Overview About Laws in Vietnam
OVERVIEW ABOUT LAWS IN VIETNAM
Vietnam is emerging as a potential market for investment. Incentive policies and laws of Vietnam, as well as natural resources and other advantages of this country, has created an outstanding attraction in SouthEast Asia.
For over 25 years, Vietnam has transformed from a centralized economy to a prosperous market economy. During that time, Vietnam’s economy has grown rapidly, the laws of Vietnam has also gradually improved to integrate with its development speed and facilitate foreign investors in the process of investment and operation in Vietnam.
In order to facilitate investors in studying information before investing in Vietnam, TriMinh Law shall brief the law system of Vietnam, as well as some legal regulations that investors may need when investing in Vietnam:
Overview on law system of Vietnam
The law system of Vietnam is classified to levels as follows:
- Constitution: this is the legal document having the highest validity, providing in general legal regulations of Vietnam, issued by the National Assembly of the Socialist Republic of Vietnam;
- Directly under the Constitution are Laws, Codes, Ordinances (Civil Code, Labor Code, Law on Enterprises, Law on Investment, Foreign Exchange Ordinance….): these are legal documents providing regulations in specific fields, issued by the Standing Committee of the National Assembly (for Ordinances) or the National Assembly (for Laws, Codes);
- Under Laws, Codes, Ordinances are guidance documents such as Decrees, Circulars, Resolutions, Offcial Documents… issued by the Government, specialized Minitries (Ministry of Planning and Investment, Ministry of Industry and Trade…) and other competent authorities (the People’s Committee, the People’s Council).
Besides, Vietnam has also participated in several International Treaties, Commitments. Accordingly, the implementation of investment project of foreign investors shall also meet conditions in such International Treaties, Commitments.
The law on investment
The law on investment allows investors to implement the following forms of investment in Vietnam:
- Investing in setting up an economic organization:
Investors are permitted to set up economic organizations to implement their investments in Vietnam. Before establishing economic organizations, foreign investors shall have investment projects and carry out procedures to obtain the certificate of investment registration.
- Investing in form of contributing capital, purchasing equity in economic organizations:
Investors contribute capital, purchasing equity in economic organizations already existed in Vietnam to implement their investments in Vietnam.
Investors shall implement procedures to register the above-mentioned activities if (i) such economic organization is operating in conditional business lines applied for foreign investors; or (ii) the capital contribution or equity purchase causes the result that foreign investors shall occupy 51% or more of such economic organization’s charter capital.
- Investing in form of PPP contracts:
Investors, project enterprises entering into contracts with competent authorities to carry out investment projects on newly building or improving, upgrading, expanding, managing and operating infrastructure works or providing public services.
- Investing in form of business co-operation contracts (BCCs):
BCCs signed between a domestic investor and a foreign investor or between foreign investors shall require the procedure to obtain the certificate of investment registration. Parties entering into a BCC shall a establish steering board to implement such BCC.
The law on enterprises
Forms of enterprises permitted to be established by foreign investors when implementing their investments in Vietnam:
- Sole member Limited Liability Company:
- Limited Liability Company with two members or more:
- Joint-Stock Company:
This form of enterprise shall be used in some specialized field such as law, audit,…
The law on land
Investors shall be entitled to use project land in one of the following methods:
- Being allocated by the Socialist Republic of Vietnam;
- Leasing from the Socialist Republic of Vietnam;
- Leasing (with assets on the land (if any)) from Management Board of an Industrial Zone, an Export Processing Zone or a High-Tech Park;
- Sub-leasing (with assets on the land (if any)) from an enterprise already leasing land from Management Board of an Industrial Zone, an Export Processing Zone or a High-Tech Park;
- Purchasing land (with assets on the land (if any)) from an object having land use right;
- Establishing a joint-venture company in Vietnam, in which Vietnamese party shall contribute capital by its land use right.
Law on taxes
When carrying out investment projects in Vietnam, investors shall be responsible for their duties to the State of the Socialist Republic of Vietnam with respect to the following taxes:
- Business-License Tax:
This type of tax shall be paid once per year. This tax shall be levied in the first month of the Lunar Calendar, newly-established companies shall be levied immediately in the month when the business registration is granted. Enterprises newly-established in the first six months shall be responsible for paying the license tax for the whole year, the ones newly-established in the last six months shall be responsible for paying 50% of the license tax for the whole year.
- Coporate Income Tax:
Enterprises shall be responsible for paying this tax basing on the revenue of such enterprises in each fiscal year.
- Private Income Tax:
Enterprises shall be responsible for paying private income tax for employees entering into labor contracts with such enterprises basing on salary levels paid to such employees.
- Value-Added Tax:
This tax is levied basing on goods and services used in manufacture, business and consumption in Vietnam.
- Some other taxes such as Import Tax, Export Tax, Contractor Tax, Excise Tax,…
The law on labor
Pursuant to the Labor Code of Vietnam, there are three (03) types of labor contracts:
- Seasonal labor contracts (with the term less than 12 months);
- Definite-term labor contracts (with the term from 12 to 36 months); and
- Indefinite-term labor contracts.
Employers and employees after entering into labor contracts shall be responsible for paying the following compulsory insurances:
- Social insurance;
- Health insurance; and
- Unemployment insurance.
Rate of payment by employers and employees shall be regulated by legal regulations of Vietnam in specialized laws.
If having desire on recruiting foreign employees, enterprises shall carry out procedures to obtain work permits for such foreign employees (unless otherwise provided by legal regulations of Vietnam).
The law on environment
Investors operating in some fields shall carry out the following procedures relating to the environment:
- Strategic environment assessment:
Objects requiring strategic environment assessment include:
- General strategy and planning for socio-economic development of socio-economic regions, key economic regions, corridors and belts;
- General planning for socio-economic development of centrally-governed cities and provinces and special administrative – economic units;
- Strategy and planning for development of economic, processing and exporting, high technology, and industrial zones;
- Strategy and planning for extraction and utilization of natural resources that require an inclusion of 02 provinces or more;
- Strategy, planning and proposal for industrial and sectoral development at the national, local and provincial level that can significantly affect the environment;
- Adjustment to the strategy, planning and proposal for specified objects described at points a, b, c, d and e as mentioned above.
- Environmental impact assessment:
Objects requiring environmental impact assessment include:
- Projects subject to the decision on investment intentions made by the National Assembly, the Government and the Prime Minister;
- Projects that use land parcels situated in wildlife sanctuaries, national parks, historical – cultural monuments, world heritage sites, biosphere reserves, scenic beauty areas that have been ranked;
- Projects that can cause bad effects on the environment.
- Environmental protection plan:
Objects requiring environmental protection plan include:
- Investment projects that are not identified as objects that require the environmental impact assessment;
- Alternatives for the production, trading and services that are not identified as objects that require the formulation of investment projects in accordance with the law on investment.
Regulations on dispute settlement
Investors may choose one of the following methods to settle disputes arsing from commercial contracts with their partners:
- Negotiation or conciliation:
This is the fastest way to settle dispute helping investors in saving time and expenses, as well as relationships with their partners.
This is a dispute settling method requiring an agreement between parties in the commercial contracts. Arbitration agreement may be an article in the commercial contract or a separate agreement. Arbitration agreement may be agreed by parties before or after the dispute arised.
This dispute settling method shall be used by parties in the commercial contract when there is an agreement on settling disputes at competent court or when parties have no agreement on dispute settlement.
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