Your Snapshot of Key Legal Developments in Asia
Issue 4 - Oct/Nov/Dec 2014
COVER STORY
CAMBODIA
- Increase in Minimum Wage of Workers and Employees for Year 2015
- The Royal Government of Cambodia's Reforms in Tax Registration
- New Insurance Law Promulgated
- New Inter-ministerial Commission to Govern and Evaluate Economic Land Concession
- Experts to Identify Risk, Money-Laundering and Financing of Terrorism
CHINA
INDONESIA
- New Insurance Act Avoids Imposing Statutory Limits on Foreign Ownership
- Changes to Rules on Mineral and Coal Mining
- New Plantation Act Leaves Foreign Ownership Restrictions up to Government
- Constitutional Court Decision on Assets Disappoints State Enterprises
- Long Awaited Regulation on Geothermal Power Prices a Step in the Right Direction
LAO PDR
- Laos to Enact Competition Law for AEC
- Lao Hydropower Company to Issue Debentures in Thailand's Capital Market
MALAYSIA
- Barriers on Foreign Participation in Distributive Trade in Malaysia
- MYCC Guidelines on Financial Penalties
- MYCC Guidelines on Leniency Regime
- Outcome of MAS, Airasia appeal case
MYANMAR
SINGAPORE
- Human Biomedical Research Bill
- Prevention of Human Trafficking Act
- Establishment of the Singapore International Commercial Court
THAILAND
VIETNAM
- Circular No. 19/2014/TT-NHNN on Foreign Direct Investment
- Circular No. 25/2014/TT-NHNN on Registration of Offshore Loans
- Circular No. 103/2014/TT-BTC on Tax Liabilities of Foreign Entities
- Decree No. 96/2014/ND-CP on Sanctions of Administrative Violations in the Monetary and Banking Area
- Circular No. 10/2014/TT- BVHTTDL Guiding the Naming of Enterprises
CAMBODIA
Increase in Minimum Wage of Workers and Employees for Year 2015
In accordance with Prakas No. 283 dated 12 November 2014, issued by the Ministry of Labor and Vocational Training, the Royal Government of Cambodia ("RGC") has decided to increase the minimum wage of the workers and employees of certain sectors of industry, such as textile, garment and footwear for the year 2015 to USD 128 per month and USD 123 per month for the workers or employees under a probationary period.Under this same Prakas, workers and employees who are being paid based on their productivity shall also be subject to the minimum wage even in the event that their productivity is lower than the minimum sum.
The Royal Government of Cambodia's Reforms in Tax Registration
New requirements and procedures for tax registration have been set out under Prakas No. 1139 MEF.P dated 9 October 2014, issued by the Ministry of Economy and Finance ("MEF"). This new reform has entered into force and has been implemented by the General Department of Taxation ("GDT") and other tax branches nationwide.Under this new procedure, in the event of a new company registration, it is strictly required that the Chairman or Director who is the applicant of the tax registration and whose name will be registered on the Certificate of Patent Tax shall scan his or her fingerprint and take his or her photo at the National Tax School in person. Registered companies are also required by the GDT to update their tax information in accordance with the notification dispatched by the tax administration.
Furthermore, under this same Prakas, the GDT has also introduced a new method of tax registration, through which an applicant may register online via the GDT's website.
New Insurance Law Promulgated
His Majesty has promulgated the new Law on Insurance under the Royal Kram No. NS/RK/0814/021 dated 4 August 2014. This new Law on Insurance enters into force on the sixth month after its promulgation, and will then abrogate the previous law.The new law defines clearer procedures in applying for both life and general insurance licenses, conditions of formality and validity of an insurance agreement, types of insurance products, parties' obligations, etc. Additionally, this law also states that all licensed insurance companies shall update their information in accordance with new requirements, such as the new minimum registered capital criteria. This will be determined by a separate Sub-Decree of the RGC.
New Inter-ministerial Commission to Govern and Evaluate Economic Land Concession
Due to non-compliance of numerous companies that have obtained the approval from the RGC to hold economic land concession ("ELC"), the RGC has instituted an Inter-ministerial Commission to take charge of supervising, measuring and evaluating the ELC. This Commission is composed of numerous high-ranking governmental officials, including ministers, the general commissioner of the national police, and heads of departments.This Commission shall make decisions regarding the revocation of the ELC from any private company that has breached the agreement that it has entered into with the RGC.
Experts to Identify Risk, Money-Laundering and Financing of Terrorism
In order to strengthen the banking sector, the National Bank of Cambodia ("NBC") has established a working group at the national level work closely in taking measures to the prevent and suppress all types of banking crimes.The NBC has clearly determined the duties and responsibilities under its Decision No. B12.014.017.D. The working group;s duties and responsibilities include identifying threats originating from money laundering and the financing of terrorism, analyzing types and sources of crimes and taking action against such crimes.
Tax Supervisory Department to Reform
The Ministry of Economy and Finance ("MEF") aims to assure that the tax sector will be the first sector to successfully reform and to increase the State's income by establishing this department under Prakas No. 960 MEF.E. The duties of this department include the gathering of information on taxable persons, standardizing procedures, and conducting internal audits and tax crimes inspection.This department consists of 6 offices, including the Taxable Persons' Information Office, Internal Audit Office, and the Tax Crimes Inspection Office.
Stamp Duty on Transfer of Ownership of Immovable Property
Prakas No. 962 MEF.P dated 28 August 2014 imposes a stamp duty on the transfer of ownership of immovable property, set as 4% of the price of the property.The MEF has clearly set out prices for each province of Cambodia in the annexes of this Prakas. Therefore, in the event that the price agreed by the parties is lower than the price determined by the Prakas, the General Department of Taxation ("GDT") shall impose the 4% stamp duty in accordance with the price determined by the Prakas. However, in the event that the price agreed by the parties is higher than the one determined by the Prakas, the tax shall be imposed in accordance with the agreed price.
INDONESIA
New Insurance Act Avoids Imposing Statutory Limits on Foreign Ownership
The approval of the new Insurance Act by the outgoing House of Representatives ("DPR") on 23 September 2014, turned out to be less contentious than had originally been expected, with the Government managing to dissuade the DPR from imposing retroactive statutory ownership limitations in a sector where foreign investment and expertise has traditionally played a key role.Up to one month before the enactment of the legislation, it had been expected that the DPR would cap foreign ownership in the insurance industry at 49%, much lower than the current cap of 80%. Having a lower cap of 49% would prevent new foreign entrants from acquiring controlling interests, and would at the same time require existing foreign-owned insurance firms to divest stakes to satisfy the 49% cap. Should the new cap have been approved, it would have caused a major shake-up in the Indonesian insurance industry, which continues to be dominated by joint ventures backed by international firms.
The fact that the DPR refrained from imposing an inflexible statutory cap on foreign ownership in the sector can only be welcomed as it allows the government to sit back and carefully evaluate what ownership limits are (or are not) desirable, having regard to all the circumstances and exigencies of the industry.
While many of the provisions of the Act are similar to those of the 1992 Act or were incorporated in government regulations, it nevertheless provides a more solid and comprehensive statutory framework for the development of the Indonesian insurance industry. It tightens up capitalization requirements and closes off various loopholes that could serve to undermine the stability of the industry. It also provides for the hiving off of sharia-compliant insurers from their conventional parents and imposes higher capital requirements on the Islamic sector. The Act also affords greater protection of policy holders and increases the size of fines.
Changes to Rules on Mineral and Coal Mining
The Government, through Government Regulation No 77 of 2014 ("GR 77"), has issued a third amendment to Government Regulation No 23 of 2010 on Commercial Mineral and Coal Mining. GR 77 came into operation on 14 October 2014.The amendments are aimed at: (i) ensuring greater business certainty for holders of Mining Licenses and Special Mining Licenses (IUP and IUPK) issued in the domestic investment framework; (ii) rearranging the Indonesian shareholding requirements in the foreign direct investment ("FDI") framework; and (iii) providing optimum benefits to the State and business certainty to holders of Contracts of Work and Coal Contracts of Work.
With respect to the first objective (ensuring greater business certainty for holders IUP and IUPK issued in the domestic investment framework), GR 77/2014 stipulates shareholding composition rules during the exploration and production operation stages of mining operations. In terms of rearranging the Indonesian shareholding requirements in the FDI framework, the Regulation sets out revised divestment obligations based on stipulated timeframes and prescribed mechanisms. There are also instances where licensees are exempted from the divestment obligation. In so far as the third objective is concerned, GR 77/2014 regulates divestment obligations, area coverage and continuity of operations subsequent to the termination of Contracts.
New Plantation Act Leaves Foreign Ownership Restrictions up to Government
The Plantation Act 2014 ("Act"), passed by a plenary session of the House of Representatives ("DPR") on 29 September 2014, has received a generally warm welcome from both social commentators and the industry. For the former, the Act provides better protection to smallholders and indigenous communities, while for the latter relief is the order of the day after the threat of a retroactive foreign ownership cap of 30% evaporated just ten days before the Act was passed.Restrictions on foreign direct investment in Indonesia are set out in the Negative Investment List ("NIL", the latest version of which was issued and entered into effect on 24 April 2014. In the case of estate agriculture, the NIL provides that 95 percent foreign ownership is permitted. The Negative List system is flexible as the list can be amended by Presidential Regulation. However, the DPR-initiated Plantation Bill originally capped foreign ownership in the sector at a maximum of 30%, effective retroactively. The expressed intention was to open up the sector to smaller local players. As this cap was set out in the legislation, it would have been very difficult to amend it (unlike in the case of a Presidential Regulation).
When the news of the 30% cap emerged, it came as something of a bombshell, especially given the government's stated goal of increasing palm oil output by a third to 40 million tonnes by 2020. Furthermore, the industry claimed that it had been excluded from the deliberations on the Bill.
Under pressure from the Government, the House special committee deliberating the Bill eventually relented by dropping the 30% cap. Thus, the Act as passed adopts a middle road, with specific foreign ownership caps for each crop to be subsequently determined by Government Regulations, having regard to the type of crop, economies of scale, and both the national interest and the interests of Indonesian planters (Article 95). Such Government Regulations must be issued within two years from the date of the legislation’s promulgation. Until such time as it is issued, the plantation sector rules in the NIL will continue in effect.
For existing foreign investors in the sector, the news is even better as their current arrangements are grandfathered until the expiry of their HGU (Hak Guna Usaha) leasehold titles (after which time they must bring themselves into line with the Act's provisions). By contrast, existing domestic investors that do not possess a Commercial Plantation License (Izin Usaha Perkebunan) must obtain one within one year of the promulgation of the Act, while those that already possess such a license must harmonize their operations with the Act's provisions within five years.
The Act also liberalizes the rules governing the acquisition of existing plantations by foreign investors. Whereas under the Plantation Act 2004 this could only be done with the consent of the Minister in the case of plantation land that had been left idle or where the concessionaire was insolvent, it is now possible in all circumstances with the approval of the Minister, having regard to the national interest.
Constitutional Court Decision on Assets Disappoints State Enterprises
The Constitutional Court recently handed down its decision ("Decision") on a challenge to the constitutionality of certain provisions of the State Finances Act 2003 and the State Audit Board Act 2006. In its judgment, the Court held that public assets vested in state or local government enterprises remain, subject to the normal state budgetary and accountability rules, including auditing by the country's national audit board ("BPK").The petitioners had argued that a state enterprise, particularly one that is semi-privatized, becomes a separate legal person as soon as its deed of incorporation is drawn before the notary, in accordance with normal company law principles. At that point in time, all of the enterprise's assets, irrespective of whether they are contributed by the state or any other shareholder, become the assets and property of the enterprise.
However, the Court did not see it that way, holding instead that all state enterprises (whatever their shareholding composition) are direct extensions of the state, and that the vesting of state assets in a state enterprise does not transfer title to the enterprise from the state nor sever the link between the asset and the state. Thus, state assets vested in a state enterprise remain state assets, rather than assets of the enterprise. Accordingly, the Court found that the BPK is fully entitled to conduct audits on all state enterprises, including those that are publicly listed.
Although the Court did urge the legislature to enact legislation so as to ensure that the BPK applies business principles when auditing state undertakings, it ignored the issue of separate corporate personality and corporate assets under the general principles of company law.
Long Awaited Regulation on Geothermal Power Prices a Step in the Right Direction
The Minister of Energy and Mineral Resources ("Minister") has issued a new regulation governing the purchase prices payable by state power utility PT Perusahaan Listrik Negara (Persero) ("PLN") for electricity produced by geothermal power plants and for geothermal steam that is used in generating electricity. The regulation ("New Regulation"), which was issued on 3 June 2014, entered into effect on the same date and specifically revokes Minister of Energy and Mineral Resources Regulation No. 22 of 2012.The New Regulation requires PLN to purchase electricity generated from geothermal power plants operated by independent power producers ("IPP") holding electricity supply business licenses ("IUPTL"), and steam for the purpose of generating electricity from the holders of geothermal exploitation licenses ("IUP"). The purchase price for electricity is negotiable but must not be higher than the relevant ceiling price set out in the New Regulation. The purchase price is dependent on the area where the power plant is located and the commercial operation date ("COD"), subject to approval of the Minister. The mechanism for determining the COD is governed by the Power Purchase Agreement.
LAO PDR
Laos to Enact Competition Law for AEC
Laos has completed a draft competition bill, in preparation for the Asean Economic Community ("AEC") which takes effect in December 2015. A technical official from Ministry of Industry and Commerce stated that the draft competition law, aimed at governing trade competition and market access in line with the requirements of the single economic region, will be submitted to the Lao National Assembly in the middle of next year for approval and enactment.Government officials have started introducing the draft bill in the provinces throughout the country to generate awareness and understanding of the law. They intend to reach out to officials from the state sectors, the private business operators and the public in general.
A relevant and effective competition regime will be one of the pillars of the country's economy to ensure Laos is in a position to benefit from greater regional integration.
Lao Hydropower Company to Issue Debentures in Thailand's Capital Market
Laotian hydropower company EDL-Generation ("EDL-Gen") plans to invest US$1 billion(US$32.70 billion) within five years from 2015 to boost production capacity from 881 megawatts to 2,272 MW. To raise 6.5 billion baht of the target investment amount, EDL-Gen will issue debentures in Thailand's capital market in December. This will be the first time that a private Laotian firm has raised funds in Thailand's capital market.The company has appointed Standard Chartered Bank (Thai), Bank of Ayudhya and TMB as joint lead arrangers for the debentures issues.
EDL-Gen is a major private hydroelectric power generator in Laos. It is one of three listed on the Lao Securities Exchanges (LSX) and accounts for about 80% of the total market capitalization of the exchanges.
MALAYSIA
Barriers on Foreign Participation in Distributive Trade in Malaysia
The Ministry of Domestic Trade Co-operatives and Consumerism ("MDTCC") has promulgated the Guidelines on Foreign Participation in the Distributive Trade Services in Malaysia ("Guidelines") to regulate foreign participation in certain distributive trade sectors in Malaysia.Under the Guidelines, all foreigners (except those in the manufacturing sector) intending to participate in the various regulated forms of distributive trade are generally required to seek the approval of the MDTCC. The MDTCC may impose certain equity or other conditions to grant such approval.
The Guidelines does not have the force of law although foreigners intending to participate in the regulated forms of distributive trade sector who choose not to comply with the Guidelines may encounter administrative consequences when dealing with Government bodies, thus deterring compliance.
The types of barriers vary depending on the scale and type of distributive trade, broadly be categorised into: (i) large-scale (e.g. hypermarkets, superstores); (ii) smaller-scale (e.g. specialty stores); and (iii) prohibitive form of distributive trade. For the large-scale and smaller-scale distributive trades, barriers may take the form of the prescribed minimum paid-up capital and percentage of bumiputera directorship, bumiputera participation in the distributive share, and formulation of employment policies to reflect the racial composition of the Malaysian population. The prohibitive forms of distributive trade are only reserved for Malaysians without any foreign participation.
Given that Malaysia is moving towards a globalised world, and many other economic sectors are gradually being liberalised by the Government to encourage competition, it remains to be seen whether the Government will liberalise the distributive trade sector in the country by eliminating the above barriers to encourage more foreign participation in the years to come.
MYCC Guidelines on Financial Penalties
The Malaysia Competition Commission ("MyCC") has finalised and published the Guidelines on Financial Penalties ("Guidelines") after a nationwide public consultation earlier this year. The Guidelines is based on the statutory framework of Section 17 and Section 40(1) of the Competition Act, 2010 ("Act"). Section 17(2)(b) grants MyCC powers to impose remedial relief including a financial penalty if it finds that there is an infringement of a prohibition in Part II of the Act. Section 17 of the Act grants the MyCC broad powers to carry out the performance of its functions under the Act and a specific power to impose a financial penalty for any infringement of the Act. Essentially, the quantum of the financial penalty to be imposed is at MyCC’s discretion as long as it does not exceed the statutory maximum established by subsection 40(4), which is 10% of the worldwide turnover of the infringing enterprise during the period of infringement.The Guidelines lists factors that will be considered by MyCC in determining the amount of any financial penalty in a specific case. A non-exhaustive list of aggravating factors and mitigating factors are also provided.
MYCC Guidelines on Leniency Regime
The Malaysia Competition Commission ("MyCC") has finalised and published the Guidelines on Leniency Regime ("Guidelines") after a nationwide public consultation earlier this year. The Guidelines is based on the statutory framework of Section 41 of the Competition Act, 2010 ("Act"). Section 41 is the specific provision to assist MyCC in dealing with any cartel activity. It allows MyCC to grant a reduction of up to a maximum of 100 percent of any penalties that could otherwise be imposed on enterprises in breach of Section 4 and specifically subsection 4(2) of the Act.The Guidelines on Leniency Regime clarifies that the leniency regime established under Section 41 is available only to an enterprise which admits to an infringement of the prohibition against a horizontal agreement with an anti-competitive object outlined in subsection 4(2) of the Act. This regime would also extend to enterprises belonging to a single economic unit named in the application as an applicant. MyCC will grant differing percentages of reductions of financial penalties, taking into consideration any circumstances including: (i) the fact that the enterprise was the first enterprise to come forward to the MyCC about an infringement; (i) the stage in the investigation, if any; (iii) the information or other form of cooperation to be provided; (iv) and the information already in possession of the MyCC.
Outcome of MAS, Airasia appeal case
The decision on the Malaysian Airlines ("MAS") and AirAsia Bhd's appeal to the Competition Appeals Tribunal ("CAT") over breach of the market-sharing prohibition in Section 4(2)(b) of the Competition Act, 2010 ("Act") is expected to be known in March 2015.This is an appeal against the Decision of MyCC on 31 March 2014 which found Malaysian Airline System Berhad, Airasia Berhad and AirAsia X Sdn. Bhd. ("AAX") to have infringed Section 4(2)(b) of the Act by entering into an agreement that has as its object the sharing of markets within the air transport services sector in Malaysia. MyCC imposed on both parties a financial penalty of RM10,000,000.00 each. MyCC considered AAX as an enterprise that forms a single economic unit with AirAsia.
Both MAS and AirAsia have lodged an appeal to CAT against that Decision.
MYANMAR
Enactment of the new Electricity Law
Myanmar recently enacted a new Electricity Law (Pyidaungsu Hluttaw Law No. 44/2014 dated 27 October 2014), repealing the outdated Electricity Law of 1984. The long-awaited law seeks to liberalise the electricity sector and ease administrative procedures in hopes of promoting the development of a much-needed modern power infrastructure. Currently, only 30% of Myanmar's population has access to electricity and the Myanmar Government has announced the goal to increase the country's installed capacity from 4,000MW to 20,000MW by the year 2030.The new Electricity Law moved away from the state monopoly created by the previous law, by explicitly encouraging private investment in the power sector. Going forward, any local or foreign investor wishing to carry out electricity related businesses (including construction, generation, transmission, distribution, utilisation, trading, exchange of electric power, sale of electric power to the national grid, among others) may apply for a permit. The permitting authority for large-scale projects (i.e., projects involving a generation capacity of more than 30 megawatts) is the Union Government, acting through the Ministry of Electric Power ("MOEP"). Regional or State Government offices, including Self-Administered Divisions or Zones, have the authority to grant permits for small and medium scale projects not connected to the national grid. However, the Electricity Law says very little as to the requirements needed to obtain a permit. Rules and regulations will be needed in future to set out the details of the licensing procedure and applicable standards.
Another salient feature of the new law is the formation of an Electricity Regulatory Commission in charge of drawing up the national electricity policy, advising on electricity rates, supervising the drafting of technical regulations and standards, encouraging private investment in the sector as well as monitoring and reporting to the Union Government on the performance of the sector.
As for electricity rates, the new law does not stipulate how rates will be determined. It simply provides that the MOEP may prescribe, with the approval of the Union Government, a suitable electricity rate according to the region. Regional or State Governments, and the Leading Body of Self- Administered Divisions or Zones, may also, in coordination with the MOEP, prescribe electricity rates for power generation and distribution in their respective regional power systems. Notably, the Electricity Law does not explicitly provide that rates will be economically viable and sufficient to cover investment costs. The objectives of the law merely state the intention to "enact fair, transparent and suitable rules and regulations" in order to set electricity rates which are "reflective of modern times".
The Myanmar Government will still have to issue rules and regulations as well as formulate policies to produce a comprehensive legal and regulatory framework for future projects, but the new law is a positive move towards the liberalisation of the power sector.
PHILIPPINES
SINGAPORE
Human Biomedical Research Bill
The Ministry of Health has published the draft Human Biomedical Research Bill ("HBR Bill") for public consultation and the public consultation ended on 18 December 2014.The HBR Bill aims to further strengthen the international standing of Singapore's research community and will provide clarity regarding the roles and responsibilities of individuals and organisations involved in human biomedical research. It will also ensure that human biomedical research, tissue collection and banking activities are carried out under good research and ethical practice principles.
In particular, the HBR Bill will enhance the protection of the safety and welfare of research participants, regulate categories of restricted research (such as human-animal combination stem cell research), protect the safety and welfare of tissue donors, and prohibit the commercial trading of human tissues regardless of whether it is used in research.
The HBR Bill is intended to be enacted in 2015.
Prevention of Human Trafficking Act
The Prevention of Human Trafficking Bill was passed in Parliament on 3 November 2014. The Act criminalises trafficking in persons ("TIP") and related activities and was crystallised as a dedicated anti-TIP legislation to deal with TIP and related activities in a more targeted manner.The definition of the various forms of exploitation of trafficked victims are largely based on relevant international treaties to which Singapore is a party, and the Model Law against Trafficking in Persons developed by the United Nations Office on Drugs and Crime.
To make out the offence of TIP, three elements - based on article 3(a) of the Protocol to Prevent, Suppress and Punish Trafficking in Persons, especially Women and Children, Supplementing the United Nations Convention Against Transnational Organised Crime ("The UN TIP Protocol") - must be proved:
(i) there must be an act of recruitment, transportation, transfer, harbouring or receipt of a person;
(ii) the act must have been carried out by means of threat, abduction, fraud or deception, the abuse of power, the abuse of the position of vulnerability, or the giving or receiving of payments or benefits to secure that other person's consent; and
(iii) the act must be for the purpose of exploitation (whether in Singapore or elsewhere).
TIP is gender-neutral and the consent of the trafficked victim (or of the parent or guardian, if the victim is a child) is immaterial in determining whether the offence is made out.
To serve the legislation's deterrent purpose, mandatory imprisonment terms, fines and caning will be imposed. For first time offenders, the penalty for the TIP offence is imprisonment for up to 10 years, a maximum fine of $100,000 and caning not exceeding 6 strokes. For repeat offenders, the penalty will be imprisonment for up to 15 years, a maximum fine of $150,000 and caning not exceeding 9 strokes.
Establishment of the Singapore International Commercial Court
Legislative changes paving the way for the Singapore International Commercial Court ("SICC") to be set up were passed in Parliament on 4 November 2014.When established, the SICC will be a division of the Singapore High Court and part of the Supreme Court of Singapore. A panel of SICC judges, comprising existing Supreme Court judges and associate judges (draw from key jurisdictions around the world) will be appointed. The SICC will deal primarily with international commercial disputes.
Representation of parties will follow the rules of representation before the Singapore High Court, in that only members of the Singapore Bar can represent parties, subject to the discretion of the court to admit Queen's Counsel or foreign lawyers on an ad hoc basis. Special rules will apply for cases which have no substantial connection to Singapore – in such cases, foreign counsel may appear before the SICC if they are registered with the court.
SICC proceedings will generally take place in open court, but parties may apply for proceedings to be heard confidentially.
In general, decisions of the SICC will be appealable to the Court of Appeal, although parties are allowed to contractually exclude or limit this right to appeal.
The SICC is expected to be established in early 2015.
VIETNAM
Circular No. 19/2014/TT-NHNN on Foreign Direct Investment
On 11 August 2014, the State Bank of Vietnam ("SBV") issued Circular No. 19/2014/TT-NHNN guiding the foreign exchange management of foreign direct investment in Vietnam. The Circular details the conditions for opening and using direct investment accounts in Vietnamese dong and foreign currencies, as well as the procedure for transferring investments to Vietnam through foreign currencies accounts and the obtaining of an Investment Certificate.This Circular shall take effect from 22 September 2014 and annul Article 9 of the Circular No. 05/2014/TT-NHNN dated 12 March 2014.
Circular No. 25/2014/TT-NHNN on Registration of Offshore Loans
On 15 September 2014, the SBV issued Circular No. 25/2014/TT-NHNN regulating the registration of offshore loans which are not guaranteed by the Government.The following points are worth noting:
- The Circular requires registration with the SBV for medium term loans, long term loans, and short term loans which have been extended to or which have reached 1 year.
- Registration is not required for offshore loans signed with non-residents and where the type of agreement does not influence the withdrawal of the loan.
- If an offshore loan is conducted in Vietnamese dong, it must be approved by the Governor of the SBV.
- The Circular also details the procedures and application dossier for the registration of offshore loans.
Circular No. 103/2014/TT-BTC on Tax Liabilities of Foreign Entities
On 6 August 2014, the Ministry of Finance issued Circular No. 103/2014/TT-BTC, which provides guidance on the fulfillment of tax liabilities for foreign entities doing business in Vietnam or earning income in Vietnam.In particular, the Circular provides that:
- Tax payers will include foreign entities providing goods under all Incoterm conditions of delivery. Further, foreign entities which distribute goods or services in Vietnam, conduct negotiations under the name of foreign entities, and exercise import/export rights in Vietnam will be subject to withholding tax.
- Foreign entities using bonded warehouses or inland clearing depots as as a warehouse serving international transport, transit of goods, or storage of goods to be processed by other companies may not be subject to withholding tax.
Decree No. 96/2014/ND-CP on Sanctions of Administrative Violations in the Monetary and Banking Area
On 17 October 2014, the Government issued Decree No. 96/2014/ND-CP on sanctions of administrative violations in the monetary and banking area.Under this Decree, the maximum fine level for a violation in the monetary and banking area has increased to VND 2,000,000,000 (approximately USD 100,000) for organisations and VND 1,000,000,000 VND (approximately USD 50,000) for individuals.
This Decree will take effect from 12 December 2014.
Circular No. 10/2014/TT- BVHTTDL Guiding the Naming of Enterprises
On 1 October 2014, the Ministry of Culture, Sports and Tourism issued Circular No. 10/2014/TT-BVHTTDL guiding the naming of enterprises in accordance with tradition, history, culture, ethics, habits and customs of the nation.In particular, the Circular provides that:
- Names of enterprises in Vietnam must not be identical with names of famous persons, country names during the time that Vietnam was under foreign occupation, names of individuals who are against good causes or historical development, names of historical people who are aggressors, names of individuals who are guilty to the country and nation, and other cases as stipulated by law.
- Names of enterprises in Vietnam must not contain words or symbols which are mean, vulgar, pornographic, depict violence, crime, or social vices, directly or indirectly threaten, insult, or disrespect other organizations and individuals, or express or insinuate regional, ethnical, religious, racial and sexist discrimination and segregation.
Decree No. 103/2014/ND-CP on Minimum Wages
On 11 November 2014, the Government issued Decree No. 103/2014/ND-CP regulating region-based minimum wages for employees working for companies, cooperatives, cooperative groups, farms, households, individuals, and organisations hiring employees under labour contracts.This Decree sets out the following minimum wages:
- VND 3,100,000/month (approximately USD 148) for enterprises operating in Region I.
- VND 2,750,000/month (approximately USD 131) for enterprises operating in Region II.
- VND 2,400,000/month (approximately USD 114) for enterprises operating in Region III.
- VND 2,150,000/month (approximately USD 102) for enterprises operating in Region IV.
The wage paid to employees working in normal conditions, satisfying normal working hours per month and completing agreed works must not be lower than these region-based minimum wages for untrained workers doing unskilled labour. The minimum wage for trained workers must be at least 7% higher than those prescribed above.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.