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Posted in: Commerce & Trading
From 1 January 2016, the Civil Code 2015 introduces a new set of rules regarding choice of governing law in a civil contract signed with a Vietnamese counterparty. In particular, parties to a contract in which there is at least one party is foreign individual or foreign “legal person” may agree to choose foreign governing law in the contract except in the following cases, among other things:
In Official Letter 2719 in October 2016, the Generate Directorate of Energy (GDE) notifies the General Department of Customs that coal-fired power producers who want to directly import coal must obtain an approval by the Prime Minister. The GDE’s notification relies on two grounds:
If a foreign company only plans to collect information and research Vietnam’s market regarding the demand of certain goods and services and to have a contact point in Vietnam then in addition to incorporating a company under both Investment Law 2014 and Enterprise Law 2014, the foreign company may consider setting up a representative office under the Commercial Law 2005 and Decree 72/2016. The advantages of having a representative office in Vietnam are:
· The timing and procedures to set up a representative office would be shorter and simpler than setting up a foreign invested company;
· Technically, a representative office can be operated and managed by one staff (who will be the chief representative in this case); and
· Operating a representative office would be simplier and less expensive cost because a representative office is not subject to tax declaration, preparation of financial statements, preparation and submission of labor and investment reports. Usually, a representative office only needs to submit annual operating report by 31 January each year.
Operating through a representative office has the following disadvantages:
· A representative office has no status of independent legal entity;
· The operation term of a representative office is 5 year at maximum (but can be extended); and
· A representative office is not entitled to enter into sale and purchase contracts or other business activities.
The inconsistencies between the new Investment Law 2014 and Decree 23/2007 have caused many lawyers confused about the process of foreign invested enterprises (FIEs) to obtain a Trading Licence to operate in the sector of sale and purchase of goods (i.e. conducting export/import rights) and the related activities (e.g. distribution) (Trading Activities). Some temporary guidelines of licensing authorities recently could help clarify the situation.
According to an official correspondence in June 2016 of Ho Chi Minh City's Department of Planning and Investment (HCMC DPI) to a foreign investor applying for an investment project relating to Trading Activities, the foreign investor should conduct the licensing procedures in the following steps: