Transfer of foreign investors’ profits

According to a new circular from the Finance Ministry, profits earned by foreign investors from capital investment under the Law on Foreign Investment in Viet Nam which can be transferred abroad include:

– Profits distributed or earned from investment activities under the Law on Foreign Investment in Viet Nam;

– Profits earned from capital transfer after corporate income tax (CIT) has been paid;

– Amounts representing CIT overpayments or refunds of reinvested profits which are now transferred abroad by foreign investors.

Foreign investors may conduct annual or lump-sum transfers of all distributed or earned profits after the end of the fiscal year and submission of tax settlement reports. Profits may be temporarily transferred quarterly or biannually during the fiscal year, after CIT has been paid. Foreign investors may transfer their profits when they cease business activities in Viet Nam.

Foreign investors must make declarations on the transfer of profits abroad. Such declarations shall be sent to the local tax offices directly managing tax collection from the foreign-invested enterprise for certification of tax obligation fulfilment and the profit amounts to be transferred abroad. Based on such certification, the banks where foreign investors maintain their accounts shall transfer the profits abroad.

(Circular No 124/2004/TT-BTC, dated December 23, 2004, of the Ministry of Finance, guiding the transfer of profits abroad by foreign economic organisations or foreigners who earn profits from investment forms prescribed in the Law on Foreign Investment in Viet Nam.)

Tax incentives for software firms

Software manufacturing and software service-providing activities may enjoy certain tax preferences, according to a new circular of the Finance Ministry.

Regarding corporate income tax (CIT): Such enterprises shall enjoy a tax rate of 10 per cent for 15 years after they commence business activities; a tax exemption for 4 years after taxable incomes are generated; and a 50 per cent reduction of payable tax amounts for 9 subsequent years.

The rate of value added tax (VAT) on export software products and services is 0 per cent. Software products and services sold in Viet Nam are not subject to VAT. Export software products are also exempt from export tax.

Raw materials imported in direct service of the manufacture of software products which cannot yet be produced domestically are exempt from import tax. Such materials are also exempt from VAT at the import stage.

(Circular No 123/2004/TT-BTC, dated December 22, 2004, of the Ministry of Finance, guiding tax preferences for software enterprises.)

Fertiliser export and import

Under a new decision, the Minister of Agriculture and Rural Development permits organisations and individuals to export fertilisers at customers’ requests.

Organisations and individuals may import fertilisers on the list of those permitted for production, trading and use in Viet Nam. They must bear responsibility for the quality of imported fertilisers. The import of fertilisers not on the list, the import of raw materials for fertiliser production, or fertiliser import in other special cases must be approved by the Ministry of Agriculture and Rural Development. Only fertilisers permitted for wide use overseas can be imported. Import fertilisers not up to the registered quality standard may be subject to administrative sanctioning or forcible re-export.

(Decision No 72/2004/QD-BNN, dated December 8, 2004, of the Minister of Agriculture and Rural Development, promulgating the regulation on management of fertiliser production, trading and use.)

Prepared by Viet Nam Law and Legal Forum

Administrative sanctions in monetary and banking activities

According to a new decree of the Government, for each administrative violation in monetary and banking activities, each violator shall be subject to a warning or a fine. Following are some violations and their associated fines:

– Violation of regulations on establishing and permitting operation of credit institutions: VND5 million – VND70 million;

– Violation of regulations on administration, management and audit: VND2 million – VND40 million;

– Violation of regulations on capital mobilisation: VND15 million – VND70 million;

– Violation of regulations on lending, bank guarantees, discounts and financial leasing: VND200,000 – VND50 million;

– Violation of regulations on foreign exchange management and gold trading management: VND200,000 – VND70 million;

– Violation of regulations on payment related to purchase of, or investment in, fixed assets and real estate business: VND1 million – VND50 million;

– Violation of regulations on ensuring the safety of credit institutions’ operations: VND2 million – VND30 million;

– Violation of regulations on accounting, statistical, information or reporting regimes; or on confidentiality of banking activities: VND500,000 – VND12 million;

– Infringing upon the business autonomy rights of credit institutions; obstructing inspection or failing to abide by requests of authorities competent to sanction administrative violations; or conducting illegal competition: VND1 million – VND12 million.

The statue of limitations for sanctioning a violation is two years from the date the violation is committed.

Domestic and foreign individuals, agencies or organisations that intentionally or unintentionally commit acts in violation of the legislation on State management of monetary and banking activities which are not otherwise crimes shall all be administratively sanctioned according to this Decree.

(Decree No 202/2004/ND-CP, of the Government, dated December 10, 2004, on administrative sanctions in monetary and banking activities)

Managing quality of construction works

A new decree on managing the quality of construction works applies to investors, contractors, organisations and individuals involved in the survey, design, construction, warranty, maintenance, management and use of construction works.

The Construction Ministry shall perform uniform State management of the quality of construction works nationwide. Ministries managing construction works shall co-ordinate with the Construction Ministry in controlling the quality of those works. The provincial-level People’s Committees shall perform State management of the quality of construction works within the administrative boundaries of their respective localities.

(Decree No 209/2004/ND-CP, of the Government, dated December 16, 2004, on managing the quality of construction works)

Prepared by Viet Nam Law and Legal Forum