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LAW ON FOREIGN INVESTMENT IN VIETNAM

 

CHAPTER IV

 

Rights and Obligations of Foreign Investors and Enterprises with Foreign Owned Capital

Article 25

Enterprises with foreign owned capital and parties to a business co-operation contract shall have the right to recruit and employ labour in accordance with business requirements and must give priority to Vietnamese citizens; shall only recruit and employ foreigners for jobs which require a level of technical and management expertise which a Vietnamese citizen cannot satisfy but must train Vietnamese citizens as replacements.

The rights and obligations of an employee of an enterprise with foreign owned capital shall be ensured by a labour contract, the collective labour agreement, and other provisions of the law on labour.

Article 26

Employers and foreign and Vietnamese employees must comply with the provisions of the law on labour and other relevant legislation, and respect the honour, dignity and traditional customs of each other.

Article 27

Enterprises with foreign owned capital must respect the rights of Vietnamese employees to participate in a political organization and socio-political organizations in accordance with the law of Vietnam.

Article 28

Enterprises with foreign owned capital and foreign parties to business co-operation contracts must purchase insurance cover for property and civil liabilities from Vietnamese insurance companies or other insurance companies permitted to operate in Vietnam.

Article 29

The transfer of foreign technology to Vietnam in foreign

investment projects may be carried out in the form of capital contribution of the value of technology or technology purchases made on the basis of a contract in accordance with the law on technology transfer.

The Government of Vietnam encourages accelerated transfers of technology, especially those of advanced technology.

Article 30

Enterprises with foreign owned capital and parties to business co-operation contracts must, following completion of capital construction for the establishment of the enterprise, check and accept the construction and prepare a financial statement of construction works which must be certified by an inspection organization.

Enterprises with foreign owned capital and parties to business co-operation contracts must carry out tenders in accordance with the provisions of the law on tendering.

Article 31

Enterprises with foreign owned capital and parties to business co-operation contracts shall have the right to autonomy in conducting their businesses in accordance with the objectives stipulated in the investment licence; to import equipment, machinery, materials, and means of transport; to export and sell either directly, or through an agent, their products in order to implement their investment projects in accordance with the law.

Enterprises with foreign owned capital and parties to business co-operation contracts must give priority to purchasing equipment, machinery, materials, and means of transport in Vietnam where the technical and commercial conditions are similar.

Article 32

An enterprise with foreign owned capital may establish branches outside the province or city under central authority in which its head office is located to carry out business activities within the scope and objectives stipulated in the investment licence provided that the approval of the people's committee of the province or city under central authority in which the branch is to be located is obtained.

Article 33

Enterprises with foreign owned capital and parties to business co-operation contracts shall, by themselves, meet the demand of foreign currency for their operations.

The Government of Vietnam assures its assistance in maintaining foreign currency balance with respect to projects for the construction of infrastructure facilities or the production of essential import substitutes, and other important projects.

Article 34

Any party to a joint venture shall have the right to assign its contributed capital in the joint venture enterprise provided that preference is given to the other parties to the joint venture enterprise. Where the assignment is made to a party other than a party to the joint venture enterprise, the conditions of the assignment must not be more favourable than those offered to the other joint venture parties. The assignment must be agreed to by the parties to the joint venture.

These provisions shall also apply to the assignment of rights and obligations of a party to a business co-operation contract.

An enterprise one hundred (100) per cent foreign owned capital may assign its capital provided that priority is given to Vietnamese enterprises.

The assignment of capital shall only be effective upon the assignment contract being approved by the body in charge of State management of foreign investment.

Where profits arise from the assignment, the assignor must pay profits tax at a rate of twenty five (25) per cent on that profit. In the case of an assignment made to a Vietnamese enterprise, the assignor shall be entitled to a reduction of or exemption from tax.

Article 35

An enterprise with foreign owned capital shall open bank accounts in both Vietnamese currency and foreign currency at Vietnamese banks or joint venture banks or foreign bank branches established in Vietnam.

In special cases, an enterprise with foreign owned capital may open a loan account at a bank located in a foreign country provided that the approval of the State Bank of Vietnam is obtained.

Article 36

The conversion of Vietnamese currency into foreign currency

shall be effected at the official exchange rate published by the State Bank of Vietnam at the time of conversion.

Article 37

An enterprise with foreign owned capital and a foreign party to a business co-operation contract shall apply the Vietnamese accounting system. The approval of the Ministry of Finance must be obtained if another common accounting system is applied.

Depreciation of fixed assets of enterprises with foreign owned capital and foreign parties to business co-operation contracts shall be carried out in accordance with the regulations of the Government.

Annual financial statements of enterprises with foreign owned capital and foreign parties to business co-operation contracts shall be audited by an independent Vietnamese auditing company or another independent auditing company permitted to operate in Vietnam in accordance with the provisions of the law on auditing. Annual financial statements must be sent to the State financial body and the body in charge of State management of foreign investment.

Article 38

Enterprises with foreign owned capital and foreign parties to business co-operation contracts shall be subject to profits tax at a rate of twenty five (25) per cent on the profits earned; where investment is encouraged, the rate of profits tax shall be twenty (20) per cent on the profits earned. Where the investment satisfies many investment promotion criteria, the rate of profits tax shall be fifteen (15) per cent on the profits earned. Where the investment is specially encouraged, the rate of profits tax shall be ten (10) per cent on the profits earned.

For investments in the oil and gas industry and a number of other rare and precious resources, the rate of profits tax shall be in accordance with the provisions of the Law on Petroleum and other relevant legislation.

Article 39

Depending on the investment sector and region as stipulated in

article 3 of this Law, an enterprise with foreign owned capital and a foreign party to a business co-operation contract may be exempted from profits tax for a maximum period of two years commencing from the first profit-making year and may be entitled to a fifty (50) per cent reduction of profits tax for a maximum period of two successive years.

Enterprises with foreign owned capital and foreign parties to business co-operation contracts implementing a project which satisfies a high number of investment promotion criteria shall be exempted from profits tax for a maximum period of four years commencing from the first profit-making year and may be entitled to a fifty (50) per cent reduction of profits tax for a further maximum period of four (4) years.

For cases where investment is specially encouraged, exemption from profits tax may be allowed for a maximum period of eight (8) years.

Article 40

During its operation, losses incurred by a joint venture

enterprise in any tax year may be carried forward to the following year and set off against the profits of subsequent years for a maximum of five (5) years.

Article 41

After payment of profits tax, a joint venture enterprise shall deduct five (5) per cent of the remaining profits to establish a reserve fund. The reserve fund shall be limited to ten (10) per cent of the legal capital of the enterprise. The percentage of profits set aside for a welfare fund and other funds shall be agreed by the parties and stated in the charter of the enterprise.

Article 42

Where reinvestment is made in encouraged investment projects, the total or a part of the profits tax paid in respect of the reinvested profits shall be refunded. The Government shall stipulate the percentage of profits tax to be refunded in respect of the reinvested profits depending on the investment sector and region and the form and duration of the reinvestment.

Article 43

A foreign investor shall, when transferring profits abroad, be subject to withholding tax at rates of five (5) per cent, seven (7) per cent or ten (10) per cent of the profits transferred, depending on the level of capital contribution of such foreign investor in the legal capital of the enterprise with foreign owned capital or the capital for the implementation of a business co-operation contract.

Article 44

Overseas Vietnamese investing in Vietnam in accordance with provisions of this Law shall be entitled to a reduction of profits tax of twenty (20) per cent of the otherwise applicable tax rate, with the exception of cases where the ten (10) per cent rate of profits tax is applicable, and shall be entitled to a withholding tax rate of five (5) per cent on profits transferred abroad.

Article 45

Pursuant to Government regulations, the body in charge of

State management of foreign investment shall apply the profits tax rates, the periods of exemption from and reduction of profits tax, and the withholding tax rates in accordance with articles 38, 39, 43, and 44 of this Law. Tax rates and periods of exemption from and reduction of tax shall be specified in the investment licence.

If the investment conditions change during the implementation of an investment project, the exemption from or reduction of taxes applicable to the enterprise with foreign owned capital or the foreign party to a business co-operation contract shall be determined by the Ministry of Finance.

Article 46

Enterprises with foreign owned capital and foreign parties to business co-operation contracts must pay rent for the use of land, water or sea surfaces. Where natural resources are exploited, royalties must be paid in accordance with the provisions of the law.

The Government shall provide for exemptions from, or reductions of, rent for the use of land, water or sea surfaces with respect to Build-Operate-Transfer, Build-Transfer-Operate, or Build-Transfer projects, and investment projects in mountainous and remote regions or regions with difficult socio-economic conditions.

Article 47

Products exported or imported by an enterprise with foreign owned capital or a party to a business co-operation contract shall be subject to export and import duties in accordance with the Law on Export and Import Duties.

Equipment, machinery, and specialized means of transportation which are used in a technological process imported into Vietnam for the purpose of forming the fixed assets of an enterprise with foreign owned capital, forming the fixed assets for the implementation of a business co-operation contract, or to expand the scale of an investment project, and imported means of transportation used to transport workers shall be exempted from import duty.

The Government may grant exemption from, or reduction of, export and import duties in respect of other special goods which are subject to investment encouragement.

Article 48

An export processing enterprise shall be entitled to exemption from export duty on goods exported from an export processing zone to a foreign country or import duty on goods imported into an export processing zone from a foreign country.

Export processing enterprises and enterprises with foreign owned capital in industrial zones shall be entitled to preferential tax rates in cases where investment is encouraged or specially encouraged in accordance with articles 38, 39, 43, and 44 of this Law. The Government shall provide for the preferential tax rates applicable to each kind of export processing enterprise and enterprise with foreign owned capital in industrial zones.

Article 49

In addition to the types of tax stipulated in this Law, an

enterprise with foreign owned capital and a foreign party to a business co-operation contract must pay other taxes in accordance with the law.

Article 50

Foreign and Vietnamese personnel working in an enterprise with foreign owned capital or for parties to a business co-operation contract must pay income tax in accordance with the law.

Article 51

Enterprises with foreign owned capital and foreign parties to business co-operation contracts have the responsibility to comply with the provisions of the law on environmental protection.

Article 52

The operation of an enterprise with foreign owned capital or a business co-operation contract shall be terminated in the following cases:

1. The expiry of the duration stipulated in the investment licence.

2. Following the proposal of one or more of the parties subject to approval by the body in charge of State management of foreign investment.

3. According to a decision of the body in charge of State management of foreign investment in consequence of a serious violation of the law or any provision(s) of the investment licence.

4. Following a declaration of bankruptcy.

5. In other cases stipulated by law.

Article 53

1. Upon the termination of operation as stipulated in clauses 1, 2, 3, and 5 of article 52 of this Law, the enterprise with foreign owned capital or the parties to the business co-operation contract must proceed to liquidate the assets of the enterprise, settle the outstanding liabilities of the parties to the contract, and perform other obligations in accordance with the provisions of the law.

2. Enterprises with foreign owned capital which are declared bankrupt shall be dealt with in accordance with the law on business bankruptcy.

 

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