VIETNAM

BUSINESS GUIDE
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2
 FOREWORD
Vietnam is a very exciting place to live and work and the journey it has taken since opening to
business has also been extraordinary. BritCham and our previous incarnation, British Business
Group Vietnam, as the first licensed international chamber of commerce in Vietnam, has been
fully involved in that journey since 1998.

Vietnam has, once again, shown its determination to further develop its role within the business
world, achieving positive GDP growth even during the tumultuous period of the last 18 months,
and is looking forward to benefitting from its resilience, as well as embracing the opportunities
the world economy presents. From being thought of as a low-cost manufacturer, the country is
moving into more value-added sectors and high-tech as well as service sectors.

The Chamber helps all British companies or subsidaries, whether they are already in-country or
are thinking about entry, by supporting them to join the market, providing dedicated resources,
working closely with the Department of International Trade, Embassy, and Consulate General
promoting British business as well as opportunities available.

From manufacturing, high-tech, green energy, finance, healthcare, as well as education and
training, Vietnam, a country of 96 million people, has the fastest-growing middle class of the
region, growing at over 9% per year.

I hope you find this guide useful and interesting and I can assure you of a warm welcome and
support, as well as outstanding beaches and hotels! Vietnam really does have everything!

Christopher Jeffery
Britcham Vietnam

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 PREFACE
During the decade it took to build ACSV Legal, Vietnam has undergone a profound and exciting
evolution. This offers investors and operators a compelling spectrum of opportunities in 2021
and beyond, that simply didn't exist when we originally opened our doors with a total staff of
three.

Looking back over the past decade, Vietnam has delivered on its potential at a breakneck pace.
The legal framework has been substantially improved together with a rapid modernisation of the
taxation system. The equity and debt capital markets have added significant depth and breadth,
offering new funding channels to companies as they grow. The country's entrepreneurial spirit
has also benefitted from the emergence of a vibrant venture capital and private equity sector
over the same period. This has resulted in a dynamic start-up community and put many mid-
sized companies on the path to a stock market listing.

Free trade agreements (FTAs) have been signed with significant trade blocs such as the US, the EU
and within Asia, which have been instrumental in expanding the industrial base into electronics,
consumer goods, and automobiles. This has been fueled, in part, by an almost doubling of
annual foreign direct investment, to USD20 billion, since ACSV Legal began. In tandem with this,
Vietnam's transportation infrastructure development has facilitated the movement of goods and
services and contributed to an increasingly mobile labour force.

Rapid urbanisation, growth in per capita GDP to almost USD3,000, and a growing sophistication
in bank credit have been instrumental in the pace of property development, the change in city
skylines and the property ownership profile across the country.

As we look forward from 2021, there is likely to be a phase of exciting new developments for
business generation. Private companies, many of which are family-owned, are on the verge of
a generational transition that will create investment avenues for external strategic investors.
The implementation of privately managed pension programmes will act as a catalyst for fintech
innovation, long-term financial security for the population, and result in sustained inflows into
capital markets. In terms of industrial infrastructure, the energy industry will be a critical focus for
investment as countrywide generation is forecast to almost triple to 130GW by 2030. The rapid
expansion in renewable power sources will also refocus attention to energy storage solutions
and shift to more energy-efficient technologies. The ongoing relocation of production facilities
into Vietnam will also require innovation in logistics, supply chain management, and process
management across the entire manufacturing base of the country.

As with any economy and market in the midst of such tumultuous change, there are an equal
number of legal and commercial challenges to resolve. To help our clients navigate these, we have
developed expertise in many practice areas including corporate M&A, private equity, real estate,
tax, structuring, banking and finance, and regulatory compliance. This spans many industries, in
particular energy, healthcare and wellness, retail, distribution, logistics, supply chain, education,
manufacturing, and technology.

From our position as one of the fastest-growing law firms in Vietnam, we look forward to
delivering this accrued expertise to ACSV Legal's clients over what promises to be a fascinating,
and rewarding, decade ahead.

Mark Oakley
Managing Partner

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 LEGAL NOTICE
This guide contains only brief information and includes legislation in force as of 31 March 2021. It
does not exhaustively cover the various topics in it. This guide is prepared for general information
only and is not intended to be a full analysis of the points discussed. This guide is also not intended
to constitute, and should not be taken as legal, tax or financial advice by ACSV Legal lawyers. The
information in this guide may not be applicable or suitable for your specific circumstances or
needs and you should seek separate advice (from us) for your specific situation. Any reference
to any specific law or practice has been compiled or arrived at from sources believed to be
reliable and ACSV Legal lawyers do not make any representation as to the accuracy, reliability or
completeness of such information. Even though we endeavour to provide accurate and timely
information, we cannot guarantee that such information is accurate as of the date it is received
or that it will continue to be accurate in the future.

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 INDEX
FOREWORD3
PREFACE4
LEGAL NOTICE 6
INDEX7
1. INVESTING IN VIETNAM 9
2. LEGAL ENTITIES 16
3. TAX  23
4. INCENTIVES 29
5. COMPETITION 32
6. INSOLVENCY, BANKRUPTCY AND DISSOLUTION 36
7. FOREIGN CURRENCY EXCHANGE AND PROFITS REMIT  39
8. BORROWING AND LENDING 40
9. NOTARISATION, AUTHENTICATION AND LEGALISATION 42
10. IRC AND ERC  44
11. EMPLOYMENT AND LABOUR LAW  46
12. INTELLECTUAL PROPERTY RIGHTS 54
13. CONTRACTS 56
14. CORRUPTION AND BRIBERY 57
15. MONEY LAUNDERING 58
16. CORPORATE CRIMINAL LIABILITY  59
17. LEGAL SYSTEM AND DISPUTE RESOLUTION  62

7
INVESTING
IN VIETNAM

8
1. INVESTING IN VIETNAM • Investment in the form of capital contribution or shares
purchased in an existing enterprise;
• Conclusion of a public-private partnership contract (PPP
contract); or
1.1 Investor • Conclusion of a business cooperation contract (BCC).

The 2020 Law on Investment, which came into force on 1 1.2.1 Incorporation
January 2021, retains a distinction between foreign and
Vietnamese investors. Therefore, different procedures A foreign investor must generally apply for an investment
often apply depending on whether the investor is foreign or registration certificate (IRC). This is issued by the competent
domestic. For instance, unlike local businesses, international Department of Planning and Investment (DPI) prior to the
investors are required to register their investment or to incorporation of a commercial entity (see paragraph 10.2 for
obtain certain documents before their investment project can more information about the registration of an investment).
begin. For the purposes of this guide, we will focus on foreign Following the registration of the underlying investment,
investors who conduct investment activities in Vietnam, the new economic organisation has to be incorporated
or who are considering an investment in this promising in accordance with the local laws on enterprises or other
destination. regulations. Again, the competent authority for this procedure
According to local law, a foreign investor is defined as follows: will be the DPI.
• An individual with a foreign nationality;
• An organisation incorporated in a foreign jurisdiction; or
1.2.2 Approval for Capital Contribution or
• A Vietnamese-incorporated enterprise in the following
cases: Acquisition
a. More than 50% of its charter capital is held by a foreign
investor(s), or a partnership where a majority of partners A foreign investor may need to obtain the DPI’s explicit
are foreign individuals in the case of a partnership approval (M&A approval) before capital can be contributed
enterprise; or shares acquired in an already existing (foreign-owned or
b. More than 50% of its charter capital is held by an local) enterprise. Under the 2020 Law on Investment, this is
enterprise(s) prescribed in paragraph (a) above; the case where the capital contribution or acquisition results
c. More than 50% of its charter capital is held by a foreign in an aggregate foreign ownership of more than 50% of the
investor(s) and an economic organisation(s) prescribed charter capital of the existing enterprise. Further restrictions
in paragraph (a) above. apply if the existing enterprise is engaged in any business
An additional consideration when structuring an investment which is conditional for foreign investors.
in Vietnam is whether the proposed activity is subject to Additionally, M&A approval will be required if the existing
additional requirements. In particular, special approvals and enterprise – by way of its legal conduct of business – possesses
application procedures may apply to an investment if it falls a certificate of land-use rights (LuRs) concerning a plot of land
into a so-called conditional sector (see paragraph 1.4 for in a frontier or coastal island, town, ward or other areas which
more details on conditional sectors or business lines). have an impact on national defence and/or security.

1.2 Forms of Investment The (new) 2020 Law on Investment, which

entered into force as of 1 January 2021,
A foreign investor can invest in one of the following ways: retains clear distinction between a foreign
• Incorporation of an economic organisation (in the form and Vietnamese investor.
of an enterprise);

FORMS OF INVESTMENT IN VIETNAM

Incorporation Share Acquisition/ BCC PPP

Capital Contribution

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1.2.3 PPP Contract among others, accounting and insurance services, securities
trading, and businesses related to gambling and lotteries, oil
The PPP Law was passed by the National Assembly on 18 June and gas, healthcare, transport, real estate, education, banking
2020. Under this law, a PPP contract is used for construction, and finance, and agriculture.
upgrading, renovation, expansion, modernisation or
operation and trade of public facilities or services such as Enterprises partaking in any of these business lines could be
roads and airports or public utilities such as power plants. asked to meet conditions related to a licence, certificate of
For a PPP contract, foreign investors - together with their satisfaction of conditions, practising certificate, certificate
project enterprises - will have to sign a PPP contract with the of professional indemnity insurance coverage, other written
relevant national state agency. This engagement is subject to certification or documentation, and/or conditions satisfied
the approval(s) of competent authorities. These authorities without any written certification or consent. The relevant
will select the investor at their own discretion, taking into requirements are provided in greater detail in separate
consideration the negotiation result on the contract, the valid guiding decrees and circulars.
bid, the information about the investors’ capacities (current
at the time the PPP contract is signed), and the respective
bidding documents. 1.5 Restrictions
The PPP Law came into effect on 1 January 2021 and, in
establishing a new form of local investment engagement, 1.5.1 Introduction
forms the first of such regulations that Vietnam has
implemented. Vietnam has committed to open its market to foreign investors
under various FTAs – a process that started when it became
1.2.4 BCC a member of the World Trade Organisation (WTO) in 2007.
Certain sectors were opened completely without restrictions.
In the case of a BCC, a foreign investor does not need to For other sectors, however, a foreign investor may be faced
establish an economic organisation. Instead, the investor with notable restrictions related to conditions regarding:
concludes a BCC with a Vietnamese or foreign investor and • The ratio of foreign ownership in an enterprise;
establishes a steering board to implement the investment • Forms of investment;
project as agreed in the BCC. The contractual structure • Scope of investment activities;
that binds both parties serves as the rules of the investor’s • Vietnamese parties participating in the implementation
engagement in this form of investment. The parties agree to of investment activities; and/or
the functions, tasks, and powers of the respective steering • Other conditions prescribed in local laws, ordinances,
board. Similar to the setup of a local company, parties to a decrees and international treaties on investment.
BCC must apply for an IRC if they include one or more foreign The possibility of restrictions is one of the major points
investors. A foreign party to a BCC may establish an operating a foreign investor should be aware of and take into
office in Vietnam to implement the BCC. This office must be consideration when choosing a suitable form and structure
registered with the DPI, which supervises its operation. of investment in Vietnam. Moreover, and this is a general
problem, it is not always easy to locate relevant legal or
administrative guidance. Applicable laws are often scattered
1.3 Banned Business Lines across different, partly overlapping legislative documents
throughout the legal system.
There are several business lines in which business investment
is prohibited and, therefore, impossible, irrespective of 1.5.2 Restrictions in Foreign Ownership
whether it is conducted by a foreign or domestic investor.
The so called banned business lines include, for example, any In principle, a foreign investor is permitted to own an unlimited
commercial trading activities in certain types of chemicals proportion of the charter capital of an economic organisation,
or minerals, as well as objects/animals that are under the except where it engages in a business line conditional to
protection of environmental laws. As of 1 January 2021, foreign investors. This may be the case regarding ownership
under the 2020 Law on Investment, these banned business ratios in industries such as banking, civil aviation, and certain
lines have been extended to also include debt-collection telecommunication services and state-owned enterprises
services. (SOEs) which are privatising (known as equitisation) or
converting their ownership into another form.

1.4 Conditional Sectors or Business Lines

Besides banned business lines, there are also so-called

conditional business lines or sectors. These are defined as
being conditional to extra requirements before being eligible
for investment. Under the 2020 Law on Investment, there
are currently 227 conditional business lines. These include,

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1.6 In-principle Approval on Investment • Development of infrastructure of industrial parks or
export-processing zones;
Some investment projects require an in-principle approval • Processing of petroleum and gas; or
from either the National Assembly, the Prime Minister, or • Casinos or other betting businesses, except for electronic
the provincial People’s Committee. This procedural loop can games with prizes for foreigners.
pose a significant hurdle to the implementation of investment • Projects of foreign investors related to telecommunications
projects and usually requires special attention from local services with network infrastructure; afforestation,
advisors. publication, and press;
• Projects requiring the simultaneous in-principle approval
1.6.1 National Assembly of at least two provincial People’s Committees; and
• Other projects which fall within the authority of the
Prime Minister under the current laws, including the laws
The following projects must obtain in-principle approval from
on public investments.
the National Assembly:
• Projects that will have a significant or potentially serious
impact on the environment, such as a nuclear power 1.6.3 Provincial People’s Committee
plant; or a project that requires conversion of the
land-use purpose of a special-use forest, an upstream The following projects must obtain in-principle approval from
protective forest, frontier protective forest of 50 hectares the provincial People’s Committee (if they do not fall within
(ha) or more, a protective forest as windbreaker, shelter the authority of the National Assembly or the Prime Minister
from flying sand or breakwater or for reclamation from as listed in paragraphs 1.6.1 and 1.6.2 above):
the sea with an area of 500 ha or more, and forests for • Projects which acquire land from the state without
production with an area of 1,000 ha or more; auction, tendering or transfer, or require the conversion
• Projects that require conversion of the land-use purpose of land-use purpose, except for land of a household
of wet rice cultivation of two harvests or more on an area or individual for which the in-principle approval is
of at least 500 ha; not required under the Law of Land; construction of
• Projects that will relocate 20,000 people or more in residential houses (for sale, lease or hire purchase) or
mountainous areas or 50,000 people or more in other urban zones which require an area of under 50 ha and
areas; and cover a population of under 15,000 people in an urban
• Projects that require an application of a special area; land of under 100 ha and which covers a population
mechanism or policy to be decided by the National of under 10,000 people in a non-urban area or which is
Assembly. domiciled within a development-restricted area or historic
centre (as determined in the urban planning project) of
a special urban area; and projects of a foreign investor
1.6.2 Prime Minister
or foreign-invested economic organisation conducted
in a frontier or coastal island, town, ward or other
The Prime Minister of Vietnam is the competent authority
areas which have an effect on national defence and/or
to approve, in principle, the following investment projects
security. However, the in-principle approval for projects
(which do not fall within the authority of the National
conducted in an industrial zone, export-processing zone,
Assembly as listed in paragraph 1.6.1 above):
high-tech zone or economic zone conforming to the
• Projects, regardless of capital sources, that meet one of
master plan approved by the authorities shall be granted
the following criteria:
by the zone’s management board; and
• Relocation of 10,000 people or more in mountainous
• Construction and commercial operation of golf courses.
areas or 20,000 people or more in other areas;
• Construction of new airports and runways, new
passenger terminals at international airports, and new
cargo terminals with a capacity of at least 1 million tons
1.7 Environmental Protection
per year; and commercial operation of passenger air
An investor must prepare an environmental impact
transportation;
assessment report (EIAR) for the projects listed below. This
• Construction of new seaports or seaport complexes in
can also be outsourced to an independent contractor.
a special seaport; new seaports or seaport complexes
• Projects which require the in-principle approval of the
with investment capital of at least VND2.3 trillion within
National Assembly, Government, or Prime Minister;
a Type 1 seaport;
• Projects which utilise land of a natural preservation
• Construction of residential houses (for sale, lease, or
area, national park, historic-cultural monument, world
hire purchase) or urban zones which require an area of
heritage site, biosphere preservation area, or a ranked
at least 50 ha, or under 50 ha but cover a population of
scenic beauty site; or
at least 15,000 people in an urban area; land areas of
• Projects which could have adverse impacts on the
at least 100 ha, or under 100 ha but cover a population
environment.
of at least 10,000 people in a non-urban area; or which
Projects not mentioned above or business plans not required
reside within preservation areas of a recognised national
to formulate an investment project under the laws on
monument, irrespective of its used land or population;
investment can be implemented with an environmental

11
protection plan (EPP).
While an approved EIAR is a precondition for the in-principle
approval (if required), the EPP can be approved at any time
before the project or plan is implemented.
As of 1 January 2022, when the 2020 Law on Environmental
Protection enters into force, the EIAR and EPP will be replaced
by a preliminary assessment of environmental impact, an
assessment of environmental impact and an environmental
licence. These shall be granted to projects subject to their
negative impact on the environment.

1.8 Transfer of Investment Project

An investor can transfer part or all of the project to another

investor when the following specific conditions are satisfied:
• The transferred part of the project is not terminated as
prescribed in the Law on Investment;
• Transferee(s) who are foreign investors must satisfy
investment conditions applicable to foreign investors of
the project, if any;
• Compliance with the laws on land, residential houses
and real estate business if the project transfer concerns
the transfer of land and/or assets attached to land;
• Compliance with conditions in the in-principle approval,
the IRC or other relevant regulations, if any; and
• Compliance with the laws on management and use
of state capital invested in production and/or trading
activities at enterprises with respect to SOEs.
• Where the project has been issued with an IRC, the
parties must generally submit an application attached
with the project transfer contract to the DPI for its
information regarding the investor implementing the
project in the IRC.

1.9 Termination of Investment Projects

Under the 2020 Law on Investment, the operation of an

investment project will be terminated in the following
circumstances:
• The investor decides to terminate operations of the
project;
• The project is terminated according to the terms of the
contract or company charter;
• The project duration is over;
• The project causes certain issues which may subject its
operation to termination as decided by the DPI but the
issues cannot be resolved by the investor;
• The land of the project is withdrawn by the state due
to a failure to use the land as prescribed by the laws on
land, or the investor is no longer permitted to use the
investment location and fails to complete procedures for
a change of the investment location within six months
from the day on which the permission on the use of the
investment location is terminated;
• The project has been suspended and the DPI cannot
contact the investor or their legal representative after 12
months from the date the suspension began;

12
• The investor fails to deposit or to obtain a guarantee on for the purpose of concealing another civil transaction or
the deposit obligation as prescribed by law; evading responsibilities to a third person.
• The project is terminated under a decision of the court or Subsequently, the investor needs to liquidate the investment
arbitral tribunal; and project in accordance with the applicable laws including the
• The investor performs the investment activity based on Law on Asset Liquidation and the Law on Land.
a false transaction, i.e. a transaction falsely entered into

INVESTING IN VIETNAM

Market Entry:
The most common way to enter the
Vietnamese market is through a new
legal en�ty, or through the
acquisi�on of
an exis�ng enterprise.

Tax &
Compliance: Human Capital:
Doing business in Vietnam requires Local opera�ons will require a
an understanding of local restric�ons,
especially when �ed into an offshore Investing in Vietnam: well-qualified local workforce and
trusted Vietnamese employees on all
holding structure across mul�ple levels of the opera�on.
jurisdic�ons. Your Vietnamese investment will
depend on five core considera�ons,
which may have different impacts and
importance for your business.

Global
mindset Resources:
- local expertise: Vietnam requires a versa�le and
Investors bringing interna�onal exper�se flexible network on the ground for
into Vietnam will work with a local your commercial success. This
team of advisors, which can assess includes materials, as well as
the risks and liabili�es suitable space.
of your project.

13
14
LEGAL
ENTITIES

15
2. LEGAL ENTITIES and a director or general director if owned by an individual.
As for those owned by an SOE, the structure must also include
an inspection committee.
The management structure of a multiple-member LLC shall
2.1 Introduction include a members’ council (with a chairperson) and a
director or general director. As for SOEs or their subsidiaries,
A foreign investor can choose from a variety of legal entities the structure must also include an inspection committee.
to carry out a project. Currently, typical options for a foreign- With respect to a JSC, except for public JSCs which may
owned legal entity include: need to be managed under another structure if stipulated
• A limited liability company (LLC) in the form of either a in the Law on Securities, their management structure shall
single-member LLC or a multiple-member LLC; and include a general meeting of shareholders (GMS), a board of
• A shareholding or joint-stock company (JSC). management (BOM), and a director or general director. The
• This chapter sets out the differences between these two structure must also include an inspection committee if there
types of legal entities. are at least 11 shareholders or if the institutional shareholder(s)
hold at least 50% of the total shares. Otherwise, at least 20%
of the BOM’s members must be independent and there must
2.2 Definitions be an audit committee under the BOM.
The director or general director is the person who manages
• A single-member LLC is an enterprise under the the day-to-day business operations of the company.
ownership of an organisation or individual; Vietnamese law does not differentiate between the two.
• A multiple-member LLC is an enterprise under the In practice, an enterprise can opt to appoint this person
ownership of between two and 50 organisations or as either director or general director based on its business
individuals; and models and management requirements. Hereinafter we will,
• A JSC is an enterprise with at least three shareholders. therefore, only refer to the general director.
There is no restriction on the maximum number of
shareholders, who may be organisations or individuals.
2.6 Meeting of a Members’ Council, a BOM or a
GMS
2.3 Liability
The governing bodies in an LLC or JSC shall meet as follows:
The liability for these various legal entities is as follows: • For the members’ council of a single- or multiple-member
• The single-member LLC’s owner is liable for debts and LLC, the meetings will be convened at the request of the
other liabilities up to the single-member LLC’s charter chairperson of the members’ council;
capital; • In case of a multiple-member LLC, the members’ council
• The members of a multiple-member LLC are liable must meet at least once per year and the meeting
for debts and other liabilities to the extent of their may also be convened on an extraordinary basis at
contributed capital; and the request of a member or group of members which
• The shareholders of a JSC are liable for the debts and satisfies relevant qualifications as prescribed by law; and
other liabilities of the JSC to the extent of their own • For a JSC, the BOM will meet at least once per quarter
contributed capital. and the GMS once per year.

2.4 Enterprise Registration Certificate 2.7 Quorum

An enterprise registration certificate (ERC) is required for To meet the legal requirement for a meeting of a members’
all economic organisations established in the form of an council, BOM or GMS which convenes for the first time, the
enterprise. The ERC is granted by the competent authority required quorum is as follows:
and contains certain information about the economic • For a single-member LLC, the votes of at least two-thirds
organisation. In order to obtain the ERC, various documents of the members’ council are required;
need to be submitted (see paragraph 10.1 for more • For a multiple-member LLC, at least 65% of the members
information about the ERC). representing the charter capital is required; and
• For a JSC, at least three-quarters of the members are
required for a BOM and more than 50% of the total
2.5 Management Structure number of shareholders’ voting slips for a GMS.
Where the meeting falls short of the required quorum,
The 2020 Law on Enterprises sets out different management subject to certain requirements as stipulated by law, it may
structures for the various legal entities. be convened for a second and third time for the members’
The management structure of a single-member LLC must council in a multiple-member LLC and the GMS in a JSC.
include a president or a members' council and a director or The specific percentage necessary will be stipulated in the
general director if owned by an organisation; or a president company charter.

16
2.8 Resolution 2.9 Legal Representative

2.8.1 Numbers Required to Approve a Resolution 2.9.1 General

Unless otherwise stipulated in the company charter, the law A company must have at least one legal representative who
requires a minimum number of members or shareholders to fulfils the following functions on its behalf:
agree with a certain resolution in order for it to be approved • Represents the company to exercise the rights and
at a meeting: perform the obligations arising out of company
• More than 50% (or 75% for certain material decisions) transactions;
of the members attending the meeting or the total • Acts as the plaintiff, defendant, and person with related
voting shares held by the attending members of a single- interests and obligations in arbitration proceedings or
member LLC; court; and
• The number of votes representing at least 65% (or 75% • Exercises other rights and performs other obligations
for certain material decisions) of the aggregated capital under the laws of Vietnam.
of the attending members of the meeting in a multiple- It is possible to have more than one legal representative,
member LLC; and which may be a suitable arrangement for roles that cover a
• The majority of attending members in a BOM meeting number of countries and, therefore, require a lot of travel.
at a JSC, except when a higher percentage is required in This is a consequence of the law requiring that, if none of the
the company’s charter. In a tied vote, the chairperson legal representatives stay in the country, someone needs to
of the BOM has the final decision. The number of be authorised to act on their behalf. The rights and obligations
votes representing more than 50% (or at least 65% for of the respective legal representatives should be laid down in
certain material decisions) of the total voting shares of the company’s charter to avoid any uncertainty.
the attending shareholders in a GMS meeting at a JSC.
That said, if the resolution causes adverse changes
to the rights and obligations of shareholders holding
preferential shares, the resolution can only be approved
if voted for by shareholders holding at least 75% of the
total number of these preferential shares.
The resolution may also be approved by collecting written
opinions from members of a multiple-member LLC or
shareholders of a JSC with the following rates:
• At least 65% of the charter capital of the multiple-
member LLC; and
• More than 50% of the total voting shares of the JSC, or
at least 75% of the preferential shares for a resolution
causing adverse changes to the rights and obligations of
the relevant preferential shareholders.
The specific percentage will be stipulated in the company
charter.

2.8.2 Effective Date

The law prescribes when a resolution or decision of the

members’ council or GSM is effective:
• From the date of passing or from the effective date
stated in the resolution, unless otherwise stipulated in
the company charter for single- and multiple-member
LLCs; and
• From the date of passing or from the date stated in the
resolution for a JSC.
If certain requirements are satisfied, a member (or group of
members) and a shareholder (or group of shareholders) can
request a court or arbitrator to cancel a passed resolution.
However, except for cases where a preliminary injunctive
relief applies, the resolution remains effective until a decision
issued by the court or arbitrator takes effect.

17
 2.9.2 Who can be a Legal Representative?

• The president or chairperson of the members’ council of a

single-member LLC owned by an organisation is the legal
representative of the company. The general director can
be the legal representative if so prescribed by the company
charter.
• For a multiple-member LLC, the chairperson of the members’
council and the general director can be the legal representative
of the company. The chairperson will automatically be the
legal representative if the company charter is silent in this
regard.
• The chairperson of the BOM or the general director can
be the legal representative of a JSC when there is only one
legal representative subject to the company charter. If the
charter does not specify, the chairperson of the BOM shall
be the legal representative. The chairperson and the general
director shall automatically be the legal representatives of the
company when there is more than one legal representative.
The role of the legal representative differs from that of the general
director, whose powers are limited to those listed in the 2020
Law on Enterprises and cluster around the daily management of
the company. The legal representative has, in principle, unlimited
power to act on behalf of the company. The legal representative’s
signature is required on numerous filing documents, such as:
• Company creation (application for an ERC);
• Establishment of branches or representative offices;
• Company dissolution;
• Changes in the ERC;
• Adjustments to the registered capital;
• Registration of an offshore loan;
• Application for licences;
• Tax returns; and
• Opening a company bank account.

2.10 Capital Contribution

2.10.1 Charter Capital

• The charter capital of a single- and multi-member LLC shall

be the total value of capital contributed by the member(s) to
the company.
• The charter capital of a JSC consists of the total aggregated
par value of shares of all classes sold by the company.
• At the time establishment is registered, the charter capital
is the total value of assets or capital that the member(s)
undertake to contribute to the LLC, or the total aggregate par
value of shares of all classes which have been registered for
subscription and stated in the company charter.

18
2.10.2 Nature of Capital Contribution shall have the rights corresponding to the capital already
paid. The capital of a multiple-member LLC that has not
Capital contribution can be in VND, freely convertible foreign been contributed will be offered for sale pursuant to the
currency, gold, land-use rights, intellectual property rights decision of the members’ council. In this case, a multiple-
(IPR), technology, technical know-how, or other assets which member LLC must register an adjustment of the charter
can be valued in VND. capital within 30 days of the last day on which the charter
capital should have been fully contributed.
2.10.3 Time Limit for Capital Contribution • A shareholder of a JSC who fails to contribute capital
for all the number of shares registered automatically
ceases to be a shareholder of the company. Meanwhile,
• The owner of a single-member LLC and the members of
a shareholder who fails to pay for part of the number
a multiple-member LLC must contribute assets or capital
of shares registered will have rights in proportion to the
as registered with the relevant authorities within 90 days
number of shares paid.
of the ERC being issued.
• If shares have not been fully or partially paid, a JSC
• The shareholders of a JSC must pay, in full, the number of
shareholder who did not pay in full cannot assign the
shares registered for subscription within 90 days of the
right to purchase the number of unpaid shares to
ERC being issued unless the company’s charter or share
someone else. Furthermore, the shares of a JSC that
subscription agreement stipulates a shorter time limit.
have not been paid for are deemed unsold shares. The
BOM has the right to sell these shares. In this case, a JSC
2.10.4 Failure to Contribute Capital within the must register an adjustment of the charter capital and
Required Period founding shareholders within 30 days of the last day on
which the shares should have been fully paid.
If capital is not contributed within the required period of 90
days, or as agreed, the following needs to be done:
2.10.5 Increase of Charter Capital
• The owner of a single-member LLC must register an
adjustment of the charter capital equal to the actual
• A single-member LLC can increase its charter capital by
value of the contributed capital within 30 days of the last
making additional investments, or by converting to a
day on which the charter capital should have been fully
multiple-member LLC or a JSC and raising capital from
contributed. The owner is responsible for the extent of
new members or shareholders.
the capital he/she has undertaken to contribute to the
• A multiple-member LLC can increase its charter capital
financial obligations of the company arising before the
by increasing the capital of its members, or by raising
adjustment of the charter capital is registered.
capital from new members.
• A member of a multiple-member LLC who fails to
• A JSC can increase its charter capital by issuing new
contribute all the capital as promised automatically
shares.
ceases to be a member of the company. Meanwhile, a
member who fails to pay part of the capital as promised

SETTING UP A BUSINESS IN VIETNAM

Step 1: Step 2: Step 3: Step 4: Step 5:

The two most Documenta�on needs Department of Planning The incorpora�on Final step is opening
common forms of to be provided in and Investment to procedure is marked by of bank account,
incorpora�on are the adequate (usually approve investment plan an Enterprise payment of
Limited Liability legalised) form. and capital. This will be Registra�on Cer�ficate. investment capital,
Company and the documented in an This contains company appointment of legal
Joint Stock Company. Investment Registra�on creden�als, lines of representa�ve(s) and
Cer�ficate. business and is a hiring of staff.
prerequisite for
commercial opera�on.

19
2.10.6 Decrease in Charter Capital activities for two consecutive years from the date the
company was registered. The JSC shall ensure its capacity
to pay all debts and other liabilities upon return to the
• A single-member LLC can decrease its charter capital by
shareholders.
returning part of the contributed capital. This is possible
The charter capital of a JSC can also be decreased by
if it has continuously carried out business activities for
redeeming issued shares for no more than 30% of the total
more than two years since the company was registered,
number of ordinary shares sold and part or all of the dividend
and guarantees payment of all debts and other liabilities
preference shares sold; redeeming sold shares at a request of
after the owner has been repaid (the so-called lock-in
a shareholder who voted against certain matters of the JSC;
period); or in case of a failure by the owner to pay the
or in case of a failure to pay in full for the charter capital by
capital contribution in full for the charter capital within
the shareholders within 90 days.
90 days.
• A multiple-member LLC can decrease its charter capital
by returning part of the contributed capital. This is
possible if it has continuously carried out business 2.11 Shares
activities for more than two years since the company
was registered, and guarantees payment of all debts • Single- and multiple-member LLCs cannot issue shares.
and other liabilities after the owner has been repaid, • A JSC can issue shares that can be bought and sold by
by redeeming contributed capital from its members; shareholders.
or in case of a failure by its members to pay the capital • After a member has contributed capital in full, a multiple-
contribution in full for the charter capital within 90 days. member LLC must issue certification to the member(s)
• A JSC can decrease its charter capital following a decision corresponding to the value of their contributed capital.
of the GMS, and shall return part of the contributed
capital to the shareholders in proportion to their ratio
of share ownership, if the JSC has conducted business

20
2.12 Listing requirements need to be met. In particular, foreign investors
must have operated their offshore business for at least five
• Single- and multiple-member LLCs cannot list their years before they can establish a branch in Vietnam.
contributed capital. Branches are permitted to conduct a wide range of commercial
• A JSC can list its shares provided listing conditions are activities including the purchase and sale of goods, unless
satisfied. specifically prohibited in the licence granted to the branch or
under local laws.

2.13 Other Commercial Presences

2.13.1 General

Two other types of commercial presence could be established

to represent foreign investors in Vietnam:
• A representative office; and
• A branch.
The activities these entities can perform depend on treaties
between Vietnam and the country where the head office is
located. For business activities that are outside the scope of
a treaty, or where no treaty exists, an authorisation from the
competent Vietnamese authorities is needed.
Since these are not independent legal entities, the parent
company is liable for various aspects such as debts and
obligations. Legal claims can (only) be brought against the
parent company.

2.13.2 Representative Office

If a foreign investor wishes to have a presence in Vietnam, but

does not want - or is not yet ready - to invest in the country, a
representative office might bridge the gap. In general, setting
up a representative office is quicker and less complicated
than acquiring an ERC and IRC. One of the conditions is that
the foreign investor’s business must have been operational
for at least one year before the foreign investor can submit
an application.
Vietnamese law prohibits a representative office from
performing profit-generating activities. It cannot conclude
agreements to sell or provide products. However, it can,
for example, conduct business enhancement or marketing
activities such as displaying goods or services at its office.
A representative office can also play an important role in
facilitating operations and business objectives on behalf of
the offshore company by liaising with the local authorities
in Vietnam and leading negotiations with potential business
partners.
The head of the representative office can sign economic or
commercial contracts with businesses in Vietnam on behalf
of the offshore company on the condition that there is a
specific power of attorney from the offshore company for
each contract. A representative office can also employ foreign
and Vietnamese staff in accordance with Vietnamese law.

2.13.3 Branch

Foreign investors in certain business sectors- such as banking,

computing, construction, franchising, non-life insurance,
and some securities services - could set up a branch as an
alternative to establishing a new company. However, specific

21
TAX

22
3. TAX have a labour contract - or the term of the labour contract
is under three months with payments each time amounting
to VND2 million or more in total - in general, 10% will be
withheld and paid directly to the tax authorities. However,
3.1 Introduction
this does not mean that the resident does not have to finalise
his/her annual tax.
Like many other countries, Vietnam has various taxes, some
of which are applicable to either businesses or individuals.
Tax planning is one of the most important factors when 3.2.4 Tax Allowances
managing a company, especially in a new market.
If certain conditions are met, exemptions and/or reductions The monthly taxable PIT income will be reduced by VND11
can be granted in order to incentivise investment in certain million for personal allowance and an additional VND4.4
areas or sectors. million for each dependant, such as eligible parents or
children. It is important to note that the dependent
allowance is not automatic. The taxpayer needs to register
their dependents and provide supporting documents to the
3.2 Personal Income Tax
competent tax office. Contributions to mandatory social,
health and unemployment insurance schemes and local
3.2.1 Scope voluntary pension schemes can also be deducted but are
subject to a cap. Contributions to certain approved charities
The Personal Income Tax (PIT) Law applies, in principle, to
can also be deducted.
both Vietnamese and foreign individuals who are resident in
Vietnam or have income sourced from Vietnam. An individual
is considered a resident if he/she:
3.2.5 Tax Codes
a. Is present in Vietnam for 183 days or more in a calendar
Everyone with taxable income is required to obtain a tax
year or during a period of twelve consecutive months
code.
from their date of entry into Vietnam (this can be
checked from passport entry/exit stamps);
b. Is a foreigner with a temporary or permanent residence
card, or a Vietnamese citizen with a regular residential 3.3 Corporate Income Tax
location registered as a permanent residential address
in Vietnam; or 3.3.1 Scope
c. Has an irregular residential location or locations such as
a hotel room(s) and/or leased house(s) in Vietnam with The Corporate Income Tax (CIT) Law applies to corporate
an aggregated lease term of 183 days or more in a tax taxpayers in Vietnam. Unlike the PIT Law, the CIT Law does
year. not explicitly include the concepts of resident and non-
If these criteria are not met, individuals will be considered resident. Instead, it adopts the principle that a corporate
a non-resident. In cases b. and c., individuals may be taxpayer - whether located in Vietnam or overseas - must
considered non-resident if they are present in Vietnam for pay CIT for its income raised in Vietnam, or raised worldwide
under 183 days in a tax year and able to prove that they are a through its business facilities in Vietnam, unless otherwise
resident under another tax jurisdiction. stipulated in treaties to which Vietnam is a party.
For instance, if a foreign investor has a subsidiary company
3.2.2 Taxable Income incorporated in Vietnam or a permanent establishment in
Vietnam, they must pay CIT to the Vietnamese authorities
on their worldwide income earned through the Vietnamese
Generally, taxable income comprises ten main types: income
subsidiary company or in connection with the operations of
from employment, business, capital investments, capital
the permanent establishment. However, the CIT Law also
transfers, real estate property transfers, winnings or prizes,
applies to companies without a permanent establishment in
royalties, franchises, inheritances, and gifts.
Vietnam. If this is the case, the company is only required to
pay tax on income raised in Vietnam.
3.2.3 Tax Rates CIT is imposed on earnings obtained through the trading of
goods or services, or from other activities such as capital
For employment incomes of residents, a progressive system transfers or real estate transactions.
applies ranging from 5% to 35% depending on the annual or
monthly taxable income. Meanwhile, for non-residents, a flat
3.3.2 Tax Rates
rate of 20% shall be imposed on the income derived from
Vietnam.
The general tax rate is 20%. This applies to all companies,
For non-employment-related income, rates vary from 0.1%
except those exploring and extracting oil, gas, and other
to 20% subject to whether the taxpayer is a resident or non-
rare resources which are subject to higher tax rates. CIT
resident and depending on the type of income; the way PIT is
incentives of 10% or 17% may be applied provided that
calculated also depends on the type of income.
certain requirements are met.
Nevertheless, if a resident performs services but does not

23
3.3.3 Calculation 3.5 Value-added Tax

CIT is calculated based on the taxable profit of a company. Value added tax (VAT) applies to goods and services used for
The elements needed for this calculation are: total domestic manufacturing, business, and consumption in Vietnam. For
or foreign-sourced revenue, deductible expenses, non- input VAT to be creditable, the company must obtain a proper
taxable income, carry-forward losses, and other assessable VAT invoice from the supplier and other documentation,
income. For expenses to be deductible, the following criteria if required, such as bank statements where the payment is
need to be satisfied: VND20 million or more. In general, the VAT invoice needs to be
• The expenses actually arose and are related to the requested on the same day the service or good is purchased.
activities of production and business of the enterprise;
and 3.5.1 Tax Rates
• The expenses are supported by complete invoices,
source vouchers, and/or bank statements as stipulated The standard VAT rate is 10% and is applicable to most goods
by law. and products. There are two other rates: 0% and 5%, with the
Fines, penalties, and taxes are not deductible. Under certain first applying mainly to exported products and services and
conditions, and sometimes limited to a maximum duration, the latter generally applying to essential goods and services.
start-up expenses; charitable contributions; payments to In addition, a VAT exemption applies to medical or veterinary
foreign affiliates (royalties, loan interest, and service fees); services, certain insurance services, and certain financial
depreciation and amortisation of tangible and non-tangible operations.
assets; and interest expenses can be deducted while net
operating losses can be carried forward for a certain amount 3.5.2 Calculation
of time.
There are two methods to calculate the payable amount:
the tax credit method or by calculating tax directly based on
3.4 Capital Gains Tax added value.

3.4.1 General 3.5.3 VAT Invoices

It is important to note that, under Vietnamese law, gains on Companies may use template invoices, self-printed invoices,
the disposal of capital or securities in a Vietnamese entity or electronic invoices. The tax invoice template must
- such as an LLC or JSC - are subject to CIT or PIT. The law contain stipulated items and be registered with the local tax
distinguishes between a corporate entity and an individual authorities. There cannot be any corrections of the invoices
taxpayer with different regimes being applied. after they have been issued. If a mistake is made, the entire
invoice needs to be cancelled (or amended, in a limited
3.4.2 Corporate Entity number of specific cases). Therefore, in Vietnam, it can be
quite difficult to amend an invoice. A document called a
For a corporate entity disposing of capital or securities in a minute, signed by relevant persons, is needed to do this.
Vietnamese entity, the gain is treated as other income and
will be taxed at the standard rate of 20%.
However, for a foreign corporate entity that does not have
a permanent establishment in Vietnam, has performed
business in Vietnam for a period of less than 183 days, or has
not adopted Vietnamese accounting regimes or been issued
with a tax code, the CIT tax rate is 0.1% of the proceeds when
disposing of securities of a JSC. Meanwhile, when the capital
of an LLC is disposed of, CIT on gains from transfers of capital
will be levied at a rate of 20% on the gain.

3.4.3 Individual

If an individual tax resident disposes of the securities of a

JSC, the gain will be subject to PIT at a rate of 0.1% of the
proceeds. When the capital of an LLC is disposed of, PIT
is levied on capital transfer gains at a rate of 20%. If the
individual is a non-tax resident and disposes of capital or
securities in a Vietnamese entity, the gain is subject to PIT at
a rate of 0.1% of the proceeds.

24
3.6 Other Taxes anti-dumping tax, anti-subsidy tax, and safeguard tax. Export
duties with rates from 0% to 40% are levied on certain goods
3.6.1 Foreign Contractor Tax such as agricultural products like rice, forest products, fish,
and natural minerals.
Foreign organisations and individuals doing business in
Vietnam, or deriving income raised in Vietnam, may be 3.6.3 Special Consumption Tax
subject to foreign contractor tax (FCT). Generally, FCT is
comprised of CIT and VAT. The FCT rates, and the income The production or import of certain goods such as cigarettes,
used for calculating FCT, vary depending on the transaction alcoholic drinks, passenger vehicles with less than 24 seats,
and taxpayers’ tax filing status. In particular, the applicable aircraft, and playing cards, as well as the provision of certain
tax rates and taxable incomes may be different from those services, in particular those related to karaoke parlours,
stated in paragraphs 3.3 and 3.5 if the taxpayer fails to meet casinos, and golf links, are subject to special consumption tax
any of the following requirements: (SCT). In other jurisdictions, this is also called excise tax.
• The taxpayer possesses a permanent establishment in SCT rates differ depending on the type of goods and services,
Vietnam in the case of a corporation, or is a tax resident but can be as high as 150%. Taxpayers producing SCT-taxable
in Vietnam in the case of an individual; goods using SCT inputs are entitled to claim a credit for the
• The taxpayer performs business in Vietnam for a period amount of SCT paid on the materials imported or purchased
of 183 days or more; and from local suppliers.
• The taxpayer has adopted Vietnamese accounting
regimes, has registered with a tax authority, and has 3.6.4 Natural Resources Tax
been issued with a tax code.
The foreign contractors may benefit from double tax Natural resources tax is levied on the exploitation of natural
agreements between Vietnam and their home country. resources such as petroleum, mineral products, forest
products, seafood, and natural water. Tax rates range from
3.6.2 Import and Export Duty 1% to 40% depending on the specific type of exploited natural
resources. Progressive tax rates apply to the production
All goods entering Vietnam are subject to import duties output of petroleum, natural gas, and coal.
which are classified into three categories: ordinary rates,
preferential rates, and special preferential rates. The 3.6.5 Property Tax
applicable rate depends on the trading relationship between
Vietnam and the exporting country. Apart from being subject The Vietnamese Government has announced its intention to
to import tax, in certain situations, Vietnam also imposes an adopt a property tax regime. As per a draft law publicised on
the website of the National Assembly, the planned property

25
 VIETNAM TAXES AT A GLIMPSE

Business License Tax Corporate Income Tax

Natural Resources Tax Personal Income Tax

Vietnamese
Land Use Tax Taxes Foreign Contractor Tax
in 2021
Special
Capital Gains Tax
Consumption Tax

Property Tax Value Added Tax

tax may be imposed on certain non-agricultural land-use • Mineral exploitation and processing; and
rights, construction facilities, aircraft, yachts, and vehicles. In • The production of construction materials and pottery
terms of non-agricultural land-use rights, the land-use rights articles.
holders may have to pay this tax with rates of up to 2% per Certain areas may be exempt or eligible for a reduction, such
square metre. However, so far, no legislative schedule has as investment project land in places eligible for investment
been publicised outlining a timescale for the draft Law on promotion or land in areas with socio-economic difficulties.
Property Tax to be passed and implemented. There are also objects on which no land-use tax will be
imposed, such as land used for public purposes (e.g. roads,
3.6.6 Environmental Protection Tax bridges, schools and hospitals).

Environmental protection tax is levied on the production

and importation of products that are considered ‘non- 3.7 Tax Reporting
environmentally friendly’ and which could have a negative
impact on the environment. These products include petrol, 3.7.1 Tax Reports
oil, grease, coal, hydrochlorofluorocarbons, plastic or nylon
bags as well as some chemicals (pesticides). Tax rates are Companies have to submit monthly or quarterly reports to
based on specific tax levels per unit of product such as litre, the regional tax office. These must include VAT, CIT and PIT
kilo, or tonne. returns as well as a report on the use of VAT invoices. VAT
and CIT reports may also need to be submitted on a receipts
3.6.7 Business Licence Tax basis in certain circumstances, such as when transferring
real estate. Companies have to pay VAT, CIT, and PIT by the
All companies have to pay an annual business licence tax. The report submission deadline. If the reporting or payment is
amount of this tax is proportional to the registered charter not completed before the deadline, a fine can be imposed.
capital of the taxed entity.
3.7.2 Annual Tax Report
3.6.8 Non-agricultural Land-use Tax The company’s financial statement, alongside its PIT and CIT
return statements, all have to be submitted to the regional
This tax is imposed on residential land in rural and urban tax office on an annual basis.
areas used for non-agricultural production and business such
as: 3.7.3 PIT Declaration and Payment
• The construction of industrial parks; An employer must declare and pay PIT either monthly (by the
• The construction of production and business 20th day of the following month) or quarterly (by the 30th
establishments; day following the reporting quarter). The amounts paid are

26
reconciled at the end of the year to determine the total tax subsequent quarter for companies with business activities
liability. Foreign experts who are tax residents and about to that started less than twelve months ago or with annual
terminate their assignment in Vietnam are also required to revenue of VND50 billion or less for the previous year.
finalise their PIT before exiting Vietnam.
3.8.4 Capital Gains Finalisation
3.7.4 Capital Gains Declaration and Payment
Capital gains need to be declared. However, again, the
The responsibility for declaring capital gains to the tax deadline for making a declaration depends on the nature
authorities depends on the nature of the party (corporate and residency of the party. Below is a summary of the main
entity or individual) and on the residency of the entity timelines that generally apply depending on the identity and
(offshore / Vietnamese or tax resident / non-tax resident). nationality of buyer and seller.

Obligation to Time to
Seller Buyer
Seller Buyer declare and declare
pay
Year-end CIT
Vietnamese entity Any
Vietnamese entity Any Seller finalisation
Offshore entity Vietnamese entity Buyer When transaction
Offshore entity Vietnamese entity
occurs
Vietnamese
Offshore entity Offshore entity When transaction
target company Offshore entity Offshore entity
occurs
Vietnamese entity
Non-tax resident Vietnamese entity
/ Tax resident Buyer Non-tax resident Monthly or
individual / tax resident
individual individual quarterly
individual
Tax resident
Any Seller Tax resident When transaction
individual Any
individual occurs

3.8 Tax Finalisation

3.9 Audit
3.8.1 PIT Finalisation
Foreign-owned entities, credit institutions, insurance
Normally, the employer will submit the tax declaration to the enterprises, public companies, and securities institutional
Vietnamese authorities for its payments to employees by traders must be audited at least once a year. This audit must
the end of the year. If an employee works for two employers be completed within 90 days from the end of the calendar
under a labour contract or another kind of agreement, year. All auditing activities will follow the Vietnam Accounting
neither company can finalise the tax over a calendar year, Standards (VAS) which differ from the International Financial
unless the labour contract or agreement is of a term less Reporting Standards (IFRS). These Vietnamese standards are
than three months or the monthly average amount paid by issued by the Ministry of Finance based on the international
the other companies is more than VND10 million. In that standards on auditing. Vietnam is expected to adopt the IFRS
case, the employee can authorise the company to submit on (phased in from 2022 to 2025) which will likely impact the
his or her behalf. Otherwise, the employee has to submit the current way of doing business in the country.
tax declaration. An annual final tax return must be submitted,
and any additional tax must be paid within 90 days from
year’s end. 3.10 Double Taxation Avoidance Treaties

3.8.2 CIT Finalisation It is interesting to note that Vietnam has concluded

agreements with almost 80 countries to prevent their
The annual CIT return must be filed and submitted no later nationals from being taxed twice. Double taxation avoidance
than 90 days from year’s end. If the annual CIT submission (DTA) treaties can apply to individuals and companies. The
is filed late, a company can be fined. The same applies if an content of a DTA differs per country and it is, therefore, good
incorrect declaration is made causing failure to pay tax to the practice to ask for advice on the applicability of a DTA in an
fiscal authorities. individual case.

3.8.3 VAT Finalisation

VAT return forms must be filed monthly by the 20th day of

the subsequent month, or quarterly by the 30th day of the

27
INCENTIVES

28
4. INCENTIVES Incentives are listed in various documents, making it very
difficult to find all relevant information. Therefore, investors
should assign local advisors to assess the most preferable
location for their investment plan.
4.1 Introduction

Vietnam currently has about 326 industrial parks (IP)

(industrial zones or export processing zones) and 17 coastal
4.3 Tax Incentives
economic zones.
In the first half of 2019, IP and economic zones attracted 4.3.1 Industries and Sectors
340 newly-registered foreign investment projects worth
almost US$8.7 billion. The leading provinces in attracting Tax and land use incentives can be granted to new or
foreign investment are Bac Ninh, Binh Duong, Dong Nai, extended investment projects in ‘investment-encouraged’
HCMC and Thanh Hoa, mainly due to better transportation areas across the country. These incentives can also be
infrastructure. granted to business sectors including education, health,
Besides the traditional IPs, some of the newer parks have high-tech, scientific research, environmental protection and
been set up as a township outside larger cities as integrated infrastructural development, among others.
work, live, play, and learn areas. These townships include Incentives are also given to producers of high-priority
shopping malls, offices, supermarkets, schools, hospitals, products. These include accessories, components and
hotels, apartments and townhouses. spare parts used for assembling goods in industries such
Thanks to attractive incentives, companies now also set up as textiles and garments, footwear and leather, electronics,
their business in other areas outside HCMC, Hanoi, and Da agricultural machinery, automobiles, shipbuilding and the
Nang. Since 1 July 2018, new concepts have been introduced prioritised mechanical sector alongside supporting products
for IPs: the auxiliary industrial zone (AIZ), or supporting used in high tech industries. Investors can also claim certain
industry zone, and the eco-industrial zone (EIZ). An AIZ is an incentives when investing in product distributing chains,
IP specialising in manufacturing auxiliary industrial products technical or other facilities or coworking spaces supporting
and providing services supporting their manufacture. An EIZ, small and medium-sized enterprises (SMEs) and start-ups.
on the other hand, is an IP in which enterprises are required
to engage in cleaner production, make effective use of 4.3.2 AIZ
natural resources, and enter into manufacturing cooperation
and affiliation to tighten industrial symbiosis in order to Projects pertaining to the infrastructure development of an
promote economic, environmental and social efficiency in AIZ - including subzones - may be entitled to tax exemption
these enterprises. and rent reduction for land leases; a land lease term of up
to 70 years (the norm is 50 years); and priority access to
state loans, ODA funds, foreign loans under government
4.2 Choice of Location guarantees and other kinds of loans.
Meanwhile, investment projects related to manufacturing
Investors unsure of where to establish a new business or supporting industry products as listed in Decree No.
investment project should take into consideration a number 111/2015/ND-CP of 3 November 2015 may enjoy certain tax
of factors such as whether to choose an area outside or incentives relating to CIT as well as export and import duties.
within an industrial park. In both cases, the following points Moreover, these projects may enjoy priority participation in
should be taken into account, depending on the business or training or assistance programmes for start-ups, SMEs, and
factory project in question: other relevant programmes administrated by the competent
• Infrastructure and connectivity with the global or local authorities.
supply chain;
• Access to suitable staff; 4.3.3 EIZ
• Complicated procedures for site clearance and
infrastructure construction; Eco enterprises in EIZs can enjoy preferential loans from
• Import duties when importing materials; the Vietnam Environment Protection Fund, Vietnam
• Access to distributors; and Development Bank, and/or other financial sources related to
• Incentives. clean industries. They will also have priority participation in
Investors who opt for an industrial park need to decide on technical support or investment enhancement programmes.
the preferred location, as operating near similar companies Furthermore, eco enterprises will be prioritised in calls to
will mean easier access to staff. Additionally, customs provide technology market information and cooperate in
warehouse keepers can support with customs clearance, industrial symbioses in the scope of production and business
provide transportation services and act as distributors for the activities.
deposited goods.
As mentioned above, one factor to consider is whether
certain (monetary) incentives are granted in the prospective
investment area. However, it is important to emphasise
that Vietnam’s tax incentive regime is relatively complex.

29
4.3.4 Specific Areas

Investors in areas with poor socio-economic conditions, such

as those with weak infrastructure, lack of an experienced
labour force, or remote and rural areas, may be eligible for
tax reduction and exemption.

4.3.5 Tax Holidays

Tax holidays can consist of a 10% rate reduction for 15

years and a 17% reduction for 10 years, starting from the
commencement of operations. It can also consist of a 50%
reduction for two to nine years; or a tax exemption of two to
four years, followed by a rate reduction. The specifics need
to be carefully examined and assessed together with legal
counsel, as the regulations of Vietnamese investment law are
numerous and difficult to navigate.

4.4 Other Incentives

If they meet the relevant criteria, enterprises may be eligible

for training or assistance programmes and others organised
by the competent authorities. Qualifying enterprises may
also receive preferential loans, invitations to participate in
technical support or investment enhancement programmes,
information on the technology market and cooperation
opportunities, exemption from duties on imported goods,
and exemption from and reduction of land rental fees and
non-agricultural land-use tax.

Most important types of investment

incentives
• Tax holidays
• Tax discounts
• Preferable land allocation
• Import duties

30
COMPETITION

31
5. COMPETITION • The agreements are absolutely prohibited if they:
̵ Prevent, restrain, or disallow other enterprises
from entering the market or developing business;
5.1 Introduction ̵ Abolish from the market enterprises other than
the parties of the agreements; or
Competition is necessary to give consumers a choice of ̵ Conspire in biddings.
products at reasonable prices. However, in an unregulated • If the parties are in the same relevant market, prohibited
market, companies will try to obtain as much profit as possible. agreements are those that:
This can lead to an imbalance of market shares or unequal ̵ Directly or indirectly fix prices;
opportunities for all market participants. In Vietnam, the ̵ Distribute outlets, sources of supply of goods, or
Competition Law contains provisions similar to those in more provision of services; or
developed countries. These include competition-restricting ̵ Restrict or control produced, purchased, or sold
acts, unfair competition acts, orders and procedures for quantities or volumes of goods or services.
settling competition cases, and measures for how to handle • If the parties are in the same relevant market and the
violations of competition legislation. The Competition Law agreements may cause an appreciable restrictive effect
applies to business organisations and individuals including on competition, prohibited agreements are those that:
enterprises producing or supplying products and services ̵ Restrict technical or technological development
for public utility, enterprises operating in state-monopolised and investments;
industries and sectors, alongside foreign enterprises and ̵ Impose conditions or unrelated obligations on
professional associations operating in Vietnam. the signing of purchase/sale contracts for goods/
services;
̵ Prevent transactions with parties other than the
parties thereto;
5.2 Application
̵ Limit consumption or supply of goods or services
of parties other than the parties thereto; or
As is common when dealing with Vietnamese regulations,
̵ May cause other restrictive effects on competition.
stipulations of the Competition Law are sometimes difficult to
• If the parties have different production, distribution,
interpret as there is no formal clarification and guidance on all
or supply businesses constituting a trade lifecycle of a
the provided concepts. One of the most crucial points is the
product or service and the agreements may cause an
scope of the law. The Competition Law states that it applies
appreciable restrictive effect on competition, prohibited
to, among others, foreign enterprises operating in Vietnam.
agreements are those that:
However, no definition is given as to what ‘operating’ means
̵ Directly or indirectly fix prices;
in practice. This, in turn, has caused confusion over what level
̵ Distribute outlets, sources of supply of goods, or
of activity is necessary to qualify. It is, therefore, advisable to
provision of services;
interpret the legislation broadly in that any kind of operation
̵ Restrict or control produced, purchased or sold
in Vietnam at any level can make a foreign enterprise subject
quantities or volumes of goods or services;
to the application of the Competition Law. In general, it is
̵ Restrict technical or technological development
understood that foreign businesses without direct operations
and investments;
and a physical or legal presence in Vietnam are likely to fall
̵ Impose conditions or unrelated obligations on
within the scope of the Competition Law when they have a
the signing of purchase/sale contracts for goods/
local subsidiary or provide sales in Vietnam. Participants of
services;
foreign economic concentrations will need to determine
̵ Prevent transactions with parties other than the
whether they are subject to the law’s merger control regime.
parties thereto;
Vietnamese Competition Law will be applicable if agreements
̵ Limit consumption or supply of goods or services
or concentrations have or have the potential to significantly
of parties other than the parties thereto; or
restrict competition in the (Vietnamese) market.
̵ May cause other restrictive effects on competition.
̵ If the agreement benefits consumers and certain
criteria are met, such as causing technical
5.3 Anti-competitive Agreements and Other innovation, an exception may be granted.
Conduct

There are a number of agreements that restrict competition 5.4 Dominant Position
and, therefore, run a risk of illegality. To determine whether
an agreement is legal, it is important to look at the relevant
If an enterprise or group of enterprises has a dominant or
contents of the agreement, the relevant market of the parties,
monopoly position, certain acts by those enterprises are
the trade lifecycle of the parties’ products and services, and/
prohibited.
or the level of restrictive effect on competition assessed by
• A dominant market position is deemed to exist if an
the National Competition Commission (NCC), the highest
enterprise has a market share of 30% or more, or if it
authority handling state management of competition under
possesses considerable market power;
the Ministry of Industry and Trade.
• A dominant market position is deemed to exist if a group

32
 of enterprises act and possess together considerable consumers, taking advantage of the monopolistic position to
market power, or unilaterally change or cancel an executed contract without
̵ Two of them have a combined market share of 50% or legitimate reasons or performing other acts abusing the
more; monopolistic position as prescribed by other laws.
̵ Three of them have a combined market share of 65%
or more;
̵ Four of them have a combined market share of 75% or 5.6 Mergers and Acquisitions
more; or
̵ Five or more of them have a combined market share of The Competition Law defines the concept of economic
85% or more. concentration which covers mergers, consolidations, and
The above group of enterprises does not include those acquisitions of controlling stocks and joint ventures between
possessing a market share of less than 10%. The considerable enterprises.
market power of an enterprise or group of enterprises is An economic concentration is prohibited if it causes or could
determined based on the following factors: cause substantial anti-competitive effects on the Vietnamese
• Market shares of the enterprises in the relevant market; market. Enterprises must file a dossier of notification to the
• Financial strength and size of the enterprises; NCC regarding their planned economic concentration which
• Barriers to market entry and expansion for other falls within any of the following:
enterprises; • The total assets in the Vietnamese market of the
• Ability to acquire, access, or control the distribution or enterprise or group of affiliated enterprises to which
consumption market, or sources of supply of goods or the enterprise is a member are valued at VND3 trillion
services; (~USD130 million) or more in the fiscal year preceding
• Advantages in technology and technical infrastructure; the expected year of the economic concentration;
• Right to own, acquire, and access infrastructure; • The total sales or purchase volume in the Vietnamese
• Right to own or use subject matters of intellectual market of the enterprise or group of affiliated
property; enterprises to which the enterprise is a member are
• Ability to switch to other sources of supply or demand of valued at VND3 trillion (~USD130 million) or more in the
relevant goods and services; or fiscal year preceding the expected year of the economic
• Particular factors in the sector or industry where the concentration;
enterprises are performing their business. • The transaction value of the economic concentration is
An enterprise is deemed to hold a monopoly position if it valued at VND1 trillion (~USD43 million) or more; or
does not have any competitors in the relevant market.

5.5 Abuse of Dominant or Monopolistic Position

An enterprise or group of enterprises with a dominant

or monopoly position in the market is prohibited from
performing the following acts:
a. Selling goods or services at prices below the total cost
price resulting in competitors being eliminated;
b. Imposing unreasonable purchase or sale prices of goods
or services, or fixing minimum resale prices, causing
damage to customers;
c. Restricting production or distribution, limiting the
market, or hindering technical or technological
development, causing damage to customers;
d. Applying different commercial terms on similar
transactions, causing restriction to market entry or
expansion by or the elimination of other enterprises;
e. Imposing conditions or unrelated obligations on the
signing of sale or purchase contracts, causing restriction
to market entry or expansion by or the elimination of
other enterprises;
f. Preventing competitors from entering or expanding in
the market; or
g. Other acts abusing the dominant position as prescribed
by other laws.
An enterprise or group of enterprises with a monopoly
position is prohibited from performing acts mentioned
in items b. to f. and from imposing adverse conditions on

33
• The joint market share of the enterprises planning to completing an investigation, the investigation report and
participate in the economic concentration accounts for case file will be handed to the chairperson of the NCC who
20% or more of the total share in the relevant market shall then issue a decision.
in the fiscal year preceding the expected year of the The Competition Law includes a number of provisions
economic concentration. regarding the investigation and handling procedures of
Greater thresholds are applied with respect to the economic competition cases, competition-related proceedings, and
concentration of credit institutions, insurance enterprises, procedures to seek exemption from the above-mentioned
and securities companies. It is important to note that the prohibitions.
economic concentration can only be carried out after the NCC’s
confirmation has been obtained stating that the economic
concentration is not prohibited under the Competition Law.
Certain economic concentrations, though not prohibited, can
only be performed and maintained where relevant conditions
are satisfied as stipulated in the confirmation of the NCC.

5.7 Penalties and Liabilities

The main penalties for violating the Competition Law consist

of warnings or monetary fines at a certain percentage of the
total annual revenue. There are also supplementary penalties
such as revocation of a licence, confiscation of profits derived
from the violation or materials and facilities used to commit
the breach. In addition, violators may also be subject to
remedial measures such as a restructuring of the enterprise
that has abused its dominant position.

5.8 Leniency

Enterprises that have voluntarily delivered a report helping

the NCC detect, investigate, and handle a prohibited anti-
competitive agreement may receive full or partial immunity
from fines under the leniency policy. The immunity is to
be decided by the chairperson of the NCC if the reporting
enterprises meet all the following requirements:
• It is a party to the agreement;
• It has voluntarily reported the violation before being
investigated;
• It has provided honest and relevant evidence; and
• It has provided full cooperation during the investigation.
The immunity does not, however, apply with respect to
an enterprise that has taken a role in forcing or organising
for other enterprises to participate in the agreement. The
immunity only applies to a maximum of three enterprises that
have first filed for entitlement of the immunity at the NCC.
The immunity, if granted, is equal to 100% of the monetary
fine for the first-filing enterprise, 60% for the second, and
40% for the third-filing enterprise.

5.9 Enforcement and Administration

Reports and claims on violations of the Law on Competition

must be submitted to the NCC. In principle, these reports
and claims must be submitted within three years of the
date of the violation. The chief of the Investigation Office
on Competition, an organisation under the NCC, upon its
verification of the submitted information and evidence, can
issue a decision on investigating the possible violation. After

34
INSOLVENCY,
BANKRUPTCY AND
DISSOLUTION

35
6. INSOLVENCY, BANKRUPTCY AND 6.2.2 Bankruptcy Stay
DISSOLUTION Once a bankruptcy order is entered, secured creditors may
enforce a claim against a debtor’s assets. Generally, secured
loans are repaid with the relevant secured assets, unless
6.1 Insolvency those assets are designated under the business recovery
plan for the company.
The main law governing the insolvency of companies The court may permit immediate enforcement of secured
established in Vietnam is the Law on Bankruptcy. An assets if there is a risk of destruction or a substantial decrease
enterprise will be considered insolvent if it fails to repay in value. Transactions subject to review may include asset
an unsecured or partially secured undisputed mature debt transfer under market price, conversion of an unsecured
within three months of the due date. An insolvent enterprise debt into a debt secured or partly secured by the company’s
may be subject to bankruptcy proceedings as decided by a assets, a transaction outside the company’s normal business
competent local court. operations, and donating assets.
The Law on Bankruptcy does impose special requirements
for credit institutions in the insolvency process. Specifically, 6.2.3 Stages of a Bankruptcy Proceeding
before the court accepts a bankruptcy petition, an insolvent
credit institution must undergo ‘special control’ imposed by A bankruptcy proceeding follows various stages with possible
the State Bank of Vietnam (SBV). This was additionally codified appeals at the second and fifth stages. Certain primary stages
in the 2017 Law amending the Law on Credit Institutions. of a typical bankruptcy proceeding are set out below:

6.2 Bankruptcy STAGE A bankruptcy pe��on is filed and the

court accepts jurisdic�on over the
1 bankruptcy pe��on.
6.2.1 Introduction

An enterprise is bankrupt when it is declared as such by the

The court issues a decision within 30
People’s Court in the province or district where the company days a�er the acceptance of the
is headquartered, after a petition is filed to commence STAGE jurisdic�on which s�pulates either:
bankruptcy proceedings. The competent court is determined star�ng bankruptcy proceedings; or
based on the complexity and nature of the case. Under the 2 rejec�ng the pe��on.
Law on Bankruptcy, the following persons are required to
file a bankruptcy petition when the company has become Appeal at Stage 2 is available.
insolvent:
• The owner of a private enterprise or a single-member
LLC; The court convenes a mee�ng with
• The chairperson of the BOM of a JSC; creditors who will decide on:
• The chairperson of the members’ council of a multiple- reques�ng the court to terminate the
member LLC; bankruptcy proceeding; instruc�on of
• A partner of a partnership; or STAGE the company to prepare a recovery
• The legal representative of a company in any form. plan; or reques�ng the court to declare
If a person specified above fails to make a bankruptcy filing 3 the company bankrupt.
when the company has become ‘insolvent’, he or she will be
subject to a monetary fine of VND1-3 million (US$43 130). The decision may be reviewed upon a
Further to this, unsecured or partially secured creditors, request by any qualified a�endant of
union representatives, an elected representative of the the mee�ng.
company’s employees, or company shareholders have the
right, but are not required, to file a bankruptcy petition upon
observing that the company has become insolvent. If the mee�ng of creditors instructs the
Acceptance of the bankruptcy petition triggers a six month STAGE
company to prepare a recovery plan,
look-back period, known as a ‘preference period’. A court 4 the company must prepare and
may rule some transactions aimed at dissolving assets of circulate a plan within 30 days.
the company during this period invalid. In this case, any
recovered assets must be included in the total assets of the
debtor company. For transactions involving a related party to The court will enter a decision of (i)
the debtor, a preference period of 18 months will apply. termina�on of the bankruptcy
STAGE
proceeding or (ii) declara�on of the
5 company’s bankruptcy.

Appeal at Stage 5 is available.

36
6.2.4 Bankruptcy Administration dispute at court or arbitral tribunal. The voluntary dissolution
procedures of a company include the following steps with
Under certain circumstances, an immediate order of relevant parties and regulatory authorities:
bankruptcy may be issued, followed by the liquidation of
the company and settlement of its obligations. This may A resolu�on on dissolu�on must
arise where the company lacks the assets to pay the basic be passed by investors, disclosed
bankruptcy fees, the court determines that the company STAGE to relevant stakeholders, sent to
cannot be rehabilitated, the company is unable to prepare relevant authori�es, and
a recovery plan, or the recovery plan is not approved or 1 announced publicly at the head
followed. office of the company.
Once the court accepts the bankruptcy petition, the judge will
appoint an asset management officer or an asset management
and liquidation company. The role of the asset manager is to STAGE Terminate contracts (with
oversee the business operations and liquidate the company customers, suppliers, landlord,
assets. These tasks include preparing the asset inventory, 2 etc.) and liquidate assets.
preparing the company’s list of creditors and debtors, taking
steps to protect assets, preventing the unauthorised sale or Se�le liabili�es in accordance
transfer of assets, selling assets in accordance with decisions with the statutory order: salaries,
of the court, and organising the valuation and liquidation of STAGE severance allowance, social
assets. insurance, other benefits owned
Waivers and/or forbearance agreements do not require 3 to the employees; tax and
any regulatory registrations, approvals, or filings (such as obliga�ons owned to the state;
registration with the SBV). debts to creditors.

6.2.5 Amendments to Credit Agreements

Submission of regulatory
Amendments to credit agreements can range from technical dossiers to the authori�es a�er
having fulfilled the obligatory
amendments to restructuring financial covenants, payment STAGE liabili�es; return of the
terms, and security packages. If the credit agreement has
been registered with the SBV, and if the changes alter this 4 company’s seal and cer�ficates, if
any; closure of tax code;
original registration, the SBV registration must be amended.
discon�nua�on of using VAT
The approval of other regulatory bodies may also be necessary.
invoices.
For instance, if the amendments entail modifications to a
corporate charter, the business registration authority must
register the revised charter.

6.2.6 Debt-for-Equity Swaps and Capital Cures

Due to caps on many key investment sectors, these tools may

not be practical solutions in Vietnam. In addition, because
such remedies fundamentally alter the borrower’s capital
structure, burdensome regulatory steps may be involved.
This is particularly relevant where the borrower is already
a foreign-invested entity. When a company is restructured,
all revised foreign ownership must be permissible under
Vietnamese law. In most cases, amendments to the corporate
charter, ERC and IRC will likely be required as well.

6.2.7 Voluntary Dissolution

Under Vietnamese law, an enterprise may be dissolved

voluntarily in the following cases:
• The operation duration stated in the company’s charter
expires without any decision on extension; or
• The dissolution is decided by the owner of a sole
enterprise; by all general partners of the partnership; by
the members’ council or the company owner of an LLC;
or by a shareholders’ meeting for JSCs.
An enterprise will only be dissolved if all debts and liabilities
are resolved and the company is not currently involved in a

37
6.2.8 Taxes

At dissolution, an enterprise must apply for a tax code closure

announcement at the Tax Department. Any company
entering a voluntary solvent dissolution in Vietnam will
be subject to a final tax audit. Tax clearance with the tax
authorities is both exhaustive and costly. Bearing in mind
the excessive pressure that the Vietnamese government
has been under to reduce the fiscal deficit over the last few
years, the target of re-collected tax liabilities through an
audit and inspection is planned for by local tax authorities.
As a result, a tax audit upon liquidation is likely to result in
tax claw-back, penalties, and interest on late payment for
the dissolving entity.
To be prepared for the an entity should be diligent in the
course of their business to remain compliant with tax
requirements, as well as up to date with common tax
liabilities which may arise during the tax audit process at
dissolution.

6.2.9 Risks

Common tax risks to be aware of include, but are not

limited to:
• Underpayment or under declaration of
VAT payable; or
• Failure to provide proof of non-cash
VAT payment for goods and services
purchased (valued at VND20 million or
more).
• Insufficient recognition of income;
• Failure to provide supporting
documentation of benefits-in-kind for
CIT employees;
• Interest-free loans, likely to be considered
interest income by tax authorities.
• Incorrect tax residency status
determination of expatriate employees;
PIT • Failure to include benefits-in-kind in
taxable income.
• Under payment or failure to pay tax
imposed on payments of service charged
FCT to offshore companies;
• Incorrect exchange rates used for
converting payment in foreign currencies.

38
 there is an agreement between relevant parties, and the
7. FOREIGN CURRENCY EXCHANGE transfer is completed via a capital account opened at a
AND PROFITS REMIT permitted credit institution.
The strict control of foreign currency exchange also affects
the payment and closing arrangements for M&A transactions.
7.1 Foreign Currency Exchange As a result, these may be more complicated than in countries
with less foreign exchange control.
7.1.1 General

VND is not freely convertible. Payment and remittance of 7.2 Profit Remittance
foreign currencies - whether inbound, outbound, and even
within Vietnam - are subject to controls by the SBV and the Vietnam guarantees that foreign investors can transfer
banking system in general. certain assets offshore if they fulfil their financial obligations
and submit proper documentation to relevant parties. It
7.1.2 Prices in VND applies to the following assets:
• Invested capital and proceeds from the liquidation of
Under Vietnamese law, transactions, price listing, payments, investments where the foreign-invested company is
advertisements, quotations, price determination and prices terminated or dissolved, investment capital is reduced,
reflected in contracts in Vietnam must be in VND. Trading or the investment project or BCC is liquidated or
in foreign currencies is only permitted in a few cases. These terminated;
include residents’ capital contribution to foreign investment • Profits derived from investment activities which can be
projects in Vietnam, certain internal transfers of capital, transferred annually or at the expiry of an investment
certain activities of domestic or foreign contractors, and project where the transfers have been declared to
the sale of certain goods or provision of services between competent tax authorities; and
residents and non-residents. The SBV can decide to exempt • Other monies and assets lawfully owned by the investor.
other activities. • If such assets include VND, foreign investors can purchase
foreign currency at a permitted credit institution for
remittance purposes.
7.1.3 Foreign Investments

To implement foreign investment in Vietnam, other than

indirect investments, foreign investors can transfer capital in
a foreign currency before the IRC is granted to the investor.
This transfer can be conducted when the following conditions
are met: the purpose is related to the pre-investment stage,

39
8. BORROWING AND LENDING 8.2 Conditions to Access a Loan

8.2.1 Onshore Loans

A foreign investor can borrow money for investment by way
of onshore or offshore loans. However, they must comply Onshore loans may be granted if a borrower has civil capacity
with legal requirements such as the purpose and registration according to Vietnamese law, there is a lawful need for the
of the loan being filed with the SBV as prescribed by law. loan, the borrower’s plan to use the loan is feasible, and the
In the case of an offshore loan, the borrower may receive borrower has the financial capacity to repay it. Currency
money from a non-resident through an offshore loan used for onshore loans can be agreed upon by the parties.
agreement. This could be in the form of a loan contract, a However, it is worth noting that foreign currency loans can
contract of goods, a purchase and sale on deferred payment, only be granted by permitted credit institutions to residents
a loan provision entrustment contract, a financial leasing in certain situations. These include payments for imported
contract, or issuance by the borrower of debt instruments. goods or services and short-term loans for short-term capital
needed to export goods. In other situations, SBV approval is
required.
REPATRIATION OF FUNDS
8.2.2 Offshore Loans

Borrowers must meet several conditions to obtain an offshore

loan. These include using the loan for its agreed purpose;
Get informed early about executing an offshore loan agreement; and securing credit
1 applicable restric�ons and lines of the loan, if any. The loan must be in a foreign currency,
formali�es. with VND only permitted by law in particular circumstances.
In certain cases, it is necessary to register the loan with the
SBV.
Prepare all necessary The borrower can be a company, a cooperative, a credit
2 documenta�on with enough institution, or a branch of a foreign bank established
lead �me. and operating in Vietnam, and must not have received a
Government guarantee for its offshore loans. Vietnamese
law is vague regarding offshore loans to an individual.
Therefore, if the foreign investor is an individual residing in
Structure your business and
Vietnam and intends to access offshore loans, his/her loan
3 plan the repatria�on of your
will be subject to the approval of the SBV.
revenue streams.

8.3 Secured Assets

Seek an exchange with and
4 guidance from local financial A Vietnam-based credit institution can take security
authori�es. over movable assets such as shares and equity interests,
equipment and machinery, cars, stocks and goods in
circulation, deposits, accounts, receivables, and insurance
proceeds. These institutions can also take security over
immovable assets such as land-use rights and assets attached
Be persistent in dealing with
5 Vietnamese authori�es.
to land. However, an offshore lender can only take security
over movable assets due to Vietnamese laws and regulations
on real estate for foreign entities/individuals.

8.1 General Structure of a Loan

There are three forms of onshore loans: a short-term loan

with a maximum term of one year, a medium-term loan with
a term of one to five years, and a long-term loan with a term
of more than five years. For offshore loans, there are two
main groups: a short-term loan with a term of up to one year
and a mid- and long-term loan with a term of more than one
year.

40
NOTARISATION,
AUTHENTICATION
AND LEGALISATION

41
9. NOTARISATION, AUTHENTICATION
AND LEGALISATION

The authorities will not accept a foreign document used for Depending on the origin of the document, additional steps
the purpose of incorporating (or restructuring) a foreign- may be required to obtain a foreign document in the required
invested company in Vietnam - nor for a work permit - unless public form. Sometimes, some of these steps can also be done
that document is legalised and notarised. Some documents in Vietnam, such as translation, authentication or legalisation.
must also be translated into Vietnamese if prescribed by law. However, this will also depend on the document’s country of
The process for this formalised procedure will typically be as origin.
follows:

FORMAL REQUIREMENTS:
NOTARISATION, AUTHENTICATION AND LEGALISATION

Copy 1 Copy the original foreign document.

Take the original and the copy to a (public) notary in the foreign
Notarisation 2 country; the notary stamps the copy authen�ca�ng the copy as
a cer�fied true copy of the original (Cer�fied Copy).

Take the Cer�fied Copy to the official body in the foreign country,
such as the Ministry of Foreign Affairs, or another official body
having similar func�ons.
Authentication 3 The official body will stamp the Cer�fied Copy authen�ca�ng that
the (public) notary’s stamp is true and that (public) notary is in good
standing (Authen�cated Copy).

Take the Authen�cated Copy to the Vietnamese Embassy in the

Legalisation 4 foreign country. The Embassy will stamp verifying that the official
body has the power to authen�cate the Cer�fied Copy and you
will have a Legalised Copy.

The legalised copy is sent to Vietnam where it will need to be

Translation 5 translated into Vietnamese and cer�fied according to
Vietnamese laws.

A�er steps 1 to 5 have been finalised, the document is ready for

Submission 6 submission to the relevant authori�es.

42
IRC AND ERC

43
10. IRC AND ERC 10.3.3 Post-establishment Formalities

Once the ERC has been obtained, several administrative

All private business enterprises in Vietnam must have an ERC, formalities need to be fulfilled within the respective time limits.
and some also require an IRC. For instance, domestic investors These include the payment of licence tax and publication on
or enterprises in which foreign investors hold an equity share the national enterprise registration information portal.
of 50% or less only need an ERC to establish a new enterprise.
Foreign investors and companies in which foreign investors
hold more than 50% equity may also be required to obtain an
IRC for a newly-created enterprise.
Foreign investments in an existing enterprise through an M&A
transaction are not required to apply for an IRC. Instead, an
application for an M&A approval may be required in certain
cases (see paragraph 1.2.2 for more information regarding
M&A approvals).

10.1 ERC

The ERC is issued by the licensing authority. It contains

information about the company registration such as the name
of the enterprise and enterprise code number which serves
as its identification for its entire corporate life cycle. It also
contains the head office address; the full name, permanent
residential address, nationality, and identity card or passport
number of legal representatives; and the registered amount of
charter capital.

10.2 IRC

The IRC is also issued by the licensing authority. The IRC is

required in case a foreign investor, or an enterprise treated
as a foreign investor, carries out an investment project by
establishing a company in Vietnam. When investors apply
for an ERC, the IRC must be included in the application file.
It contains information registered by the investors about an
investment project, such as information about the investor, the
location of the project, as well as its scale and objective.

10.3 Timeline and Required Documents

10.3.1 IRC

Preparing the application dossier for an IRC, including the

translation and execution of all documents, might take
between two and four months. A variety of documents will
need to be translated, legalised and notarised to be included in
the application file. Passport copies, financial documents, and
investment proposals may also need to be notarised. After the
application dossier has been submitted, the law states that it
will take 15 days for the IRC to be issued. However, in practice,
it might take longer in some cases.

10.3.2 ERC

In general, it takes about three business days to obtain an ERC.

In practice, however, it might take longer.

44
 EMPLOYMENT
AND LABOUR LAW

45
11. EMPLOYMENT AND LABOUR LAW Although no longer compulsory, it is recommended that
the contract is in Vietnamese or in dual language with the
Vietnamese version prevailing in cases of inconsistency. The
contract must be signed by the employee. However, if the
11.1 Scope
employee is aged under 15 it must also be signed by their
legal representative, or otherwise consented to in writing by
The 2019 Labour Code, which came into effect on 1 January
the legal representative if they are under 18 years old. Since
2021, applies to all individuals – foreign and Vietnamese –
2021, men can generally retire at 60 years and three months,
working for Vietnam-based organisations or Vietnamese
while the usual retirement age for women is 55 years and
individuals, but also to Vietnamese nationals working
four months. The retirement ages then increase by four
overseas. Exceptions to this rule exist where an international
months each year for women and three months each year
treaty to which Vietnam is a party state otherwise.
for men until 2035.
An individual may enter into employment contracts with more
than one employer. If an individual receives income from more
than one employer, this will impact the PIT finalisation and
A labour contract means an agreement the payment of social, health and unemployment insurance
between an employee and an employer on schemes, which needs to be dealt with appropriately. If an
a paid job that details the wage, the working individual has more than one place of work, unless the 2019
conditions, and the rights and obligations of Labour Code stipulates otherwise, the primary place(s) shall
be recorded in the labour contract. When employees are
each party. An agreement, though agreed
required to travel to other temporary locations, in general,
by the parties to be named otherwise, still employers shall reimburse all reasonable travel expenses.
remains a labour contract so long as it has This reimbursement may be deductible from the company’s
contents demonstrating a paid job with CIT if it is aligned with certain regulatory requirements.
wages, administration, management and/
or supervision by a party.
11.3 Contract Types

There are two types of labour contract:

• A definite-term labour contract (of up to three years);
and
11.2 Labour Contract • An indefinite-term labour contract (no duration defined).

The 2019 Labour Code sets out the provisions to protect the
rights of employees and employers. One of the provisions is
related to the labour contract.

SCOPE OF VIETNAMESE LABOUR LAW

Labour Code (2019)

Labour Contract/Collective
Labour Agreements
A: Vietnamese
Employees
B: Foreign Employees Minimum Wage
C: Trade Unions
D: Workers’ Unions
Worker Safety

Social and
Unemployment Insurance

46
11.4 Probation 11.7 Minimum Salary

Probation can apply only once for a job and the length is The wage of an employee working in the private sector must
based on its nature and complexity. A probation period can not be lower than the minimum wage rate stipulated by the
be up to 180 days for jobs of certain enterprise managers; 60 Government. There are various regional minimum wage
days for jobs requiring professional or technical college-level rates that depend, amongst others, on the region where the
qualifications or higher; 30 days for jobs with intermediate- person works. These regions are defined by the Government
level specialised or technical expertise, technical workers, and need to be looked at in detail when scouting locations for
and professional staff members; and six working days for investing in Vietnam.
other jobs. The salary during the probationary period cannot
be lower than 85% of the full wage. A separate probation
contract may be entered into prior to entry into the labour 11.8 Overtime
contract.
The regular working time is eight hours a day and 48 hours a
week maximum. For work requiring contact with dangerous
11.5 Additional Clauses and/or harmful factors, employers are responsible for
applying the work time limits in accordance with national
Covenants on confidentiality and protection of intellectual technical regulations and related laws. Employers are entitled
property and business secrets are allowed via written to require employees to work overtime under the following
provisions in the labour contract or in separate agreements. conditions:
Agreements on non-solicitation and non-competition, if • The employee agrees; and
requiring covenants less favourable for the employee than • Overtime hours will not exceed 50% of the normal
those stipulated under the labour laws (e.g. restraining the working hours per day; with a maximum of twelve hours
employee from working for competitors), should be made in per day, 40 hours per month, and 200 hours per year.
writing and in a separate document from the labour contract In some special sectors and industries such as textiles
to secure their validity and enforceability. and garments, leather, electronic products, aquaculture
Reinforcing this interpretation of Vietnamese labour law, processing, and telecommunications, alongside extraordinary
HCMC People’s Court has upheld an arbitral award of the cases such as a lack of necessary workforce for urgent work,
Vietnam International Arbitration Centre (VIAC). In the overtime is higher and capped at 300 hours per year. An
arbitral award, VND205 million (~US$9,070) was awarded employer is required to notify the relevant Department
to the employer because the employee had violated a non- of Labour, Invalids and Social Affairs (DOLISA) in writing to
compete clause in a separate non-disclosure agreement. implement an overtime policy exceeding 200 hours per year.
In addition, there are some specific regulations for female,
elderly and teenage workers in terms of salaries, working
time, days off and type of workplaces for the full protection 11.9 Maternity and Paternity Leave
of their individual benefits.
A female employee is entitled to six months of maternity
leave. When she gives birth to more than one child at the
11.6 Renewal of Contracts same time, she will be entitled to additional leave. During
maternity leave, Vietnamese employees receive a monthly
It is possible to renew contracts with a definite or fixed remuneration worth the average of their latest six months’
term. It is important to stay alert as the law contains some salary or remuneration on which the social insurance
restrictive provisions designed to protect the employee. premium was based. However, there is a maximum salary
When a definite-term contract expires, parties can sign cap that applies at a multiple of 20 times the applicable
a new fixed-term contract. If they fail to do so, but the minimum wage in the region. When an employee is nursing
employee continues working, the contract will automatically a child under one year of age, she is entitled to a break of 60
be converted into an indefinite-term contract. Employers minutes per day.
should also be aware that a fixed-term contract can only be A male employee paying a social insurance premium is
renewed once. Once the second term has expired and the entitled to five days of paternity leave if the child is born
employee continues working, an indefinite-term contract naturally, or seven days if the child is born by surgery or at
must be entered into. This restriction, however, does not under 32 weeks. The number of days increases if more than
apply to foreign employees, elderly employees, employees one child is born at the same time.
hired to be directors in SOEs, or current members of the
management board of the representative organisation of
employees.

47
11.10 Paid Leave proper reason for five consecutive working days or
more; or
An employee is entitled to a minimum of twelve days paid g. The employee provides untruthful information affecting
annual leave, exclusive of public holidays, if the employee his/her recruitment.
works twelve months in full. In practice, companies often In cases of a., b., c., e., and g. the employer must send the
allow employees to take pro-rata leave. employee a written notice prior to their termination as
Employees will be given an additional day of annual leave for detailed below, at least:
every five years of consecutive service for an employer. Apart • 45 days for indefinite-term contracts;
from this, employees are entitled to take leave on the 11 • 30 days for definite-term contracts of between 12 and
Vietnamese public holidays. Expatriate employees are also 36 months; or
entitled to a day off for the traditional new year, if different • Three working days for definite-term contracts of less
from 1 January, and another for the national day of his/her than 12 months or for termination of the contract due
country. Furthermore, employees could be entitled to paid to illness or injury of the employee.
leave to attend special personal occasions such as weddings
or funerals. 11.12.2 Not allowed

There are also circumstances in which the employer cannot

11.11 Sick Leave unilaterally terminate the labour contract:
• The employee is suffering from an illness, work-related
A Vietnamese employee is entitled to paid sick leave. The accident, or occupational disease and is being treated
maximum number of paid sick leave days within a year is or nursed under the decision of a competent health
between 30 and 60 and is based on the number of years the institution, except for the reasons set out in 11.12.1.b.;
employee has paid their social insurance premium. It can • The employee is on annual leave, personal leave, or any
also vary depending on the job. other type of leave permitted by the employer; or
Parents are entitled to paid leave to care for their sick • The employee is pregnant, on maternity/paternity leave,
children. A parent is entitled to a maximum of 20 days a year or nursing a child younger than twelve months.
if the child is younger than three years old, and up to 15 days
if the child is between three and seven years old. Payment
during this leave is calculated in the same way as their own 11.13 Unilateral Termination by an Employee
sick pay and is covered by the social insurance fund.
An employee may unilaterally terminate a labour contract
prior to its expiry by sending a prior notice of at least 45 days
11.12 Unilateral Termination by an Employer for indefinite-term labour contracts, 30 days for definite-term
contracts of between 12 and 36 months, or three working
11.12.1 Allowed days for definite-term contracts of less than 12 months.
However, prior notice is not required in the following cases:
An employer is entitled to unilaterally terminate a labour • The employee is not assigned to the job or workplace,
contract in the following circumstances: or is not given the working conditions as agreed in the
a. The employee repeatedly fails to perform work in labour contract, except for extraordinary cases where
accordance with the terms of the labour contract. the employer is permitted in law to assign jobs other
This is determined based on the assessment criteria than those agreed in the labour contract;
of work performance level in the rule issued by • The employee is not paid in full or on time, except for
the employer upon consulting a grassroots-level force majeure cases where the payment is delayed as
employee representative organisation which includes permitted in law;
the grassroots-level trade union and other employee • The employee is maltreated or is subject to forced labour
organisations at an enterprise (labour union), if any; or other behaviours affecting his/her health, dignity or
b. The employee is ill or injured and remains unable to honour, including sexual harassment at the workplace;
work after receiving treatment for 12 consecutive • A female employee is pregnant and must quit the job as
months (indefinite-term contract), six consecutive prescribed by a competent health establishment;
months (definite-term contract of between 12 and 36 • The employee reaches retirement age; or
months), or more than half of the contract duration • The employer provides untruthful information affecting
(definite-term contract of less than twelve months); the implementation of the labour contract.
c. The employer, while taking all measures to remedy
the problem, has to reduce the number of employees
due to natural disasters, fire, epidemics, or other force
majeure reasons;
d. The employee fails to attend the workplace within 15
days of the expiry of suspension of the labour contract;
e. The employee reaches retirement age;
f. The employee arbitrarily leaves his/her work without

48
11.14 Illegal Unilateral Terminaton as well as notifying the provincial People’s Committee and
the employee at least 30 days in advance. Each redundant
11.14.1 By Employer employee with at least twelve months’ service is entitled to a
redundancy allowance. The amount of the allowance is equal
In case of unlawful unilateral termination of employment, the to one month’s salary for each year of employment with a
following consequences shall be imposed on the employer: minimum of two months’ salary.
• If an employer violates the notice period requirements,
the employer must compensate the employee with an 11.15.2 Corporate Restructuring, Reformation or
amount that is pro-rata to the salary for the working Transfer of Asset
days without prior notice.
• If the employee agrees to return to work, the employer An enterprise which is an employer must prepare a labour
must pay compensation of at least two months’ salary usage plan in case it is divided, split, consolidated, merged,
as well as the salary, social insurance, health insurance, sold, leased, or converted into another enterprise form; or
and unemployment insurance for the period in which its ownership or use right over its asset(s) are transferred
the employee was not allowed to work. If the position affecting the jobs of many employees.
is no longer vacant, both parties will negotiate to modify The current and future employers are responsible for
and/or supplement the labour contract; implementing the labour usage plan which has already been
• If the employee refuses to return to work, the employer approved. Where employees are laid off, they are entitled to
is required to compensate the employee as stated above the redundancy allowance worth one month’s salary for each
and, in addition, pay a severance allowance of half a year of employment with a minimum of two months’ salary.
month’s salary for each year of employment; and
• If both employer and employee agree to discontinue the 11.15.3 Other
employment relationship, the employer is required to
pay the compensation and severance allowance stated Employment is also terminated in the following circumstances:
above and additional compensation of at least two • On the expiry of labour contracts, except for those of
months’ salary as agreed by the parties. executive members of the labour union that shall survive
until the expiry of his/her office term;
11.14.2 By Employee • The job has been completed in accordance with the
labour contract;
In cases of unlawful unilateral termination of employment, • Both parties agree to terminate the labour contract;
the following consequences shall be imposed on the • The employee is sentenced to a jail term or the death
employee: penalty, or is prohibited from performing the job
• The employee is not entitled to severance allowance prescribed in the labour contract by a legally enforceable
and must compensate the employer with half a month’s court decision;
salary in accordance with the labour contract; • The employee is a foreigner working in Vietnam but
• If the prior notice term is violated, the employee must is deported following a valid decision of a court or a
compensate the employer with an amount pro-rata to competent authority;
his/her salary for the working days absent without prior • The work permit becomes invalid with respect to a
notice; and foreign employee who works in Vietnam;
• The employee shall be obliged to return the training • The employee is deceased or a court declares that the
costs to the employer as stipulated by law. employee has lost the capacity for civil acts, is missing,
or deceased;
• The employer, which is an individual, is deceased or a
11.15 Other Reasons for Termination court declares that she/he has lost the capacity for civil
acts, is missing, or deceased; or the employer, which is
11.15.1 Redundancy not an individual, terminates its operation or is notified
by a competent authority of failing to have a legal
Termination on the grounds of redundancy (structural and representative or an equivalently authorised person;
technical changes or economic reasons) is also possible. • The employee reaches retirement age;
Employers seeking to make redundancies of two or more • The employee is dismissed for breach of labour
employees are required to draft a labour usage plan, consult discipline; or
with the labour union (if any) on the plan, and file the plan • The probation, where stated in the labour contract,
with DOLISA. It is important to note that an employer must does not meet the requirement or a party rescinds the
also draft a labour usage plan when changes in company agreement on probationary work.
structure or technology would affect the employment of
more than one employee. The plan must be notified publically
to employees within 15 days of the date it is approved.
If new vacancies cannot be allocated to employees, employers
have the right to terminate labour contracts after consulting
the labour union to which the employee is a member, if any,

49
11.16 Severance Allowance offices or projects, foreigners who marry a Vietnamese
person living in Vietnam, or owners or BOM members of a
If an employee has worked for a company for twelve months Vietnam-registered LLC or JSC with contributed capital at a
or more and is not covered by the unemployment insurance value stipulated by the Government.
scheme, he/she is entitled to a severance allowance equal to Individuals with a business visa can perform certain
the aggregate amount of half a month’s salary for each year commercial activities. Those with a tourist visa cannot work
of employment where the labour contract is terminated for at all. The consequences of not having a work permit while
reasons other than structural or technical changes; economic working in Vietnam are monetary fines for both foreigner
reasons; or corporate restructuring, reformation, or transfer and company and expulsion of the foreigner. A work permit
of assets by the employer. An employee is, for example, is valid for up to two years and can be extended only once
(partly) not covered if he/she worked for the company before for a maximum of a further two years. Employers must still
the introduction of unemployment insurance in 2009 or if apply for a certificate to exempt them from obtaining a work
he/she is a foreigner and is not covered by the insurance. permit.
Severance allowance will not be paid in the following
circumstances: 11.18.2 Requirements to Obtain a Work Permit
• The employee is entitled to a pension;
• The labour contract is unilaterally terminated following Foreign workers who want to work in Vietnam must satisfy
the employee’s failure to attend work without proper the following conditions when applying for a work permit:
reason for five consecutive working days or more; • Be at least 18 years of age and have full capacity for civil
• The work permit becomes invalid or the employee is acts;
deported from Vietnam; or • Be in good health, as stipulated by the Ministry of Health;
• The employee is dismissed for breach of labour discipline. • Have expertise, technical skills, or working experience;
Severance allowance depends on the average monthly salary and
mentioned in the labour contract during the six months prior • Not have been or currently be subject to a criminal
to termination. conviction or prosecution in Vietnam or other
jurisdictions.
In order to hire a foreigner, a company needs to obtain
11.17 Collective Labour Agreements approval from the People’s Committee. Once this approval
has been granted, all relevant documents - such as a health
Vietnam also has the concept of collective labour agreements. certificate from a recognised hospital, (non )criminal records,
These are written agreements that have been agreed upon and proof of expertise or experience - need to be submitted
between the employer and the labour collective following to obtain a work permit. Many of these documents need to
a collective bargaining session. The labour collective only be notarised, legalised and translated.
needs a simple majority to vote in favour of the collective
labour agreement. It is binding and both the employers
and employees, whether starting work prior to or as of the 11.19 Mandatory Insurance
binding date, must implement and comply with it when it has
been signed by legal representatives of the employer and the Vietnamese employees and their employers are required
labour collective. to contribute to social insurance (SI), health care insurance
Collective labour agreements shall prevail against labour (HI), and unemployment insurance (UI). Foreign employees,
contracts and other rules of the employer if it stipulates together with their employer, are not required to contribute
greater rights, obligations, and interests for the parties. to UI, but are subject to the SI and/or HI in certain
In Vietnam, sector-specific agreements exist, known as circumstances. The rates of SI, HI, and UI contributions paid
industry collective labour agreements. These agreements for Vietnamese employees are:
may also apply to a non-member enterprise if it has a
scope of application covering more than 75% of employees
or enterprises in the same industry in the industrial zone, SI HI UI Total
economic zone, export processing zone, or high-tech zone as 8% 1.5% 1% 10.5%
decided by the competent authority.
Employee

11.18 Work Permit SI HI UI Total

17.5% 3% 1% 21.5%
11.18.1 General
Employer
In principle, a foreigner would need a work permit to work in
Vietnam unless he/she belongs to an exempted group. These The salary used for the calculation of the contributions
groups include foreign lawyers, intra-corporate transferees in consists of the monthly salary rate and certain allowances
certain industries, chiefs of Vietnam-domiciled representative prescribed in the labour contract. However, the amount is
capped.

50
11.20 Labour Unions 11.21.2 Content

11.20.1 Trade Unions The ILRs must contain:

• Working hours and rest breaks;
A trade union at an enterprise is the most common type of • Rules on workplace order;
labour union. According to the Law on Trade Unions, a trade • Labour safety and hygiene rules;
union is formed on a voluntary basis as a grassroots-level unit • Anti-sexual harassment rules as well as processes and
of the national trade union. Together with state agencies and procedures for dealing with sexual harassment at the
economic and social organisations, the trade union cares for workplace;
and protects the legitimate and legal rights and interests of • Rules on protection of assets, business secrets, and
employees at the company. confidentiality of the company’s technology and
The trade union can also participate in investigating and intellectual property;
monitoring the operations of the company. All employees are • Cases in which the employer is permitted to temporarily
entitled to form a trade union. Their employer is required to assign an employee to do work other than that stated in
acknowledge the status of a legally established trade union the labour contract;
and, on request, to assist with the formation and provide • Conduct by employees which constitutes a breach of
facilities in order for the trade union to function. labour rules;
Both public and private sector employers are required • Penalties imposed for breaches of labour rules;
to contribute to a fund for trade union activities. This • Liability in case of damages; and
contribution is equal to 2% of the employer’s salary fund. • A person with the authority to handle labour discipline.
Based on this, SI is paid for its employees, irrespective of
whether or not a trade union has been established at the
workplace. 11.22 Disciplinary Actions

11.20.2 Worker’s Union The 2019 Labour Code sets out disciplinary actions and details
procedures about how these actions can be implemented.
Aside from the trade union, employees may also establish, The following disciplinary actions can be imposed:
access and take part in the operations of a worker’s union • Reprimand;
at an enterprise, if granted with a registration certificate by • Deferral of wage increase for a maximum of six months;
the competent authority. This new type of labour union was • Demotion; and
introduced in the 2019 Labour Code. • Dismissal.
A worker’s union can operate in parallel with, and with • Dismissal can only apply when:
rights and obligations equal to, a trade union in protecting • An employee commits an act of theft, embezzlement,
the legitimate rights and interests of employees. However, gambling, deliberate violence causing injury, or uses
membership of a worker’s union cannot include both drugs at the workplace;
ordinary employees and employees directly involved in • An employee discloses technology or business secrets,
making decisions on working conditions, recruitment, labour infringes the employer’s intellectual property rights,
discipline, termination of labour contracts, or assigning causes serious loss or damage or threatens to cause
employees to do other work. particularly serious loss or damage to the employer’s
At the time of its registration, a worker’s union must have the property or interests, or commits an act of sexual
minimum number of members who are employees working harassment at the workplace which is stipulated in the
at the enterprise as stipulated by the Government. ILRs;
• The employee is disciplined through the deferral of a
wage increase or demotion and then commits a second
11.21 Internal Labour Rules offence during the period when the initial disciplinary
measure had not been absolved. A second offence
means a case where the employee recommits the
11.21.1 General
breach for which he/she has already been dealt with
for a breach of discipline and for which the disciplinary
Employers with ten or more employees must have written
action record has not yet been removed as stipulated
internal labour rules (ILRs) and register them with DOLISA.
by law; or
Prior to issuing, amending, or supplementing ILRs, the
• An employee arbitrarily takes an aggregate of five days
employer must consult the labour union, if any. The ILRs
off in a period of 30 days or an aggregate of 20 days off
must be shared with employees and the main contents must
in a period of 365 days without proper reason.
be posted at necessary locations in the workplace.
Employers are not permitted to deal with a breach of
Employers with ten or more employees must register their
labour discipline in any form where such a breach has not
ILRs with the competent authority. The ILRs shall come into
been stipulated in the ILRs, agreed in the labour contract or
effect 15 days after this registration is completed. In practice,
codified in the laws on labour.
the registration could be delayed if the competent authority
challenges or questions any of the contents of the ILRs.

51
11.23 Work Safety a mutual agreement to terminate the working relationship is
the easiest and fastest way.
Employers are required to implement safety measures in
the workplace. They will be liable if work-related accidents
or occupational diseases cause injuries or casualties to their 11.27 Dissolved or Bankrupt Companies
workforce in the course of their employment. For instance,
employers must pay full salary to an employee who takes Where an enterprise is dissolved or declared bankrupt,
leave required for treatment, as well as all medical costs the payment of wages, severance allowances, social and
and expenses not covered by health insurance. Employers health insurance, job loss insurance, and other interests
are also required to compensate the employee with an of the employees in accordance with the collective labour
amount stipulated by law based on the reduced level of agreement and signed employment contracts must be
their working ability due to a disease or accident which was prioritised.
not entirely their fault. Furthermore, employers must pay
financial support equal to at least 40% of the compensation
stated above, even when the cause of the accident can be
attributed to the employee.

11.24 Employees' Data Protection

Vietnam does not have a law specifically regulating the

personal data of employees nor protecting employee privacy.
In general, the law requires consent from an individual if their
personal information is collected, processed, used, or stored.
In May 2018, the general data protection regulation (GDPR)
of the European Union (EU) entered into force. Even though
this is an EU regulation, it can still apply to companies in
Vietnam as it protects the rights of EU citizens outside the
EU. The fines imposed by EU authorities can be as high as
EUR20 million, or up to 4% of annual worldwide turnover.

11.25 Discrimination and Harassment

Discrimination causing diminishing equality in job

opportunities on the basis of gender, race, skin colour,
national or social origin, ethnicity, age, maternity or
marital status, beliefs, religion, political opinion, family
responsibilities, HIV infection, disability and/or sexuality are
prohibited under the 2019 Labour Code. The same applies
to establishing and joining labour unions and participating in
labour union activities.
In 2015, the Industrial Relations Committee of Vietnam
issued a code of conduct on sexual harassment at the
workplace. This code can be used as a basis and guidance
for companies to develop and adopt their own policies on
sexual harassment. When there are grounds to assume that
an employer's decision or behaviour breached labour law,
the employee can make a claim or deposit a denunciation to
the employer or labour inspectors to protect his/her rights
and interests.

11.26 Labour Dispute Resolution

In general, the Vietnamese Labour Code is very employee-

friendly and makes it quite difficult to fire someone.
Emphasis is also placed on negotiation and conciliation in
order to resolve labour-related disputes. If this fails, court
action may be instituted with the appropriate court. Often,

52
 INTELLECTUAL
PROPERTY RIGHTS

53
12. INTELLECTUAL PROPERTY RIGHTS last for ten years and can be renewed every decade. Trademarks
can be registered in Vietnam or based on the Madrid Protocol.

12.1 Introduction
12.4 Industrial Design
The Civil Code and the Law on Intellectual Property contain the
most relevant provisions related to intellectual property (IP). Industrial design means the outward appearance of a product
Vietnam is also a signatory to various international agreements embodied in three-dimensional configuration, lines, colours or
such as the Paris Convention, the Madrid Agreement, the a combination of these elements. Under Vietnamese law, IP
Stockholm Convention of 1967, the Berne Convention for rights to an industrial design shall be established based on a
the Protection of Literary and Artistic Works, and the Geneva decision of the competent state body. It can be granted based
Convention for the Protection of Producers of Phonograms on Vietnam's Law on Intellectual Property or an international
against Unauthorised Duplication of their Phonograms. treaty to which Vietnam is a member. Generally, an industrial
Registration may be required to protect IP. Generally, design shall be eligible for protection when it can demonstrate
registration of copyright will create prima facie evidence for that it is novel, creative, and susceptible to industrial application.
protection. However, it is important to note that the rights are However, some items are ineligible for protection as industrial
protected upon registration on a ‘first-to-file’ priority basis for designs. These include where the outward appearance
most other IPRs. Therefore, it is essential to register a patent of a product is due to the technical features, the outward
or trademark before introducing products or services to the appearance of civil or industrial construction works, or where
Vietnamese market. The first-to-file rule does not apply to trade the shape is invisible during the use of the product.
secrets, geographic indicators, and trade names entitled to Authors who have created industrial designs through their
legal protection upon fulfilling certain conditions for formation labour and at their own expense can register an industrial
and usage. design. Organisations or individuals who have supplied funds
In the case of joint ventures or mergers, enterprises should and material facilities to authors in the form of job assignment
conduct due diligence on potential partners and decide if they or hire can register it as well, unless otherwise agreed. A
can register the intellectual property rights. Investors need to protection title, also known as an industrial design patent, shall
be sure that the registration is done on their behalf or that the recognise the owner of the industrial design; the author of the
partner is willing to transfer the rights if the partnership ends. industrial design; and the subject matter, scope, and term of
Though it has improved over recent years, IP protection remains protection. An industrial design patent is valid for five years
one of the most significant issues for investors. It is one of the from the date granted and may be renewed for two consecutive
biggest reasons why some companies are hesitant to invest. terms of five years.
Despite recent efforts by Vietnamese lawmakers to close the Applications must be submitted using a template together with
gaps in the regulatory framework, implementation continues documents and photos describing the registered subject matter
to cause issues in practice. and specifying the registration rights. The application must be
submitted to the Intellectual Property Office of Vietnam, after
which a decision should take one month from the submission
date. In practice, however, it could take longer.
12.2 Patents
When different parties file applications for (almost) identical
industrial designs, a protection title will be granted to the one
Vietnamese regulations acknowledge two types of patent:
with the earliest priority or filing date amongst those satisfying
utility solutions (petty patents) and patents for invention.
all conditions. If two or more applications meet the conditions
A patent can be submitted through direct filing, including
and have the same earliest priority or filing date, a protection
by a foreign applicant within the relevant term. A patent is
title shall be granted to one application only with agreement
locally protected if it meets the requirements of novelty step,
from all applicants. Without such an agreement, no protection
inventive step (not applicable to utility solutions), and industrial
title shall be granted.
applicability.
The validity of patents for utility solutions is ten years from the
filing date, and 20 years for inventions. To maintain the validity
of a Vietnamese patent, the owner must pay the fee annually. 12.5 Copyright
Documentation required to file a Vietnamese patent consists
of the patent's specification, claims of the patent or amended The registration of copyright is conducted at the National
claims, drawings, and certified copies of priority documents. Copyright Office. In Vietnam, copyright also applies to computer
programs, which cannot be patented because they lack (one
or more) requirements for being granted a patent. Vietnam’s
copyright IP is governed by the Berne Convention on copyright
12.3 Trademarks
which states that the minimum protection from publication
will be 75 years for cinematographic works, photographic
The trademark system in Vietnam protects symbols, three-
works, dramatic works, works of applied art, and anonymous
dimensional objects, colours, and other visual devices used
works; and 50 years after the death of the author for other
to identify a business’ products or services. Trade name rights
works. While no copyright registration is required in Vietnam,
are established through perpetual and public use rather than
registering a copyright is advisable.
the need to be formally registered. Online domain names are
registered on a first-to-file basis. Locally registered trademarks

54
CONTRACTS

55
13. CONTRACTS 13.5 Formation

The Civil Code does not prescribe a specific form for a

13.1 Source of Contract Law contract, so contracts can be written or verbal. Generally, a
written contract has been entered into when all parties have
The two laws most relevant when drafting a contract are signed the contract, while an oral contract is deemed to have
the Civil Code and the Commercial Law. Together, they been executed when parties have reached an agreement on
form the basic framework for commercial contract law in its content.
Vietnam. The first applies to all types of contracts while the
latter, in principle, only applies to commercial and profit
making contracts. Provisions in the Commercial Law and 13.6 Interpretation
industry-specific laws, such as the Law on Construction and
the Petroleum Law, have, in general, precedence over the For the interpretation of a contract, the following factors can
general provisions established by the Civil Code. be taken into account:
• The real intention of the parties at the time when the
transaction was entered into (during the process prior
13.2 Principles to and after the time of establishment and performance
of the contract);
The Civil Code and Commercial Law contain provisions on • The objective of the transaction and the nature of the
certain basic principles, such as: contract;
• The customary practice of the place where the
• Freedom to contract: parties to a contract are generally transaction was entered into;
free to agree on the contents of their contract, as long • The way which, when effective, the contract will best
as they do not contradict prohibitive provisions of law benefit the parties;
and social ethics; • The mutual intentions of the parties (in case of a conflict
• Formation of a contract: the law provides rules of offer between the mutual intentions of the parties and the
and acceptance; and wording in the contract); or
• Contractual terms: there are no specific rules to • The weaker party, in case the stronger party - i.e. the
determine whether a statement does or does not drafting party - inserts contents disadvantageous to the
constitute a contractual term. party in a weak position.

13.3 Choice of Law 13.7 Invalidity

Unless otherwise stipulated by law, parties may agree on A contract may be deemed invalid for reasons of illegality,
a jurisdiction of their choice as governing law if a contract contradicting social ethics, falsification, lack of capacity,
involves a foreign element (e.g. if one of the parties is misunderstanding, deception, threat or compulsion,
foreign). The chosen law can only be applied if such foreign duress, or if the subject of the contract lacks cognition and
or international commercial laws are not contrary to the behavioural control. A contract can also be invalid in case
principles of Vietnamese law. If no law has been agreed, of non-compliance with the form, unless either party has
the contract will be governed by the law of the country to undertaken at least two-thirds of its performance under the
which it is most closely connected. However, Vietnamese contract.
law will generally apply if the contract involves real estate, The law contains provisions as to the consequences of an
employment, or consumer matters. invalid contract, the time limit within which a party can
request the court to declare a civil transaction invalid, and
how third parties’ interests can be protected.
13.4 Language

The law remains silent as to the language(s) that may be 13.8 Breaches and Sanctions
used in locally concluded agreements. Therefore, when
foreign companies engage in a transaction with individuals The Commercial Law defines two types of breach:
and organisations in Vietnam, they often use Vietnamese • Contractual breach: the failure of a party to fully or
or bilingual contracts (English and Vietnamese). However, properly perform its obligations according to the
in case of a dispute, the contract will generally be examined agreement between the involved parties; and
on the basis of the Vietnamese language version. If the • Substantial breach: a contractual breach by a party
counterpart is a Vietnamese Government agency, the law which causes damage to the other party to an extent
states that contracts need to be held entirely in Vietnamese. that the other party cannot achieve the purpose behind
Some specific laws also prescribe that contracts that do their entry into the contract.
not include such state enterprises have to be drafted in
Vietnamese.

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13.9 Exemption from Liability applicable in Vietnam. Over 80 countries are signatories to
the CISG and it provides a unified legal framework for the sale
A party that breaches a contract shall be exempted from of goods between member countries. The CISG is expected
liability in the following cases: to support the commercial activities of traders with regards
• Exemption agreed upon by the parties; to customers and counterparts abroad by providing a legal
• Force majeure; framework that improves efficiency and minimises costs and
• One party is entirely at fault caused by the other party; uncertainties that previously hampered trading, in particular
or with regard to disputes.
• Implementation of a decision of a competent state The CISG will automatically govern all international sales
management agency which the party could not have contracts between companies based in Vietnam and those
known at the time the contract was entered into. in other signatory countries, unless parties agree otherwise.
It might also apply to contracts between Vietnam-based
companies and those in non-signatory countries.
13.10 Remedies

The Commercial Law defines several remedies to a breach 13.14 Electronic Signatures and Contracts
of contract. These include specific performance of contracts,
fines, forcible payment of damages, suspension or stoppage In Vietnam, electronic signatures can be in the form of
of contract performance, or cancellation of contracts. Unless words, letters, numerals, symbols, sounds, or other forms
otherwise agreed, aggrieved parties are not entitled to by electronic means, logically attached or associated with a
suspend or stop contract performance or cancel contracts data message and capable of certifying the person who has
against insubstantial breaches. signed and approves its content. A handwritten signature is
not always needed for a contract to be considered valid, and
a contract cannot be refused because it is electronic.
13.11 Complaints and Legal Proceedings Where the law requires information to be in writing, a
data message will meet this condition if the information is
One party may need to lodge a complaint with another party accessible and usable for reference when necessary. Parties
before starting legal proceedings before a court. If the party can agree to use (certified) e-signatures to sign a data
does not submit a complaint within a certain time, it may message in the transaction process.
be assumed that neither party has issues with the goods or
services delivered. For the statute of limitations for lodging
a complaint, a distinction is made with regards to the 14. CORRUPTION AND BRIBERY
quantity or quality of goods delivered and other contractual
obligations. The statute of limitations for initiating legal Corruption remains a global issue, and one which has a
proceedings is two years from the infringement of lawful particular impact on Vietnam’s business environment.
rights and interests, or nine months from the date of goods Vietnamese leaders have made significant commitments to
delivery in case of suits against a logistics service provider address this issue. However, this task is neither simple nor
that has received a complaint regarding its services. The Civil straightforward, despite the country’s aggressive approach in
Code includes a three-year statute of limitations with regard dealing with major corruption cases.
to contractual issues. Investors may need to consult their In 2019, Transparency International, a non-profit
legal counsel as to which statute of limitations may apply to organisation, ranked Vietnam 96th out of 180 countries and
particular cases. regions in its Corruption Index with a score of 37/100. This
score decreased by one point in 2020, causing Vietnam’s
rank to fall to 104th. Within ASEAN, Vietnam and Malaysia
13.12 Dispute Resolution Clause are the only two countries to see a statistically significant
improvement in their Corruption Perceptions Index score.
Parties to commercial transactions may agree to use However, on a scale of 0 (highly corrupt) to 100 (very clean),
arbitration, either in Vietnam or overseas, instead of a court Vietnam is still among two-thirds of the world’s countries to
procedure. However, it is important to be aware that it is not score below 50.
always easy to have a foreign arbitral award recognised in Consistent with the United Nations Convention against
Vietnam (please find more information on arbitral awards in Corruption, to which Vietnam is a party, the Vietnamese
paragraph 17). Penal Code and the Law on Anti-Corruption criminalise both
public and private sector corruption. In particular, acts such
as attempted corruption, abuse of office, as well as active and
13.13 Convention on Contracts for the International passive bribery are prohibited. Punitive measures range from
Sale of Goods fines to capital punishment, depending on the severity of the
offence. Recently, several defendants have been convicted in
Since 1 January 2017, the United Nations Convention on high-level bribery court cases, however, the overall impact of
Contracts for the International Sale of Goods (CISG) has been corruption is still high.
Under the 2015 Penal Code, the threshold for a gift subject

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to criminal bribery is VND2 million. This amount applies to
material interests but not to non-material interests which
are not defined. However, these are generally understood
to be related to sexual relationships, promotions, privileged
information, etc.
The privatisation of SOEs, also called equitisation, helps to
reduce corruption while also increasing efficiency. These
enterprises often have a no-profit mentality, which invites
corruption and makes the companies less competitive in a
market economy.

15. MONEY LAUNDERING

The current Law on Anti-Money Laundering has been
effective since 1 January 2013. It requires businesses to
report transactions over a certain threshold and suspicious
transactions to the Financial Intelligence Unit within the SBV.
In addition, certain businesses need to check the identity of
their clients in certain transactions. Failure to comply with
these legal provisions may result in a number of sanctions,
ranging from monetary fines to prison terms and, in some
cases, a ban on holding certain professional positions for a
particular amount of time. It is also important to note that
violation of this law by an employee could result in corporate
criminal liability.

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CORPORATE
CRIMINAL LIABILITY

16. CORPORATE CRIMINAL LIABILITY 16.3 Conditions

For a company to be held criminally responsible, certain

16.1 Introduction conditions need to be met. The first is that only a commercial
juridical person can be criminally responsible. According
On 1 January 2018, a new Penal Code came into force to the Civil Code, “[a] commercial juridical person means a
bringing Vietnamese law more into line with international juridical person whose primary purpose is seeking profits
standards. Now, a broad range of violations can lead to and its profits shall be distributed to its members and include
criminal liability for a business. Certain violations- particularly enterprises and other business entities”. Therefore, only
those committed by individual employees - may not lead to legal entities that make a profit can be criminally responsible,
criminal liability, however, they may still damage the business’ regardless of their business line or company nature.
reputation. It is important to note that violations on tax, The second requirement under the Penal Code is two-
competition, the environment, business, and trading - while fold. It states that a commercial juridical person can be
not criminal acts - can be administratively sanctioned both criminally responsible if it can be proven that the criminal
for individual and corporate entities. The main difference offence has been committed in the name and the interests
between the two systems is that the statute of limitations of that person and is under their instruction or approval.
under the administrative procedure is much shorter and the A criminal prosecutor has to prove these requirements
punishments are lower. before a commercial juridical person can be found criminally
responsible.

16.2 Corporate Criminal Liability

16.4 Criminally Liable Entity
Not all criminal offences by individual employees lead to
criminal corporate liability. The Penal Code contains two The Penal Code applies to both a foreign and/or Vietnamese
articles that set out the offences leading to corporate criminal commercial juridical person. However, for a subsidiary,
liability, and each respective applicable article also includes the parent company will not be responsible as it is an
information on criminal corporate liability. For example, independent entity. Meanwhile, for a representative office
corporate criminal liability is introduced for offences such or branch, the parent company could be responsible as they
as insurance fraud, tax evasion, violation of competition are not independent legal entities. In the Penal Code, there
regulations, financing terrorism, money laundering, pollution, is no provision on criminal offences committed in a corporate
manufacturing of counterfeit products, violation of IPR laws, group (parent and subsidiary). So, it is not clear yet under
violation of several food safety laws, and corruption. It is what conditions the foreign parent company could be held
important to note that bribery is excluded. criminally responsible for offences committed by directors,
managers, or representatives of local Vietnamese entities.

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If a convicted commercial juridical person is divided, out, or has happened but fails to report it could be criminally
separated, consolidated or merged, the succeeding responsible.
corporate legal entity will inherit rights and duties from
the convicted corporate legal entity and will be responsible
for any pecuniary penalties and damages. The fact that a 16.7 Punishment and Additional Measures
corporate legal entity is criminally liable does not exempt the
criminal liability of an individual. Depending on the offence and the person or entity having
committed it, punishment can be a monetary fine, restraining
measures, a forced suspension or termination of business
16.5 Territorial Scope operations, or a ban on conducting certain business activities
and/or raising capital. Punishments can be higher where
The Penal Code states that any Vietnamese citizen or there are aggravating circumstances such as recidivism,
corporate legal entity may be held responsible for crimes crimes committed in a professional way or by a group, abuses
defined under the code committed either inside or outside of power and position, or offences committed in the name of
of Vietnam. The new Penal Code also provides that a foreign an agency or organisation. In these cases, possible additional
corporate entity shall be subject to criminal responsibility for measures include: compulsory dismantling of works,
offences committed abroad if the offence infringes the lawful compulsory removal from Vietnam’s territory, destruction of
rights and interests of Vietnamese citizens, the interests of goods, bans and confiscatory measures.
Vietnam, or interests under an international agreement to
which Vietnam is a signatory.

16.6 Criminal Liability for Legal Representatives

A legal representative may be charged with certain violations

of the 2019 Labour Code regarding the dismissal or laying
off of staff; forcing someone to resign; anti competitive
behaviour; or evasion of social, unemployment, or health
insurance payments. Furthermore, it is important to
understand that, in Vietnamese law, there is no relevant
provision dealing with the liability of directors or managers
for not adopting (intentionally or negligently) measures
to prevent a crime. However, according to the Penal Code,
any person (with some exceptions) who conceals a crime
or who knows that a crime is being prepared, being carried

60
LEGAL SYSTEM
AND DISPUTE
RESOLUTION

61
17. LEGAL SYSTEM AND DISPUTE However, even though the legislative system is fully
developed and adequate in principle, uncertainty lingers in
RESOLUTION practice. This is due to imprecise, unclear, and overlapping
guidance throughout the hierarchy of legal texts. For
instance, the implementing guidelines of former laws often
17.1 Legal System continue to apply even after new laws have superseded their
parent legislation. Furthermore, the ranking of legal texts
The Vietnamese legal system consists of a Constitution, is not always observed in practice, with Circulars prevailing
Codes, Laws, Ordinances, Decrees, Decisions, Circulars, over Decrees and even Laws, in some cases.
Directives, and Resolutions. Codes, Laws, and Ordinances are Another aspect to consider in the Vietnamese legal system
referred to by name. However, Decrees, Decisions, Circulars, is the vast degree of administrative discretion, as authorities
Directives, and Resolutions are usually referred to by their have significant interpretative authority. In this context,
number, signing date, and the acronym of the issuer. practice can be as important as the literal reading of a text
Legal texts are published in the Official Gazette. Decrees and when there is relatively little transparency or accountability.
Circulars contain guidelines to implement Laws, Codes and The fact that regulations are mostly passed at the central
Ordinances. Local governmental agencies may also issue level, while their implementation, administration, and
Official Letters further guiding the implementation of any of enforcement are mainly decentralised, only adds to this
these pieces of legislation. uncertainty. This means that, in practice, the legal system is a
heavy and costly administrative burden on foreign investors
and remains one of the key deterrents.

ISSUER DOCUMENT
17.2 Governing Law
Cons�tu�on, Law, Code,
Na�onal Assembly Business investment activities in Vietnam must comply with
Resolu�on
Vietnamese law including, amongst others, the Law on
Investment and the Law on Enterprise. Parties can choose
Standing Commi�ee of a different law to govern their contract(s) under certain
Ordinance, Resolu�on
the Na�onal Assembly circumstances, (e.g., if at least one party is a foreign investor).

President Direc�ve, Decision

17.3 Dispute Resolution
Government Decree
17.3.1 Court system
Prime Minister Direc�ve, Decision The Constitution of Vietnam governs the country’s judicial
system, together with the Law on the Organisation of
Ministries and People's Courts and the Law on the Organisation of People's
their equivalent Circular Procuracies.
State Agencies Vietnam is a one-party socialist republic. The judiciary falls
under the leadership of the Communist Party of Vietnam
and is accountable to the National Assembly. Judges and
Jus�ce Council of procurators are all members of the Party.
the Supreme Resolu�on The Supreme People's Court is the country’s highest court.
People’s Court Below that, there are three levels of People’s Courts:
• The high People's Courts;
Chief Jus�ce of the • The provincial-level People's Courts; and
Supreme People’s • The district-level People's Courts.
Court and Head of Circular The High Courts in Hanoi, Da Nang, and HCMC are appellate
the Supreme and cassation courts respectively responsible for the
People’s Prosecutor northern, central, and southern regions of the country. The
provincial courts are both trial and appellate courts, while
district courts are trial courts.
State Audit Office
Decision Business, commerce or labour-related cases where one party
of Vietnam
or the related asset is located offshore, or which require
judicial assistance by an overseas representative agency of
People’s Council Resolu�on Vietnam, foreign court, or other foreign competent authority
are generally subject to the jurisdiction of the provincial
court.
People’s Commi�ee Decision There is a people's procuracy for every People’s Court.

62
The people's procuracies are the prosecutorial authority 17.3.4 Arbitration
and are responsible for supervising and inspecting judicial
compliance by government agencies, officials and other Arbitration is an alternative to dispute resolution in Vietnam
people in Vietnam. but is restricted to governing commercial disputes. A
Recently, case law has been more developed and applied in domestic arbitration award is automatically enforceable
Vietnam’s judicial bodies. For instance, Resolution 04/2019/ and, therefore, unlike a foreign arbitral award, does not
NQ-HDTP of the Justice Council of the Supreme People’s have to be recognised first to be locally enforceable. There
Court requests courts, regardless of their hierarchical level in are currently more than 30 domestic arbitral institutions
the system, to review and recommend their own precedent operating in Vietnam, according to the Ministry of Justice on
court judgements and decisions for the Supreme People’s its official website (https://bttp.moj.gov.vn). The most well-
Court to consider and develop into official case law. Moreover, known Vietnamese arbitration institution is the Vietnam
it is stipulated that court judges must ensure the application International Arbitration Centre (VIAC) at the Vietnam
of case law in their judgements and decisions so that matters Chamber of Commerce and Industry.
falling within similar legal circumstances are resolved in the Foreign investors tend to refer to foreign arbitration due to
same way. It is important to note that case law is only binding a lack of confidence in the capability and transparency of
after it has been selected and announced as a precedent in Vietnamese courts. Since Vietnam has joined the New York
accordance with the law. As of 12 March 2021, there were Convention on Recognition and Enforcement of Foreign
43 decisions officially announced by the Chief Justice of the Arbitral Awards, arbitration clauses agreed between the
Supreme People’s Court as precedent. Such precedent cases parties have to be respected. However, Vietnamese courts
present diverse subject matters in legal areas such as criminal are still entitled to decide whether or not a foreign arbitral
law, inheritance law, contract law, labour law, insurance and award can be recognised and deemed enforceable in
real estate law. Vietnam within certain boundaries.
As a result, it is worth noting that, in practice, Vietnamese
17.3.2 Enforcement courts may reject the enforcement of an award on the grounds
that it “is not in line with basic principles of Vietnamese law”.
A court judgment or decision, if not voluntarily enforced This may be even more frustrating for litigious companies
by the losing party, may be referred to the civil judgment when the interpretation of the basic principles of Vietnamese
enforcement agency. Enforcement of a judgment or decision law was addressed in the underlying proceedings. This, in
is time-consuming as there is an overload of cases that need turn, leads to a frequent reopening of cases which adversely
to be enforced. affects all parties to the trial. Even when an arbitral award
is accepted it can often take years to actually enforce it in
17.3.3 Mediation Vietnam.
Therefore, investors would be well advised to anticipate this
Vietnam is not a litigious society and a large number of issue with local enforcement and try to steer clear of any
disputes are resolved outside court. Vietnamese laws also legal disputes. This can be done through careful preparation
highly emphasise the role of mediation and, in certain and negotiation of the underlying agreements and very close
contexts, it is a mandatory part of a litigation procedure such control of their Vietnamese counterparties.
as for civil, labour, marriage and family litigations. Indeed,
Vietnamese laws set out different mechanisms for mediation 17.3.5 Dispute Resolution in Investment Treaties
such as out-of-court and in-court mediation. Generally
speaking, out-of-court mediation is conducted outside the In 2018, Vietnam joined the Comprehensive and Progressive
courtroom and is independent from orthodox litigation Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP
proceedings convened by the court. Meanwhile, in-court came into effect in Vietnam on 14 January 2019 and is expected
mediation is required to take place at civil courts during the to open significant opportunities for foreign investors who
course of instance trial. may take advantage of favourable incentives established by
Apart from the out-of-court and in-court mediation the agreement to build up lucrative businesses in Vietnam.
mentioned above, following a successful pilot scheme of pre- In particular, amongst others, for securing equality and
proceeding mediation and negotiation at courts in resolving transparency in dispute resolution related to investment
civil and administrative disputes from March 2018, the Law activities of foreign investors of member countries, the CPTPP
on Mediation and Negotiation at Courts came into force on 1 sets out its own specific dispute resolution mechanism by
January 2021. The mediation or negotiation will be performed which investors can initiate a claim against invested member
voluntarily before the courts are to accept jurisdiction in the states. Under the CPTPP, parties in dispute are requested to
case as required under the laws on civil or administrative initially attempt to settle disputes in an amicable manner
proceedings. The court’s decision recognising the result of - i.e., consultation and negotiation - before taking recourse
a successful mediation shall be legally valid and cannot be to arbitration. If the dispute has not been resolved within
appealed. However, it may be reviewed if it has been created six months of the respondent receiving a written request for
without satisfying the relevant proceeding conditions. consultation, the claim can be submitted for arbitration under
the ICSID Convention, ICSID Additional Facility Rules, UNCITRAL
Arbitration Rules, or rules of other arbitration institutions
subject to the parties’ agreement.

63
The issuance and enforcement of a tribunal award shall be
subject to the conditions and requirements stipulated under
the CPTPP. This includes, among others, that the investor
may only claim losses or damages that have been incurred in
its capacity as an investor. The tribunal may also award costs
and attorney’s fees incurred by the investor in connection
with the arbitral proceedings. However, the tribunal may not
award any punitive damages, as this is not aligned with the
stipulations of the treaty. Nevertheless, it is worth noting
that, where the investor submits the claim to a court or
administrative tribunal of Vietnam, that selection shall be
definitive and exclusive. Consequently, the investor may not
submit the claim to arbitration under the CPTPP thereafter.

64
 ABOUT ACSV LEGAL

ACSV Legal is a vibrant and dynamic, Vietnam based law-firm,

located in Ho Chi Minh City with unparalleled domestic expertise.
We have one of the premier Corporate / M&A practices in
Vietnam and we have extensive experience in private equity
transactions with a strong commercial focus. We have advised
various clients on (re-)structuring their businesses in the light of
investments in or outside Vietnam.
Our clients are typically businesses within South-East Asia
which are experiencing significant growth, as well as leading
international and local corporations who need advice on a broad
array of multi-jurisdictional transactions. We have advised our
clients on matters in a wide range of sectors and industries such
as healthcare, beauty and fitness, pharmaceutical, food and
beverage, IT and technology, hospitality and leisure, education,
retail, manufacturing and distribution, apparel and fashion,
Fintech and payment services.
We have a team of experienced lawyers who are qualified in
Vietnam, the UK, the US, Germany, and Malaysia in civil and
common law jurisdictions. The languages spoken at ACSV Legal
include Vietnamese, English, German, Japanese, Italian, Dutch,
French and Malay.

For more information, please contact

MARK OAKLEY HIEU PHAM

MANAGING PARTNER SPECIAL COUNSEL
[email protected] [email protected]

LEVEL 11, EMPRESS TOWER, 138-142 HAI BA TRUNG

STREET, DISTRICT 1, HO CHI MINH CITY, VIETNAM
T: +84 28 38224539
F: +84 28 38224239
W: ACSVLEGAL.COM

65
VIETNAM
BUSINESS GUIDE

LEVEL 11, EMPRESS TOWER, 138-142 HAI BA TRUNG STREET, DISTRICT 1, HO CHI MINH CITY, VIETNAM
T: +84 28 38224539 | F: +84 28 38224239 | W: ACSVLEGAL.COM

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