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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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