As it was Independence Day this past week, I thought it would be a good time to review the major legal developments in Vietnam of the last year. Particularly as one of our lawyers conveniently prepared a list of the major developments in the law over. The past 12 months have seen a slew of changes to Vietnam’s laws. There have been some major developments that affect investors and businesses as well as employment relationships.
New Law on Investment
To further enhance the regulatory framework for investment and to make Vietnam a more appealing investment destination, the new Law on Investment of 2020 came into effect from 1 January 2021. The new law amended the definition of business investment; and introduced new market approach requirements for foreign investors. It updated the list of conditional business lines and relaxed investment conditions for startups and SMEs. It slightly changed the foreign ownership ratio for determining when an enterprise is a foreign investor and clarified the M&A approval requirements. It provided guidance on investment policy approval and selection of investors for state-sponsored projects. It also provided new investment supports and incentives, amendments to project termination procedures, and hinted that nominee arrangements may be challenged moving forward.
Enterprise: New Law on Enterprises and its guidance
Vietnam’s new Law on Enterprises of 2020 and its primary implementing guidance (Decree No. 01/2021/ND-CP on enterprise registration) came into effect on 1 January 2021. The new law provided new conditions for corporate seals and cleared up a lot of the dross of administrative licensing procedures. It clarified the operating status of enterprises and the power of legal representatives while clarifying the capital transfer transaction payment flow. Time limits for capital contribution were adjusted and more protection for minority shareholders was provided. There were some major changes to the corporate governance of JSCs and more difficulties placed in the way of making private placements of corporate bonds by non-public companies.
Securities: New Decree elaborating the 2019 Securities Law
Decree No.155/2020/ND-CP elaborating the Law on Securities 2019, which went into force on 1 January 2021 provides amendments and supplementations to create a stricter legislative framework with significant influence on Vietnam’s securities market. The decree allows for the offering of shares at a price lower than par value for the first time and other provisions governing public offerings. It also clarified conditions for listing of securities and investment conditions for foreign investors and foreign-invested organizations on Vietnam’s stock market. It also provided for the registration of encumbrances over registered securities.
Labour: New Labour Code
Vietnam’s new Labour Code and its implementing guidance (Decree No. 145/2020/ND-CP) came into effect on 1 January 2021 with numerous significant modifications. It expanded the scope of coverage of the Labour Code and provided more flexibility in the renewal and termination of labour contracts. It recognized the validity of electronic labour contracts and stipulated the term of a work permit. It set out labour union and internal labour rules conditions. It added sexual harassment as grounds for the dismissal of employees and increased the cap on overtime hours while increasing the retirement ages for both men and women.
Cybersecurity / Social Network: The Code of Conducts on Social Networks
On June 17, 2021, Vietnam’s Ministry of Information and Communication issued the Code of Conduct on Social Networks with the goal of (i) facilitating a healthy development for social networks in Vietnam; (ii) conforming with international standards, customs, and conventions in which Vietnam has participated; and (iii) building an ethical standard as to conducts and behaviors on social networks and to educate awareness and create positive habits in behaviors of users on social networks. The Code of Conducts on Social Networks stated that it is prohibited to post information using offensive and dignity-offended languages and to conduct illegal advertising activities. It also encouraged state agencies to respond to opinions on cyberspace.
Advertising: New Decree on Penalties for Administrative Violations in Culture and Advertising
Decree No. 38/2021/ND-CP on Penalties for Administrative Violations in Culture and Advertising (“Decree 38”) took effect on June 1, 2021, and generally increased the fines applicable to advertising. The covered subjects expressly include foreign organizations and individuals that commit administrative violations in the fields of culture and advertising in Vietnam. General penalties are set out for violations of advertising regulations and the fines imposed on organizations are twice the fines imposed on individuals. An organization can face a maximum fine of VND 200 million for committing a violation pertaining to advertising.
E-Commerce: New Circular on electronic tax payment transactions
Vietnam’s Ministry of Finance recently issued Circular 19/2021/TT-BTC on electronic tax payment for Vietnamese citizens, with the aim of enhancing support for taxpayers and easing the tax payment process so that users will experience a convenient tax payment process. This proves that the taxation system in Vietnam still holds strong opportunities for improvement, as the government seeks ways to enhance e-government operations and digitalization.
Covid-19 Related Issues
After successfully controlling the virus for most of the pandemic in 2020, Vietnam is now facing a rapid spread of infections, which has resulted in movement restrictions around the country and lockdowns in the southern region. Since the inception of the pandemic, however, Vietnam has been implementing several measures to try to control and prevent the spread of the infection. Vietnam applied strict measures to control the spread of infection at all points of entry (land crossing points, seaports and airports). Vietnam authorities issued nearly a dozen directives and resolutions that focused on measures for prevention and control of Covid-19 that included requirements for travel and movement within the country, curfews, sanitation requirements, and social distancing.
Vietnam implemented several economic measures to assist businesses and individuals throughout the pandemic including:
Tax relief measures include extended due dates for taxpayers to pay value-added tax (VAT), individual (personal) income tax, and amounts owed for land rental if the taxpayers are considered “vulnerable” in light of the coronavirus (COVID-19) pandemic. In particular, businesses with total revenue in 2020 not exceeding VND200 billion (around USD8.5m) are entitled to a 30% reduction of Corporate Income Tax payable in 2020. Further guidelines for the determination of income subject to tax and expenses exemption were also issued.
The Prime Minister requested the Vietnam Social Insurance to assume the primary responsibility and coordinate with the concerned agencies in guiding the suspension of payment of social insurance for those who are affected by the Covid-19 pandemic until the end of June or December 2020 without interest charges for late payment. Vietnam’s government also issued certain policies to support employees and employers in difficulty due to the Covid-19 pandemic.
Legal Assistant Nguyen Dam Phuong Anh contributed to the research for this article.