Legal Newsletter Issue No. 11 | November 2022

Dear Valued Customers and Partners,

GV Lawyers would like to introduce you Legal Newsletter Issue No. 11 of November 2022 with the latest legal information:

• The novelties on amending and supplementing a number of articles of the Law on Tax Administration, on guidance on tax obligations when enterprises set up and use the Fund for Science and Technology Development. We will keep you updated about the novelties on amendment of regulations on granting special loans to credit institutions placed under special control.
• In the section “Legal Guidance“, we will update the questions related to tax policy such as: (i) Value-added tax declaration for real estate transfer activities outside the province; (ii) Interest expenses are deductible upon calculating corporate income taxes; (iii) Guidance on personal income tax declaration and finalization; and (iv) Tax policy upon receiving sponsorship from overseas companies.
• Enterprises will be interested in the fact that Private enterprises are not required to establish a People’s Inspection Committee under the Law on Implementation of Grassroots Democracy by the National Assembly passed on 10 November 2022, at the same time the Board IV proposed that commercial banks buy back bonds at maturity in “Good readings for you”
• The last part of the Legal Newsletter is, as usual, the issued list of selected latest legal documents.

 

We hope you will find this newsletter useful. To read the full Legal Newsletter, please click DOWNLOAD

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Legal Alert | November 2022

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On 30 October 2022, the Government issued Decree 91/2022/ND-CP (“Decree 91/2022”)[1] detailing a number of articles of the Law on Tax Administration, notably featuring the regulation that E-commerce exchange owners will not have to declare and pay taxes on behalf of sellers.

However, according to Article 1.7 of Decree 91/2022, the owner of an E-commerce platform is responsible for providing the tax agency with complete, accurate and timely information on traders, organizations or individuals that conduct in part or in whole the process of buying and selling goods and services on the E-commerce trading floor. Information to be provided includes:

1. Name of the seller;
2. Tax identification number or personal identification number or identity card or citizen identity card or passport, address, contact phone number; and
3. Sales revenue through the online ordering function of the floor.

The provision of information is carried out on a quarterly basis, no later than the last day of the first month of the next quarter, by electronic method, via the Portal of the General Department of Taxation under the data format announced by the General Department of Taxation.

Thus, Decree 91/2022 has reduced the tax compliance burden for E-commerce platforms according to the controversial previous regulations[2] that E-commerce platforms must declare and pay taxes on behalf of individuals who sell goods and services through the floor (on the basis of authorization under civil law).

Decree 91/2022 will take effect from the date of signing, i.e. 30 October 2022

 

[1] Decree 91/2022 amending and supplementing a number of articles of the Governmental Decree 126/2020/ND-CP dated 19 October 2020.

[2] Circular 100/2021/TT-BTC of the Ministry of Finance dated 15 November 2021 guiding the said Decree 126/2020 on amending and supplementing a number of articles of Circular No. 40/2021/TT-BTC dated 01 June 2021 of the Minister of Finance providing guidance on value added tax, personal income tax and tax administration for business households and individuals.

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Legal Alert | October 2022

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On 13 October 2022, the Ministry of Industry and Trade issued Statemen No. 6328/TTr-BCT on approval of the National Power Development Planning Project for the period of 2021 – 2030 and with vision toward 2050 (hereinafter referred to as “Power Planning VIII”.) The main objectives of Power Planning VIII are: (i) future development orientation of the power sector, (ii) quantification of the target values of electricity supply, (iii) determination of scale, progress and spatial distribution of power source projects, power grids, and (iv) proposing solutions to implement the plan, thereby contributing to ensuring a safe and continuous supply of electricity for socio-economic development, national security and defense.

In this Statement, the Ministry of Industry and Trade has proposed the Prime Minister the following major contents:

• Regarding source structure: by 2030, the total capacity of power plants will be about 123,682-145,589 MW; the year 2050 is oriented toward a total capacity of about 375,361-501,558 MW. The overhead power structure includes rooftop solar power, cogeneration sources, and self-dissipating solar power.

• Regarding solar power projects:
  • Projects approved and supplemented to the revised Master Plan VII: it is proposed to allow the continued development of solar power projects that have been approved by investors until 2030 with a total capacity of 2,360.42 MW provided that such projects must absolutely comply with the law on investment, land, construction, … at the same time, these projects are only allowed to be deployed in line with the regional power grid infrastructure and the general absorption capacity of the national power system.
  • Rooftop solar power: encouraging localities, enterprises and people to strongly develop rooftop solar power for the purpose of self-use, not selling into the national electricity system. Power Planning VIII identifies this type as a priority, allowing the development of unlimited capacity, regardless of the planned power source structure.

• Regarding onshore and offshore wind power: prioritising strong development of onshore wind power of 16,821 MW (expected to increase by 4,659 MW, of which 1,500 MW in the North and 7,000 MW of offshore wind power (only in the North is 4,000 MW).

• Regarding coal power projects: having 5 coal power projects (Cong Thanh, Quang Tri, Song Hau II, Nam Dinh I and Vinh Tan III) with a total capacity of 6,800 MW being prepared for investment, which face difficulties in deploying and putting capital into balance and compensating with other sources.

• Regarding gas power projects:
  • Prioritising gas-fired power projects using domestic natural gas, focusing on developing two chains of gas-electric projects, Block B and Ca Voi Xanh, with a total new capacity of 6,900 MW by 2030.
  • Reducing 17,000 MW of electricity using imported LNG compared to the March 2021 plan, it is expected that by 2030, 23,900 MW of electricity will be built using LNG.

• Regarding biomass power: it is expected that biomass power capacity will reach 2,470 MW by 2030.

• Regarding hydropower: prioritising the development of multi-purpose hydropower projects, selectively develop small and medium hydropower projects by 2030 about 28,946 MW of hydroelectricity.

• Regarding fuel conversion of coal-fired and gas-fired thermal power plants: orienting to 2050, most coal- and gas-fired power plants will switch to using hydrogen. At the same time, identifying wind and solar power projects for hydrogen production and not selling electricity to the national grid identified as development priority groups.

 

The Ministry of Industry and Trade will continue to complete the Power Planning VIII dossier and submit it to the Prime Minister for consideration.

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Legal Newsletter Issue No. 10 | October 2022

Dear Valued Customers and Partners,

GV Lawyers would like to introduce you Legal Newsletter Issue No. 10 of October 2022 with the following main contents:

• The newsletter will keep you updated about the novelties on foreign loans and payment of foreign debts of enterprises, at the same time on bank guarantee. This is the information that enterprises are waiting for, in the context of tight domestic capital.
• For human resource managers, is the representative office in Vietnam the employer in the labour contract with its employees? That seemingly silly question is a controversial legal issue. In the article “Who is the employer of those working for a representative office?”, Lawyer Dinh Quang Thuan, Partner of GV Lawyers will share his practice at the Court in this regard. Through the article, GV Lawyers hopes to help businesses recognize and properly apply labour laws to avoid legal risks while still managing human resources effectively.
• Enterprises will be interested in the fact that the regulations on calculating the car localisation rate will be removed from 01 October 2022, at the same time recommend an credit room extension of 1-2% despite high interest rate of HOREA in “Good readings for you”
• In the section “Legal Guidance“, we will update the questions related to tax policy such as: (i) Personal income tax on employee gifts; (ii) Time of invoice issuance, value-added tax declaration for construction and installation activities ; (iii) Personal income tax exemption and reduction under the Agreement on Avoiding Double Taxation; and (iv) Expenses before establishment of an enterprise.
• The last part of the Legal Newsletter is, as usual, the list of selected latest legal documents issued.

 

We hope you will find this newsletter useful. To read the full Legal Newsletter, please click DOWNLOAD.

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Who is the employer of those working for a representative office?

GV Lawyers would like to introduce our valued readers an article by Lawyer Dinh Quang Thuan titled “Who is the employer of those working for a representative office?” posted Saigon Economic Times (No 1.658) on 22 September 2022.

***

In reality, there are trivial matters that often cause confusion through the application of law, but if due care is not given to them, they can totally erupt into the cause of disputes which may even lead to legal actions.

Eighteen years ago, a Singapore-based company set up its representative office in Vietnam to carry out market research and trade promotion. At the end of 2020, the role of this representative office was deemed to be completed and the company decided to terminate the office’s operations. As a matter of law, the company would notify the Department of Industry and Trade thereof; the office would cease all activities, terminate all contracts, including those signed with suppliers, office lease contracts and labour contracts. The liquidation of those contracts was normally carried out until some of the liquidated employees complained that it went against the law to terminate labour contracts with them. They initiated a legal action to request the company to reinstate them to work and pay compensations.

The representative office believes that the termination of labour contracts in this situation falls under the case “The employer who is not an individual terminates its operations” as specified in Article 36.7 of the Labour Code 2012 (the “LC 2012”). The employees, on the contrary, believed that because their labour contracts were signed by the manager of the representative office on behalf of its foreign company, so this company was their employer. These employees contended that when their labour contracts were terminated due to the company terminating the representative office’s operations, it was the case where “The employer retrenches employees due to a structural change”, which is specified in Article 36.10 of the LC 2012, and also argued that the foreign company retrenched many employees as a result of not developing a labour usage plan as regulated in Article 44 of the LC 2012. Thus, it was illegal for the foreign company to terminate their labour contracts.

This argument of the employees is pushed forward by some advocates upon commenting that that the representative office cannot be the employer because it is not a legal entity, but just an affiliated unit which the foreign company must take responsibility for.

However, some opine that the drafter may have made a mistake when writing in the labour contracts that the manager of the representative office signed on behalf of the foreign company, since the foreign company cannot sign labour contracts to recruit employees for its representative office in Vietnam. According to the Civil Code 2005 and the Civil Code 2015 alike, when foreign legal entities establish and perform civil transactions in Vietnam, their civil legal capacity is governed by the Vietnamese law. Since the Commercial Law only stipulates that a Vietnam-based representative office of a foreign company may hire employees, but does not stipulate that a foreign company may hire employees for its representative office in Vietnam. Thus, the Vietname-based representative office of a foreign company can sign labour contracts to hire employees for that office, but this is not the case with the foreign company.

This opinion also refers to some provisions of Decree 75/2014/ND-CP of the Government on recruitment and management of Vietnamese employees working for foreign organisations and individuals in Vietnam (Decree 75). Accordingly, “foreign organisations in Vietnam” as defined in Article 2 of Decree 75 include a number of organisations licensed for establishment by Vietnamese competent authorities, e.g. Vietnam-based representative offices of foreign companies, but excluding such foreign companies.

The author is among some advocates of the view that “representative offices are employers” since all relevant provisions of the commercial and labour laws are in favour of and consistent with the view. As the Vietnamese law does not stipulate that a foreign company is a “foreign organisation in Vietnam” which can sign a labour contract, it is inconsistent with the Vietnamese law for the employees to argue that the foreign company signs labour contracts to recruit them for its Vietnam-based representative office.

Furthermore, acceptance of this view will leave the court confined to a “dilemma” as it has to consider how the foreign company will reinstate the employees to work under the labour contracts when its Vietname-based representative office has closed. Will the court force the company to restore the operation of the representative office and reinstate the employees? Or will the court force the company to accept the employees back to work at the company’s office abroad? The author contends that there is no legal basis for the court to make such a decision. Even with the issuance of such a decision, there is no legal ground to enforce the decision.

Therefore, the labour contracts of the employees working at the representative office will be consistent with law if they are signed between the representative office and those employees. But it is inconsistent with the Vietnamese law to write in the labour contracts of the employees working at the representative office that they are signed with the representative of the foreign company.

This type of dispute arises from a trivial matter. Some trivial matters are likely to cause confusion when they are applied in practice, but little attention is paid to them for correction. The trivial matter referred to in this article seemed not to cause any obstruction in the daily operations of the representative office, but likely raged into a cause of dispute when the office ceased to operate. Therefore, to avoid future disputes, the Vietnam-based representative offices of foreign companies should review the labour contracts signed with their employees and, if necessary, re-sign them to be consistent with the Vietnamese law.

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Legal Alert | September 2022

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On 16 September 2022, the Government issued Decree 65/2022/ND-CP (“Decree 65/2022”) amending and supplementing a number of articles of Decree 153/2020/ND-CP regulating the private placement of corporate bonds in the domestic market and overseas (“Decree 153/2020”.) Decree 65/2022 will take effect from the date of signing, i.e. 16 September 2022 with some novelties affecting businesses as follows:

 

1. Enterprises are allowed to issue bonds for the purpose of restructuring their own debts

According to Decree 65/2022, the purpose of issuing bonds is to implement investment programmes and projects, to restructure the enterprise’s debts or in accordance with specialized laws. The enterprise must specify the bond-issuing purposes in the issuance plan and disclose information to investors who subscribe for the bonds. The enterprise’s use of capital raised from the issuance of bonds must be consistent with the bond-issuing purposes specified in the issuance plan and the information disclosed to investors.

Thus, compared to Decree 153/2020, Decree 65/2022 allows enterprises to issue bonds for the purpose of restructuring their own debts, increasing the size of operating capital, and restructuring the capital of the enterprise, which was abolished according to the previous regulations.

 

2. Change the terms and conditions of bonds issued in the domestic market

According to Article 1.3 of Decree 65/2022, for bonds which have already been issued in the domestic market, enterprises may only change the conditions and terms of the bonds upon satisfaction of the following two conditions: (i) Approved by a competent officers of the bond-issuing enterprise; and (ii) Approved by the number of bondholders representing at least 65% of the total number of bonds of the same type in circulation on the market.

Information on the change of conditions and terms of the bonds must be disclosed by the issuer by an extraordinary notice as prescribed.

 

3. Increase the par value of bonds offered for sale in the domestic market

Decree 65/2022 has increased the par value of bonds offered for sale in the domestic market to VND100 million or a multiple of VND100million instead of VND100,000 or a multiple of VND100,000 as previously stipulated in Decree 153/2020.

 

4. Investors may request the issuer to redeem the bonds before maturity

According to Article 1.6 of Decree 65/2022, investors may request the issuer to redeem the bonds before maturity in the following cases:

• Early redemption under the agreement between the issuer and the bondholder.
• Forced redemption at the request of the investors when:
  • The issuer violates the law on the offering and trading of corporate bonds according to a decision of a competent authority, which cannot be remedied or the remedy thereof cannot be accepted by a number of bondholders representing at least 65% of the total number of bonds of the same type in circulation on the market.
  • The issuer violates the bond-issuing plan but such violation cannot be remedied or the remedy cannot be accepted by a number of bondholders representing at least 65% of the total number of bonds of the same type in circulation on the market.
  • Other cases are specified in the bond-issuing plan (if any).

 

5. Shorten the time limit for disclosing bond offering results

Decree 65/2022 has shortened the time limit for disclosing bond offering results from 10 days to 5 days. Specifically:

• No later than 05 working days of completion of the bond offering, the enterprise must disclose the results of the bond offering to the investors and send the disclosure notice to the Stock Exchange.

• If the bond offering is unsuccessful or cancelled, the enterprise must, no later than 05 working days from the end of the bond distribution, disclose the information and send the disclosure notice to the Stock Exchange.

 

6. Reduce the bond offering duration

According to Decree 65/2022, the maximum duration for distributing bonds of each bond offering is 30 days (previously 90 days) from the date of information disclosure before the offering, and the total time of several offerings is up to 06 months (previously 12 months) from the issuing date of the first offering.

 

7. Professional securities investors must have at least VND2 billion worth of listed securities

According to Decree 65/2022, a professional securities investor is the one with financial capacity or professional qualifications in securities as required by the Securities Law. In which, a professional securities investor being an individual who is identified as qualified to subscribe for privately-placed corporate bonds must itemise listed securities worth of at least VND02 billion, which is determined by the daily average market value of such securities for at least 180 consecutive days prior to the date of determination of the status of a professional securities investor, excluding the value of margin lending transactions and the value of repo transactions.

 

8. The bondholder’s representative will supervise the enterprise

According to Articles 1.22 and 1.25 of Decree 65/2022, the representative of bondholders will report to the State Securities Commission and the Stock Exchange on a quarterly or annual basis and also report where the issuer is found to have committed violations affecting the interests of bondholders.

At the same time, the representative of bondholders is responsible for complying with the provisions of the securities law and Article 14 of Decree 65/2022 when providing the bondholders’ representative services and is subject to the management of the State Securities Commission.

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Legal Newsletter Issue No. 9 | September 2022

Dear Valued Customers and Partners,

GV Lawyers would like to introduce to you Legal Newsletter Issue No. 09 of September 2022 with the following main contents:

• In the first part of the newsletter, we will keep you updated about the novelties on foreign exchange management for international bond issuance, on compulsory civil liability insurance for third parties in construction activities. In addition, we will keep you updated with the regulations on electronic identification and authentication of enterprises.
• Is it possible to establish an enterprise with too high or too low charter capital?, a subject for discussion in the article “What is large and small when it comes to the charter capital?”, Lawyer Do Duc Anh of GV Lawyers cites the case of an enterprise registering its establishment with a charter capital of VND500,000 billion in Ho Chi Minh City to analyze the purpose and meaning of registration of charter capital and affirms that the current Law on Enterprises does not limit the amount of charter capital when enterprises are established for business lines in which legal capital is not required. Thereby, he recommends that the licensing agency should have a more open view of charter capital when reviewing corporate establishment.
• In the section “Good readings for you”, enterprises will be interested in VCCI’s proposals to remove legal obstacles relating to condotels and beach villas, and also the re-proposal by the Ministry of Construction to allow definite-term ownership of condominium units in the 2nd draft of the Housing Law (amended).
• In the section “Legal Guidance“, we will update the questions related to tax policy such as: (i) Determining the price as a basis for calculating value-added tax on real estate transfers; (ii) Value-added tax for the rental of the positions for installing billboards and advertising equipment; (iii) Personal income tax of the individuals who sign service contracts with a company; and (iv) Corporate income tax on capital transfer activities.
• The last part of the Legal Newsletter is, as usual, the list of selected latest legal documents issued.

 

We hope you will find this newsletter useful. To read the full Legal Newsletter, please click DOWNLOAD.

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