Vietnam Business Law is a website managed by lawyers of Venture North Law Limited (VNLaw). Venture North Law Limited (VNLaw) is a Vietnamese commercial law firm. We won the Rising Law Firm of the Year Award at the Southeast Asia Law Awards for the years 2020 and 2021 held by The Legal 500. Very few Vietnamese law firms have achieved a similar regional recognition.
Posted in: Merger & Acquisition
The Investment Law 2014 introduces entirely new procedures “acquisition registration” for investment by foreign investors in the form of capital contribution or acquisition of equity interests in existing companies in Vietnam. However, due to its novelty, the new procedures may raise various unexpected consequences:
In April 2015, the General Department of Tax (GDT) instructs a provincial tax department to consider imposing corporate income tax (CIT) on a capital transfer transaction whereby a Vietnamese buyer acquires the entire equity interest of a Hong Kong company (Offshore Target Co) from a foreign seller. The Offshore Target Co holds shares in a joint venture company in Vietnam. The GDT considers the purchase price that the foreign seller receives from the Vietnamese buyer for sale of shares in the Offshore Target Co as “taxable income arising in Vietnam” (thu nhập chịu thuế phát sinh tại Việt Nam) of the foreign seller under Decree 12/2015. The GDT’s view could raise a tax concern over capital transfer in an offshore company which in turn have shares in a Vietnamese company, at least in case the buyer is a Vietnamese company.
The table below summaries the key conditions that a new foreign institutional investor may need to satisfy when investing in an existing insurance company in Vietnam. The target insurance company can be either a joint stock company (JSC) or a limited liability company (LLC). The investment could either be acquisition of new shares issued by the target or of existing share held by existing owners. Except in case of acquiring less than 10% existing shares, in all cases, an approval from the Ministry of Finance is required.
Under Enterprise Law 2014, a foreign investor wanted to set up a company in Vietnam is required to obtain an Investment Registration Certificate (IRC) regarding the foreign investor first. Under Investment Law 2014, an IRC is a document recording the information about the investment project that the investor registers with the licensing authority. However, as there is no clear definition of an investment project, there may be various “kinds” of ICs that may be available to a foreign investor.