Solving commercial disputes by negotiation

When participating in economic relations, the occurrence of disputes and conflicts between individuals and organizations is inevitable. In the dispute, all parties want to find the solution to resolve the dispute to best ensure their rights and affect the relationship between the parties is the lowest, so as to achieve efficiency but less costly time and money. Therefore, the choice of dispute resolution method is extremely important. In fact, the most commonly used methods of dispute resolution include negotiation, mediation, arbitration, and court.

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Negotiation is the first method of settlement in the dispute resolution process, which is reflected in the fact that the parties in the dispute actively meet, discuss and agree on each party's rights and obligations.

The law on dispute resolution does not require the parties to negotiate. Therefore, from the process of organization, implementation, the presence of the parties, the rights and obligations of the entities, the negotiation results are not subject to the adjustment of legal regulations. It all depends on the goodwill of the parties. In case an agreement is reached in the negotiation meeting, and then one of the parties fails to comply, the parties cannot request the competent state agency to carry out the enforcement.

The mode of negotiation is usually prioritized by the parties when the dispute occurs, because this method is adjust by the law and not restricted by strict regulations on the process of negotiation, participants, time, as well as inexpensive money. Due to the self-settlement with each other, disputes should not be greatly enlarged, without affecting the reputation of the parties. Also because there is no regulation of the law, there is no enforcement on the bargaining results.

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Entering into a labor contract

A Labor contract is an agreement between an employee and an employer on paid employment, working conditions, rights and obligations of each party in the employment relationship.

Before starting to work, the employee and the employer need to sign a full employment contract so that they can know their rights and obligations when working, and carry out immigration-related procedures, temporary residence in compliance with Vietnamese law.

Labor contracts are made on the principles of voluntariness, equality, goodwill, cooperation and honesty, free-of-agreement between the parties but must not contravene the law and collective labor agreements and social ethics. .

There are three main types of Labor contracts: indefinite-term labor contracts, definite-term labor contracts (with term from full 12 months to 36 months), seasonal or specific employment contracts with a term of less than 12 months. The parties to the contract should pay attention to be able to know the time of contract termination according to the provisions and make an extension, sign a new contract according to the agreement of the parties.

The content of the labor contract should contain sufficient information about the parties, the job and the place of work, the contract term, salary, form and deadline of salary payment, wage allowances and additional amounts, the regime of wage increase, working time, rest time, insurance policies, training, ... these are necessary information required in a labor contract, the parties need to consider implementing, to ensure its rights and obligations with respect to employment contracts.

For foreign employee, it is necessary to pay attention to the content and cost of implementing legal procedures to ensure working in Vietnam such as entry visa, temporary residence card, work permit to avoid unqualified labor contract performance as committed with the employer. During the implementation of the labor contract, the parties have the right to agree to terminate the contract ahead of time or unilaterally terminate the labor contract in accordance with the law, but the notice must be given within the time appropriate to the other party.

In addition, during the implementation of the labor contract, the parties may amend and supplement the labor contract in accordance with the current law. Any addition or modification must be agreed by the parties by signing an appendix of the contract or signing a new labor contract.

The labor contract is a very important agreement that directly affects the rights and interests of the parties in their activities, so the parties should pay attention to the terms of the contract to avoid unfortunately disputes. 

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Mergers and acquisitions

Mergers and acquisitions (M&A) is an activity that takes control of a business through owning part or all of that business. This is the term for a merger, consolidation or acquisition between two or more businesses together. In Vietnam, the system of legal documents does not have the concept of mergers and acquisitions, this is the commercial term. In legal terms, this term is understood to include activities of consolidation, merger and acquisition of enterprises, specifically:

Merger of an enterprise is the transfer of all of its lawful assets, rights, obligations and interests to another enterprise and at the same time terminating its business or its existence. The acquirer company still exists and inherits all assets, rights and obligations of the acquired companies.

Consolidation of enterprises means that two or more enterprises transfer their entire properties, rights, obligations and lawful interests to a new enterprise and at the same time, consolidating companies shall cease to exist.

Acquisition of an enterprise is a activity that an enterprise directly or indirectly acquires all or part of the capital and assets of another enterprise sufficient to control and dominate the enterprise or a business line of the acquired enterprise. Acquired enterprise still exist, only changing the enterprise structure.

M&A always requires strict legal compliance with both acquired and acquirer enterprise. Under Vietnamese law, merger, consolidation and acquisition are one of the forms of economic concentration. Recently, economic concentration is the legal acts which have been implemented quite popular in Vietnam. Along with the positive effects, this activity also has the potential to affect competition in the market. Therefore, the merger activity is not only governed by the Enterprise Law but also regulated by the Competition Law. The current Competition Law has amended and prohibited businesses to implement economic concentration that has an impact or is likely to cause significant anti-competitive effects on the Vietnamese market.

On the economic side, the economic concentration will reduce competition (because competitors cooperate with each other and the market access becomes difficult) and distort the market leading to damage to consumers. Stemming from the need to control economic concentration activities to avoid the formation of large enterprises with the power to control the market and unfair competition, create conditions for new businesses to join in market, Competition Law creates a legal corridor that allows state management agencies to control economic concentration activities, and accordingly adjust M&A activities.

Each M & A form has governed by its own legal provisions. Therefore, before conducting any M&A activity, investors need to carefully understand the provisions of the law to best protect their rights and interests in accordance with the provisions of law.

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Temporary residence card for foreigner

After appropriate entry into Vietnam, if the investor, the employee needs to reside in Vietnam to be able to facilitate the implementation of investment, labor, the investor and the employee needs to apply Temporary residence card in accordance with the purpose of his/her residence.

Temporary residence card is a document issued by an immigration authority or a competent authority of the Ministry of Foreign Affairs to a foreigner who is permitted to reside for a limited period of time in Vietnam and is valid for visa replacement. When a temporary residence card is available, the investor or foreign worker will present a temporary residence card instead of a visa when entering / leaving Vietnam and legally residing in Vietnam.

To avoid administrative fines or deportation for violations of the law on residence in Vietnam, foreign investors and employees need to follow procedures for applying for a temporary residence card suitable for the purpose of entry (symbol visa). Investors, employees who have appropriate entry visas (DT or LD visa) will be considered by the Immigration Authority to grant a temporary residence card.

For the application for a temporary residence card that requires the investor, the employee needs to have all business documents, proving that it is eligible to sponsor a foreigner and enter the country for the right purpose. Request a Certification of exemption from a work permit / work permit, entry visa for the right purpose, legal residence address in Vietnam.

When all of the above conditions are met, investors and employees shall carry out the procedures for applying for temporary residence cards in Vietnam so that they can reside, leave and enter in accordance with law. The duration of the temporary residence card is issued pursuant to the purpose of entry and the proposal of agencies, organizations and individuals. The temporary residence card is from 1 to 5 years but shorter than the passport duration by at least 30 days, specifically:

- Temporary residence cards with symbols NG3, LV1, LV2, ĐT and DH are valid for no more than 05 years.

- Temporary residence cards with symbols NN1, NN2, TT are valid for not more than 03 years.

- Temporary residence cards with the symbol LD and PV1 are valid for no more than 02 years.

When the temporary residence card expires, the foreign individual will be considered for a new card.

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Work permit

According to the labour law in Vietnam, enterprises that need to employ employees working in their organizations must fully meet the provisions on using foreign workers in the Labor Code 2012. Specifically, enterprises are only allowed to recruit foreign citizens to work as managers, executives, experts and technical workers that Vietnamese workers have not yet met the production and business needs. Before recruiting foreign citizens to work in the territory of Vietnam, enterprises must explain their employment needs and be approved in writing by competent state agencies. Therefore, enterprises wishing to recruit foreign workers to work in their company, need approval of competent state agencies, in particular, Department of Labor, War Invalids and Social Affairs in the province / city where the business is located ("DOLISA")

With DOLISA's approval, enterprises need to prove that the recruitment of foreign workers for the required job position is consistent with the needs of the business, the situation of Vietnamese labor recruitment for those positions, the benefits achieved for businesses when recruiting foreign workers instead of Vietnamese employees.

After approval of the demand for foreign labor from DOLISA, the enterprise shall follow the procedures for applying for a work permit for foreigners in accordance with DOLISA's approval. Foreigners who work in Vietnam without a work permit will be expelled from the territory of Vietnam according to the regulations of the Government and employers, who use foreign citizens without a work permit, will be handled in accordance with the law, specifically the administrative fine from VND 30,000,000 to VND 75,000,000 shall be imposed on employers depending on the seriousness of their violations (Article 22 of the Decree 95/2013/ND-CP). Therefore, employers and employees need to comply with the work permit when working in Vietnam or employing foreign workers to work in Vietnam.

For foreign workers, in order to be eligible for a work permit, the following specific conditions are required: (i) Having full civil act capacity as prescribed by law; (ii) Be physically fit to the job requirements; (iii) Be a manager, executive director, specialist or technical worker; (iv) Not be a criminal or subject to criminal prosecution in accordance with the laws of Vietnam and foreign laws; (v) Approved in writing by a competent state authority on the employment of foreign workers.

These are necessary conditions before an employee applies for a work permit in Vietnam. Documents proving the fulfillment of the conditions for granting a work permit, if issued by foreign countries, must be consular legalized and translated into Vietnamese when submitted in Vietnam.

The issuance of a work permit must be made at least 15 days in advance from the date the employee is expected to work in Vietnam.

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The note when housing transfer formed in the future?

Houses formed in the future are those in the process of construction investment and have not been tested and put into use. According to Clause 2, Article 105 of the Civil Code 2015, future-formed housing is an asset and the transfer of property must comply with civil law and relevant laws. One of them is the regulation related to taxes and fees when transferring property ownership.

For housing transfer formed in the future, the financial obligations under the law include: registration fee and personal income tax. For each of these taxes and fees, there are specific legal documents regulating.

Firstly, for registration fee: According to Decree 140/2016 / ND-CP, the house is one of the subjects liable to registration fee, with a fee of 0.5% of the registration fee calculation price. In particular, the price to calculate the registration fee for a house is the price promulgated by the People's Committee of the province or city directly under the Central Government in accordance with the law on construction at the time of registration fee declaration.

Secondly, for personal income tax: According to Article 24 of the 2007 Law on personal income tax, for non-resident individuals, the tax rate applicable to real estate transfer is 2%. However, in some special cases, this personal income tax and registration fee may be waived. Specifically, according to Clause 1, Article 4 of the 2007 Personal Income Tax Law, income from real estate transfer between husband and wife; natural father and mother with natural children; adoptive father and adoptive mother with adopted children; father-in-law, mother-in-law and daughter-in-law; father-in-law, mother-in-law and son-in-law; grandfather, grandmother with grandson; grandfather, grandmother with grandchildren; Siblings are income exempt from personal income tax.

In addition, the seller may be subject to some additional items such as cadastral fee, metering fee, notarization of transfer contract unless the parties have agreed that the buyer will incur this fee or the parties have other deal.

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PPP and BCC Investment

1. PPP Investment

Public-private partnership investment (hereinafter referred to as PPP) is a form of investment which basis of a project contract between a competent state agency and a project investor or enterprise to build, renovate, operate, trade, manage infrastructure projects, and provide public services.

PPP is a fairly developed model and is applied by many countries to take advantage of the state and the private sector for socio-economic development. The object of the contract is usually infrastructure works that fall within the state's responsibility in the fields of transportation - urban areas, parks, electricity, social infrastructure works, commercial infrastructure works, economic zone and hi-tech technical infrastructure; agriculture,... Therefore, the State encourages cooperation with the private sector in the form of PPP to reduce the burden as well as the risks to the budget.

PPP investment is governed by many legal documents related to the use and management of state assets, including the Construction Law, the Law on Investment, the Law on Public Investment, and the Law on Management and Use of Public Assets, Bidding Law. In the near future, PPP Law will be drafted and enacted to focus on unified and uniform management in a legal document.

PPP contracts allowed by Vietnam include: Build - Operate - Transfer (BOT) Contract; Build - Transfer - Operate (BTO) Contract; Build - Transfer (BT) Contract; Build - Own - Operate Contract (BOO); Build - Transfer – Leases (BTL) Contract; Construction – Leases - Transfer (BLT) Contract; Business - Management (O&M) Contract; and Combined contracts combining the above types of contracts. In case the investor proposes to apply a contract different from those listed above, this contract needs to be approved by the state agency, considered and approved by the Prime Minister.

2. BCC Investment

In the forms of investment, business cooperation contracts is often chosen by investors because of the advantages of not having to set up economic organizations when project operates. Business cooperation contract (BCC) is a contract signed between investors in order to conduct business cooperation for profit distribution and product distribution without establishing economic organizations. Parties to a BCC contract establish a coordinating board to carry out the BCC contract. The functions, duties and powers of the coordinating board are agreed by the parties. BCC contracts signed between domestic investors and foreign investors or between foreign investors must carry out the procedures for the grant of investment registration certificates.

In the course of contract performance, the parties retain their own legal status and perform their rights and obligations under the contract on their behalf. The rights and obligations of the parties are only bound by the contract, but there is no organizational commitment as in the form of new legal entities. BCC contracts are suitable for short-term projects in the field of profitability and quick profitability.

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How Foreigners Could Obtain Residence in Vietnam Through Investment Scheme?

Foreigners could reside in Viet Nam under permanent residence or temporary residence status. In particular, foreign investors establishing or contributing capital to companies operating in Vietnam are subject to have temporary residence cards.

A Temporary Residence Card is the required document for the foreigners to legally stay temporarily in Viet Nam and the maximum term of a card is 05 years. The following will explain how Temporary Residence Card can be obtained in Vietnam through investment.

What are conditions for foreign investors to be granted temporary residence card?

Foreigners whom are granted a visa with a DT sign will be considered for a temporary residence card. The foreigners will need to apply for work permit exemption from authorities in Vietnam. The passport of foreigners has a minimum term of 13 months. Documents proving that foreigners contribute capital to, or invest in, enterprises in Vietnam for instance business registration certificates, investment registration certificates will be required. The foreigners will also need to provide clean criminal record card.

What required documents to be prepared for application for temporary residence card?

1. 01 Document requesting temporary residence card of guarantor ( form NA6 for agencies, organizations; form NA7 for individuals)

2. 01 Information form for a temporary resident card (form NA8)

3. 02 photos (image size 2×3 cm);

4. 01 Copy of passport and a valid visa (bring an original for comparison);

5. 01 Notice of use of the seal of the enterprise.

6. 01 Document introducing seal, signature of the authorized person of the organization (form NA16)

7. 01 Copy of legal ducuments of organizations to prove purpose to be granted temporary residence card, such as: investment registration certificate, business registration certificate.

How long it takes to apply for temporary residence card?

After 5 working days since receiving sufficient documents, state agencies will consider and issue temporary residence cards.

What are procedures to apply for temporary residence card?

Step 1: Prepare documents as prescribed by law.

Step 2: Submit application file

The officer receiving the application will check the legality and the content of the file. If the application is complete and valid, the officer receives the application and prints a receipt for the submitter.

Step 3: Return results

What state authorities to apply for temporary residence card?

Immigration Management Department of province or cities where the investment is registered.

Some difficulties when carrying out the procedure

Everyone can apply for a temporary residence card by themselves, but not all cases are eligible for a temporary residence card. When applying for a temporary residence card, have some difficulties like: the visa is not for right purposes; foreigners don’t understand the required documents, procedures for applying for temporary residence card so that you don’t know how to write the declaration of temporary residence card; have confusion about the declaration form used for individuals and agencies, organizations…. For result, application file is invalid and will be returned. You will have to go to implementing agencies many times to complete application file, which is costly, laborious, time-consuming but not yet available. Therefore, foreigners need the assistance of a reputable law firm to carry out the procedure effectively to be granted temporary residence card.

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What are common investment methods in Vietnam?

In Vietnam laws, there are a number of investment methods such as establishing economic organizations; investment in the form of capital contribution, purchase of shares or capital contributions in business organizations; Business Cooperation Contract or Public Private Partnership. Investment in establishing economic organizations, capital contribution, purchase of share or capital contributions are most common in our opinion.

Investment in establishing economic organizations

For investment in the establishment of economic organization, an investor invests capital to carry out the establishment of an enterprise, cooperative, cooperative union or other organization to carry out business investment activities. This is a way of direct investment in which investors directly invest capital and directly participate in management activities.

Forms of establishment of economic organizations include two types: Establishing company with 100% foreign capital; or establishing joint ventures between domestic investors or the Government of Vietnam with foreign investors.

Before establishing an economic organization, the foreign investor must have an investment project and carry out the procedures for the grant of an investment registration certificate. Besides, the conditions for the charter capital ownership and the conditions prescribed by international treaties to which Vietnam is a member need to be met. Regarding charter capital, foreign investors are allowed to hold unlimited ownership in economic organizations, except for cases where the investors operate in fields related to listed companies, public companies, securities trading organizations and securities investment funds in accordance with the law on securities; State owned enterprises equitized or transformed under other forms. In addition, investors must check international treaties to which Vietnam is a signatory.

It should be noted that depending on the amount of investment capital of a foreign investor, the legal status of an economic organization after its establishment will be determined differently. If the foreign investor holds 51% or more of charter capital, the economic organization after its establishment will have to carry out the procedures applicable to foreign investors. Conversely, if foreign investors hold less than 51% of the charter capital, the regulations applicable to economic organizations after their establishment are applied as domestic investors.

Investment in the form of capital contribution, purchase of shares or capital contributions in business organizations

Foreign investors who wish to access the Vietnamese market but do not want to establish an economic organization can contribute capital, buy shares or buy capital contributions to business organizations operating in Vietnam.

With this form, the investor will become a member or shareholder of that economic organization. It requires investors to meet a conditions similar to the form of establishment of economic organizations. Having said that, it must meet the conditions for the charter capital ownership and the conditions prescribed by international treaties to which Vietnam is a member. Depending on each specific case, the investor must follow the procedures for registration of capital contribution, purchase of shares or capital contribution in an economic organization and send to the competent agency for recognition of legal investment.

Let us know if you need legal help. ANT Lawyers, your lawyers in Vietnam.

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Which area of business foreign investors could invest in Vietnam?

Recently, Vietnam has been an attractive investment destination to foreign investors thanks to the social-economic innovation policy from the early 80s of the twentieth century to the present. The economic, political and social situation always keeps stability and achieves remarkable developments, establishing trade relations with most countries in the world. Especially, Vietnam Government has been focusing efforts to improve the investment and business environment, which is favorable for not only domestic investors but also foreign investors. The Government has been issuing policies to improve the business environment, support business development and take decisive actions through resolutions and legal documents.

In addition to continuing to implement incentive policies to attract foreign investment such as corporate income tax exemption and reduction, import tax exemption for a number of industries, exemption from rent and land use,...the Government is also committed to reform administrative procedures to simplify procedures, create the best conditions for investors, and opening the economy for foreign investors.

Foreign investors, when investing in another country, must identify their business lines and areas of business, and consult with experts or Vietnam lawyers whether that business line is subject to any special conditions. There are areas with out conditions of investment and but there are also industries that are restricted from doing business under strict conditions, and even prohibiting business in specific professions on purpose.

In Vietnam, the investors of Vietnamese are free to do business in area which which is not in the list of prohibited. For foreign investors, the business lines allowed to invest are considered based on Vietnam's WTO Commitments on Trade in Services and the Agreements signed between Vietnam and other countries. After that, business conditions in each specific industry to foreign investors will be applied.

General conditions applied to domestic and foreign investors are that investors are entitled to carry out business investment activities in industries and trades which are not prohibited by laws. The industries and trades banned from business investment include: trading in narcotic substances; trading in some toxic chemicals, precursors, minerals; trading in specimens of wild plants and animals according to the provisions of Appendix 1 to the Convention on International Trade in Endangered Species of Wild Fauna and Flora; specimens of endangered, precious and rare wild animals and plants of Group I originated from nature according to the provisions of the Investment Law; trading in prostitution; buying and selling people, tissues, body parts; business activities related to asexual reproduction on people; and trading in firecrackers.

Apart from the above-said prohibited business and investment lines, the remaining industries and trades are divided into conditional business lines and common business lines. For common business lines, investors can freely invest without barriers. By contrast, conditional business lines impose conditions that must be met if organizations wish to invest. Understanding the business lines is the first step for investors to enter the Vietnam market and consulting with Vietnam lawyers would help investors make informed decision for their business plan in Vietnam.

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Vietnam to Investigate Anti- dumping Measures on Some Monosodium Glutamate (MSG)

On October 31st, 2019 Ministry of Industry and Trade issued the Decision no. 3267/QD-BCT on carrying out investigation anti- dumping measures on some monosodium glutamate (MSG) HS code no. 2922.42.20 originating from the People’s Republic of China and Republic of Indonesia.

The case has been initiated based on request by representative of domestic manufacturing industry on August 19th, 2019. The requesting party and supporting party are three companies representing domestic manufacturing industry, including: Vedan Vietnam Joint Stock Limited Company, Ajinomoto Vietnam, and Miwon Vietnam Limited Company. Products under investigation are Monosodium Glutamate products (MSG Products).

After having the investigation decision, within 15 days, investigating agency shall send the questionnaire to the relevant parties. The relevant parties shall submit written response to all questions in the questionnaire within 30 days from the date of receiving the investigation questionnaires. The date of receiving the investigation questionnaires shall be set at seventh days after the investigation questionnaires are sent by investigating authority.

Investigating agency has issued official dispatch no. 760/PVTM-P1 on September 04th, 2019 which requires requesting party to supplement, adjust to clarify contents, methods and basis of determining dumping margins amplitude and damages of domestic manufacturing industry.

The relevant parties shall register participation in investigation within 30 days from the date of issuance of Decision No.3267/QD-BCT. The Vietnam Ministry of Industry and Trade recommends that all organizations and individuals who are manufacturer of products under investigation should register as a relevant party and provide necessary information to the Ministry of Industry and Trade to ensure their rights and interests in accordance with the law of Vietnam.

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How a Foreign Company Apply for Certificate of Origin in Vietnam?

Vietnam has growing fast due to the opening policy of the government, and has been signing a number of free trade agreements with ASEAN, China, Korea, Japan, India, Australia, New Zealand, Chile, Russia, Belarus… with effectiveness. The expecting Europe Vietnam Free Trade Agreement has been signed but not yet effective at this moment. Having said that, Vietnam has become a destination for foreign investors to set up company and factory in Vietnam to undertake manufacturing for export and enjoy tax preference because of Vietnam origin.

The applicant wishing to be granted the Certificate of Origin (“C/O”) needs to register the trader profile under Vietnam regulations before submitting the dossier applying for C/O. There are steps to be followed at the State authorities to check the trader profile, its legal registration in Vietnam, manufacturing facilities that produce the goods which are subject of C/O. Further, additional information and proof will be required for verification at Vietnam State Authorities including the declaration of origin provided by manufacturer or supplier of originating materials or locally produced originating goods if such material is used in subsequent stage to produce another good, good manufacturing process. Not only checking the documents, the authority could undertake an inspection visit to the manufacturing facility of trader and request the applicant to submit evidence of customs declaration of materials imported and used in production of exported goods (if imported materials are used in the production process); a sale contract or VAT invoice of locally purchased materials (if locally purchased materials are used in the production process) and other documents as deemed necessary. If the documents, the process, and the conditions are met, the C/O will be issued.

In general, an originating good is a good which is originating in a country, group of countries, or territory where the last processing operation is performed and substantially transforms such good. To qualify for non-preferential goods, there will be required of:

1.“Change in tariff classification” (hereinafter referred to as CTC): means a change in two-digit, four-digit, or six-digit HS heading of a good as compared with the HS heading of non-originating materials (including imported materials and materials of undetermined origin) used for the production of such good.

2.“Local value content” (hereinafter referred to as LVC)

The applicant for C/O shall choose either direct formula or indirect formula at their own discretion to calculate LVC and apply the chosen formula throughout such financial year. The verification and identification of LVC criteria for exported goods of Vietnam shall be based on the aforesaid formula.

In order to calculate LVC according to the formula, value of materials and cost incurred in the production process of goods shall be determined as follows:

a) “Value of materials originating in a country, group of countries, or territory of production” is inclusive of CIF value of materials acquired or locally produced that are originating in a country, group of countries, or territory; direct labor cost, overhead cost, other costs and profits.

b) “Value of materials originating in a country, group of countries, or territory of production” is CIF value of materials imported that are originating in a country, group of countries, or territory; or the earliest ascertained price stated in the VAT invoices associated with materials of unidentifiable origin used for the production, processing of ultimate product.

c) “FOB” is the value stated in the export contract which is calculated as follows: “FOB = Ex-workshop price + other costs”.

– “Ex-workshop price” = Production cost + profit;

– “Production cost” = material cost + direct labor cost + overhead cost;

– “Material cost” covers expenses associated with purchase of materials, their cost of freight and insurance;

– “Direct labor cost” covers wages, bonuses and other welfare amounts related to the production process;

– “Overhead cost” covers: Overhead cost relates to production process (insurance for buildings, factory rents and hire-purchase cost, depreciation of buildings, repairs, taxes, collateral interests); hire-purchase cost and interests of factories and equipment; factory security; insurance (for factories and equipments used in the production process); expenses for essentials for production process (energy, electricity and other essentials to be used directly in the production process); research, development, design and workmanship; pressing molds, moulds, devices and amortization, maintenance and repairs of factories and equipment; patent royalties (in respect of patented machines or use of patented machines in production process or goods production licenses); testing of materials and goods; storage in factories; waste treatment; cost factors in calculating value of materials, such as port-related cost, good clearance and import duties on taxable components;

– “Other costs” are the costs incurred in placing the good in the ship or other means of transport for export including, but not limited to, domestic transport costs, storage and warehousing, port handling, brokerage fees, service charges and relevant costs incurred when loading goods onboard ships for export.

If the goods that do not qualify to be issued C/O in Vietnam, it can not be granted C/O. Any violations of laws will be punished by the government.

It appears that many manufacturers are in the process to relocate significant manufacturing process to Vietnam to enjoy “Made-in-Vietnam”.

In the meantime, alarmingly, there are equal number of other manufactures whom wish to only transfer a small portion of manufacturing process to Vietnam i.e re-packaging, re-labeling which does not meed to qualifications above.

It is important that Vietnam authorities to alert and constantly monitor the C/O application process to ensure all responsible departments, officers to follow the rule as set by law to evaluate the C/O application documents, and proof given by trader, manufacturer carefully.

By doing that, Vietnam government will encourage the “real” transition of manufacturing from China to Vietnam, therefore increasing FDI, boosting the economy through encouraging manufacturing sectors.

By urging customs authority to investigate and punish violators, the Vietnam government is sending strong message to US that Vietnam is not standing to support unfair trade, and in the meantime take advantage of the situation to attract quality manufacturing projects into Vietnam. Therefore, more crackdowns are expected.

ANT Lawyers, as a law firm in international trade has been actively providing legal services through advisory to manufacturers on the C/O matters and assisting a number of investor to set up manufacturing company, review leasing contract at industrial zone as part of the process to transition manufacturing into Vietnam to seriously invest and do business taking advantage of origin, labour, opening policy of Vietnam government.

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Korean Investors Research to Invest in Solar Power Projects in Quang Tri Province

IL Yang Industrial Company (Korea) is planning to invest in Vietnam, conducting research, study, proceed to set up company building solar power plant in Quang Tri province, Vietnam.

On December 22nd, IL Yang Industrial Company (Korea) had a meeting with Quang Tri People’s Committee to discuss their investment in solar power project in Quang Tri province. Previously IL Yang Industrial Company had a field trip in Hai Lang and Vinh Linh district, Quang Tri province.

According to IL Yang Industrial Company, through surveys, the Company found that Quang Tri is a potential province to develop solar power. Therefore, in the coming time, the Company will continue to work with the province and other sectors to better understand the indicators to study, proceed to invest in building solar power plant in Hai Lang district with the capacity of 500MW and Vinh Linh district with the capacity of 200MW.

At the meeting, IL Yan Industrial Company expressed their wish to exchange relevant information as well as support and create favorable conditions from Quang Tri province’s leaders to study the project.

According to the People’s Committee of Quang Tri province, Quang Tri province is currently planning to attract investment projects in the field of industry, with priority in the areas of competitive advantage and environmentally friendly industries. In fact, there have been some solar power projects in the area.

The proposed investment in solar power plants in Hai Lang and Vinh Linh of IL Yang Company with advanced technology is suitable with the planning policy of locality. Since then, Quang Tri province is ready to cooperate, create conditions for the company to complete procedures and apply the maximum support policies of the province.

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Assistance to Set-up Business in Vietnam

Foreign investors could make direct investment in Vietnam through setting up one hundred per cent (100%) capital of foreign investors, or establishing joint venture between domestic and foreign investors, or investing in the contractual forms of: BCC, BO, BTO, and BT.

Types of enterprise for foreign investors to invest in Vietnam are as following:

a) Set-up Limited Liability Company in Vietnam

Limited Liability Company is a form of enterprise which is established by contributing of members. A member shall be liable for the debts and other property obligations of the enterprise within the amount of capital that it has undertaken to contribute to the enterprise.

Limited liability companies are regulated by two types:

– One member Limited Liability Company is an enterprise owned by one organization or individual;

– Limited Liability Company with two or more members is an enterprise owned by organizations or individuals, in which the number of members shall not less than two members and not exceed fifty.

Organizational and management structure of Limited Liability Company normally comprise of a Member’s Council, General Director or Director.

b) Set-up Joint Stock Company in Vietnam

Joint Stock Company is an enterprise which has charter capital divided into equal portions called shares. The minimum number of shareholders shall be three and there shall be no restriction on the maximum number.

Shareholders shall be liable for the debts and other property obligations of the enterprise only within the amount of capital contributed to the enterprise.

Joint Stock Companies may issue all types of securities to raise funds. Founding shareholders must together register to subscribe at least twenty per cent (20%) of the number of ordinary shares which may be offered for sale.

The main difference between Joint Stock Company and Limited Liability Company is the Joint Stock Company can raise funds by offering shares or securities. In addition, an enterprise tends to join the Stock exchanges or public company must be a Joint Stock Company. Management system of Joint Stock Company is more complicated than Liability Company.

c) Set-up Partnership in Vietnam

A partnership is an enterprise which must be at least two members being co-owners of the company jointly conducting business under one common name. In addition to unlimited liability partners, there may be limited liability partners.

Unlimited liability partners must be individuals who shall be liable for the obligations of the company to the extent of all of their assets. Limited liability partners shall only be liable for the debts of the company to the extent of the amount of capital they have contributed to the company.

d) Set-up Representative Office of Foreign Trader in Vietnam

A foreign business entity or a foreign trader is allowed to establish Representative Office in Vietnam.

Representative office of a foreign business entity in Vietnam (referred as “Representative Office”) means a subsidiary unit of the foreign business entity, established in accordance with the law of Vietnam in order to survey markets and to undertake a number of commercial enhancement activities permitted by the law of Vietnam.

Representative Office will need to apply and obtain the establishment license; and have a seal bearing the name of the representative office.

Representative Office is not allowed to directly conduct profit making activities in Vietnam (i.e: the execution of contracts, direct payment or receipt of funds, sale or purchase of goods, or provision of services), but the representative Office is permitted to

-To operate strictly in accordance with the purposes, scope and duration stated in the license for establishment of such representative office;

-To rent offices and to lease or purchase the equipment and facilities necessary for the operation of the Representative Office;

-To recruit Vietnamese and foreign employees to work for the Representative Office in accordance with the law of Vietnam;

-To open accounts in foreign currency and in Vietnamese Dong sourced from foreign currency at banks which are licensed to operate in Vietnam, and to use such accounts solely for the operation of the Representative Office.

e) Set-up Branch of Foreign Trader in Vietnam

The Branch of a foreign business entity in Vietnam (referred as “The Branch”) means a subsidiary unit of the foreign business entity, established in accordance with the law of Vietnam in order to enter into contracts in Vietnam and conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

The Branch will need to apply and obtain the establishment license; and have a seal bearing the name of the Branch.

The Branch is permitted to conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

f) Investment by Signing Contracts in Vietnam

Business co-operation contract (BCC) means the investment form signed between investors in order to co-operate in business and to share profits or products without creating a legal entity.

Build-operate-transfer contract (BOT) means the investment form signed by a competent State body and an investor in order to construct and operate commercially an infrastructure facility for a fixed duration; and, upon expiry of the duration, the investor shall, without compensation, transfer such facility to the State of Vietnam.

Build-transfer-operate contract (BTO) means the investment form signed by a competent State body and an investor in order to construct an infrastructure facility; and, upon completion of construction, the investor shall transfer the facility to the State of Vietnam and the Government shall grant the investor the right to operate commercially such facility for a fixed duration in order to recover the invested capital and gain profits.

Build-transfer contract (BT) means the investment form signed by a competent State body and an investor in order to construct an infrastructure facility; and, upon completion of construction, the investor shall transfer the facility to the State of Vietnam and the Government shall create conditions for the investor to implement another project in order to recover the invested capital and gain profits or to make a payment to the investor in accordance with an agreement in the BT contract.

Foreign investors may sign BOT, BT and BTO contracts with a competent State body to implement infrastructure construction projects in Vietnam. Typically, the contracts are for projects in the fields of transportation, electricity production, water supply, drainage and waste treatment.

The rights and obligations of the foreign investor will be regulated by the signed BOT, BT and BTO contract. The Government encourages both public- and private-sector investors to participate in BOT, BTO and BT in the following sectors:

(i) Construction, operation and management of brand-new infrastructure facilities; and

(ii) Renovation, expansion, modernization, operation and management of the existing infrastructure facilities such as:

• Roads, bridges, tunnels, and ferry landings;

• Railway bridges and railway tunnels;

• Airports, seaports and river ports;

• Clean water supply systems; sewage systems;

• Wastewater, waste collecting and handling systems;

• Power plants and power transmission lines;

• Infrastructure works of health service, education, training, career training, culture, sport and offices of State agencies; and

• Other projects as may be determined by the Prime Minister

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Vietnam – Singapore Industrial Park Company Limited (VSIP) Surveyed Investment in Quang Tri

Chairman of Quang Tri Provincial People’s Committee, Mr Nguyen Duc Chinh just had a meeting with the delegation of Vietnam – Singapore Industrial Park Limited Company (VSIP) led by Mr Anthony Tan, Deputy General Director of VSIP, representing VSIP (Singapore) – Amata (Thailand) – Sumitomo (Japan) as the leader.

On this occasion, Mr Anthony Tan, Deputy General Director of VSIP informed the leaders of Quang Tri province about the project of developing industrial parks and urban areas in VSIP at Quang Tri. According to representative of VSIP, currently the joint venture of investors VSIP – Sumitomo – Amata has selected contractors to survey the terrain and geology of the regions and soon have results to report to the Provincial People’s Committee.

On behalf of the provincial leaders, Chairman of Quang Tri Provincial People’s Committee thanked the delegation of VSIP – Sumitomo – Amata Joint Venture investors for visiting Quang Tri province. At the same time, in 2019, Quang Tri province will celebrate the 30th anniversary of the re-establishment of the province. Therefore, the provincial leaders have directed the branches and authorities to make efforts to work together with investors to start or inaugurate projects to celebrate this important event.

Regarding the investment plan for the infrastructure development project of industrial parks and urban areas in Quang Tri, Chairman of Quang Tri provincial People’s Committee wishes that the join venture of VSIP (Singapore) – Amata (Thailand) – Sumitomo (Japan Version) makes more efforts to start the project as soon as possible.

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Danang cooperates with South Korea in building an intelligent transportation system

On October 28th, Vice Chairman of Danang People’s Committee had a meeting with Seoul Metro delegation, represented by Mr. Shim Seung Moo – Director of Seoul Metro International Relations Department.

At the meeting, the parties discuss about the program “Building Intelligent Traffic System” (ITS) in Danang, including the main contents such as: basic survey of the area where the project is supported; Reviewing and evaluating Danang plans and policies, development regimes; Analyze the appropriateness of the time as well as the project content and budget ….

Mr. Shim Seung Moo – Director of Seoul Metro’s International Relations Department said: Using the ITS application to operate and manage the transportation system is a necessary job for Vietnam and Danang. If ITS is implemented in an integrated manner, traffic congestion during peak hours as well as traffic accident incidents in the area will be quickly resolved.

In the coming time, to deploy the ITS project, Seoul Metro will support Danang in installing infrastructure, equipment, violation monitoring systems (speeding, illegal parking), system of moving fee, parking management … It is expected that the project will be implemented according the plan during 3 years: The first year of construction of architectural frames, the second year of organizing training and installation, the third year of operation.

On behalf of the representative of Danang city, Vice Chairman of the City People’s Committee-Mr. Dang Viet Dung, agreed and highly appreciated the proposals of the Seoul Metro mission in surveying and supporting Danang to build the ITS system. Especially in the context that Danang aims to build a smart city in the period of 2018-2025, with a vision to 2030.

South Korea is known as a country with IT industries in the world, including the electronics, telecommunications and transportation. Therefore, the application of information technology applications in parking, solving traffic congestion, traffic flow,… will be necessary conditions towards building a smart city in Danan in the future.

The Vice President assigned the Department of Transport and the Department of Planning and Investment to early develop a detailed plan of the project to submit to KOICA and competent agencies in Vietnam for consideration, and to build a roadmap to receive it. KOICA’s non-refundable capital. Besides, the Vice Chairman expected the relevant units to coordinate to implement the project effectively.

With the goal of building a smart city in 2030, Danang wants to attract more investors from many different countries, to make investments in the field of information technology in Danang, to achieve the goals to be the smart city set by the city in the future.

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Establishing Distribution Company In Danang

Da Nang is a city in the Central of Vietnam, with the advantage of being a trading place of many countries in the world. Danang has a large seaport in the top 10 large seaports of Vietnam, facilitating trading activities with many countries around the world.

At the present, Da Nang is promoting foreign investment into Da Nang, and many investors have chosen Da Nang to do business in the distribution business line. For this business line, Vietnam has committed to open up to attract 100% foreign investment. As committed, foreign-invested companies in the distribution sector will be allowed to provide commission agents, wholesalers and retailers of all products manufactured in Vietnam and legally imported products into Vietnam. Therefore, the investors can import or produce goods, then they distribute the goods in accordance with regulations.

In addition, with the increasing in the number of tourists coming to Da Nang in recent years, the demand for consumer products, fashion and other items for tourists has increased. This triggers demand that many companies to provide essential goods for tourists, and this is a great investment opportunity for investors both domestically and abroad. The investors could explore this opportunity to set up company in Da Nang and fill the market’s demand.

In addition, with many policies to support enterprises in administrative procedures, as well as management, investors can easily carry out procedures as well as manage and control their business better. Enterprises investing in Da Nang are now very satisfied with the way public services are handled in the city’s administrative procedures, therefore more and more investors are choosing Da Nang as a destination for investment when targeting in Vietnam.

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Why Asian Investors Prefer Vietnam Real Estate Market?

Profitability of high-end real estate in Vietnam surpasses that of ASEAN countries.

According to Mr Pham Lam, General Director of DKRA Vietnam, in the past 3 – 5 years, Asian investors from Korea, Hong Kong, Japan, Malaysia and China have been active in the Vietnam real estate market. They prefer golden land funds, specializing in high-end and luxury real estate development.

Also according to leaders of DKRA Vietnam, the investment wave of Asian investors will increase in the next few years. The expert also outlines the 7 causes of the trend that Asian investors hunting for golden land to develop high-end real estate projects.

Firstly, Vietnam is a developing real estate market. In emerging markets, there are more investment opportunities than markets that have grown too long (saturation of opportunity). Real estate in many Asian countries are too expensive and the investment at the present time is not attractive in the native country has urged Asian investors poured capital into Vietnam market.

Secondly, Vietnam is a country with political stability, which is considered as the most important factor that is of international concern before entering a new market. The stable political background brings safety for investment yields in the context of global geopolitical fluctuation is increasingly unpredictable.

Third, high-end and luxury real estate in Vietnam, especially Ho Chi Minh City (HCMC), is more profitable than ASEAN countries. According to a recent report of some surveyors in the country, high-end real estate in districts 1 and 3 of HCMC have a profitability ratio of more than 4%. In District 2, especially Thao Dien, An Phu and Thu Thiem areas, luxury apartments achieved a profitability rate of 5 – 6.5%.

Meanwhile, the profitability rate of investment in luxury apartments in ASEAN is fluctuating in the range of 3.7 to 5.2% and in Asia, it also has the same threshold. Therefore, luxury real estate in HCMC is considered quite competitive while the price is lower.

Fourth, Vietnam has Asian culture in accordance with the culture of other countries in the area. The similarity or proximity in culture is a very effective bridge in the process of investment promotion, investment cooperation, helping the Asian real estate owners easily access and penetrate the real estate market in Vietnam.

Fifth, Vietnam has a young population and is experiencing a spurt in income, so the demand for housing has increased sharply. The middle class, even the rich and the super-rich, are among the fastest growing groups in the world. This is a remarkable advantage of Vietnam.

With the flagship product of Asian investors, which is high-end real estate, they target rich consumers who are willing to pay for high-value assets with outstanding quality to assert their position.

Sixth, interest rates in the developed real estate markets in the Asia is very low. Interest rate in Japan is 1%, Singapore is 3%, Korea is below 2% and other regions such as Taiwan, Hong Kong is also at a modest level compared to Vietnam. This is the factor attracting the attention of investment funds and major real estate companies in Asia coming to Vietnam. In addition to developing projects with committed profit margin, they also carry out loan deals with better interest rates than in their hometowns.

Seventh, due to the same region, the moving distance between Vietnam and their home country of Asian investors is considered to be faster, more convenient than other continents. Close geography distance helps Asian investors have more opportunities to monitor, check the new market and make important decisions in time, making the most effective investment.

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