DOING BUSINESS IN VIETNAM A LEGAL GUIDE 2012 Page 1 INDEX INDEX..................................................................................................................................1 ABOUT LEADCO LEGAL COUNSEL ................................................................................4 PART I: MERGER AND ACQUISITION..............................................................................5 I. OVERVIEW...............................................................................................................5 I.1. M&A in this Legal Guide...................................................................................5 I.2. Market trends ...................................................................................................5 I.3. M&A strategy and government intent...............................................................6 II. LEGAL FRAME-WORK FOR M&A IN VIETNAM....................................................8 II.1. Legal frame-work .............................................................................................8 II.2. Significant notes...............................................................................................9 III. TYPICAL TYPES OF TRANSACTIONS...............................................................9 III.1. Transfer of shares............................................................................................9 III.2. Merger............................................................................................................10 III.3. Consolidation .................................................................................................11 III.4. Division...........................................................................................................11 III.5. Separation......................................................................................................12 III.6. Assignment of a project..................................................................................13 IV. GOVERNMENT APPROVAL AND CONSENT ..................................................13 V. WTO IMPACTS...................................................................................................14 V.1. Access to the local market .............................................................................14 V.2. Additional requirements to be concerned.......................................................15 VI. TAXATION ..........................................................................................................15 VI.1. Transactional Tax...........................................................................................15 VI.2. Double Taxation Issue ...................................................................................15 VI.3. Significant Notes ............................................................................................16 VII. EMPLOYMENT ...................................................................................................16 VII.1. Transfer of Employment.................................................................................16 VII.2. Unwanted Employees ....................................................................................17 VII.3. Special Considerations for Expatriates ..........................................................17 VIII. DUE DILIGENCE ................................................................................................18 VIII.1. Letter of Intent................................................................................................18 VIII.2. Checklist of documentation............................................................................18 VIII.3. Due diligence process....................................................................................19 IX. PAYMENT OF THE TRANSACTION .................................................................19 IX.1. Required evidences for payment of the transaction.......................................19 IX.2. Escrow account..............................................................................................20 IX.3. Conditions precedent for the transaction .......................................................20 IX.4. Completion of the transaction ........................................................................20 PART II: FOREIGN DIRECT INVESTMENT ................................................................22 I. INVESTMENT HOW-TO.........................................................................................22 Page 2 I.1. Legal framework.............................................................................................22 I.2. Direct investment forms .................................................................................24 I.3. Procedures.....................................................................................................29 II. BUSINESS MANAGEMENT ..................................................................................35 II.1. Company........................................................................................................35 II.2. BCC................................................................................................................43 II.3. Rep. Office or Branch.....................................................................................43 III. LABOUR ISSUES...............................................................................................43 III.1. Labor Contracts..............................................................................................43 III.2. Internal Working Rules...................................................................................44 III.3. Wages, Overtime Payments, and Statutory Minimums..................................44 III.4. Work Permits..................................................................................................46 III.5. Trade Unions..................................................................................................46 III.6. Labor Disputes...............................................................................................46 III.7. Labor Strikes..................................................................................................47 IV. LAND ISSUES ....................................................................................................47 IV.1. Land Contribution by a local party to a Joint Venture (“JVC”)........................47 IV.2. Land Lease ....................................................................................................48 IV.3. Lease of Commercial Property.......................................................................49 IV.4. Mortgage over Land Use Rights ....................................................................50 V. TAXES AND OTHER DUTIES............................................................................50 V.1. Value Added Tax (“VAT”)...............................................................................50 V.2. Corporate Income Tax (“CIT”)........................................................................52 V.3. Foreign Contractor Withholding Tax (“FCWT”) ..............................................54 V.4. Capital Assignment Profits Tax......................................................................55 V.5. Special Sales Tax (“SST”)..............................................................................55 V.6. Natural Resources Tax ..................................................................................55 V.7. Environment Protection Tax...........................................................................55 V.8. Import And Export Duties...............................................................................55 V.9. Personal Income Tax (“PIT”)..........................................................................57 V.10. Social, Health And Unemployment Insurance................................................58 V.11. Other Taxes ...................................................................................................58 VI. FOREIGN EXCHANGE REGULATIONS ...........................................................58 VI.1. Current transactions.......................................................................................59 VI.2. Capital transactions........................................................................................59 VI.3. Opening a foreign currency account in Vietnam ............................................61 VI.4. Using of foreign currencies ............................................................................63 DISCLAIMER ....................................................................................................................64 Page 3 ABOUT LEADCO LEGAL COUNSEL Leadco is recognized nationally and internationally for its busi- ness law practice. The firm is a Vietnamese leader in each of its core practice areas and has developed in-depth knowledge of a Address: Pacific Place, Suite 404, 83B Ly Thuong Kiet, Hoan wide range of industries. Kiem District, Hanoi, Vietnam Contact: Phan Nguyen Toan, Managing Partner Located in Hanoi with affiliated office in Ho Chi Minh City via its T +844.3942.5633 ext.104 partnership with Indochine Counsel, Leadco ranks among the F +844.3942.5632 leading practices in Vietnam. Leadco is also prominent interna- M +849.0341.1098 E [email protected] tionally, with extensive experience in APEC and European W www.leadcolawyers.com countries.