Recently, the Ministry of Planning and Investment issued the Draft Decree on the Government’s incentives for businesses suffering from the consequence of the corona virus pandemic. It is aimed that by the end of 2021, at least 01 million businesses will have access to favorable credit policies, reduction or termination of payment of tax, land fees as well as electricity, water, telecommunication charges. The Draft Decree is pending the Prime Minister’s approval.

Under the Draft Decree, there are four key groups of tasks for government agencies.

Group 1: Implement flexible and effective measures to prevent and control the COVID-19 pandemic, creating conditions for enterprises to stabilize and maintain production and business activities.

Group 2: Ensure stable production, smooth and efficient circulation of goods, overcome supply chain disruptions

_ Apply fast-track customs clearance for aid or donation from abroad for the healthcare sector to deal with the pandemic
_ Allow enterprises to submit scanned copies certified by digital signatures for documents that must be submitted as originals in the form of paper/notarized/certified original to resolve bottlenecks of customs clearance of goods

Group 3: Support to cut costs, remove difficulties in cash flow for businesses

_ Propose policies suspending or reducing the social insurance premiums in 2021 for businesses until June 2022.
_ Develop a plan to support air transport enterprises, and report to the Prime Minister in September 2021.
– Requesting shipping companies to publicly and transparently list shipping rates to eliminate unreasonable increase in freight rates that lead to cost burden for enterprises
_ Reduce of electricity prices for goods warehouses of logistics and processing enterprises in the agriculture, forestry, fishery and a number of commodity industries with export turnover of over USD 1 billion USD. Continue to reduce electricity prices for tourist accommodation establishments.
– Expeditiously implement the issued policies on relaxation and reduction of taxes, fees, charges and land rents; implement preferential tax policies for imported goods to finance COVID-19 prevention and control after being approved by the Government.
– Extend the deadline for paying excise tax on automobiles manufactured or assembled in Vietnam. Continue to reduce registration fees for domestically manufactured or assembled cars for an additional period of time in line with the COVID-19 pandemic.
_ Research to allow travel businesses to temporarily withdraw deposits for domestic and international travel and tourism services; reduce deposit withdrawal settlement time from 60 days to 30 days; continue to extend the reduction of the license fee for travel service business and issue tourist guide cards until the end of 2021.
_ Continue to administer monetary policy to control inflation, contributing to stabilizing the macro-economy; encourage credit institutions to continue reducing lending interest rates for existing loans and new loans to support production and business.
_ Supplement policies on debt rescheduling, exemption and reduction of interest and fees, keeping the same debt group for customers affected by the Covid-19 epidemic
_ Research and consider the exemption of trade union fees for members of businesses affected by the COVID-19 pandemic in 2021 and 2022

Group 4: Regarding labor issues, experts

_ Propose policies to flexibly apply and relax regulations and conditions on the grant and extension of work permits for foreign experts working in Vietnam
_ Adjust regulations on tax finalization and bad debt and for borrowing capital to pay wages to employees when restoring production and business.

This is the second Draft Decree issued by the Ministry of Planning and Investment upon collection and investigation of opinions from Deputy Prime Minister Vu Duc Dam, Deputy Prime Minister Le Van Thanh and opinions of 15 ministries. As such, it has reflected the current situations as well as takes into consideration the cities’ and provinces’ proposals. The Vietnam Government has continuously proved that it accompanies the business community to immediately implementing measures to remove difficulties and bottlenecks in production and business with the motto “soonest – most effective” in order to minimize damage and negative impacts on the business sector.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.


1. Official No. 5111/VPCP-KTTH issued by the Government Office in response to Official Letter No. 5400/BTC-CST of the Ministry of Finance in relation to tax preferences applicable to solar roof projects of 50 kW or less.
Issuance date: 31 May 2018
Effective date: 31 June 2018
The Government in-principle approves the request from the Ministry of Finance on tax advantages applicable to solar roof projects of 50 kW or less. The Government also assigned the Ministry of Finance to issue relevant legal documents to implement this policy. Currently, request of the Ministry of Finance and draft future regulations on this topic have not yet been published.

2. Legal news: Solar power master plan – rumor on delay
The Ministry of Industry and Trade (“MOIT”) must report the list of approved solar power plants to the Prime Minister before 15 July 2018. The MOIT must also promptly finalize the national solar power development master plan for the Prime Minister’s consideration.
Currently, the number of solar power projects submitted by investors to the MOIT is significant. According to Vietnamnews, the MOIT has approved more than 70 solar power projects, with a total capacity of over 3,000MW, to come into operation before June 2019. The capacity is much larger than the combined capacity of projects by 2020 (i.e., 850 MW for solar power projects) as approved by the Prime Minister in the current power master plan VII.

Unconfirmed rumor: the MOIT (and other authorities) would likely not review and approve any application for addition of new solar power projects to the power development master plans / solar power development master plans from now until 30 June 2019. In addition, the MOIT would issue an official letter to confirm this temporary suspension.

3. Decree No. 63/2018/ND-CP issued by the Government on Investment in Form of Public-Private Partnerships (“PPP”) (“Decree 63”) replacing the old PPP Decree 15/2015/ND-CP (“Decree 15”)
Issuance date: 4 May 2018
Effective date: 19 June 2018
Decree 15, when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP laws and regulations in Vietnam move closer towards bankable projects. However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects.
We provide below key notes on Decree 63:

Capital contribution responsibility
The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s equity capital in total project investment capital is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.
There is no capital contribution requirement from the Government side.

Project approval authority
Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects
Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

Conversion of existing public projects
Decree 63 contains procedures on converting existing public projects to PPP projects aside from other revised provisions. Those who are engaged in infrastructure projects in Vietnam may want to review how to implement such conversion in practice.

4. Decree No. 82/2018/ND-CP issued by the Government on the management of industrial zones and economic zones (“Decree 82”)
Issuance date: 22 May 2018
Effective date: 10 July 2018
Decree 82 regulates the planning, establishment, operation, policies and state management of industrial zones (IZ) and economic zones (EZ). It governs state management agencies, organizations and individuals related to investment, production and business activities in industrial zones and economic zones.
IZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with difficult socio-economic conditions under the investment law.
EZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with special difficult socio-economic conditions under the investment law.

Capital for investment on infrastructure of IZs
Investment projects on infrastructure development in IZs in areas with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions shall be supported with capital from the central budget for the infrastructure investment.
Provincial People’s Committees shall balance local budgets to support investors in developing technical infrastructure systems inside and outside the IZs.

Capital for investment on technical infrastructure and social-economic infrastructure of EZ
EZ’s technical infrastructures, social infrastructure facilities and important environmental protection and treatment works shall be allocated capital from development investment sources of local budgets and support capital sources.
Large-scale infrastructure investment projects which play a key role in the development of EZs, may mobilize capital from bonds issuance. The technical and social infrastructure facilities, service works and public facilities of the economic zone may be financed by official development assistance (ODA) capital, preferential credit capital and supports other techniques.
Investment projects on construction and business of infrastructure in functional zones in EZ may mobilize capital by allowing investors to lease a part or whole of the land area in EZ for their investment or sub-lease business activities.
Please do not hesitate to contact Dr. Oliver Massmann and Tran Minh Thanh under if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director and Tran Minh Thanh is the Vietnamese lawyer of Duane Morris Vietnam LLC.


The Government has implemented principles and measures in order to create favorable economic environment for enterprises through the issuance of Resolution 35/2016/NQ-CP dated 16 May 2016. These principles include, among others:

  • The State shall ensure the stability, consistency and predictability of relevant policies.
  • Regulations on business shall be clear, transparent and achievable, and the State shall issue reasonable route maps for removal of unreasonable sub-licenses, fees and charges.
  • Competent authorities shall be in charge of examining regulations on tax, tax administration and customs and proposing adjustments to simplify process and save time and business costs.

Continue reading “Lawyer in Vietnam Dr. Oliver Massmann UNNECESSARY TAX AND CUSTOMS RELATED BURDENS ON INVESTORS”



The recently formed Government has manifested its ambition to support reforms especially related to business. Short after the oath of inauguration, it organized a conference with Vietnamese enterprises leading to the issuance of Resolution 35/2016/NQ-CP dated 16 May 2016. The main focus was to improve the investment environment. Nevertheless, some difficulties remain and review of tax policies is required from some specific perspectives.

Granting tax incentives

The Government can grant preferential incentives to foreign enterprises through investment licensing or certificate, the most secure way for enterprises to obtain their incentives despite tax law amendments. However, some local tax departments do not agree with the Government’s policy on incentives and oblige enterprises to apply the current regulations regardless of enterprises’ incentives. This reluctance is a breach in the Government’s protection over investment and investors and must be prevented.

Official Letter 12404/BTC-TCT and Circular 96/2015/TT-BTC, both issued by the Ministry of Finance (MOF), grant Corporate Income Tax (CIT) incentives for enterprises established before 01st January 2014 and not yet operational. Some local tax departments have refused to recognize such incentives and asked enterprises to amend their charter while making their business starts in 2014 in order to be entitled to CIT incentives. This request is acting towards the MOF’s willingness to boost investment and should be dropped out.

According to tax offices, any project planning the increase of enterprises capacity or fixed assets is necessarily considered an investment if increase of capacity was equivalent to increase of capital. Tax authorities then rescind CIT incentives because they believe that investment certificates are no longer updated due to the increase. Yet, initial investment certificates do not mention capacity and should remain updated as long as increases solely concern enterprise capacity and not capital. A regulation should precise that project expansion may only be investment when there are adjustments on capital investment.

Decree 218/2013/ND-CP issued by the Government, extends preferential tax rate application to 15 years for investment projects under VND6 million (~ US$260,000). To ensure a fairer treatment towards businesses, different levels could be established such as 3 years of preferential tax rate application for projects between VND 10 to 20 billion (~ US$450,000 to US$900,000).

According to the draft Decree No. 12, bonuses and commissions granted based on sale volume are deductible expenses for enterprises. Nevertheless, agents being individuals or organizations must pay taxes on these sum of money as such expenses are related to business activities. It would be more convenient for agents to have their commissions and sale bonuses exempted of VAT invoices.

On the other hand, benefits granted to employees should be extended in part to their family: welfare or recreational expenditures, visa application fee for employees’ families, etc. Through these benefits, a longer relationship between the company and the employee is ensured.  Expenses for employees’ families are deductible for companies if stated in labor contract or in companies’ Labor policy. Decree 218/2013/ND-CP should then be amended.

Resolving tax payment issues

Tax-related regulations are often amended and interpreted differently from one year to another. As tax inspections often take place a long time after the corresponding fiscal year, it seems impossible for companies to know what to comply with. Many enterprises have to pay penalties and high interests because of changing regulations between the time of tax payment and the time of tax inspection. Besides, many businesses are chased for unpaid taxes due to errors from the tax office, even though the taxes were duly paid. In the tax office, the members of the staff are not dedicated enough to reconcile tax obligations and payments.

An annual tax inspection or a change in the method of calculating penalties and late payment interests should be considered. In addition, the nomination of a task force exclusively for reconciling tax obligations and payments would be a good improvement.

Understatement of payable tax or overstatement of tax refund is liable to a fine of 20% of the difference between the tax payable and declared or paid tax amount.  Households or individuals stated in Article 107 of the Law on Tax Administration are exempted from the fine. Enterprises are sometimes in overpaid position and are still charged with a fine when the inspection occurs regardless of the intention to make a false declaration or not. The implementation of clearer regulations would avoid confusion and wrongful declaration leading to fines in such cases.

Late tax payment is also subject to penalty . Yet, several contradictory documents have been issued and it became complicated to determine on what basis to calculate the late payment interest. Indeed, Circular 26/2015/TT-BTC issued by the Ministry of Finance states a rate of 0.05% per day accordingly to the deficit of the tax payable until the tax is fully paid, for taxes declared before January 1st 2015 and found insufficient after the same date. Circular 130 contends that the late payment interest is regulated for each period. The two documents provide inconsistent guidelines, thus putting enterprises in a very delicate situation.

Article 14 of Circular 78/2014/TT-BTC states that transfer of Limited Liability Company requires filling a form equivalent to real estate transfer, regardless of the percentage real estate represents in the company assets.  Moreover, since indirect capital transfer is considered taxable income in Vietnam and in the country of origin, a double taxation in both countries applies. The system should be rethought and the application of deferred tax assets (DTA) should be considered.

Explaining VAT calculation and refund

Circular 130/2016/TT-BTC (Circular 130) provides a tax refund for short-term investment (under 12 months) with special provisions for businesses not executable within a year such as ship construction. Value Added Tax (VAT) can then be refunded for a few years only until the ship is completed and exported abroad, regardless of the total investment. This specific case should be extended to other similar industries.

Circular 130 is referring to declaration period for tax refund and elaborates the whole system around this notion without giving a clear definition and measurement. According to Circular 130, VAT is not refundable for domestic sale activities but is refundable up to 10% of the revenue generated by exported goods and services. However, the distinction is thin for enterprises doing both activities.

Besides, VAT refund for trading of imported and exported goods is not clearly explained in Article 1 of Circular 130., notably for determining the activities eligible for VAT refund. Circular 119/2014/TT-BTC adds that input VAT deduction requires non-cash payment except for gifts and donations, but excludes samples and test items.

In addition, some imported goods and services are subject to 5% VAT notably in health care industry according to Article 10.11 of Circular 219/2013/TT-BTC guiding the implementation of the Law on VAT. Article 10 of draft Decree guiding Law 106/2016/QH13 prevents businesses with 5% VAT to be entitled to VAT refund. The input costs related to such businesses being subject to 10% VAT and the input VAT not refundable are significant amount for enterprises to maintain their activities.

The services exported and “consumed outside Vietnam” have a VAT rate of 0%, whereas a VAT rate of 10% applies when such services are consumed in Vietnam. Tax authorities often focus on the place the service is performed more than on the place it is used. The notion of export services should be reviewed without allowing differing interpretation so that one definition – based on the location of the consumer – and one rule prevail.

Under the Vietnamese Law, warranty is a service the supplier provides at the expense of the buyer but not attached to goods or services delivery. Circular 103/2014/TT-BTC issued by Ministry of Finance made clear that warranty attached to goods delivered at Vietnam’s borders were not submitted to withholding tax. For the contracts signed prior to Circular 103, the situation is not clear and the Ministry of Finance should establish clear provisions. Furthermore, guidelines on provisions for foreign suppliers’ responsibility would help ensure the efficiency of free warranties for the buyer.

Circular 39/2014/TT-BTC sets out the criteria of issuing invoices as a condition to determine the finished date of service provision without explaining the term “finished”. It may depend on type, frequency or period (per month, per hour) of service.  More details on the definition of finished service and the calculation of the payment time should be provided.

Outlook on the EVFTA

The EVFTA signed on December 2 2015, will offer great investment opportunities for Vietnam. With elimination of almost all tariff barriers (85% right after the EVFTA’s entry into force, 99% a few years after), the automotive industry as well as trades in sectors such as textile and footwear will be boosted.

The Government is already supporting foreign investment by implementing a favorable policy and strict respect of a stable economy and a controlled inflation. We can expect that the EU will influence the resolution of tax issues and will impose fixed and determined tax rules to apply in Vietnam.

Most important issues

–       Local tax departments should be clearly guided about enterprises’ incentives and the notion of project expansion.

–       The taxation system with declarations and incentives in several documents, is too complex for enterprises to comply with. The tax refund calculation method must be clearly stated to help taxpayers apply regulations properly.

–       Granting VAT refund for business establishments exporting goods and services and not for businesses with output VAT at 5% may be regarded as discrimination in term of taxes among businesses.

If you have any question on the above, please do not hesitate to contact Mr. Oliver Massmann under . Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!





Lawyer in Vietnam Oliver Massmann Impact of WTO Accession – An analysis

Question: How would you generally describe the impact of the Vietnamese WTO accession on the country?


Generally speaking, the WTO accession has created more opportunities and advantages than disadvantages to the Vietnamese economy.

However, without appropriate macroeconomic policies and necessary reforms, these opportunities sometimes did become challenges to Vietnam.

Accordingly, appropriate policy measures following the accession, especially in training and education, migrations, regional and social protection policies were of great importance.

– Macroeconomic impacts:

+ When Vietnam joined the WTO, the world was facing the Great Recession. After the accession, impacts from the global market have become greater due to close connections with other markets, creating more risks to the Vietnamese economy. However, the increase in economic growth is also considerable due to great amount of investment.

+ The import of the heavy industry in Vietnam accelerated after the accession.

+ Vietnam switched from exporting primary commodities to exporting goods produced with high technologies.

+ Since the accession, Vietnam has diverted from agriculture-driven economy to focus more on developing industrial sectors. Areas requiring high technologies have become very attractive.

– Impacts on agriculture:

+ Although the share of agriculture in GDP in Vietnam is decreasing, this field remains crucial to the Vietnamese economy. Agriculture is facing several issues after the accession including quality and competitiveness.

– Impacts on the society:

+ The WTO accession has created several working opportunities for unemployed people.

+ It has also lessen the gap between the rich and the poor and eradicated several gender inequlities in Vientnam.

+ The number of juvenile laborers has largely decreased.

Question: How would you describe the impact of the accession on politics and the economy of Vietnam?


  1. a) Impact on the Economy:

+ Positive impacts on economic growth:

  • Trade liberalization was promoted following the accesion.
  • Market access was also improved for the country’s exports.
  • After Vietnam joined the WTO, foreign capital flows strongly poured into the economy and improved the economic growth of Vietnam.
  • Import clearly has a greater growth due to increase in investment as well as higher average income, allowing access to foreign goods.
  • Approximately 5.7 million jobs were created prior to the accession (2000-2006).
  • The annual growth rate of the economy of Vietnam gradually increased from 2001 until 2005 and remained stable, reaching over 8% until 2007.
  • Limiting poverty. For instance, in the Red River Delta area, the figure for poverty decreased from 62.7% in 1993 to 8.8% in 2006.

+ Negative impacts on economic growth: inequalities among the citizens

  1. b) Impact on the Politics:

– Market opening and international economic integration has put Vietnam’s economy right at the door of opportunities and challenges.

– Vietnamese law has become more transparent and uniform.

– There has been a reduction in administrative procedure, creating flexibility in the market.

– WTO accession has laid a good foundation for Vietnam’s deeper integration into the world’s economy.

– The process of economic integration, particularly since Vietnam joined the WTO, however, revealed the immanent weaknesses of the Vietnamese economy.

– The current situation requires an effective import-export strategy to improve efficiency of resource allocation, improve competitiveness of the economy and macroeconomic stability.

– In this context, it is important to focus on macroeconomic stability, growth paradigm shift towards quality and efficiency as outlined in the Strategy of Social – Economic Development in the period from 2011 to 2020.

Question: In which domains was this impact particularly strong?

– One of the crucial terms of the WTO agreement is trade liberalization.

– After the WTO accession, Vietnam has made a commitment to open markets for services sector. Thus, Vietnam are obliged to open the market (allowing foreign investors to participate in the provision of services in Vietnam or to organizations and individuals in Vietnam) at least at the levels of the commitment. This is one of the main reasons leading to the rise in investment in this sector. Particularly high investment growth in the property business was derived from the transfer of capital from investors from risky markets to the emerging markets with higher returns.

– In the first few years of joining the WTO, the sector has the strongest investment growth in the economy was the property and business consulting services (an increase of 263.0% in 2007 and 15, 0% in 2008); market sectors open to foreign investment, such as finance and credit (up 87.4% in 2007 and 5.8% in 2008); transport, storage and communication (29.5% in 2007 and 5.8% in 2008).

– Growths of this sector are mainly due to the contribution of foreign investments and economic sectors outside the state.

Question: How important would you say is compliance to international trade law – represented through the WTO – in policy making in Vietnam?


– WTO is a community which allows easier trading terms among countries with fewer barriers and this was reinforced by international trade law set forward by the WTO.

Therefore, being in compliance with the international trade law is one of the crucial requirements in joining the WTO as it promotes the integration of the Vietnamese economy into the international economy and it also creates similar opportunities for Vietnam in order to further develop its economy.

Question: Would you say that organizations such as the American Chamber of Commerce or the European Chamber of Commerce in Vietnam gained more leverage in representing their interests through the legal WTO commitments?


Part 2: Questions about a concrete policy case in Vietnam

Case description:

In February 2014, the Vietnamese Ministry of Finance set up and amendment draft to the Law on Special Consumption to impose a 10% tax on sugar-sweetened, non-alcoholic carbonated beverages. This caused resistance by different parties, such as the Ministry of Trade and in particular, the American Chamber of Commerce, representing foreign producers of soft drinks. One of the main arguments of the opponents to the tax was that Vietnam could violate its commitment to the principle of “national treatment” because 88% of the products that would be affected by the tax are foreign branded. In the monthly resolution of the government in July 2014 (Document Number: No 56//NQ-CP, point 8), the government declared to not include the proposed tax within the Law on Special consumption.

Letter of the American Chamber of Commerce to the Vietnamese Prime Minister:


Are you familiar with this case? Did you hear about it when it happened?

– Yes.

How would you generally describe this case? Is rather ordinary or more special?

  • The main reason that the Ministry of Finance proposed such amendment was its concern about the health impacts of sugar-sweetened, non-alcoholic carbonated beverages, such as causing diabetes, obesity, stomachache, gout or even cancer. Concern about health leading to the authority’s decision to impose higher special consumption tax rate is quite ordinary. Many other countries in the region such as Thailand or Cambodia also impose higher tax rate for certain types of beverages not good for public health. In Vietnam, goods such as beer, cigars or alcoholic beverages are also subject to very high special consumption tax rate.

Would you say that the claim of a violation of the principle of “national treatment” is justified?

  • I believe you are referring to Article III:2 of the GATT 1994. Generally speaking, this Article prohibits members from treating imported products less favourably than like domestic products once the imported product has entered the domestic market.
  • As you can see, the objective of this article is imported products vs. domestic products. The discrimination in this article is not a discrimination of nationality of investors. For your information, in the Vietnam’s market, most of sugar-sweetened, non-alcoholic carbonated beverages are produced or imported by foreign invested companies in Vietnam. All locally produced and imported goods are subject to this type of tax. However, I agree with the AmCham position paper that despite this equal application, the overall effect of the measure benefits local producers at the expense of foreign producers. Thus, a violation of the NT principle could be established.

Would you say that compliance to WTO law was one factor that caused the tax proposal to fail? If so, how important was that factor compared to others?

  • WTO has a dispute resolution regime for any members violating its commitments. If there is any dispute arising and the disputing parties have to go to the Dispute Settlement Body, it will not only harm trade relations but also political relations between the parties. Vietnam always wants to comply with the commitments it made for its own sake.

Would you say that the tax – if applied – could have justified a claim through the WTO dispute settlement mechanism?

  • Vietnam could use Article XX GATT 1994 to make its claim, but it will be hard for Vietnam to meet strict requirements under this exception, especially when there is no established scientific-based evidence available at that time.


Please do contact the author Oliver Massmann under if you have any questions. Oliver Massmann is the General Director of Duane Morris Vietnam.




Vietnam Economic Times interviewing lawyer in Vietnam Oliver Massmann on impact of new laws for foreigners in Vietnam

1. In your opinion, which are the important regulations taking effect in the year of 2016 that foreigners may care about and the reasons for those?
Note: The below answer will only address regulations that have direct impact on foreigners in Vietnam. Other regulations which do not regulate foreigners specifically in their governing scope will then be excluded.
Foreigners should be aware of the following legal documents will be in effect from January 2016 as these new laws will significantly impact their rights and obligations:
– Law on Social Insurance:
o Foreign employees with work permit or practicing certificate or practicing license issued by Vietnam’s competent authorities are now subject to compulsory social insurance.
o Accordingly, foreign employees are entitled to insurance on their sickness, maternity, labor accidents, occupational diseases, retirement and death. These entitlements are the same as what local employees currently enjoy.
o From 01 January 2016, male employees (including foreign ones) are entitled to paternity leave if the wife is on maternity.
In particular, male employees are entitled to 5 working day leave if his wife is on normal maternity. In case of operation or giving birth to an under 32-week baby, a 7-working-day leave will apply. In case of giving birth to a twin, paternity leave is 10 working days, with additional 3 working day leave for each further baby. In case the wife gives birth to a twin or more babies by operation, 14-day paternity leave applies. Please note that this paternity leave only applies within 30 days from the birth date of the baby.
o Male employees when adopting a child under 6 month old are also entitled to the same paternity treatment as in the case of female employees adopting such child.
– Decree No. 122/2015/ND-CP: in relation with the social insurance participation, foreigners should also note the following minimum regional salary, which serves as the basis to calculate payment amount of social insurance, health insurance and unemployment insurance; o Region I: 3.500.000 VND/month (increasing by 400.000 VND/month) o Region II: 3.100.000 VND/month (increasing by 350.000 VND/month) o Region III: 2.700.000 VND/month (increasing by 300.000 VND/month) o Region IV: 2.400.000 VND/month (increasing by 250.000 VND/month)
– Law on Civil Status:
o Foreigners permanently reside in Vietnam must register their civil status with the People’s Committee at ward level instead of the provincial level as previously.
o Children of foreigners born in Vietnam are allowed to register their birth with the People’s Committee at ward level where the mother or father lives.
o Foreigners residing in Vietnam wishing to register their marriage in Vietnam can do so at the People’s Committee at ward level where the wife/ husband lives. Interview is no longer required so that the total time to register a marriage is reduced by half to 15 days (compared with 25 days previously) o Foreigners wishing to apply for a Confirmation on marital status can do so at the People’s Committee at ward level where they register their permanent or temporary residence. The Confirmation on marital status is issued within 3 working days from the receipt of a valid dossier and will be valid for 6 months from the issuance date.

2. Starting January 1st, special consumption tax on cigarette, beer, wine will be raised. How will this affect the economy of Vietnam in the long-term? Also, with this, how do we expect the change in Vietnamese’s consumption habit of these commodities?
Answer: For alcohols of 20oC and above, from 01 January 2016 to 31 December 2016, the tax rate is 55%. This rate will be 60% for the whole 2017 year and 65% from 01 January 2018 onwards. The schedule for increase in special consumption tax rate for beer is the same. Meanwhile, this rate for cigarettes is higher (70% from 01 January 2016 to end of 2018 and 75% from 01 January 2019 onwards).
In my opinion, the increase of such tax rate will on its face increase the State budget. It will somehow reduce the number of people smoking and drinking alcohol, thereby protect public health and prevent negative social issues related to social orders, traffic safety and crimes related to smoking and drinking alcohol.
However, given the fact that the increase is not very high (compared with the increase in minimum regional salary), the retail price of these goods will not be much affected, leading to stagnant change in purchasing power of the products. Adults may still continue to consume these goods. Moreover, the tax increase may create more chances for smuggling which is already very complicated and hard to control in Vietnam.
Thus, together with policies of increasing special consumption tax, the Government should adopt regulations on strict control of smuggling, educate young people’s awareness on serious effects resulting from consumption of alcohols and cigarettes.

3. Starting July 1st, individuals, organizations are not permitted to send commercial information to e-addresses (including email, mobile number, personal sites and other similar means) in the cases the recipient does not accept that. How is your view on this regulation?
Answer: The spread of spam emails and text messages with advertising nature has created strong disturbance for internet and network users. While previous regulations such as the Decree and Circular on preventing spam emails and messages or Circular on managing prepaid subscribers seem to have limited impact, this new regulation is another effort of the Government to fight against the more serious and much more complicated forms of advertisment. I really doubt about whether this new regulation could bring significant positive improvement to the current situation, but highly hope that with cooperation from network operators, strong sanctioning measures from the state authorities, the situation will improve gradually.

Please do not hesitate to contact Oliver Massmann under if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Mining in Vietnam – And the Message is:Better Transparency on Fee and Tax Management by Authorities

The economy of Vietnam is heavily dependent on the mining industry. Using modern, high technology in mining was emphasized by Directive No. 2/CT-TTg of January 2012 and Decree No. 15/2015/ND-CP and during a visit by the Prime Minister to Australia. However, the legislation governing the mining sector seem unfriendly to both foreign and local investors, especially concerning the high royalty rates and other taxes and fees, particularly:

Payment for mining rights: Under Decree No. 203/2013/ND-CP, mining companies have to make a payment between 1-5% of the original value of the original ore to get mineral exploitation rights before receiving licenses. This fee is impractical and will deter foreign companies from investing in the mining industry. The reason behind is that in this period, they must spend a lot on exploitation and mining construction without any revenue. Accordingly, they will seek to reduce their investment in mining technologies to pay for such fee. Consequently, advanced and environmentally friendly technology is not used by mining companies for exploitation, resulting in economic inefficiency. In light of the above, the Government should amend the Decree to allow such fee to be paid on an annual basis after the mining companies make revenue.
Environmental protection fee: Circular No. 158/2011/TT-BTC imposes the environmental protection fee on the basis of “the quantity of crude metal mineral ores actually exploited”. The calculation of such fee is only based on the mineral output without taking into account the level of pollution caused by each mine. This regulation is not fair because mining companies using advanced technology to limit impacts on the environment and those which are using cheap technology and destroying the environment must pay the same fee. It will discourage mining companies from investing in modern machinery and technology to protect the environment. The Circular should be amended to reflect the fee calculated in proportion to the levels of pollution caused by mining exploitation.
Royalty tariff on minerals: Under Resolution No. 712/2013/UBTVQH13, the natural resources tax has considerably increased for many types of minerals such as wolfram (18%), titanium (16%), copper (13%), iron (12%), etc. Although the natural resources tax for gold, silver, alumina and bauxite, tin, lead and zinc was not increased but was subject to 10% royalty tariff. Moreover, the Ministry of Finance proposes increasing tax on exploitation of natural resources for almost minerals at 15-50% from 1 January 2016. This has increased the tax burden on the mining companies and it is likely that they will be liquidated. Therefore, the Government should support this industry by postponing the tax increase.
Corporate income tax for mining enterprises: Decree No. 122/ND-CP amending and supplementing a number of articles of the Government’s Decree No. 124/2008/ND-CP detailing and guiding the implementation of a number of articles of the Law on Enterprise Income Tax No. 14/2008/QH12 reduced Corporate Income Tax for all companies to 25% except for mining of precious and rare natural resources which are currently fixed at 50%. Under this Decree, the rate will be reduced to 40%, more than 70% of the mine areas located in difficult social-economic areas. The Decree also confirmed that mineral exploitation activities do not enjoy other incentives of the enterprise income tax.

Although the royalties, fees and taxes of the mining operations in Vietnam are high, but the ways they are collected and spent afterwards are not transparent. The business community is not informed of fee management. The environmental protection fee must be used to recover the environment at the mining areas, however, the mining companies have to pay a fee for this. The Government should publicize information on licensing and financial obligations of the applicants for mining operations and fee management.
Additionally, the Government should not raise taxes at this period because an increase in tax and mining right fee will cause a reduction in investment of the mining companies in the technology. Accordingly, they will use cheap machinery and technology for their mining exploitation activities and this goes contrary to the Prime Minister’s Directive.
In conclusion, in order to encourage more investments in mineral exploitation operations and use of advanced and environmental friendly technology for mining industry, the Government should control the tax collection instead of raising taxes and provide transparency on fee and tax management.


Please do not hesitate to contact Oliver Massmann under if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.



Vietnam Latest on Customs and Tax Compliance – What Has to be Improved to Match WTO Commitments

Over the past year, we have seen significant efforts and progress made by the General Department of Customs in terms of improved regulations, more effective e-customs operations, and increased dialogue and consultation with the business community. From 01 January 2015, the new Customs Law takes effect with its implementing Decrees coming into force on 15 March. The implementing Circulars are also already in force from 01 April with the most notable one, Circular No. 38/2015/TT-BTC. This Circular, which replaces 13 previous customs regulations, is considered the most comprehensive among the new regulations. We are looking forward to more regulations being adopted soon following the new Customs Law, for example, regulations on advance customs rulings, post-clearance inspection which stem from the ASEAN agreements implementing the AFTA, the WTO Trade Facilitation Agreement, or regulations in anticipation of the upcoming Free Trade Agreements. These agreements commonly have major requirements on advance customs ruling, availability of information, separation of customs clearance from final determination of duties and taxes, international cooperation in customs, etc. The Prime Minister has adopted Resolution No. 19 for a period of three years, from 2015 to 2018, to prioritize these changes. During the implementation process, Vietnam has been receiving much technical support from foreign experts of the WTO, WCO and other organizations.
We have also seen progress in reforming Vietnam’s tax procedures over the recent years. Up to 01 January 2015, the total time for tax compliance is reduced to 370 hours per year, which is an impressive decrease compared with 872 hours annually according to the 2013 statistics. Time spent for tax declaration and payment is also reduced to 121.5 hours per year, with possibility of online tax declaration and payment. Although German enterprises highly appreciate these tax reforms, we would expect that the efforts are not only at Government or ministerial levels but also at the local levels where we have to deal with the authorities there directly.
Notwithstanding the above positive developments, Vietnam still has much to do in the upcoming time. We address below certain major issues and suggest solutions accordingly.
1. Application of blended tax
Blended tax is a combination of ad valorem tariff and specific/ fixed duty rate. Since Vietnam has made WTO commitments in reducing import duty, especially for goods of commercial value imported from WTO members, the application of blended tax could be considered as going against WTO commitments on market opening and tax reduction. We suggest that if the Draft Law on Import and Export Tariff has to include provisions on blended tax, it should specify in which cases it is applicable or else it would create confusion for local companies in Vietnam who are only familiar with either ad valorem or specific duty for each of their commercial goods.
2. Application of quota duty
Decree No. 187/2013/ND-CP and Circular No. 111/2012/TT-BTC subject salt, raw tobacco, eggs, and sugar to tariff quota regime. This means if the imported quantity of these goods exceed the quota as prescribed by the Ministry of Industry and Trade or there is no import license as required under the tariff quota regime, import of these products will be imposed an import tariff of 50%-90%. We would suggest these provisions be included in the Law on Export and Import Tariffs rather than Decree No. 197 or Circular No. 11. Moreover, the Law on Export and Import Tariffs should also address applicable import tariffs for minimum and maximum import quota for specific types of goods and the authority to issue documents governing the application of import quota from time to time. This would serve as the basis for the competent authorities to perform their rights and obligations and enterprises to clearly understand government’s import and export policies.
3. Tariff policies for goods imported for production of exports
It is recommended that goods which are imported for production of exports be not subject to tariff upon importation. This tariff exemption works more efficiently compared with tax refund upon goods exportation in terms of cash flows burden for export enterprises and will help improve the competitiveness of domestic enterprises. However, there should be a mechanism to monitor and request for tariff payment if the goods are then used for domestic consumption.
4. Goods imported for implementation of investment projects
According to the new Investment Law, projects being implemented in certain geographical areas and industries will enjoy tax incentives. The implementing Decrees of the Investment Law or the Law on Export and Import Tariffs should provide a detailed list of such areas and industries. The law should also clarify whether imported goods are still exempted from duty if the investment project is entitled with tax incentives under the initial investment license but is no longer qualified for such preferential treatment due to a change in technology.


Please do not hesitate to contact Oliver Massmann under if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.



FIRST EVER Double Taxation Agreement signed between Vietnam and the United States of America

On 07th July 2015, the United States and Vietnam signed an income tax treaty with Vietnam, the first ever between the two countries. The Double Taxation Agreement applies to personal income tax and enterprise income tax in the case of Vietnam.
What is a permanent establishment?
Under the Double Taxation Agreement, a company is considered to have a permanent establishment if its business is wholly or partly carried out through a fixed place.
Permanent establishment does not include the following: (1) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; (2) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; (3) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (4) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information for the enterprise; (5) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; and (6) the maintenance of a fixed place of business solely for any combination of the activities mentioned in subparagraphs (1) through (5), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.
A broker, general commission agent or any other agent of an independent status will not be considered as a permanent establishment of an enterprise of the United States or Vietnam merely because such enterprise carries on business in that other contracting country through these persons. However, where a person other than an agent of an independent status is acting in a contracting state on behalf of an enterprise of the other contracting state and habitually exercises in that contracting state an authority to conclude contracts in the name of the enterprise, that enterprise would be considered to have a permanent establishment in the first-mentioned contracting state.
The fact that a company that is a resident of a contracting state controls or is controlled by a company that is a resident of the other contracting state, or that carries on business in that other contracting state (whether through a permanent establishment or otherwise), does not of itself constitute either company a permanent establishment of the other.
Enterprise income tax
The enterprise is subject to taxation in Vietnam if it derives certain income as defined by the Double Taxation Agreement in Vietnam, however, only to the extent that such profits are attributable to the permanent establishment. Executive and general administrative expenses so incurred, whether in the contracting state in which the permanent establishment is situated or elsewhere, or other deductible expenses, are taken into the determination of the profits of a permanent establishment for tax purposes.
Personal income tax
The Agreement applies to persons who are residents of one or both of the contracting states. The applicability of the Agreement does not depend on the nationality. The term “person” means an individual or corporate body.
Article 14, paragraph 1 stipulates that “Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that state unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing of his activities or his stay in the Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days within any twelve-month period commencing or ending in the taxable year concerned.” The income may be taxed in the other country to the extent that it is attributable to the fixed base.
Income from salaried work derived by a resident of a contracting country should be taxable in that country unless the employment is exercised in the other country (Article 15, paragraph 1). Notwithstanding of this, “remuneration derived by a resident of the Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State, if the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State and the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.” (Article 15, paragraph 2).
Methods for eliminating double taxation
Where a resident of a contracting state generates profits, income, or gains which under the law of the other contracting state and in accordance with the Double Taxation Agreement, the former will allow a credit against its tax on the income, profits or gains an amount equal to the tax paid to the later. It is possible to get the credit for already paid income tax on dividends by the contracting state if a company in one contracting state owns at least ten percent of the voting stock of the company which is a resident of the other contracting state.
Special regulations apply to, among others, entertainers and sportsmen, pensions, social security, annuities, alimony and child support, students and apprentices.
Automatic protection under the Agreement?
Residents of Vietnam and the United States wishing to be protected under the Agreement need to file an application to relevant tax authority. Please do not hesitate to contact us so that we can advise you on how to apply for such protection according to Vietnam laws.
Please do not hesitate to contact Mr. Oliver Massmann under if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.



Question on doing business in Vietnam!

Interview by Vietnam Financial Times
Oliver Massmann

Question 1: What do you think about the reform in tax and customs of Vietnam so far? For the German enterprises in Vietnam, how do these policies affect them?

Over the past year, we have seen significant efforts and progress made by the General Department of Customs in terms of improved regulations, more effective e-customs operations, and increased dialogue and consultation with the business community. From 01st January 2015, the new Customs Law takes effect with its implementing Decrees coming into force later on 15 March. The implementing Circulars are also already in force from 01 April with the most notable one being Circular No. 38/2015/TT-BTC. This Circular, which replaces 13 previous customs regulations, is considered most comprehensive among the new regulations. While there are still more regulations being adopted soon following the new Customs Law, for example, regulations on advance customs rulings, post-clearance inspection, or regulations in anticipation of the upcoming Free Trade Agreements, impacts on German enterprises need to be accessed later.

We have also seen much progress in reforming Vietnam’s tax procedures over recent years. Up to 01 January 2015, the total time for tax compliance is reduced to 370 hours per year, which is an impressive decrease compared with 872 hours annually according to the 2013 statistics. Time for tax declaration and payment is also reduced to 121.5 hours per year, with possibility of online tax declaration and payment. Although German enterprises highly appreciate these tax reforms, we would expect that the efforts are not only at Government or ministerial levels but also at the local levels where we have to deal with the authorities there directly.

Question 2: How do the German enterprises in Vietnam look at the VN’s business environment? In the future, what should VN adjust to attract more German enterprises?

The Government of Vietnam has made certain success in stabilizing the economy to reach a high growth rate projection in 2015 by World Bank (i.e., 6%) and maintain import-export balance over the five years.

Vietnam is also extremely successful in international economic integration, especially by joining the negotiations for the Trans-Pacific Partnership (“TPP”), the European – Vietnam Free Trade Agreement (“EVFTA”), Korea – ASEAN Free Trade Agreement, Japan – ASEAN Economic Partnership Agreement, and establishment of the customs union Russia- Kazakhstan-Belarus, and notably the ASEAN Economic Community by end of this year. Vietnam is expected to be the main beneficiary of the major trade pacts, with additional growth of 13.6% (for the TPP) and 15% growth of GDP (for the EVFTA). With such deep integration into the multilateral and regional economy, Vietnam is expected to be an attractive investment environment for investors and witness a significant growth in the upcoming years.

Moreover, with the adoption of the 2014 Investment Law and Enterprise Law, the investment environment in Vietnam now even becomes more attractive to foreign investors, especially to German investors. Nevertheless, there are still certain outstanding issues that should be further addressed to attract foreign investors in general and German enterprises in particular. These problems include annulment and unenforceability of arbitral awards in Vietnam, certain trade restrictive measures in the field of import and export, burdens created for enterprise in tax administration by state authority, and especially corrosive and widespread corruption in Vietnam. These problems require Government’s stronger efforts and urgent actions to solve, in addition to several current attempts which we really appreciate.

Please do not hesitate to contact Mr. Oliver Massmann under if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.



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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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