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CHAPTER IV: RIGHTS AND OBLIGATIONS OF FOREIGN INVESTORS AND ENTERPRISES WITH FOREIGN CAPITAL INVESTMENT Enterprises With Foreign Capital Investment [and] parties to Business Co-operation Contracts may employ workers pursuant to their business requirements and must give priority to the employment of Vietnamese citizens; [they] may only employ foreigners to perform tasks requiring technical and management qualifications which Vietnam has not yet attained, but [they] must train Vietnamese personnel for replacement. The rights, interests and duties of employees working in Enterprises With Foreign Capital Investment shall be ensured by means of labor contract, collective labor agreement and the provisions of labor law. Persons using labor, Vietnamese workers and foreign workers must comply with the provisions of labor law and relevant laws, [and they] must respect each others' honor, dignity and tradition.
Enterprises With Foreign Capital Investment must respect the right of Vietnamese workers to participate in political [and] socio-political organizations in accordance with the provisions of Vietnamese law.
An Enterprise With Foreign Investment Capital [and] the Foreign Party to a Business Co-operation Contract shall insure [their] assets and civil liabilities with a Vietnamese insurance company or another insurance company permitted to operate in Vietnam.
The transfer of foreign technology to Vietnam in foreign investment projects may be carried out in the form of contribution of the value of the technology as capital or the purchase of the technology on the basis of a contract, in compliance with the law on technology transfer. The Government of Vietnam encourages the rapid transfer of technology, especially advanced technology. An Enterprise With Foreign Capital Investment [and] the parties to a Business Co-operation Contract, after completing the basic construction for the enterprise's formation, must conduct final acceptance of, and [prepare] final accounts for the facility with a certification from an inspection organization. Enterprises With Foreign Capital Investment [and] the parties to Business Co-operation Contracts shall conduct tendering in accordance with the provisions of the law on tendering. Enterprises With Foreign Capital Investment [and] parties to Business Co-operation Contracts shall have the right to conduct business autonomously in accordance with the objectives stipulated in the Investment License. They may import equipment, machinery, materials and means of transport, export directly or entrust the export of and sell their own products in order to implement the investment project in accordance with the provisions of law. Enterprises With Foreign Capital Investment [and] parties to Business Co-operation Contracts must give priority to the purchase of equipment, machinery, materials and means of transport in Vietnam where the technical and commercial conditions are commensurate. An Enterprise With Foreign Capital Investment may establish a branch 24 outside of the province [or] city directly under the Central Authority 25 where the Enterprise has set up its head office in order to conduct business activities within the scope and objectives stipulated in [its] Investment License and [such establishment] must be approved by the People's Committee of the province [or] city directly under the Central Authority where the branch is established. Enterprises With Foreign Capital Investment and parties to Business Co-operation Contracts may purchase foreign exchange at [a] commercial bank in order to meet [their] current transactions and other permitted transactions in accordance with the provisions of the laws concerning foreign exchange control. The Government of Vietnam guarantees to balance foreign exchange for especially important projects that are invested pursuant to a program of the Government from time to time. The Government of Vietnam guarantees to assist in the balancing of foreign exchange for projects that build infrastructure facilities and a number of other important projects. The parties to a Joint Venture Enterprise have the right to assign the value of their portions of capital in the Joint Venture Enterprise, but [they] must give priority of assignment to the parties to the Joint Venture Enterprise. In the event that an assignment is made to an enterprise outside of the Joint Venture, the assignment conditions shall not be more favorable than those offered to the parties to the Joint Venture Enterprise. An assignment of capital must be agreed upon by the parties to the Joint Venture Enterprise. These provisions shall also apply to the assignment of the rights and obligations of the parties to a Business Co-operation Contract. The Investor of an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital has the right to assign [his/her/its] capital. In the event that an assignment of capital generates a profit, the assignor shall pay enterprise income tax at the rate of twenty-five per cent (25%). An Enterprise With Foreign Capital Investment shall open accounts in Vietnamese currency and foreign currency with [a] Vietnamese bank or joint venture bank or branch of [a] foreign bank established in Vietnam. In special circumstances as approved by the State Bank of Vietnam, Enterprises With Foreign Capital Investment may be permitted to open [an] offshore account.
Article 36 The conversion between Vietnamese currency and foreign currencies shall be effected at the official exchange rates announced by the State Bank of Vietnam at the time of conversion. Enterprises With Foreign Capital Investment [and] Foreign Parties to Business Co-operation Contracts shall adopt the Vietnamese accounting system. In circumstances where it is necessary to adopt another commonly used accounting system, approval from the Ministry of Finance must be obtained. The system for depreciation of fixed assets of Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts shall be implemented in accordance with the regulations of the Government. The annual financial statements of Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts shall be audited by an independent Vietnamese auditing company or other independent auditing company permitted to operate in Vietnam in accordance with the provisions of the law on auditing. The annual financial statements must be submitted to the financial authority and the State authority in charge of management of foreign investment. Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts shall pay enterprise income tax at a rate of twenty-five per cent (25%) of the profits made; in circumstances where investment is encouraged, the enterprise income tax rate shall be twenty per cent (20%) of the profits made; in circumstances where a number of criteria for investment encouragement [are met], the enterprise income tax rate shall be fifteen per cent (15%) of the profits made; in circumstances where investment is especially encouraged, the enterprise income tax rate shall be ten per cent (10%) of the profits made. With respect to the fields of oil and gas and a number of other precious and rare natural resources, the rate of enterprise income tax shall be in accordance with the provisions of the Oil and Gas Law and relevant laws. Depending on the investment fields and geographical areas stipulated in Article 3 of this Law, Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts may be exempted from enterprise income tax for a maximum period of two (2) years from the time when the business begins to make a profit, and may be granted a fifty per cent (50%) reduction of enterprise income tax for a maximum period of two (2) subsequent years. In cases where Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts implement a project that [satisfies] a number of the criteria for investment encouragement, [they] are exempted from enterprise income tax for a maximum period of four (4) years from the time when the business begins to make a profit, and are granted a fifty per cent (50%) reduction of enterprise income tax for a maximum period of four (4) subsequent years. With respect to cases where investment is especially encouraged, the maximum period of exemption from enterprise income tax shall be eight (8) years.
Article 40 Enterprises With Foreign Capital Investment and the parties to Business Co-operation Contracts that suffer losses after [their] tax finalization with the tax authority are entitled to carry forward the losses to the following year, [and] such losses can be deducted from the taxable income. The period during which losses may be carried forward shall not exceed 5 years. After the payment of enterprise income tax and fulfillment of other financial obligations, an appropriation from the remaining income for the purpose of establishing a reserve fund, welfare fund, production expansion fund and other funds is decided by the Enterprise. In the case of reinvestment in projects for which investment is encouraged, a refund of part or all of the enterprise income tax already paid on the amount of the profits reinvested will be granted. The Government shall stipulate the proportion of tax refund based on the field, geographical area, form and term of reinvestment.
Article 43 When remitting profits abroad, a Foreign Investor must pay an amount of tax at the rate of three per cent (3%), five per cent (5%) or seven per cent (7%) of the amount of profit remitted abroad, depending on the amount of the Foreign Investor's capital contribution to the Legal Capital of the Enterprise With Foreign Capital Investment or the [amount of] capital for implementing the Business Co-operation Contract. Vietnamese persons resettling abroad who invest back into the country in accordance with the provisions of this Law shall be entitled to a twenty per cent (20%) reduction of enterprise income tax as compared to projects of the same category, except in the circumstances where the enterprise income tax rate of ten per cent (10%) is applied; and [they] are entitled to a profit remittance tax rate of three per cent (3%) on the amount of profit remitted abroad.
Article 45 Based on the regulations of the Government, the State authority in charge of management of foreign investment shall determine the applicable enterprise income tax rates, enterprise income tax exemption and reduction periods and tax rates for the remittance of profits abroad in accordance with the provisions of Articles 38, 39, 43 and 44 of this Law. The [applicable] tax rate and the period of exemption and reduction of tax shall be stated in the Investment License. If there is a change to investment conditions during the course of implementing a project, the tax exemption and reduction for Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts shall be determined by the Ministry of Finance. 1. Enterprises With Foreign Capital Investment [and] Foreign Parties to
Business Co-operation Contracts, who use land surface, water surface [and/or]
sea surface must pay rent; in the case of exploiting natural resources,
natural resource tax must be paid in accordance with the provisions of law. 1. Export duty [and] import duty for goods exported and imported by an Enterprise With Foreign Capital Investment and the parties to a Business Co-operation Contract shall be applied in accordance with the Law on Export and Import Duties. 2. Enterprises With Foreign Capital Investment [and] the parties to Business Co-operation Contracts are exempted from import duty with respect to items imported to form the fixed assets, including: a. Equipment [and] machinery; b. Means of carriage for specific use which are parts of the line[s] of technology and means of transportation to be used for the carriage26 of workers; c. Components, parts, detached devices, spare parts, installations, moulds [and] accessories which accompany the equipment, machinery [and] means of carriage for specific use provided for in point b of this clause; d. Raw materials [and] materials to be used for the manufacturing of the equipment [and/or] machinery which are parts of the line[s] of technology or for the manufacturing of components, parts, detached devices, spare parts, installations, moulds [and] accessories which accompany the equipment [and/or] machinery; [and] e. Construction materials that can not yet be manufactured domestically. 3. Raw materials, materials [and] components imported for production [purposes] of projects [that invest] in a field for which investment is especially encouraged or in a geographical area with especially difficult socio-economic conditions are exempted from import duty for a period of 5 years as from the commencement of production. 4. The Government shall stipulate the exemption [and/or] reduction of export and import duties with respect to other goods for which investment needs to be especially encouraged.
Article 48 Export Processing Enterprises are exempted from export duty on goods that are exported from the Export Processing Zone to foreign countries, and from import duty on goods that are imported from foreign countries into the Export Processing Zone. Export Processing Enterprises [and] Enterprises With Foreign Capital Investment in Industrial Zones are entitled to enjoy tax preferences in circumstances where investment is encouraged or especially encouraged in accordance with the provisions of Articles 38, 39, 43 and 44 of this Law. The Government shall stipulate the specific preferential tax rate for each type of Export Processing Enterprise [and] Enterprise With Foreign Capital Investment in an Industrial Zone. In addition to the types of taxes stipulated in this Law, Enterprises With Foreign Capital Investment and Foreign Parties to Business Co-operation Contracts must pay other types of taxes in accordance with the provisions of the law.
Article 50 Foreigners and Vietnamese persons who work in Enterprises With Foreign Capital Investment or work for parties to Business Co-operation Contracts must pay personal income tax in accordance with the provisions of the law.
Enterprises With Foreign Capital Investment and the Foreign Parties to Business Co-operation Contracts have the responsibility to comply with the provisions of the law on environmental protection. An Enterprise With Foreign Capital Investment [and] a Business Co-operation Contract shall terminate [their] operations in the following circumstances: 1. The term of operation stated in the Investment License expires; 2. Pursuant to the conditions for termination of operation as stipulated in the contract [and/or] enterprise charter, or as agreed upon by the parties; 3. Pursuant to the decision of the State authority in charge of management of foreign investment due to a serious violation of law or a stipulation of the Investment License; [or] 4. Due to being declared bankrupt.
Article 53 1. Upon termination of operation under the circumstances stipulated in Clauses 1, 2 and 3 of Article 52 of this Law, the [concerned] Enterprise With Foreign Capital Investment [and] the parties to the [concerned] Business Co-operation Contract must proceed with the liquidation of the enterprise?s assets [and] discharge the contract. 2. If an enterprise, during the course of liquidation of its assets, is discovered to be on the verge of bankruptcy, the enterprise?s bankruptcy shall be handled in accordance with the formalities prescribed by the laws concerning enterprise bankruptcy. 3. The bankruptcy of an Enterprise With Foreign Capital Investment shall be carried out in accordance with the provisions of the laws concerning enterprise bankruptcy. 4. In the event that the Vietnamese Party participating in a Joint Venture Enterprise who contributes capital in [the form of] the value of land use rights is dissolved or bankrupt, the remaining value of the land use rights contributed as capital shall be included in the Enterprise?s assets that are subject to liquidation.
NOTES: 24. Branch: As defined under Article 100 of the 1995 Civil Code of Vietnam, a branch (or "chi nhanh" in Vietnamese) is a subordinate unit of a juridical person, and which has the duty to perform all or part of the functions of the juridical person, including representative functions, under the juridical person?s authorization. A branch does not have the status of a juridical person, and all civil rights and obligations arising from transactions performed by the branch shall be assumed by the juridical person establishing it. See also Article 15 of the 1999 Enterprise Law for a somewhat similar definition. 25. Administrative units: In Vietnam, a province is accountable directly to the Government (usually expressed as the Central Authority") and is comprised of provincial cities, towns, rural districts, municipalities, precincts, villages, hamlets and neighborhoods. A city directly under the Central Authority such as Ho Chi Minh City and Hanoi is also accountable directly to the Government and is divided into urban districts, rural districts, wards and neighborhoods. Vietnam also has special zones which are accountable directly to the Government. 26. Carriage of workers: For picking up and bringing workers to/from a work site.
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Source: Department of Ministry of Investment and Planning, HCM city, Vietnam |
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