IS SOCIAL INSURANCE PAYABLE DURING PROBATIONARY PERIOD OF A LABOUR CONTRACT IN VIETNAM?

According to Social Insurance Law 2014, from 1 January 2018, any employee working under a labor contract with a term of from one month to three months must participate in the compulsory social insurance scheme (SI Requirement). The social insurance contributions are paid by both employer and employee subject to the contribution rate, of which the employer usually pays larger part. However, it is not clear whether an employee working under a “probation labour contract” (hợp đồng thử việc) with a term of from one to two months (Probationary Contract) must comply with the SI Requirement. There are various views on this issue.

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Written by Nguyen Quang Vu On In

Limitations on bank lending in Vietnam

Under the Law on Credit Institutions 2010 (as recently amended), a bank is subject to several limitations when extending a loan and other forms of credit to a borrower including the following:

(a)    the aggregate outstanding credit extended to (1) a single client and (2) a single client and its related persons must not exceed 15% and 25% of the equity capital of the bank respectively. The outstanding credit includes, among other things, (1) bonds issued by the client and its related persons, (2) loans to clients being other credit institutions or loans secured by guarantees by other credit institutions, (3) loans secured by individual saving deposits, and (4) loans financed by funds entrusted by the Government, organizations or individuals. The Prime Minister may decide to waive this limitation subject to a limitation of 400% of the equity capital of the bank;

(b)    a commercial bank must not extend credit to (1) board member, member of member council, member of board of controllers, general director, director, deputy director, deputy general director and equivalent positions in the commercial bank, legal entities being a shareholder whose representative of the capital contribution portion is a board member or member of board of controllers; and (2) a parent, spouse or child of a board member or member of board of controllers or of general director, director or deputy general director, deputy director and equivalent positions.

A bank must not extend credit to a borrower on the basis of security provided by any of the persons specified at (b);

(c)    a bank must not extend credit without security or under preferred conditions to following  persons: (1) auditing organization and auditor currently conducting an audit at such bank or inspector currently conducting an inspection at such bank; (2) chief account of such commercial bank; (3) major shareholders and founding shareholders of such bank; (4) companies of which more than 10% of charter capital is owned by one of the persons specified in (b); (5) people conducting appraisal and approval of loans; and (6) subsidiaries or affiliates of such bank or of an enterprise controlled by such bank.

The total outstanding credit balance extended by a bank to all borrowers specified at (1) to (5) must not exceed 5% of equity capital of such bank. Such outstanding credit balance includes the total of the investment and purchase of bond issued by the borrowers (if applicable).

The total outstanding credit balance extended by a bank to a single borrower specified at (6) must not exceed 10% of equity capital of such bank and to all borrowers specified at (6) must not exceed 20% of equity capital of such bank. Such outstanding credit balance includes the total of the investment and purchase of bond issued by the borrowers.

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Written by Nguyen Quang Vu On In

Decree 163/2017 on logistic services in Vietnam

Decree 163 of the Government on logistics services was issued on 30 December 2017 (Decree 163/2017). It is going to take effect on 20 February 2018 and replace Decree 140 of the Government on logistics services dated 5 September 2007 (Decree 140/2007). Below are salient changes in Decree 163/2017.

Decree 163/2017 no longer requires the logistics services providers to meet the condition of adequate equipment and personnel. That condition was applied to some logistics services, but under Decree 163/2017, the logistics services providers have only to meet conditions specific to the logistics service that they provide.

Decree 163/2017 allows foreign investors to apply, at their discretion, investment conditions regarding logistics services under an international treaty where multiple treaties are applicable.

Decree 163/2017 classifies logistics services in accordance with Vietnam’s commitments to the WTO. By contrast, Decree 140/2007 has its own classification of logistics services which is not consistent with the description of logistics services under the WTO Commitments. And the investment conditions and foreign ownership limit provided in Decree 163/2017 are generally consistent with the WTO Commitments. Therefore, it is easier to compare the Decree 163/2017 with the WTO Commitments.

The table below sets out the applicable foreign ownership limit under Decree 163/2017, to the extent possible, in comparison with Decree 140/2007:

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Written by Nguyen Quang Vu On In ,