology transfers The Ministry of Science & Technology issued Circular No. 20/2015/TT-BKHCN on 05 November 2015 detailing and guiding the implementation of Decree No. 93/2014/ND-CP on the sanctioning of administrative violations in scientific and technological activities and technology transfers. Some notable provisions are as follows: As to the violations against the regulations on registration of results of scientific and technological tasks funded by the State budget, the act of “failing to register the result of scientific and technological tasks funded by the State budget according to the regulations by regulatory agencies” is clarified as the act performed by the organization managing the scientific and technological tasks thereof, wherein that organization does not register the results of those tasks within 30 days of their official inspection. With regard to the violations against regulations on scientific and technological activities, the term “committed time” in an act of “performing a scientific and technological task funded by the State budget in a period exceeding the committed time without approval from the State management agency that assigned the task” is defined as the prescribed time in the assignment decision of the State agency or scientific and technological contract. In respect to the violations against regulations on the assessment of public scientific and technological organizations, the act of “conducting assessment with unconformable methods and criteria” is clarified as an act performed by the dependent organization entitled to assess public scientific and technological organizations for the purpose of serving the State administration, wherein the organization thereof fails to comply with the prescribed methods and criteria of assessment as regulated in Circular No. 38/2014/TT-BKHCN on the appraisal of scientific and technological organizations. This Circular took effect on 20 December 2015. Securities Circular on securities practice On 03 December 2015, the Ministry of Finance promulgated Circular No. 197/2015/TT-BTC providing for standards of securities practice (“Circular No. 197”). Securities practice certificates are categorized into the three following types: securities brokerage certificates, financial analysis certificates and fund management certificates. A securities business practice is valid if the certificate holder is employed by a securities company, a securities investment company or a fund management company, that has been notified to the State Securities Commission of Vietnam. Securities practice certificates carry an indefinite term, unless revoked in accordance with Article 80 of the Securities Law. Regarding the principles of securities practice, each of the above mentioned certificate holders can practice in different businesses as follows: • Securities brokerage certificate holders can practice securities brokerage and securities investment consultancy; • Financial analysis certificate holders can practice securities brokerage, securities investment consultancy, securities dealing and securities underwriting; • Fund management certificate holders can practice securities brokerage, securities investment consultancy, securities dealing, securities underwriting, securities portfolio management and securities investment funds. Further, if holders of one of the above mentioned certificates also hold another professional derivative securities and derivative securities market certificate, they can practice in derivative securities-related businesses at a securities business organization. Circular No. 197 also regulates the responsibilities of securities business practitioners and organizations employing securities business practitioners. Circular No. 197 took effect on 25 January 2016, superseding Decision No. 15/2008/QD-BTC of the Ministry of Finance on the regulation on securities business practice and Circular No. 147/2012/TT-BTC of the Ministry of Finance on amendments and supplementations to Decision No. 15/2008/QD-BTC. 102 Vietnam Non-resident foreign organizations must open VND capital accounts for securities issuance in Vietnam Circular No. 40/2015/TTNHNN dated 31 December 2015 regulating the opening and use of securities issuance capital account denominated in VND (“SICA”) for securities issuance in Vietnam by non-resident foreign organizations.. Once permitted to issue securities in Vietnam, the foreign organization must open a capital account to conduct collection and spending transactions. When there is a change of credit institution, such capital account must be closed and the remainder must be transferred to another account opened at another licensed credit institution. The reporting regime is similar to provisions under Circular No. 39/2015/TT-NHNN. This Circular took effect on 1 March 2016. Organizations must open foreign-currency capital accounts for securities issuance overseas in foreign currency Circular No. 39/2015/TT-NHNN dated 31 December 2015 regulating the opening and use of securities issuance capital accounts ("SICA") denominated in foreign currency for securities issuance overseas by resident organizations. Prior to registration for securities issuance overseas, the organization in question must open a foreign currency capital account to conduct collections and spending transactions related to the securities issuance at licensed credit institutions providing services of foreign exchange. When there is a change of credit institution, the opened capital account must be closed and the remainder must be transferred to another account opened at another licensed credit institution. After the closing or opening of a foreign currency capital account, the credit institution when opening or closing a foreign currency capital account must send a report to the State Bank of Vietnam regarding the status of such capital account pursuant to the form attached in Annex 1 of Circular 39 by the 12th of the following month. Credit institutions are to send reports to the State Bank of Vietnam on a monthly basis on the collection and spending activities with regards to the foreign currency capital account of the issuing organization pursuant to the form attached in Annex 2. This Circular took effect on 1 March 2016. Circular on listing securities on stock exchanges On 18 December 2015, the Ministry of Finance (“MOF”) issued Circular No. 202/2015/TT-BTC giving guidance on listing securities on stock exchanges (“Circular No. 202”). Circular No. 202 details conditions, dossier standards, procedures for listing, listing adjustments, and re-listing securities on stock exchanges. Circular No. 202 regulated conditions for listing securities of consolidating companies and merging companies on the stock exchanges of Hanoi and Ho Chi Minh City. Registration dossiers for listing securities on stock exchanges comprises of (i) a registration letter for listing stocks, bonds, public investment fund certificates, and stocks of securities investment companies as prescribed in Annex 1 of this Circular; (ii) prospectus of listing stocks/bonds, investment fund certificates, and stocks of securities investment companies on stock exchanges as prescribed in Annexes 2, 3, and 4 of this Circular. Mandatory Delisting For circumstances in which securities must be delisted as regulated in Decree No. 58/2012/ ND-CP and amended by Decree No. 60/2015/ND-CP, stock exchanges must notify listing organizations and publish information when it is recognized that listed securities are likely to be delisted. In the case of mandatory delisting, stock exchanges must issue a decision to delist securities and publish information to the market. Delisted securities can continue their transaction for 01 month after the date of issuance of the Decision. Voluntary Delisting Organizations that register to delist securities will submit an application dossier to request that securities be delisted as prescribed in Decree No. 58/2012/ ND-CP and the settlement plan for the rights and benefits of shareholders to the stock exchanges. Within 15 working days of the date of receipt of a valid dossier, the stock exchanges shall issue a decision providing its approval of delisting securities. Re-registration for listing securities Organizations having delisting securities can only re-register for listing securities after 12 months of the date of delisting securities if all requirements are met as stipulated in Decree No. 58/2012/ND-CP and amended by Decree No. 60/2015/ ND-CP. This Circular took effect on 1 March 2016 and repealed Circular No. 73/2013/TT-BTC dated 29 May Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 103 2013, guiding articles regarding securities in Decree No. 58/2012/ ND-CP giving guidance on the Securities Law and the Law amending and supplementing Securities Law. Circular on trading on the securities market On 21 December 2015, the Ministry of Finance issued Circular No. 203/2015/TT-BTC guiding trading on the securities market (“Circular No. 203”). This Circular details listed securities trading and securities registered for trading on stock exchanges (“SE”). Trading on the securities market comprises of: margin trading, intraday trading, buy-in sell-out trading, treasury shares trading and market making trading. The SE holds securities trading by the order matching method and by the put-through trading method. a. The order matching method on the trading system must ensure the principles of price priority and time priority; b. The put-through trading method on the trading system of the SE is conducted in accordance with SE rules. Securities trading account An investor must open a securities trading account with a securities company in order to conduct securities trading on the SE, and is liable to provide complete and accurate client identification information when opening such account. Trading and making payments for securities transactions An investor is permitted to place a sell order for the quantity of securities available in its depository account on a trading day plus securities pending settlement. Except for margin trading and intraday trading, an investor is only permitted to place a buy order when he/she has a sufficient monetary escrow deposit in a securities trading account. Promulgation of 28 administrative procedures for public offering of securities on the security market On 14 April 2016, the Ministry of Finance (“MOF”) issued Decision No. 820/QD-BTC promulgating administrative procedures for public offering of securities on the security market. Twenty three (23) of these administrative procedures under this Decision replace the administrative procedures as prescribed in Decision No. 1836/ QD-BTC dated 5 August 2013 by the MOF on announcing administrative procedures in the field of securities under the MOF’s scope of management. This Decision also provides two (02) administrative procedures which abolish the administrative procedures prescribed in Decision No. 2854/QD-BTC dated 9 November 2012. This Decision took effect on 15 December 2015. Decision promulgating 06 administrative procedures for listing securities on the security market On 24 February 2016, the Ministry of Finance issued Decision No. 299/QD-BTC promulgating administrative procedures for listing securities on the security market (enclosed with Appendix). One of the administrative procedures promulgated by this Decision replaces the administrative procedure on registration for listing on the stock exchange as prescribed in Decision No. 1836/QD-BTC dated 05 August 2013 on administrative procedures in the field of securities under the scope of management of the Ministry of Finance. This Decision took effect on 1 March 2016. Prescribing rates, collection, remittance, management and use of charges for securities operations to be applied at the Stock Exchanges and the Vietnam Securities Depository Centre. On 26 April 2016, the Ministry of Finance issued Circular No. 65/2016/TT-BTC providing instructions on the collection and remittance of charges at the Stock Exchanges (“SE”) and the Vietnam Securities Depository (“VSD”). The Circular specifies the calculation of the listed charges and other guidelines for respective charges for businesses and individuals as well as the SE. i. The collection and remittance of charges at the SE: In the case where businesses and organizations re-register as new SE members, charges on managing SE membership, maintaining connection, and utilizing terminal equipment will remain similar to charges for new members. In the case where the trading members whose trading or trading activities are stopped or suspended or whose online connection is stopped extending to the subsequent year without termination of their membership, the trading members shall have to pay the trading member management fee, the periodical connection maintenance fee or the terminal equipment use fee of the subsequent year. If membership has been terminated, then the 104 Vietnam trading member would not be subject to the aforementioned fees. ii. Designated time to collect, submit, and refund charges: Organizations which are members of SE and VSD and are being listed on SE shall pay the trading member management fee, the listing management fee, the periodical connection maintenance fee or the terminal equipment use fee before 31 January of each year to SE and VSD. Organizations that have recently registered to be the members of SE and VSD and registered their listing are required to pay the trading member management fee, the listing management fee, the periodical connection maintenance fee or the terminal equipment use fee within 05 working days after the membership and listing has been duly approved. The SE and VSD shall refund the depository member management fee and trading member management fee to the trading members and depository members within 05 working days after SE the issuance of the decision on membership termination or on the revoking of the depository member certificate. The SE shall make additional collection or refund the fee to the listed organizations and fund management companies within 05 working days after the issuance of the approval on the change of listing in case of change of listing or the valid cancellation date of the listing. In the case of registering for an ETF fund certificate, companies managing funds are required to submit additional SE registration fees no later than the 15th of the following month after the VSD adjusts the registration. The Circular took effect on 10 June 2016 and replaced Circular No. 27/2010/TT-BTC and Circular No. 2/2013/TT-BTC. Tax and Fees Tax management regarding traders at border marketplaces, border gate marketplaces and marketplaces in border gate economic zones On 31 December 2015, the Ministry of Finance issued Circular No. 218/2015/TT-BTC on the policy and tax management regarding traders at border marketplaces, border gate marketplaces and marketplaces in border gate economic zones pursuant to Decision No. 52/2010/QD-TTg dated 20 October 2015 of the Prime Minister (“Circular No. 218”). Accordingly, traders conducting business at border marketplaces, border gate marketplaces and marketplaces in border gate economic zones must use invoices as follows: Whenever selling any goods of which the value is more than VND200,000, the seller must issue an invoice and give it to the purchaser. The seller takes the responsibility for the origin of the goods. In case the purchaser does not take the invoice or provide his/her name, address and/or tax code, the seller still has to make an invoice in which it is written “the purchaser does not take the invoice” or “the purchaser does not provide his/her name, address and/or tax code”. Circular No. 218 took effect on 14 February 2016. Resolution on Schedule of Royalty Tax Rates On 10 December 2015, the Standing Committee of the National Assembly issued Resolution No. 1084/2015/UBTVQH13 providing for the new schedule of royalty tax rates. Accordingly, the following groups of natural resources are imposed with increased royalty tax rates: i. Metallic mineral group: iron (14%), titan (16%), gold (17%), wolfram and antimony (20%), bronze (15%), manganese (14%), platinum, silver and tin (12%), lead and zinc (15%), rare earths (18%), cobalt, molybdenum, mercury, magnesium and vanadium and other metallic minerals (15%). ii. Non-metallic minerals: white marble (15%), sand (15%), sand used for glass-making (15%), soil used for brick-making (15%), granite (15%), coal (12%), etc. iii. Natural water group: natural mineral water, natural thermal water and refined natural water, bottled or canned (10%), natural water used for hydropower generation, natural water used for production and business activities (5% for water used for clean water production and 8% for water used for other purposes). Royalty tax rates imposed on natural forest timber groups are decreased. Specifically, the royalty tax rate for timber from group IV is 18% and for timber from groups V, VI, VII, VIII and for timber of other types is 12%. The royalty tax rates for the following groups remain Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 105 unchanged: natural aquatic resources, natural swallows’ nests, crude oil, natural gas, and coal gas. The Resolution takes effect on 01 July 2016 and repeals Resolution No. 712/2013/UBTVQH13 dated 16 December 2013. Import and tax rates for implementation of bilateral trade agreements between Vietnam and Laos On 31 December 2015, Circular No. 216/2015/TT-BTC was issued providing guidance on import and tax rates for implementation of bilateral trade agreements between Vietnam and Laos. In its Annex 1, this Circular stipulates a list of goods originating from Laos imported into Vietnam that will enjoy a tax reduction of 50% under the ASEAN Trade in Goods Agreement (“ATIGA”). Additionally, in cases where the export tariffs in the ATIGA are higher than the tariff regulations in the Most Favoured Nation (“MNF”) Rules, imported goods will be subject to a 50% tax reduction under the MNF. In Annex 2 of the Circular, a list is provided regarding imported goods originating from Laos that are imported into Vietnam which are not eligible to receive import tax incentives. Where goods originating from Laos are not listed in Annexes 1 or 2, the imported tax duty rate is 0%. The Circular stipulates that the list of goods originating from Laos when imported into Vietnam shall have 0% of annual duty quotas applied to them. This Circular took effect on 14 February 2016 and will expire on 03 October 2020; and replaced Circular 36/2012/TT-BTC dated 02/03/2012 guiding imported tax policy with respect to the goods applicable to imported tax duty incentives. Minimum sales price of cigarettes Decision No. 70/QD-BTC was issued on 08 January 2016 by the Ministry of Finance on the minimum sales price of cigarettes. As of 15 January 2015, the minimum prices of popular filtertipped cigarettes for domestic consumption are as follows: VND4,390/pack for cigarettes with hard packaging, and VND3,860/pack for cigarettes with soft packaging. The above prices are the sales price for enterprises, including excise tax and compulsory contributed amounts paid into the Fund of Preventing and Combatting against Tobacco’s Detrimental Health Effects, but do not include VAT. Each cigarette pack has 20 cigarettes. This Decision took effect on 15 January 2016. VAT rate of 0% for leasing bonded warehouses services Official Letter No. 5293/TCT-CS, issued 10 December 2015, states that in case an enterprise provides leasing bonded warehouses services for foreign enterprises to store materials used for processing export goods and such goods are actually exported, then this enterprise shall be entitled to apply for VAT with a rate of 0% if it meets the requirements regulated in Point c, Clause 2, Article 9 of Decree 209/2013/ND-CP. CIT applicable to salary expenses for directors of SMLLCs Official Letter No. 5168/TCT-CS of the General Department of Taxation dated 04 December 2015 provides that salaries and wages of owners of private enterprises or single-member limited liability companies (owned by an individual) and remuneration paid to the founding members, members of the Members’ Council or Board of Directors who are not directly involved in directing production and business are non-deductible expenses for determining taxable income. Policies on VAT, invoices and CIT in money support programs Official Letter No. 5165/TCTCS of the General Department of Taxation dated 04 December 2015 asserts that enterprises are to implement money support programs for sale agencies having good sales performance under specific regulations in contracts and commitment documents between enterprises and sale agencies. When sales agencies issue VAT invoices with tax amounts for the enterprises and declare and pay VAT applicable to such invoices, then the enterprises shall be entitled to a VAT refund. Application of risk management in tax administration On 21 December 2015, the Ministry of Finance issued Circular No. 204/2015/TT-BTC, which consists of 3 Chapters and 28 Articles, specifying the application of risk management in tax administration. Risk management will be applied to all major tax administration activities, including: tax registration; tax declaration and payment; tax debts and enforcement of tax administration decisions; tax refunds; tax audits and inspections; management and use of tax documents; other activities during the implementation of tax administration tasks, 106 Vietnam etc.36Accordingly, tax payers are subject to assessment and ranking on risk levels based on certain sets of criteria and indicators developed by the tax authorities,37 namely to: • assess the level of tax compliance of tax payers; • evaluate the rating on risk levels of tax payers; • select cases for audit of tax registration; • choose tax declaration dossiers to audit at the tax office; • clarify tax refund dossiers and select tax payers to supplement the plans for audit and inspection after refund; • manage tax debt collection and application of enforcement; and • identify risky cases to supplement the plans for audits and inspection of invoices and other tax documents. Regarding the assessment of the compliance levels and rating of the risk levels of tax payers, this Circular classifies compliance levels into 03 categories, including: (i) high-compliance, (ii) moderate-compliance and (iii) lowcompliance38; and rates the risk levels into the following 06 levels (i) very low risk, (ii) low risk, (iii) average risk, (iv) high risk, (v) very high risk, (vi) tax payers in operation for less than 12 months.39 This Circular took effect on 04 February 2016. 36 Article 6, Circular No. 204/2015/TT-BTC. 37 Article 15, Circular No. 204/2015/TTBTC. 38 Article 16, Circular No. 204/2015/TTBTC. 39 Article 17, Circular No. 204/2015/TTBTC. New updates on customs duties On 17 November 2015, the Ministry of Finance issued Circular No. 184/2015/TT-BTC, regulating on the procedures for the declaration and guarantee of taxes, tax collection and payment, delayed payment interests, fines, charges, fees, and other revenues for imported/exported or transited goods and means of transport. This Circular consists of 3 Chapters and 31 Articles with the following notable points: Firstly, this Circular clarifies the identification of tax payment date:40 • In respect to tax payment by electronic methods: tax payment date is identified when the tax payer commences tax payment through the electronic transaction, which is confirmed successful by the Core Banking system; • In respect to direct tax payment: tax payment date is identified when the State Treasury or the respective bank confirms the paid-in tax amounts of the tax payers. Secondly, this Circular regulates on the location, forms, methods of tax and fee payment;41 • Tax payers shall pay taxes and fees at the State Treasury or banks; • Tax payers and customs declarer can choose to pay taxes, charges, fees and other revenues by cash or other payment methods without cash; • Tax payers for imported/ exported goods pay taxes through electronic transactions or directly by cash. 40 Art 4 Circular No. 184/2015/TT-BTC 41 Art 16, Circular No. 184/2015/TT-BTC In addition, this Circular also guides the tax payment through collection coordinating banks:42 • Tax payers for imported/ exported goods shall declare related information to each payable amount of money on the list of tax payment or commence payment declaration on the electronic Customs postal sending to branches, trading points of the collection coordinating banks for tax payment or to require tax payers to deduct and remit payments; • In case tax payers for imported/ exported goods use the electronic transaction channels of banks, they shall sign onto the tax collection and payment program for the purpose of tax declaration. The Circular took effect on 01 January 2016 and replaced Circular No. 126/2014/TT-BTC. Applicable export duties on antimony ores Official Letter No. 12376/TCHQTXNK of the General Department of Customs dated 31 December 2015 opines on policies on export duties and import duties applicable to antimony ores. Accordingly, antimony ores are not subject to export and import tax exemption. Export tax duties for raw and processed antimony ores are 30% and 20%, respectively. The import tax duty of both raw and processed antimony ores is 0%. Amendments of the preferential import tax rate applicable to numerous goods in the preferential import tariff On 21 January 2016, the Ministry of Finance issued Circular No. 16/2016/TT-BTC amending the preferential import tax rate 42 Art 17, Circular No. 184/2015/TT-BTC Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 107 applicable to numerous goods included in Classes 27.07, 29.02, 39.02 in the preferential import tariff. Accordingly, the tax rate (%) is regulated as follows:43 • benzene (01%) and xylenes (01%) (Class 27.07: oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents); • benzene (01%), xylenes (00%) and p-xylenes (01%) (Class 29.02: cyclic hydrocarbons); • polypropylene (00%), dispersion form (01%) and other (01%) (Class 39.02: polymers of propylene or of other olefins, in primary forms). In addition, this Circular also amends and supplements some provisions in respect to codes and the specific preferential import tax rate applicable to numerous groups of goods and goods as stipulated in Part II, Appendix II of the preferential import tariff attached with Circular 182/2015/ TT-BTC.44 This Circular took effect on 06 March 2016. Guidance on excise tax Circular No. 195/2015/TT-BTC dated 24 November 2015 on guiding the implementation of Decree No. 108/2015/ND-CP detailing and guiding the implementation of some articles of the Law on Excise Tax and the Law on Amending and Supplementing Articles of the Law on Excise Tax. Under this Circular, the following commodities are not subject to 43 Article 1, Circular 16/2016/TT-BTC 44 Article 2, Circular 16/2016/TT-BTC special excise tax (“SET”): goods imported from abroad into a free trade zone; goods sold to a free trade zone from inland and used within the free trade zone; goods traded between free trade zones, except for goods taken into a free trade zone having residents, passenger cars having fewer than 24 seats and aircrafts serving national defence and security purposes. Taxable pricing Where a trader imports goods subject to SET (except for gasoline) and a manufacturer of goods subject to SET sells goods via its financially dependent subsidiaries, the taxable price is the selling price imposed by such subsidiaries. Goods are sold by an agent at prices fixed by the importer (except for importers of gasoline) or manufacturer (the agents only receive commissions). Taxable prices are the prices imposed by the importer or manufacturers inclusive of commissions. Where an importer of goods subject to SET (except for cars having fewer than 24 seats and for gasoline), or a manufacturer of goods subject to SET (except for cars having fewer than 24 seats) sells such goods to trading establishments, taxable prices are the selling prices imposed by such importer or manufacturer and must not fall below 7% of the average price of products sold by the trading establishments in the month,with regard to an importer, manufacturer, or assembler that sells cars having fewer than 24 seats to trading establishments. With regards to imported cars having fewer than 24 seats, the taxable price is the selling price imposed by the importer, which must not fall below 105% the cost price of an imported car. The taxable price of cars having fewer than 24 seats manufactured or assembled in Vietnam is the selling price of the same type of products manufactured which must not fall below 7% of the average price imposed by the trading establishments.With regard to imported goods, taxable prices at importation is determined as follows: taxable price = price on which import duty is imposed + import duty Where an exporter buys goods subject to SET from a manufacturer and sells them domestically instead of exporting, the taxable price is the selling price exclusive of SET, environmental protection tax (if any), and VAT, and is determined as follows: if the selling price (inclusive of VAT, environmental protection tax, and SET) declared by the exporter as the basis for determination of taxable price is lower than 7% of the selling price on the market, the taxable price shall be imposed by a tax authority in accordance with the Law on Tax Administration and its instructional documents. The taxable prices for goods/ services are inclusive of surcharges (if any) imposed by manufacturers or sellers. Taxable prices of tobacco are inclusive of mandatory contributions and a supportive budget specified in the Law on Prevention of Harmful Effects of Tobacco. Tax refunds, deductions and reductions For biofuel, the amount of deductible SET in the period depends on the amount of paid SET on a unit of material purchased in the previous period for manufacturing of biofuel. Payers of SET on goods subject to SET at import (except for 108 Vietnam gasoline) may deduct SET paid at importation from the SET payable on goods sold domestically. Deductible SET is equal to SET on goods subject to SET that are sold after import, and must not exceed the SET on goods sold domestically. The taxpayer may include SET that remains after deduction because of a force majeure event in expenses when calculating corporate income tax. This Circular took effect on 01 January 2016 and replaced Circular No. 05/2012/TT-BTC. Narrowing VAT Refund and Increasing Special Consumption Tax Cost Under Amended Tax Law The National Assembly has passed a legally-binding amendment to the Law on Value Added Tax, the Law on Special Consumption Tax, and the Law on Tax Administration. The amendment, referred to in this article as “the new Law”, will take effect from July 1, 2016. While the new Law provides a welcome change by reducing the interest rate for late tax payment from 0.05 to 0.03 per cent per day, businesses may still face certain operational issues as discussed below. Narrowing VAT refund Under the existing law, VAT can be refunded if input VAT is not fully claimed after a 12-month or 4-quarter period. The new Law, however, abolishes this VAT refund, which may create significant cash flow problems for companies that need to carry large inventories and input materials due to the nature of their business. The new rule, therefore, calls for businesses to re-plan their supply chain and inventory levels in order to minimise the cash flow impact due to trapped input VAT. VAT refunds for new investment projects during pre-operating periods still exist under the new Law. However, it introduces further restrictions whereby VAT refunds will not be allowed if the charter capital of the project is not properly contributed according to the registration, or in cases where the taxpayer fails to meet the operational requirements of its conditional business. VAT refunds will not apply to new investment projects licensed from July 1, 2016 and engaged in the exploitation of natural resources and minerals. Nor will it apply to business in production projects where the value of natural resources, minerals, and power costs account for 51 per cent or more of the cost of goods sold. VAT refunds for export business under certain cases are still maintained in the new Law but it excludes the cases where goods are imported for export and where export of goods is not conducted at customs operation zones stipulated by Customs Law. Increase in Special Consumption Tax for importers The amendment in the new Law reintroduces changes that were already stipulated in Decree No. 108/2015/ND-CP, which took effect on January 1, 2016 (Decree No. 108). This has raised the issue that such significant changes had been introduced in a decree before being legislated under a law. Specifically, the taxable price of imports is being increased to match the selling price by importers under the new Law and Decree No. 108. Under the previous rule, this price was calculated as the dutiable price plus import duty. The new Law introduces the taxable price of imports as the importers’ selling price and the percentage cap on the difference between the manufacturers’/ importers’ selling price and the selling price by related distributors. The new Law aligns the taxable price of imports with Decree No. 108 to the extent that it is the selling price by importers. However, under Decree No. 108 if distributors are dependent units of manufacturers/importers, the taxable price is the selling price by such dependent units. Furthermore, while the percentage cap on the difference between the selling price by manufacturers/ importers and the selling price by related distributors applies when distributors are related parties of manufacturers/importers in accordance with the amended Law, this percentage cap applies to transactions between unrelated parties in accordance with Decree No. 108. Such inconsistencies between the new Law and Decree No. 108 need to be addressed in the coming implementation guidelines. It is expected that the requirement for reference to the average selling price by distributors to determine the taxable price would create significant problems for manufacturers/importers since distributors may not want to provide information on their selling price to manufacturers/importers for reasons of confidentiality. Also, it is practically difficult to have such information on a timely basis for tax reporting purposes. New Circular promulgated amending preferential import tax rates applicable to certain petroleum products as laid out in Group 27.10 On 17 March 2016, the Ministry of Finance issued Circular No. 48/2016/TT-BTC amending Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 109 preferential import tax rates applicable to certain petroleum products designated in Group 27.10 and biodiesel products designated in Chapter 98 of the preferential import tariffs as enacted by the Minister of Finance in Circular No. 182/2015/TT-BTC, dated 16 November 2015. Particularly, tax rates are reduced from 10% to 7% for the following items: • Aviation fuel, except for jet fuel; • Automotive diesel fuel; • Other diesel fuels; • Fuel oils; • Jet fuel with a flash point of 23o C or higher; • Jet fuel with a flash point of 23o C or lower; and • Biodiesel fuels (B5, B10). The tax rates for other types of kerosene in Group 27.10 are reduced from 13% to 7%. Circular No. 48/2016/TT-BTC took effect on 18 March 2016. The Law on Value Added Tax, Law on Excise Tax and Law on Tax Administration amended and supplemented On 6 April 2016, the National Assembly promulgated Law No. 106/2016/QH13 (“Law No. 106”) amending and supplementing a number of articles of the Law on Value Added Tax (No. 13/2008/ QH12, amended and supplemented by Law No. 31/2013/QH13), the Law on Excise Tax (No. 27/2008/ QH12, amended and supplemented by Law No. 70/2014/QH13) and the Law on Tax Administration (No. 78/2006/QH11, amended and supplemented by Law No. 21/2012/ QH13 and Law No. 71/2014/QH13). Law on Value Added Tax Articles 5.1, 5.9 and 5.23 of the Law on Value Added Tax are amended and supplemented to exempt the following entities from paying VAT: • Enterprises and cooperatives buying cultivation, husbandry, aquaculture, and fishery products which have not been processed into other products or which have only been subject to conventional preliminary treatment for sale to other enterprises and cooperatives shall not have to declare and pay VAT and are eligible for input VAT deduction; • Services for the elderly and the disabled; and • Exports made from resources and minerals with the total value of resources, minerals and energy costs exceeding 51% of the products’ value. Articles 13.1 and 13.2 of the Law on Value Added Tax are amended so that business establishments: • Are no longer eligible for a VAT refund if input VAT is not fully claimed after at least twelve (12) months or four (4) quarters from the first month or quarter. • Shall be not be entitled to a VAT refund and must forward the tax amounts which were not deducted of the investment project to the next period when: (i) the investment project does not have enough charter capital as registered; the establishment fails to satisfy or maintain the conditions while conducting business in industries and fields requiring conditions; and (ii) the investment project for resources or minerals exploitation with a license from 1 July 2016 or project producing goods with the total value of resources, minerals and energy costs exceeding 51% of the price. • Shall be entitled to a VAT refund on a monthly or quarterly basis if such an establishment exports goods or services in a month or a quarter with an input VAT amount of VND300 million or more which has not been deducted unless such goods are imported to be exported or exporting goods are not exported within a customs controlled area as prescribed by the Law on Customs; the policy of “refund first, inspection later” shall be applied to (i) any manufacturer of exports that does not violate laws on taxation and customs for two consecutive years; and (ii) any taxpayer that is not considered high-risk as prescribed by the Law on Tax Administration. Law on Excise Tax Articles 6.1 and 6.2 of the Law on Excise Tax are amended as follows: Taxable prices of goods which are sold to commercial business facilities where the seller and the facility have a parent companysubsidiary relationship or are both subsidiaries of the same parent company must not be lower than the average price. The taxable price of imports is the taxable price for import plus import duty. The excise tax amount paid during the import stage of such goods shall be deducted when determining the payable excise tax amount for the sale of goods. The tax rates applicable to passenger cars have been significantly adjusted, particularly: reducing the tax rates applicable to passenger cars with a cylinder capacity of 2,000 cm3 or less and increasing the tax rates applicable 110 Vietnam to passenger cars with a cylinder capacity of 2,500 cm3 or more. A tax rate of 70% shall be applied to motorhomes from 1 July 2016 to 31 December 2016 and 75% beginning on 1 January 2018. Law on Tax Administration Article 61 of the Law on Tax Administration is amended to exempt households and individuals having an annual non-agricultural land use tax of VND 50,000 or less from such tax. The late payment interest rate in Article 106 is reduced from 0.05% to 0.03% per day. Article 42.3 regulating the time limit for paying taxes on imports and exports shall be repealed on 1 September 2016. Law No. 106 took effect on 1 July 2016. Tax policies regarding prices and surcharges of seaway transportation services On 09 May 2016, the Ministry of Finance issued Official Letter No. 6142/BTC-CST that further instructs both Vietnamese and foreign shipping companies on calculating taxes and commission. i. Surcharges from foreign shipping companies do not need to be enumerated and accounted for in calculating value-added tax (“VAT”). In particular, such surcharges for shipping from Vietnam to other countries will be counted towards corporate income tax (“CIT”) which amount to 2% of the revenue. In the case where Vietnam imports products based on FOB, seaway surcharges do not have to be enumerated when calculating VAT. ii. Other than the surcharges foreign shipping companies enjoy from services performed outside of Vietnam that do not need to be accounted for when calculating VAT, surcharges on services performed in Vietnam will be applicable for taxes on the contractors as 5% of the revenue to VAT and 5% of revenue to CIT iii. Tax policies on prices and surcharges of seaway transport services of foreign shipping companies include: surcharges, which are considered as the costs of seaway transport services; other surcharges for arising costs; and agency commissions in Vietnam received from foreign shipping companies. Seaway transportation companies will need to account for all revenue in order to calculate CIT and VAT, including commissions specifically received from the foreign shipping companies mentioned above. Vietnamese shipping companies will enjoy VAT exemption on international shipping services if they fall under the applicable scope of Part C, Item 2, Clause 9 of Official Letter No. 219/2013/ TT-BTC, and will be subject to 10% VAT on other services performed in Vietnam. More specific guidance on VAT declaration and CIT incentives On 5 February 2016, in order to better guide the regulations laid out in Decree No. 111/2015/ ND-CP, dated 3 November 2015, the Ministry of Finance issued Circular No. 21/2016/TT-BTC providing for guidance on value added tax (“VAT”) declaration and corporate income tax (“CIT”) incentives as set forth in the above mentioned Decree in connection with the development of supporting industries. The Circular sets out clear guidance on the scope of governing, application subjects, how to declare VAT, tax declaration dossiers and CIT incentive rates applied to each type of supporting industrial products. Regarding the scope of governing, this Circular provides for guidelines on declaration of VAT and CIT incentives with respect to those projects producing supporting industrial products as specified under the list of priorities supporting industrial products for development issued under Decree No. 111/2015/ND-CP. This Circular also applies to: (i) organizations and individuals producing supporting industrial products under the abovementioned list, and (ii) tax authorities and other related agencies, organizations and individuals. Accordingly, any organization producing supporting industrial products in the above mentioned list in the territory of Vietnam may perform a VAT declaration on revenue quarterly regardless of the amount of revenue. This form of quarterly VAT declaration also applies in cases where a taxpayer has generates revenue from supporting industrial products as well as revenue from other production and business activities. Particularly for individuals generating revenue from supporting industrial products under the above stated priority list, tax declarations must be made on an annual basis and VAT payments must be made on a quarterly basis. Where an individual taxpayer generates revenue during each interval of time from supporting industrial products under the priority list, such a taxpayer may choose to declare and pay VAT Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 111 at each interval or on a monthly basis. CIT incentives are applied to an enterprise’s income generated from the implementation of projects producing supporting industrial products since 1 January 2015 that meet the conditions stipulated in Law No. 71/2014/ QH13, dated 26 November 2014, Amending and Supplementing a Number of Articles of the Laws on Taxes and guiding documents granted by competent authorities such as the Certificate of Preference on Production of Supporting Industrial Products (the “Certificate of Preference”). This Certificate shall be the basis for applying for CIT incentives. Regarding the incentive rate, the starting point for applying incentives and the forwarding of incentives shall comply with the provisions of laws on corporate income tax. The formalities and procedures for certification and post-inspection of the projects producing supporting industrial products under the above list shall be implemented in compliance with the provisions of Circular No. 55/2015/TT-BCT, dated 30 December 2015, of the Ministry of Industry and trade. In order to enjoy CIT incentives as prescribed, if an enterprise performs many manufacturing and business operations, it must separately determine the income generated from projects producing supporting industrial products on the list of priority for development. This Circular took effect on 1 April 2016 and the CIT incentives under this Circular apply to the CIT period beginning in the year 2015. Deduction of input VAT on goods used in exploration and development of oil fields The input value added tax on goods and services used for the activities of searching, exploring and developing oil and gas fields until the first day of exploitation or production shall be entirely deductible under Circular No. 36/2016/TT-BTC issued by the Ministry of Finance on 26 February 2016 guiding the implementation of tax provisions for organizations and individuals carrying out the activities of searching, exploring and developing oil and gas under the provisions of the Petroleum Law. Furthermore, this Circular contains some notable points as follows: • Where no commercial oil and gas is discovered during the performance of an oil and gas contract and this contract is terminated as decided by the competent authority, it is not allowed to retrospectively collect the input value added tax on goods and services used for the activities of searching, exploring and developing oil and gas fields if such input value added tax has been refunded; • The Circular guides how to determine the amount of payable natural resource tax, provisional natural resource tax, provisional export duty on crude oil and natural gas, corporate income tax, tax on transfer of interests of the participation in oil and gas activities, etc.; • Exemption from import duty on goods imported for the purposes of searching, exploring and exploiting oil and gas shall be implemented in compliance with the provisions of the laws on import and export duties as well as applicable tax management laws. This Circular took effect on 12 April 2016 and shall apply to tax periods from 2016 onwards; and only has applied to crude oil and natural gas since 1 January 2016. New preferential tax policies to promote information technology growth Resolution No. 41/NQ-CP was issued by the Government on 26 May 2016 to supplement the execution of Resolution No. 36/NQ-TW encouraging development in the IT sector by applying preferential tax policies to individuals and enterprises working in the IT sector. Resolution No. 41/NQ-CP states that the following are eligible to receive CIT incentives per the levels applicable to software product manufacturing projects: • Hi-tech employees working, providing hi-tech services, managing hi-tech operations operating equipment and/ or lines used for production of hi-tech products in the IT sector or managing information system safety will be eligible for a reduction of 50% of their personal income tax; and • Enterprises implementing projects containing digital information content and/or software services or producing key information technological products. Registration fee changes On 24 May 2016, the Ministry of Finance issued Circular No. 75/2016/TT-BTC amending and supplementing Clause 2, Article 1 of Circular No. 34/2013/TT-BTC. Circular No. 75 supplemented Circular No. 34/2013/TT-BTC 112 Vietnam to provide on situations that will require registration fee payment. Such situations include: changing names, changing founding shareholders (for jointstock companies which have founding shareholders), changing shareholders that have initial charter capital (for joint-stock companies without founding shareholders), as well as other situations. This Circular took effect on 10 July 2016 Instruction on CIT incentives for newly established enterprises in industrial parks On 5 May 2016, Official Letter No. 1874/TCT-CS was issued by the General Department of Taxation, answering questions regarding Corporate Income Tax (“CIT”) incentives for enterprises established from investment projects in industrial parks being granted investment permits before 1 January 2014 (excluding industrial parks that have favorable socioeconomic conditions). Depending on the time when such enterprise entered into operation and began generating turnover, enterprises shall be entitled to enjoy CIT incentives in new investment projects if they meet certain requirements as follows: • If the firm in question operated and generated turnover in the taxable period of 2014, it must meet the requirements regulated in item a, Clause 5, Article 18 of Circular No. 78/2014/TT-BTC and Article 6 of Circular No. 151/2015/TT-BTC; and • If the firm operated and generated turnover in the taxable period of 2015 and onwards, it must meet the requirements regulated in Clause 2, Article 13 of Circular No. 96/2015/TT-BTC and Article 6 of Circular No. 151/2015/TTBTC. PIT in the last year for foreign employees under long-term labor contracts On 17 May 2016, the Department of Taxation of Hanoi issued Official Letter No. 31787/CT-HT regarding the Personal Income Tax (“PIT”) applicable to non-resident individuals. According to Official Letter No. 31787, if a foreign employee is subject to PIT but has resided in Vietnam under 183 days in their last working year due to the long-term labor contract, the PIT-applicable income from this employee for the last year may be declared and paid at the 20% rate applied to non-resident individuals. Additionally, such employee would not be required to settle taxes when leaving Vietnam. Tax policies for employees under labor contracts with a term of under three months On 30 May 2016, the General Department of Taxation issued Official Letter No. 2323/TCT-CS replying to questions about tax policies, including tax policies applicable for employees under seasonal contracts with a term of under three (3) months. Accordingly, pursuant to Article 5 of Circular No. 62/2009/TTBTC, and Article 1 of Circular No. 113/2011/TT-BTC, enterprises employing employees under seasonal contracts with terms of under three (3) months shall withhold Personal Income Tax in accordance with the regulated rates. Enterprises employing employees under seasonal contracts with term lengths of three (3) to twelve (12) months shall withhold Personal Income Tax in accordance with a partially progressive tariff. New registration fee for motorbikes Following Official Letter No. 1630/ TTg-KTN, dated 11 September 2015, and Official Letter No. 16139/ BCT-CST, dated 2 November 2015, on the registration fee for unregistered motorbikes, the General Department of Taxation promulgated Official Letter No. 2325/TCT-CS regarding the application of new motorbike registration fees. Official Letter No. 2325 stated that from 1 July 2016 onwards, when registering ownership or the right to use an electronic motorbike, the respective owners shall have to declare and pay a registration fee in accordance with the current regulations. Preparation of Value Added Tax (VAT) invoices for customers’ deposits when purchasing an apartment On 13 June 2016, the Department of Taxation in Hanoi issued Official Letter No. 39313/CT-HTr replying to various enterprises’ questions regarding the preparation of VAT invoices for customers’ deposits when purchasing an apartment. According to Official Letter No. 39313, when an enterprise receives a customer’s deposit before signing the contract in order to make reservations for the purchase of future apartments, if the deposit receipt is not included in the project’s implementation schedule or money collection process, the enterprise shall not be required to prepare a VAT invoice. Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 113 Technology New program on development of intellectual asset development for the period of 2016-2020 On 14 June 2016, the Prime Minister issued Decision No. 1062/ QD-TTg, approving the Program on the Development of Intellectual Asset Development for the period of 2016-2020 (“Program”). Accordingly, the Program’s objectives are to: raise public awareness about intellectual assets during this period of international economic integration; assist with the practical application of at least 50 innovations/utility solutions from Vietnam; assist with the protection, management and development of intellectual property rights for at least 70 products bearing geographical names. The Program’s aims also include the following: • Assist in protection registration, management and protection of intellectual assets • Assist in the commercial promotion and development of intellectual assets and • Assist in establishing and developing intellectual asset management and development models. Funds for program implementation will be raised from various sources, including the state budget, enterprises’ contributions and other lawful funding sources. The following organizations are responsible for the Program’s implementation: the Ministry of Science and Technology, the Ministry of Finance and the People’s Committee of provinces and cities under the jurisdiction of the central government, cooperating with the relevant ministries and agencies. This Decision took effect upon signing. Telecommunications Management, provision and use of radio and television services On 18 January 2016, the Government issued Decree No. 06/2016/ND-CP (“Decree No. 06”) concerning the management, provision and use of radio and television services. Decree No. 06 outlines the rights and obligations of both providers of radio and television services (“providers”) and subscribers of such services (“subscribers”), in the event of pay television or radio. This Decree also details the application and licensing procedures for an entity to provide radio and television services to the public and/or to paid subscribers, and sets out content requirements and restrictions for radio and television programs. Clarification of compliance requirements and definitions By legally classifying internet radio and television services, Decree No. 6 clarifies that providers of such services must comply with Vietnamese law. Decree No. 06 also clarifies the definition of a pay radio or television service provider to be an enterprise that has been granted a license to provide pay radio and television services and uses technological measures to limit reception of its radio and television signal to subscribers. Rights and obligations of providers Under Decree No. 06, providers are now obligated to (i) adhere to a reporting regime by submitting forms provided by the Ministry of Information and Communications to respective central and local regulatory authorities; (ii) comply with corporate ownership requirements under the Law on Telecommunications; (iii) limit subscriber access only to channels registered with the government; and (iv) not transfer their radio and/or television licenses to another entity. Though much of the reporting requirements in section (i) were initially outlined under Decision No. 20/2011/QD-TTg regulating the management of pay television, Decree No. 06 does introduce a new requirement where regulatory authorities may necessitate that providers produce evidence attesting to the accuracy of information provided in their previously submitted report. Procedures for issuance of licenses for providers A potential provider must fulfil several new conditions in order to receive a license to provide pay radio or television services that include, inter alia, having a plan that sets out the mode and scope of service (s) to be provided, including the proposed technical framework of provision of the service online or on-demand (if applicable), the proposed rights and obligations of contractual parties; having a plan evidencing that the provision of services complies with radio and television programming transmission schedules already in existence; possessing a ‘.vn’ domain name or definite internet address; and having the ability for and the agreement permitting the transmission of required governmental programming to subscribers. The term of duration for a license to provide pay radio and television services is 10 years. 114 Vietnam The processing time for the issuance of a new license is 30 days and to amend a license is 15 days (the previous processing time was 60 and 30 days respectively). Decree No. 06 also sets out new procedures for license renewal and re-application. Content of pay radio and television services Providers must ensure that the content of pay radio and television services complies with the 1999 Law on Media and the 2012 Law on Advertising. In addition, providers must transmit required national programming to subscribers. Foreign programming, which is programming provided by a foreign entity, must be edited by a government authority before transmission, except for live sports reporting and the opening and closing ceremonies of regional and global sports tournaments. In addition, the amount of foreign programming channels exploited in the system of pay radio and television services shall not exceed 30% of the total exploited channels. Other regulations: Providers are required to register with the Ministry of Information and Communication and provide a list of content that they propose to broadcast. Such registration must include documents evidencing (i) legitimate use of copyright for the content and (ii) that such content has been edited by a licensed press agency. A logo of a pay television provider must be supplied to distinguish its services, and may be placed in any four corners of the screen. Decree No. 06 took effect on 15 March 2016 and repealed Decision No. 20/2011/QD-TTg; Decision No. 18a/2013/QD-TTg; Circular No. 19/2009/TT-BTTTT; Articles 10, 11, and 12 of Circular No. 07/2011/TTBTTTT. List of telecommunication services subject to quality control On 15 December 2015, the Ministry of Information and Communications issued Circular No. 35/2015/TTBTTTT promulgating the list of telecommunication services subject to quality control, including 06 services and the respective National Technical Regulations as follows: • Telephone services via terrestrial fixed telecommunications network: QCVN 35:2011/BTTTT; • Terrestrial fixed broadband internet access services using FTTH/xPON (Fiber optic Internet access services): QCVN 34:2014/ BTTTT; • Terrestrial fixed broadband Internet access services using Cable Modem Technology (Television cable Internet access services): QCVN 34:2014/BTTTT; • Terrestrial fixed broadband Internet access services using xDSL (xDSL Internet access services) : QCVN 34:2014/BTTTT; • Telephone services via terrestrial mobile telecommunications network: QCVN 36:2011/BTTTT; • Internet access services via terrestrial mobile telecommunications network IMT-2000: QCVN 81:2014/BTTTT. This Circular took effect on 15 February 2016 and replaced Circular No. 02/2013/TT-BTTTT. Amended and supplemented legislation regarding art, fashion, modelling and beauty performances, as well as on the circulation and trade of audio and video recordings of these types of performances Decree No. 15/2016/ND-CP (“Decree No. 15”) was promulgated by the Government on 15 March 2016, which serves to amend and supplement some articles of Decree No. 79/2012/ND-CP (“Decree No. 79”), dated 5 October 2012, on art performances, fashion shows, modelling and beauty contests. The circulation and trade of audio and video recordings of these types of performances are also addressed by this Decree. Firstly, Decree No. 15 supplements Decree No. 79 by adding Article 7a on the conditions by which licenses of organizations and individuals participating in art performances, fashion shows, modelling and beauty contests may be revoked; as well as providing regulations regarding the proper circulation and trade of audio and video recordings of art performances. In particular, Article 7a specifies that violators of Article 6, Articles 7.2(a), (b), (c), (g) and (h), Articles 7.3 (a) and (b), and Article 7.5 of Decree No. 79 are liable to have their licenses revoked, depending on the nature and seriousness of the violations in question. Article 10.2 of Decree No. 79 regarding the validity of licenses has also been amended. Accordingly, licenses for foreign organizations and individuals to perform art and fashion shows in Vietnam as issued by the Ministry of Culture, Sports and Tourism are now valid nationwide; licenses for foreign organizations and individuals to perform art and fashion shows in cities and provinces as issued by provincial level People’s Committees shall be Indochina Law Quarterly Volume 24 No. 2 & 3 March/June 2016 115 valid only in the relevant locality; licenses for Vietnamese individuals residing overseas to perform art as issued by the Department of Performing Arts are valid for a maximum period of six (6) months. The maximum license validity period for singing, dancing and musical performances is also six (6) months, while the maximum license validity period for fashion programs is twelve (12) months. Decree No. 15 also amends Article 17 pertaining to the legitimacy of organizers of modelling and beauty contests. Particularly, legitimate organizers under the Decree now include the following: (i) Vietnamese organizations licensed to undertake cultural and artistic activities; (ii) Vietnamese organizations which have officially established institutional branches for the purpose of undertaking cultural and/or artistic activities; or (iii) foreign organizations cooperating with such Vietnamese organizations. Amendments to Article 22 were also made regarding the conditions and procedures for issuing licenses to compete in international modelling and beauty contests. Accordingly, the dossier requesting licensing for contestants to participate in international modelling and beauty contests must include one (1) copy of an Establishing Decision or Enterprise Registration Certificate (entities undergoing administrative procedures for the first time and entities violating provisions of Article 6 in Decree No. 79 shall submit a certificated copy or provide an original for comparison). Decree No. 15 took effect on 1 May 2016. New circular guiding the collecting and accounting of contributions to the Vietnam Public Utility Telecommunications Service Fund and regulating the transfer of its assets On 29 March 2016, the Ministry of Finance issued Circular No. 57/2016/TT-BTC (“Circular No. 57”) providing guidance for collecting and accounting contributions made to the Vietnam Public Utility Telecommunications Service Fund (hereinafter referred to as the “Fund”). Circular No. 57 also provides guidance for the transfer of assets accumulated into the Fund’s budget by 2020. Accordingly, telecommunication enterprises have the obligation to deduct a certain amount from the annual revenue and contribute the same amount to the Fund for the purpose of public utility. Numerous specific regulations are as follows: • Contribution premiums equivalent to 1.5% of revenue accrued are applicable to the following telecommunication enterprises: - Telecommunication enterprises which (i) provide telecommunication services; and (ii) have network infrastructure. - Telecommunication enterprises which (i) provide international telecommunication services for backtrack; and (ii) do not possess a licence for network infrastructure establishment. In accordance with this Circular, telecommunication enterprises have the obligation to establish a plan for financial contributions regarding the above-mentioned premiums and submit the same amount to the fund. The submission of this plan may be no later than 30 September annually. Notably, in 2016, the foregoing plan must be established quarterly and submitted to the Fund no later than 1 June 2016. • Policy regarding the transfer of assets formed by the Fund’s budget: Transferred assets are assets invested and established by the Fund’s budget. The transfer of such assets must be in accordance with a decision to transfer issued by the Ministry of Information and Communications (“MIC”). The transfer of aforesaid assets must be officially recorded. This record must further be certified by both the transferor and transferee within ten (10) days of the date of receipt of the MIC’s decision to transfer. This Circular took effect on 15 May 2016. Transportation Stipulations on cargo transportation on inland waterways The Ministry of Transportation issued Circular No. 61/2015/ TT-BGTVT on 2 November 2015 on regulations on cargo transportation on inland waterways, including the notable provisions below. This Circular regulates that an application dossier for approval for super-size or super-weight cargo transport plans must include: (i) a written request in accordance with the prescribed form in this Circular; and (ii) the super-size or super-weight cargo transport plan as prescribed the instructions in this Circular. The aforementioned dossier shall be sent to certain competent agencies for examination, namely: 116 Vietnam Vietnam Inland Waterways Agency or Regional Inland Waterways Branch (in the case of inland watercrafts leaving inland ports and traveling on interprovincial waterway routes); Services of Transport (in the case of inland watercrafts leaving inland ports and traveling on intraprovincial waterway routes); Vietnam Maritime Administration or Maritime Branch (in the case of inland watercrafts leaving sea ports). In addition, this Circular also addresses the settlement of arising disputes and respective compensation in respect to the business of cargo transportation on inland waterways. Accordingly, during the transport of cargo on inland waterways, any issue arising and affecting the interests of the parties shall be settled via (i) negotiation and (ii) reconciliation. If the issue cannot be settled, the parties have the right to refer to the arbitrator for settlement or file a lawsuit in court. This Circular took effect on 1 January /2016, replacing Decision No. 33/2004/QD-BGTVT, dated 21 December 2004 providing for transport of cargo on inland waterways. One-liter limit for liquids permitted onto airplanes The Ministry of Transport issued Circular No. 01/2016/TT-BGTVT on 1 February 2016 detailing the Program on Aviation Safety and Quality Control (the “Circular”). Specifically, passengers and crewmembers, when passing through airport security and international sterilized areas, may only bring liquid for which the volume does not exceed one liter (regardless of being on the person or in the carry-on luggage). The volume of the bottle must not be in excess of 100 ml and must be completely sealed. However, the following cases are exempted from such requirement: • medications accompanied by prescription; • milk and food for babies and toddlers who must be accompanied by their parent(s) on the flight; and • liquids bought at stores within international sterilized areas and on international flights, and have been stored in sealed security bags. The Circular provides where checked luggage is torn, broken, or is not intact prior to being loaded onto the plane or if there is a sign of unauthorized intervention therein, it must be re-checked under airport security and documented. In the circumstance where a passenger has been issued with a boarding pass but is absent from the plane, the airline is responsible for all of such passenger’s luggage to be loaded out of the plane before its departure. This Circular took effect on 1 May 2016 and replaced Circular No. 30/2012/TT-BGTVT dated 1 August 2012. Entry and departure fees for inland waterway and oceangoing vessels entering and leaving ports and inland wharves On 29 March 2016, the Ministry of Finance issued Circular No. 59/2016/TT-BTC on entry and departure fees for inland waterway and ocean-going vessels entering and leaving ports and inland wharves. This Circular named which objects are not subject to such fees and charges, as well as provide the specific collection level for each type of fee. Circular No. 59 took effect on 15 May 2016 and repealed Circular No. 177/2012/TT-BTC dated 23 October 2012. Decree on Road Maintenance Fund On 20 April 2016, the Government issued Decree No. 28/2016/ND-CP amending a number of articles of Decree No. 56/2014/ND-CP and Decree No. 18/2012/ND-CP on the Road Maintenance Fund. Under this Decree, the provision on collecting road tolls for motorcycles and mopeds are removed. Additionally, only the following are subject to road tolls: automobiles, tractors; trailers or semi-trailers towed by automobile or tractor and similar vehicles. This Decree took effect on 5 June 2016. Water Declaration, payment of royalties on small-scale water exploiting firms The General Department of Taxation issued Official Letter No. 1879/TCT-CS on 5 May 2016, regarding the payment of royalties by small enterprises exploiting underground water. The Official Letter stated that in in the event that enterprises exploit underground water serving activities of production, businesses and/or services on a scale not exceeding 10m3 per day and night, those enterprises shall not be subject to registration, nor shall they be granted a license to exploit resources under the Law on Water Resources. They shall be eligible for royalties as regulated. 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