----------------------------------------------------------- Document source: [Version: 15 August 1997] http://coombs.anu.edu.au/~vern/luat/luat.html AVSL, GPO Box 161; BELCONNEN, ACT 2616 Australia and Coombs Computing Unit, Australian Nat. Univ. ------------------------------------------------------------ Source: APTIRC-BULLETIN March 1990 DECREE OF THE COUNCIL OF MINISTERS REGULATING IN DETAIL THE IMPLEMENTATION OF THE LAW ON FOREIGN INVESTMENT THE COUNCIL OF MINISTERS Pursuant to the Law regulating the organisation of the Council of Ministers of the Socialist Republic of Vietnam on July 4, 1981; Pursuant to the Law on Foreign Investment in Vietnam on December 29, 1987; On the proposal of the Minister of External Economic Relations, DECREES CHAPTER 1 GENERAL PROVISIONS ARTICLE 1 The present Decree concretises the Law on Foreign Investment in Vietnam (hereinafter referred to briefly as Investment Law) for the purpose of creating favourable conditions for the regular implementation of this Law. ARTICLE 2 The definitions given in Article 2, Chapter 1 of the Investment Law shall apply to the terms used in this Decree. The terms for which no definition is provided in the Investment Law shall be defined in the relevant clauses of this Decree. ARTICLE 3 This Decree regulates, in details, direct investment operations of foreigners in Vietnam in the forms provided for in Chapter II of the Investment Law. Indirect operations, such as capital lending etc., are not within the scope of this Decree. ARTICLE 4 The objects of regulation of the Investment Law are specified hereunder: 1. Vietnamese economic organisations enjoying the juridical person status, including individual enterprises, complex enterprises, unions of enterprises and other State economic entities, joint State-private companies and production co-operatives. Economic administration bodies are excluded from the function of conducting investment co- operation with foreign partners. 2. Vietnamese private persons, including private companies, are allowed to join capital with the above-stated Vietnamese economic organisations to constitute the Vietnamese partner for business co-operation with a foreign partner. 3. Vietnamese residents abroad making direct investments in Vietnam, irrespective of their nationalities, have the same rights and obligations as foreign investors. In case they join capital with one or more Vietnamese economic organisations stated in clause 1 of this Article to constitute the Vietnamese partner of business co-operation with a foreign partner, they shall be entitled to the same rights and liable to the same obligations as Vietnamese private persons. On both these instances they shall enjoy favourable conditions separately provided for. 4. Enterprises with foreign invested capital enjoying the juridical person status. 5. Foreign economic organisations as juridical persons, including national and international economic and financial establishments and foreign private persons making direct investments in Vietnam. ARTICLE 5 The economic organisations enjoying the juridical person status as stated in Article 4 are those which meet the following conditions: 1. They must be legally established organisations; 2. They must have their own assets and are independently responsible for these assets; 3. They must have the right to make independent decision over their own production and business operations; and 4. They must have the capacity to enter into civil relations independently, viz to contract and carry out contracted obligations, and to act as claimant and defendant before a law-court. ARTICLE 6 The State organ for administration of foreign investment of the Government of the Socialist Republic of Vietnam stated in Chapter V of the Investment Law is the State Committee for Co-operation and Investment. The Minister of External Economic Relations shall act as a Government body responsible for receiving and processing investment projects submitted by foreign investors, recommending optional handling approaches and reporting to the State Committee for Co-operation and Investment for examination and decision. ARTICLE 7 1. Foreign organisations and private persons investing in Vietnam in any of the forms provided for in Article 4, Chapter II of the Investment Law shall have to observe the procedure set out in this Decree. 2. A foreigner desiring to invest in Vietnam who is yet to find a suitable partner for co-operation may, for this purpose, get in touch with a central or regional investment service company, or with the Ministry of External Economic Relations; 3. Before negotiating of entering into any co- operation project with a foreign partner, the Vietnamese partner shall have to make a pre- feasibility study and obtain its approval by the relevant administering authority (at central, provincial, city or special zone under central authority level, as the case may be). 4. Official fees for consideration of an application for business co-operation or investment, for issuance of a business licence, an investment licence or a certificate of registration of the charter of an enterprise, for its notification to the authorities concerned and publication on the official gazette shall be paid only once by the applicant, at the time of filing the application. In respect of a business co-operation or joint venture contract, the two partners shall agree on which of them shall bear the fees. ARTICLE 8 Documents to be sent to the State Committee for Co- operation and Investment shall be established in Vietnamese or both in Vietnamese and a widely-used foreign language. Both Vietnamese and foreign language texts shall be equally authentic. CHAPTER II CONTRACTUAL BUSINESS CO-OPERATION ARTICLE 9 1. A business co-operation contract is a document signed by a Vietnamese partner and a foreign partner with a view to jointly conducting one or more production or business operations in Vietnam on the basis of mutual allocation of responsibility and distribution of business results without creating a joint venture enterprise or any other new juridical person. Commercial contracts and other economic contracts in the nature of goods exchange, such as delivery of raw materials in return for finished products, etc., are not within the scope of this Decree. 2. The term of a business co-operation contract shall be agreed upon between the parties, in keeping with the nature of the business and with the length of time required for fulfilment of the contractual objectives. ARTICLE 10 A business co-operation contract must be signed by duly authorised representatives of the contracting parties. ARTICLE 11 When filing an application to the State Committee for Co operation and Investment for approval of a business co-operation contract and for issuance of a business licence, the applicant shall submit the following documents: a. The business co-operation contract agreed upon between the parties; b. A demonstration of the economic-technical base of the contract; c. Necessary information relating to the parties, such as the charter of the company or the legal capacity of the individual as a party of the contract and the financial standing of the contracting parties; d. Any other pertinent documents as may be required by the State Committee for Co-operation and Investment for clarification of any matters in connection with the above information and documents; e. Petition for preferential treatment, if any ARTICLE 12 The State Committee for Co-operation and Investment shall communicate its decision to the partners of the business co-operation within three (3) months from the date of receipt of the application for issuance of a business licence. If the contract is approved, the State Committee for Co-operation and Investment shall grant the business licence to the partners, send copies of the said licence to the central authorities and the people's committee of the province, city or special zone concerned and, thereafter, publish it on the official gazette of the Government of the Socialist Republic of Vietnam. ARTICLE 13 While considering an application for a business licence, the State Committee for Co-operation and Investment shall satisfy itself with the regularity of the business co-operation contract. The contract shall contain, among others, the following main items: a. All relevant data relating to the contracting parties, such as their respective nationalities and addresses, and their duly authorised representatives'. b. A description of the business activities contemplated; c. A descriptive list, quantity and quality of the main equipment and materials required for business operations and their sources of supply; the specification, quantity and quality of the products and their outlets. In the case of service contracts, the ratio between a stipulated freely convertible currency and Vietnamese currency in service charges to be collected must be expressly stated; d. The rights and obligations of the parties and the conditions for assignment of their respective rights and obligations under the contract; e. The clauses dealing with the term, amendments to and termination of the contract; f. The procedure for settlement of disputes between the parties arising from the execution of the contract. ARTICLE 14 A business co-operation contract shall not become effective until it is approved by the State Committee for Co-operation and Investment and a business licence issued to this effect. ARTICLE 15 Any assignment by either party to a third person of his rights and obligations under the contract shall be subject to prior consent of the other party. The assignee who takes over the assignor's rights and obligations under the contract shall send to the State Committee for Co-operation and Investment the documents and information specified in item c, Article 11 of this Decree. An assignment of the rights and obligations of either party under the contract shall not be valid unless it is approved by the State Committee for Co-operation and Investment. ARTICLE 16 When the contracting parties agree to extend the contract term, they shall have to file an application to this effect to the State Committee for Co-operation and Investment for approval, not later than one (1) month prior to the expiry of the contract. The State Committee for Co-operation and Investment shall communicate its decision, in writing, to the applicants within fifteen (15) days from the date of receipt of the application. ARTICLE 17 1. A business co-operation contract may be terminated prior to the date of its expiry if the conditions for its termination stipulated in the contract are met. 2. Failing the fulfilment of the conditions for its termination, the contract shall remain effective despite its expiry unless the contracting parties agree to terminate it. 3. After the contract expires, the relevant clauses concerning the settlement of disputes and claiming right as agreed upon in the contract shall remain in effect within the legal prescription of arbitration of litigation, or within the prescription agreed between the contracting parties if no legal prescription has been instituted yet. ARTICLE 18 The parties of a business co-operation contract shall make an annual report to the State Committee for Co-operation and Investment on the results of execution of the contract during the year, such report to be submitted not later than March 30, the following year. ARTICLE 19 Each party of a business co-operation contract shall: a. Ensure full payment of all the taxes that are due; b. Bear responsibility for its own acts before the law of the Socialist Republic of Vietnam. CHAPTER III JOINT VENTURE ARTICLE 20 In this chapter the following terms are used, with their respective meanings set out below: 1. 'Total invested capital of a joint venture' refers to the sum of all capital items used for carrying out a joint venture project, comprising the fixed and working capital, including credits, necessary for the operation of the joint venture. 2. 'Legal capital' refers to the initial capital of a joint venture stated in its charter, consisting of contributions which the partners commit themselves to make for the operation of the joint venture, excluding any loans provided to the joint venture. 3. 'Registered capital' refers to the legal capital registered to the State Committee for Co-operation and Investment. ARTICLE 21 1. A joint venture is established in Vietnam on the basis of a joint venture contract concluded between a Vietnamese partner and a foreign partner (hereinafter referred to as joint venture partners) for the purpose of conducting production and other business activities in different sectors of the Vietnamese economy. In special cases, a joint venture may be established on the basis of an agreement concluded between the Government of the Socialist Republic of Vietnam and the Government of a foreign country. 2. A joint venture shall operate on the principle of independent economic accounting, in conformity with the joint venture contract, the charter of the joint venture and the Law of the Socialist Republic of Vietnam. ARTICLE 22 A joint venture is formally established upon issuance by the State Committee for Co-operation and Investment of an investment licence and the certificate of registration of its charter. ARTICLE 23 An application for investment must be signed by one or both the joint venture partners and relevant file submitted to the State Committee for Co-operation and Investment for consideration and approval. The application shall be accompanied with the following documents: a. The joint venture contract; b. The feasibility study; c. The charter of the joint venture; d. Other information as may he required by the State Committee for Co-operation and Investment for clarification of specific matters in connection with the above documents; e. Petition for preferential treatment, if any. ARTICLE 24 A joint venture contract shall contain the following main items: a. Relevant data relating to the joint venture partners, such as their nationalities and addresses and their authorised representatives; b. The business name of the joint venture, its proposed address and a description of its business activities; c. The total invested capital, the legal capital, the registered capital, the capital contribution by each partner, the plan of capital contribution, the conditions and procedure of assignment of the invested capital; d. The list, quantity and quality of the main equipment and materials necessary for business operations and their sources of supply; the specification, quantity and quality of products and their outlets. In case of a service contract, the rates of charges in freely convertible currencies and in Vietnamese currency shall be clearly stated; e. The duration of the joint venture and the cases of its termination and dissolution; f The principles of financial management, accounting and auditing including amortisation of fixed assets, the rates of appropriation for required funds and the insurance of assets of the joint venture. g. The number of members and composition of the Board of Management, the number of directors to be appointed by each partner, the authority and responsibilities of the Board of Management, the Board Chairman, the General Director and Deputy General Directors; h. The rate of profit and loss sharing between the joint venture partners; i. Labour relations within the joint venture; j. The training plan in regard to executives, technical and business personnel and workers; k. The procedure for settlement of disputes between the joint venture partners arising from the execution of a joint venture contract and the applicable law in cases of disputes; 1. The language of the joint venture contract; and m. The conditions for giving effect to the joint venture contract. ARTICLE 25 The charter of the joint venture shall contain the following main items: a. Full names and addresses of the joint venture partners and of their representatives; b. The business name of the joint venture and its seat; c. A description of the proposed production and business activities of the joint venture, the objectives and the course of production, business and marketing of products; d. The intended duration of the joint venture; e. The total invested capital, the legal capital and the system of capital contribution to the legal capital of the joint venture; f. The proportion of contribution of each joint venture partner to the legal capital; g. Organisation and composition of the Board of Management, and organisation of the conduct of business of the joint venture; h. The representative of the joint venture before the law-courts and the State authorities; The principles governing financial matters, accounting and auditing; The rate of profit and loss sharing between the joint venture partners; k. The cases and procedure of winding up the joint venture; l. The procedure of amending the charter of the joint venture. ARTICLE 26 1. Within three (3) months from the date of receipt of the application for an investment licence, the State Committee for Co-operation and Investment shall communicate its decision to the joint venture partners. 2. In case the State Committee for Co-operation and Investment requires the joint venture partners to provide additional documents or to amend certain clauses in the contract and/or the charter, a written request to this effect shall be sent to them within one (1) month from the date of receipt of the application. If no written reply is given by the joint venture partners within forty-five (45) days of receipt of such a request, the application for the investment licence shall be considered no longer valid. In the case of an inadequate reply from the joint venture partners, the extra time necessary for obtaining a satisfactory response to the request shall be excluded from the time allowed for consideration and approval of the application as provided for in clause 1 of this Article. 3. If the application is approved, an investment licence and a certificate of registration of the charter of the joint venture shall be issued to the joint venture partners. Copies of these two documents shall be sent to the central authorities and the people's committee of the province, city or special zone concerned. The investment licence and the certificate of registration of the charter of the joint venture shall then be published on the official gazette of the Government of the Socialist Republic of Vietnam. ARTICLE 27 From the date of issuance of the investment licence and the certificate of registration of the charter of the joint venture, the joint venture contract shall become effective and the joint venture shall acquire the status of a juridical person. ARTICLE 28 Any amendment to the clauses of the joint venture contract and the charter of the joint venture as may be agreed upon by the joint venture partners shall not take effect until it is approved by the State Committee for Co-operation and Investment. ARTICLE 29 The joint venture partners shall make their respective contributions to the legal capital of the joint venture in accordance with the provisions of Article 7 and Article 8 of the Investment Law. The assessment of the capital contribution of each partner shall be subject to agreement between the two partners, based on prices prevailing in the international market at the time the contribution is made. The State Committee for Co-operation and Investment shall have the authority to review such assessment and request the partners to re-assess their capital contributions, in keeping with the provisions of this Article. ARTICLE 30 Contributions to be made by the joint venture partners to the legal capital may be effected once in full at the time of establishment of the joint venture or in instalments over a reasonable period agreed upon between the two partners. The manner of capital contribution to the legal capital shall be expressly stated in the charter of the joint venture. ARTICLE 31 In the course of operation, a joint venture is not allowed to decrease its legal capital. Any increase in the legal capital shall be subject to agreement between the joint venture partners and to registration to the State Committee for Co-operation and Investment. ARTICLE 32 Either of the partners has the right to assign his capital contribution in a joint venture and, in so doing, shall give priority to the other partner. Failing an agreement between the partners on the assignment conditions, the intending assignor shall have the right to assign his invested capital to a third party, provided that the conditions for this assignment shall not be more favourable than those which have been proposed to the other partner. Any such assignment shall not be effective until it is unanimously agreed upon, in writing, by the Board of Management of the joint venture and Approved by the State Committee for Co-operation and Investment. ARTICLE 33 A joint venture shall be established as a limited liability company, the liability of each partner to the other partner, to the joint venture and to third parties being limited to the legal capital. ARTICLE 34 The highest body of a joint venture is its Board of Management. The Board of Management has the authority to make decisions on all important matters facing the joint venture. ARTICLE 35 1. The number of members of the Board of Management, the Board membership distribution, the appointment of members and the nomination of the Board Chairman, the General Director and Deputy General Directors shall be determined in accordance with Article 12 of the Investment Law. The Chairman of the Board of Management may concurrently be the General Director of the joint venture. 2. The term of office of members of the Board of Management shall be agreed upon between the joint venture partners but shall not exceed five (5) years. ARTICLE 36 The periods for convening meetings of the Board of Management shall be determined by the partners in the charter of the joint venture, provided, however, that the Board shall meet at least once a year. Meetings of the Board of Management shall be convened by the Board Chairman. ARTICLE 37 Any meeting of the Board of Management shall require the attendance of two-thirds (2/3) of its members. Members of the Board of Management may delegate powers, in writing, to their representatives to attend the Board meetings and to vote on their behalf. ARTICLE 38 A decision on any of the matters set out below shall be made on the principle of unanimity: 1. Production and business plan of the joint venture, its budget and borrowings; 2. Amendments and additions to the charter of the joint venture, and substantial changes in the organisation and operation of the venture, including any change in its registered objective and operational course, any increase in the legal capital, any capital assignment, extension of its duration or temporary discontinuance of its activity, merger and dissolution; 3. Nomination, replacement and dismissal of the Chairman of the Board of Management, the General Director, any of the Deputy General Directors and other key personnel of the joint venture. Decisions made by the Board of Management on other matters shall be valid only if they are approved by a majority of two-thirds (2/3) of the Board members present. ARTICLE 39 The General Director and Deputy General Directors shall be responsible for the management and conduct of day-to-day business of the joint venture. In case the joint venture has more than one Deputy General Director, the Board of Management shall appoint one of them as the First Deputy General Director. If the General Director is a foreigner, the First Deputy General Director shall be a Vietnamese citizen. The Board of Management shall determine the respective responsibilities and authority of the General Director and the First Deputy General Director. The General Director and First Deputy General Director shall be responsible to the Board of Management for the operation of the joint venture. ARTICLE 40 Transfer of technology, as referred to in this Chapter, means the introduction into a joint venture by either of the partners of a required technology in the form of capital contribution, or the sale of technology to the joint venture by a third party. ARTICLE 41 1. The technology transferred to a joint venture shall be one necessary and suitable for the joint venture to produce significant socio-economic effects or to increase the competitive strength of its products in the international market. 2. The transferred technology has to meet one of the following requirements: a. It must be capable of bringing a considerable improvement in the appearance and quality of products and an increase in output; b. It must be capable of creating new products which Vietnam urgently needs or of producing import substitutes; c. Its application will result in a considerable saving in terms of raw materials and energy. ARTICLE 42 The Government of the Socialist Republic of Vietnam shall protect the industrial property of the transferrer of the technology. The rights and obligations of the parties stated in the contract of transfer of technology shall conform to the provisions prevailing in Vietnam in this regard and to international practice. Any contract for transfer of technology to a joint venture in the form of capital contribution shall be attached to the application file for an investment licence. ARTICLE 43 The duration of a joint venture shall be agreed upon between the joint venture partners in the joint venture contract. In principle, the duration of a joint venture shall not exceed twenty (20) years. However, in respect of projects for exploitation of natural resources or those requiring large investments and a long period for construction or for recovery of the invested capital, the joint venture partners are allowed to agree on a longer duration which shall not exceed fifty (50) years. ARTICLE 44 The duration of a joint venture shall commence from the date of issuance of the investment licence and the certificate of registration of the charter of the joint venture. ARTICLE 45 In case the joint venture partners agree to extend the duration of a joint venture as stated in the investment licence, they shall file an application to this effect with the State Committee for Co-operation and Investment for consideration and approval, at least six (6) months prior to the expiry of the duration of the joint venture. Within thirty (30) days from the date of receipt of the application, the State Committee for Co-operation and Investment shall notify the joint venture partners of its decision. If the application is approved, the joint venture partners may continue their activity without having to proceed with re-registration. ARTICLE 46 A joint venture may terminate its operation and be dissolved prior to the expiry of its duration stated in the joint venture contract in the following cases: 1. Any force majeure case provided for in the contract, resulting in the impossibility of its execution. 2. Failure by one or both the partners to discharge his or their respective obligations under the contract, thus depriving the joint venture from the conditions to continue its operation. 3. The losses of the joint venture are such that it is no longer in a position to pursue its activities. 4. A serious pollution of the environment caused by the activities of the joint venture, without any solution to control it in time. 5. Assignment by either of the joint venture partners of the whole of his capital in the venture to the other partner; 6. Other cases for dissolution provided for in the joint venture contract. If the joint venture is dissolved by default of one of its partners, the defaulting partner shall indemnify the other partner for all resulting losses. ARTICLE 47 The dissolution of a joint venture prior to the expiry of its duration shall be decided upon by the Board of Management and reported to the State Committee for Co-operation and Investment for approval. The State Committee for Co-operation and Investment has the authority to dissolve a joint venture prior to the expiry of its duration if the activities of the joint venture deviate from its objectives and the scope of its operation as stated in its charter and in the investment licence. ARTICLE 48 Not later than six (6) months before the duration of a joint venture expires, or following a decision to dissolve the joint venture prior to its expiry, as the case may be, the Board of Management shall form a Liquidation Commission consisting of at least three (3) members and determine on the work to be performed by the Commission. Members of the Liquidation Commission may be chosen from among the personnel of the joint venture or lay experts. All expenses incurred for the liquidation process shall be borne by the joint venture and their payment shall have priority over other liabilities of the joint venture. ARTICLE 49 The Liquidation Commission shall notify the State Committee for Co-operation and Investment of the date on which it is actually set up and starts its work. From that date, the Liquidation Commission shall represent the joint venture in all acts in connection with the legal proceedings before the law court and/or administrative bodies. The working period of the Liquidation Commission shall not exceed six (6) months. When necessary, this period may be extended but shall not then exceed one (1) year. ARTICLE 50 The assets of the joint venture shall be assessed according to their actual state at the time of liquidation. If the value of these assets exceeds the legal capital, the balance shall be considered the profit of the joint venture and included in the taxable income. ARTICLE 51 At the conclusion of its work, the Liquidation Commission shall make a liquidation report to the Board of Management and submit it to the State Committee for Co-operation and Investment not later than two (2) months thereafter. At the expiration of the one-year period provided for in Article 49, the State Committee for Co-operation and Investment shall, however, terminate the work of the Liquidation Commission even if disputes still exist between the joint venture partners over the liquidation process. Such disputes shall be settled in accordance with the provisions of Article 53 of this Decree. The State Committee for Co-operation and Investment shall then issue a decision cancelling the investment licence and communicate its decision to the authorities concerned. Thereupon, the Liquidation Commission shall return the original of the investment licence to the State Committee for Co-operation and Investment. ARTICLE 52 After the winding up of the joint venture, its books of accounts and other relevant documents shall be left in care of the State Commission for Co-operation and Investment. ARTICLE 53 Any dispute between the joint venture partners arising from the execution of a joint venture contract shall first be settled through negotiation and amicable arrangement between the partners. Failing an agreement between them, the disputing partners may refer the dispute to one of the following bodies: - The Foreign Trade Arbitration Committee at the Chamber of Commerce and Industry of the Socialist Republic of Vietnam or an arbitration body in a third country or, still to an international arbitration body; or - An arbitration committee to be set up as may be agreed upon between the partners. The joint venture partners shall state the agreed form of arbitration and arbitration body in the joint venture contract. CHAPTER IV ENTERPRISE WITH 100 PER CENT FOREIGN CAPITAL ARTICLE 54 An enterprise with 100 per cent foreign capital is one wholly owned by a foreign organisation or a private person, established and fully managed by the same organisation or the private person. ARTICLE 55 An enterprise with 100 per cent foreign capital shall be established as a limited liability company and a Vietnamese juridical person subject to the law of the Socialist Republic of Vietnam. ARTICLE 56 The duration of an enterprise with 100 per cent foreign capital shall be the same as provided for a joint venture in Article 43 of this Decree. ARTICLE 57 When filing an application for issuance of an investment licence, the applicant shall submit to the State Committee for Co-operation and Investment the following documents: a. The feasibility study which serves as the basis for the applicant's decision to make the proposed investment, explicitly stating the economic and financial desirability of the project; b. The charter of the organisation or the legal capacity of the private person deciding to make the investment, along with necessary information relating to the investor, primarily his financial standing; c. Guarantees to the effect that the investor is qualified to conduct long-term business in Vietnam; d. The charter of the enterprise intended to be established in Vietnam; e. Petition for preferential treatment, if any; f. Other documents as may be required by the State Committee for Co-operation and Investment. ARTICLE 58 The charter of an enterprise with 100 per cent foreign capital shall contain the following main items: 1. The business name of the enterprise and its seat; 2. A description of production and business activities of the enterprise; 3. The total amount of capital investment and the legal capital of the enterprise; 4. The intended duration of the enterprise; 5. The organisation of day-to-day management and conduct of operations; the representative of the enterprise before Vietnamese Law-courts and State authorities; 6. The principles governing financial matters, accounting and auditing; 7. The cases and procedure for dissolution of the enterprise. ARTICLE 59 The examination of a file for investment and issuance of an investment licence to an enterprise with 100 per cent foreign capital shall follow the same procedure as provided for a joint venture in Chapter III of this Decree. ARTICLE 60 Any amendment to the charter of an enterprise with 100 per cent foreign capital shall be effective only after it is approved by the State Committee for Co-operation and Investment. ARTICLE 61 The non-resident owner of the enterprise shall appoint a duly authorised representative in Vietnam and shall observe the provisions set forth in the investment licence. ARTICLE 62 The State Committee for Co-operation and Investment shall have the authority to issue a decision for temporary discontinuance of the operation of an enterprise with 100 per cent foreign capital or for its dissolution prior to the expiry of the duration if the operations of the enterprise deviate from its objectives and scope of activities as stated in the charter of the enterprise and in the investment licence, or cause a serious pollution of the environment without any solution to control it in time. CHAPTER V BUSINESS ORGANISATION ARTICLE 63 The parties to a business co-operation contract and an enterprise with foreign invested capital are fully entitled to decide on their own production and business programmes and plans. The Vietnamese State authorities shall not assign plan targets to such parties. ARTICLE 64 In the feasibility study accompanying the application for an investment licence or a business licence, the parties of a business co-operation contract and an enterprise with foreign invested capital shall explicitly state: - In respect of capital construction: the rate of construction progress and the sources of supply of equipment, machinery, building materials, water and electric power, fuel, etc.; - In respect of production plan: the sources of supply of raw and other materials and fuel for production purpose; - In respect of product-marketing: export and marketing of products in the domestic market, if any. ARTICLE 65 For equipment, machinery, transport vehicles or raw and other materials to be imported into Vietnam by the foreign partner as part of his capital contribution, only one import application shall be required. Imports of equipment, machinery, spare parts, transport vehicles, raw and other materials, fuel, among others, to meet the needs of production under a business co-operation contract already approved by the State Committee for Co-operation and Investment shall be subject to either a single overall import quota or an annual import quota as may be proposed by the parties of the contract. When necessary, additions or adjustments may be approved for an import quota in consideration of a fair proposal made by the enterprise to this effect. Any import licence shall be issued in accordance with the export-import control regulations currently in force. Under comparable commercial terms and conditions, priority shall be given to the procurement of needed products in Vietnam as substitution for imports, in which case the procurement shall be contracted with interested Vietnamese economic organisations in conformity with Vietnamese law, with payments made either in foreign currencies or in Vietnamese currency, depending on each particular product. ARTICLE 66 The parties of a business co-operation contract and an enterprise with foreign invested capital shall have the right to conduct, on their own, exports of products in accordance with their annual export plans or assign such exports to agents of the foreign partner or to Vietnamese foreign trade companies, as may be agreed upon between the parties concerned. ARTICLE 67 In respect of the products allowed to be sold in the Vietnamese market, the parties of a business co-operation contract and an enterprise with foreign invested capital may, likewise, conduct the sales on their own or assign them to interested Vietnamese trading organisations under economic contracts and in conformity with the laws currently in force in Vietnam. CHAPTER VI LABOUR RELATIONS IN ENTERPRISES WITH FOREIGN INVESTED CAPITAL ARTICLE 68 Labour relations in an enterprise with foreign invested capital including recruitment, working hours, holidays, labour protection, labour discipline, wages and salaries, bonuses, social security benefits and settlement of labour disputes, shall be regulated by labour contracts. ARTICLE 69 An enterprise with foreign invested capital may decide to enter into labour contracts under one of the following types: a. To conduct free selection of workers and thereupon sign separate contracts with individual workers introduced by a Vietnamese labour administration office; b. To sign a collective labour contract with the trade union set up at the enterprise or with a labour supply company or an investment service company; c. To enter into a collective labour contract as stated in item (b) above and thereupon sign separate contracts with individual workers. Whatever type of contract the enterprise may conclude with its workers it shall conform to the labour regulations currently applicable to enterprises with foreign invested capital in Vietnam. ARTICLE 70 The wages of workers shall be agreed between the two parties, corresponding to their respective skills, work fields, labour output and work quality. Such wages shall ensure a fair living standard, taking into account the wage levels obtained in other countries in the area in similar working conditions. ARTICLE 71 Depending on the terms agreed upon in the contract, an enterprise with foreign invested capital shall pay the workers' wages and salaries either directly to them or through the organisation which signs the collective labour contract with the enterprise. ARTICLE 72 Labour in an enterprise with foreign invested capital has the right to form its own trade union in order to ensure labour relations in the enterprise and to represent the workers in all outstanding issues between them and the enterprise. The enterprise is liable to create favourable conditions for its trade union to discharge its regular function. CHAPTER VII FINANCIAL MATTERS ARTICLE 73 1. An enterprise with foreign invested capital and the foreign partner of a contractual business co-operation venture shall be liable to pay a corporate income tax on taxable profits under one of the following categories: a. Priority category: 15 per cent to 20 percent of actual profits; and b. Standard category: 21 per cent to 25 per cent of actual profits. 2. The priority category covers investment projects in the areas specified in Article 3 of the Investment Law, which meets two of the criteria prescribed hereunder: a. The legal capital of the enterprise must be no less than ten (10) million US dollars; b. The technology transferred to the enterprise meets at least two of the requirements set forth in clause 2, Article 41 of this Decree; c. The enterprise exports at least eighty (80) per cent of its products or earns at least eighty (80) per cent of the costs of its available services in foreign currencies; d. The rate of profits of the enterprise is on the low side as compared with the average rate obtained in other projects in the same branch; e. The investment project is located in a region where natural, economic and social conditions are unfavourable; f. The investment is made within the first five (5) years of implementation of the Investment Law. 3. The standard category includes all investment projects other than those specified in the above priority category. 4. Pursuant to the criteria set forth in clauses 2 and 3 of this Article the State Committee for Co-operation and Investment shall decide on a specific tax rate for each particular project within the tax scales prescribed in clause 1 of this Article. 5. In respect of projects for exploitation of oil and gas and a number of other rare and precious natural resources, the State Committee for Co- operation and Investment shall, on a case-by-case basis, decide on any corporate income tax rate in excess of twenty-five (25) per cent of actual profits in accordance with international practice and in consideration of the proposal of the foreign investor. ARTICLE 74 In the case of a joint venture under the priority category, the State Committee for Co-operation and Investment may, in keeping with the criteria prescribed in clause 2, Article 73 of this Decree, grant a tax exemption for a maximum period of two (2) years from the time the joint venture starts making profit and a fifty (50) percent reduction of corporate income tax for another maximum period of two (2) succeeding years. ARTICLE 75 1. In exceptional cases where encouragement for investment is needed, the State Committee for Co-operation and Investment may grant to a joint venture the following special financial incentives: a. A corporate income tax varying form ten (10) percent to fourteen (14) per cent of actual profits; b. Exemption of corporate income tax for a period not exceeding four (4) years and a fifty (50) per cent tax reduction for another maximum period of four (4) succeeding years, following the first profit-making year. 2. To be entitled to the special financial incentives, a joint venture, in addition to its inclusion in the priority category prescribed in Article 73 of this Decree, must have other qualifications, including its operation in exceptionally difficult conditions, in remote ares with a very low level of development, or the important significance of its activity, despite a low profit margin, to the Vietnamese national economy. ARTICLE 76 A foreign economic organisation or a private person shall be liable to pay a withholding tax on remittance of profits abroad at the following rates: 1. For a foreign economic organisation or a private person with a capital contribution exceeding fifty (50) per cent of the legal capital or with an invested capital in excess of ten (10) million US dollars: five (5) per cent of the amount of any profit remittance. 2. For organisations and private persons other than those specified in paragraph l of this Article ten (10) per cent of the amount of any profit remittance. ARTICLE 77 Any foreign economic organisation and private person reinvesting any part of their share of the profits for a period of three (3) years upwards shall be entitled to a refund by the tax authorities of the amount of income tax already paid on that part of the profits thus reinvested. ARTICLE 78 The tax-year applicable to an enterprise with foreign invested capital and to contractual business co-operation partners shall commence on the first of January and end on the thirty-first of December. The enterprise and the business co-operation partners may, however, apply to the Ministry of Finance of the Socialist Republic of Vietnam for adoption of their respective twelve-month financial years for accounting and tax-payment purpose. ARTICLE 79 The taxable corporate income of an enterprise with foreign invested capital shall be its net income in any tax-year after deduction of all costs and expenditures incurred during that year. Such income shall include the taxable income of both its principal and dependent establishments, if any. Revenues and expenditures of an enterprise with foreign invested capital shall consist of the following items: a. Revenues from sales of products or services supplied to customers and all other incomes accrued from any business activity of the enterprise; and b. Expenditures covering: - Costs of raw and other materials and energy for the manufacture of principal products and by-products or for operation of services; - Wages, salaries and fringe benefits paid to the foreign and Vietnamese personnel and workers of the enterprise; - Amortisation of the fixed assets used in the production and business operations. The rate and amount of such amortisation shall be subject to agreement between the two partners and to approval by the Ministry of Finance of the Socialist Republic of Vietnam; - Acquisition or use under licence of any technical documents, patents, industrial licences, and costs of technical services; - Overhead expenses; - Taxes and tax-like payments; - Costs and expenses directly connected with the marketing of products and operation of services; - Any allocation to the social insurance fund; - Costs of insurance of the assets of the enterprise; - Any losses brought forward from previous years; - Other expenditures which together shall not exceed five (5) per cent of the total amount of expenditures. ARTICLE 80 In respect of a business co-operation contract, the method of assessment of profits shall be determined by the State Committee for Co-operation and Investment in consideration of the type of co-operation and the proposal of the partners concerned. In the case of production sharing, the income tax and other benefits of Vietnam derived from the right of use of land, water surface and sea surface, and any royalty, etc., shall be added to the share of the Vietnamese partner of the production. ARTICLE 81 An enterprise with foreign invested capital and the contractual business co-operation partners shall be entitled to an exemption of import duties in the following cases: a. The imported equipment, machinery, spare parts, production and business facilities, including transport vehicles, and other materials are a contribution to the capital of the enterprise or of the business co-operation venture; b. The imported equipment, machinery, spare parts and other materials are bought by the fund of the enterprise and form part of its total invested capital; and c. The raw materials, spare parts, accessories and other materials are imported for production of articles destined for export. All the imported products specified in items (a), (b) and (c) above, if ceded and sold in Vietnam, shall be subject to payment of import duties and to sales tax under the law provisions currently in force in Vietnam. ARTICLE 82 An enterprise with foreign invested capital or foreign partners of a contractual business co-operation operating Vietnamese currency-earning services or selling products in the Vietnamese market shall be liable to pay business tax or sales tax under Vietnamese laws. ARTICLE 83 Foreign and Vietnamese persons employed in an enterprise with foreign invested capital or working for the execution of a business co-operation contract shall pay personal income tax in accordance with the provisions of the Vietnamese law. ARTICLE 84 Lands, forests, seas and other natural resources within the territorial boundaries of Vietnam are under the sovereignty of the Socialist Republic of Vietnam. In case the royalty and rents for land, water surface and sea surface are not included in the capital contribution of the Vietnamese partners as provided for in Article 7 of the Investment Law, the enterprise with foreign invested capital and the contractual business co-operation partners shall be liable to pay such royalty and rents. Any payable royalty shall be determined following international practice and on the principle of mutual benefit. Rents for land, water surface or sea surface to be charged on the account of the business co-operation partners shall be determined in relation to the particular conditions existing in each geographical area. CHAPTER VIII FOREIGN EXCHANGE CONTROL ARTICLE 85 All capital funds and revenues of an enterprise with foreign invested capital in foreign currencies and in Vietnamese currency must be deposited in its accounts maintained at the Bank for Foreign Trade of Vietnam or at branches of joint Vietnamese-foreign banks or of foreign banks in Vietnam as may be authorised by the State Bank of Vietnam. All revenues and expenditures of the enterprise shall be effected through these accounts. If necessary, foreign partners in a contractual business co-operation may open the same accounts as indicated in the above paragraph. ARTICLE 86 An enterprise with foreign invested capital shall have the right to convert foreign currency deposits in its accounts into Vietnamese currency, if and when necessary. ARTICLE 87 On the principle of ensuring, on its own, a balance between its foreign currency revenues and expenditures, except for particular cases, such as production of import substitutes or construction of infrastructure projects, foreign currency revenues from exports and other sources of the enterprise shall at least be sufficient to meet all its foreign currency expenditures, including profit remittances abroad and payments of wages, salaries and fringe benefits to the Vietnamese personnel and workers employed by the enterprise although such payments may be made in Vietnamese currency. ARTICLE 88 1. Foreign economic organisations and persons investing in Vietnam shall have the right to remit abroad: a. The share of the profits they have accrued from business operations; b. Any approved payments due to them for provision of services and transfer of technology; c. Principals and interests on any loans made by them to the enterprise; d. Any other sums of money and assets in their legal ownership; Any of the above remittances may be effected only after applicable taxes have been fully paid. 2. Foreign economic organisations and persons shall have the right to transfer abroad their capital contributions and any capital reinvested in the enterprise after payments of all debts, if any, in the cases of termination and dissolution of the enterprise. 3. Transfer of capital abroad under this Article shall ordinarily be made in three (3) equal yearly instalments. In exceptional cases, however, the State Bank of Vietnam may allow such transfer to be made within a shorter period. 4. If for any reason the amount of the capital proposed to be transferred abroad under clause 2 above is higher than the original amount of the capital contribution and reinvestment made by a foreign economic organisation or a person, the prior approval of the State Committee for Co-operation and Investment shall be required for remittance of any such higher amount. ARTICLE 89 Foreigners working in Vietnam under a business co-operation contract or employed by an enterprise with foreign invested capital shall have the right to remit abroad, in foreign currencies, their wages, salaries and other legal incomes after deduction of their income taxes and living expenses in Vietnam. ARTICLE 90 The conversion of foreign currencies into Vietnamese currency and vice versa for purposes of investment, remittances, transfer of capital abroad and business operations of the enterprise shall be effected at the official exchange rate announced by the State Bank of Vietnam and in accordance with the foreign exchange control regulations in force in Vietnam. ARTICLE 91 All transactions in foreign currencies and Vietnamese currency shall be conducted only through authorised banks indicated in Article 85 of this Decree. CHAPTER IX ACCOUNTS AND AUDIT ARTICLE 92 An enterprise with foreign invested capital shall keep proper books of accounts in respect of the following items: 1. Assets, materials and funds used in the production and business operations of the enterprise and their fluctuations; 2. Revenues, and expenditures; 3. The process and results of operation of the enterprise, including purchases, production, marketing, profits and losses and distribution of the results of production and business operations; The foreign partner of a contractual business co-operation venture shall keep accounting records corresponding to the type of business co-operation involved. In principle, the books of accounts shall be kept in the Vietnamese language. However, subject to agreement between the joint venture partners and to approval of the State Committee for Co-operation and Investment, they may be kept in a foreign language. ARTICLE 93 The enterprise shall ensure that its accounting records are kept in an accurate, adequate, up-to-date and systematic manner. ARTICLE 94 1. The standard measure units for book-keeping purposes shall be the official measures currently in force in Vietnam. All other measure units stated in accounting documents must, therefore, be converted into Vietnamese official measures. 2. In principle, the monetary unit for use in book-keeping shall be the Vietnamese Dong. However, a foreign currency may also be used for this purpose, provided that it is agreed upon between the two partners and approved by the State Committee for Co-operation and Investment. ARTICLE 95 The financial year of an enterprise with foreign invested capital shall correspond to the tax year of the enterprise as prescribed in Article 78 of this Decree. ARTICLE 96 An enterprise with foreign invested capital shall keep its books of accounts according to generally accepted international accounting principles and standards recognised by the Ministry of Finance of Vietnam. The accounting system shall include: a. The system of accounts; b. The form of accounting and the manner in which accounting records are kept; c. The set of standard forms of accounting statements. ARTICLE 97 1. The accounting statements shall include: a. The balance sheet; b. The profit and loss account; c. The report of the Board of Management. 2. The balance sheet shall reflect the position, sources and employment of the capital of the enterprise at the end of the financial year. The profit and loss account shall provide a fair view of rational expenditures and revenues during the financial year and the profits and losses of the enterprise. The report of the Board of Management shall bear out the true state of affairs of the enterprise, the results of its operation, the distribution and employment of the results of production and business operations. 3. The accounting statements of an enterprise with foreign invested capital shall be submitted to the State Committee for Co-operation and Investment and the income tax authorities under the Ministry of Finance within three (3) months of the close of its financial year. ARTICLE 98 1. An audit of the accounts of an enterprise with foreign invested capital shall be conducted once a year, at a determined time. 2. The Ministry of Finance of Vietnam shall appoint a specialised body to audit the books of accounts, the accounting statements and comment on the accounting system of the enterprise. ARTICLE 99 The audit body shall make a report on the results of its work which shall contain the following statements: 1. The conduct of the accounting work of the enterprise. 2. The accuracy of the figures and accounting statements. 3. The implementation of the accounting system and regulations. 4. The application of the audit system by the enterprise. 5. Any petitions. ARTICLE 100 The audit report shall be completed and sent to the responsible authorities prior to the deadline for submission of the accounting statements referred to in Article 97 of this Decree. CHAPTER X CUSTOMS, IMMIGRATION, RESIDENCE AND COMMUNICATIONS ARTICLE 101 An enterprise with foreign invested capital and the contractual business co-operation partners shall be liable to pay import duties on commercial goods indicated in Article 81 and Article 82 of this Decree. ARTICLE 102 Personal effects imported into Vietnam by the foreign partner of an enterprise with foreign invested capital or the foreign partner in a contractual business co-operation or a foreign person working for the enterprise shall be given a preferential treatment in accordance with the regulations currently in force. ARTICLE 103 The Ministry of External Economic Relations shall issue licences for exports and imports of commercial goods. The General Department of Customs shall issue licences for imports and exports of the personal effects of foreign persons indicated in Article 102 of this Decree. ARTICLE 104 The General Department of Customs shall create favourable conditions to facilitate customs clearance for all enterprises with foreign invested capital and foreign persons employed by them and the foreign partners in contractual business co-operation. ARTICLE 105 Foreigners entering Vietnam to conduct investigation and prepare for an eventual investment may be granted multi-entry visas for a period not exceeding three (3) months. Such visas may be extended for successive periods of three (3) months each. ARTICLE 106 Foreigners participating in the execution of an investment project, including their personal helps, shall be granted multi-entry visas for a period which ordinarily shall not exceed one (1) year but may be extended for successive one-year periods corresponding to the term of the contract, with due consideration of the length of time required for the process of dissolution of the enterprise or termination of the contract. ARTICLE 107 1. As a rule, entry visas shall be issued by diplomatic missions or consular offices of the Socialist Republic of Vietnam in foreign countries, not later than five (5) days after fulfilment of formalities for visa application by the interested persons. 2. Where a foreign applicant is a citizen of a country with which the Government of the Socialist Republic of Vietnam has entered into an agreement providing for exemption of certain exit and entry visas, the said agreement shall apply. 3. In urgent cases requiring an immediate solution to an unforeseen emergency or technical support to the investment project underway, a foreigner, whether or not he is a member of the personnel of an enterprise with foreign invested capital, may be issued an entry visa at the port of entry, provided that a request to this effect is made by the authorised representative of the enterprise concerned or by the Vietnamese economic organisation as a partner in the contractual business co-operation. Such a request shall be submitted to the State Committee for Co-operation and Investment twenty-four (24) hours before the proposed entry. ARTICLE 108 Any foreigner referred to in Article 105 and Article 106 of this Decree shall enjoy free circulation in the areas deemed necessary for production and business operations, which have previously been registered to the State Committee for Co operation and Investment, the forbidden areas being excluded. The foreigner may also circulate to other areas if so authorised by the competent authorities concerned. Any tourist activity shall, otherwise, be guided by the General Department of Tourism. ARTICLE 109 The provisions and privileges concerning immigration, residence and circulation stipulated in the above Articles shall equally apply to the foreigner's wife or husband, children and accompanying members of the family, including household helps referred to in Article 106, during his or her residence in Vietnam. ARTICLE 110 After fulfilment of required formalities with the relevant Post administration authorities, a foreigner working in an enterprise with foreign invested capital shall be entitled to the following treatment: - Priority in the use of available Vietnamese postal and telecommunication facilities for both internal and outward communications; - Setting up his own communication system for the conduct of production and business operations within the enterprise. CHAPTER XI FINAL PROVISIONS ARTICLE 111 The present Decree shall become effective as from the date of its signing. ARTICLE 112 The Minister of External Economic Relations, the Minister of Foreign Affairs, the Minister of Finance, the Minister of Labour, War Wounded and Social Welfare, the Minister of the Interior and the General Director of the General Department of Customs shall be responsible, each within his function and authority, for issuing circulars to guide the implementation of this Decree, not later than 45 days from the date on which it takes effect. ARTICLE 113 The Ministers, Presidents of State Committees, Heads of Departments under the Council of Ministers and Chairmen of People's Committees of provinces, cities and special zones under central authority shall be responsible for the implementation of this Decree. For the Council of Ministers P P President Vice-President VO VAN KIET (signed) ----------------------------------------------------------------------- End of File