Introduction

From 1 July 2025, Vietnam’s local Government system formally operates according to a new “two-tier” system in 34 provinces as opposed to the old “three-tier” system in 63 provinces. In the new system, there are only two levels of local Government including provinces (tỉnh) and wards (xã, phường). Government agencies at district level no longer exist. Vietnam also combines several existing wards to form a larger ward. As a result, we estimate that Vietnam now has about 3,300 local people’s committees down from 10,000 local people’s committees.

To achieve this, by 1 July 2025, the National Assembly and the Government have, among other things, amended the Constitution, amended the Law on Organisation of Local Government, issued 34 resolutions and 28 Decrees to restructure the local government system. Unfortunately, despite such herculean efforts, it appears that the new regulations have not addressed adequately various legal issues arising from the restructuring. In this post we will discuss some of these issues. More information can be found from the attached research generated by the latest AI LLM from Google (Gemini Pro 2.5).

No clear geographical boundaries between various local authorities at wards levels.

It appears that on 1 July 2025, the Government did not establish clear geographical boundaries between the newly established wards. This is because the Standing Committee of the National Assembly sets a deadline of 30 September 2025 for the Government to do so for each province. Until a source of truth of the geographical boundaries at wards level is set up, many companies and individuals may not know for sure the correct addresses that they may use in their operations including application submitted to the authorities, invoices issued to clients, or contracts.

No clear process and framework for transferring the assets and liabilities of discontinued authorities to their successors.

The National Assembly and the Government did not establish clear process on how the discontinued authorities should transfer to their successors. The Law on Organisation of Local Government 2025 generally provides that by 30 June 2025, the district level Government agencies must compete the transfer of tasks, documents, financials, budget, and assets to “competent authorities” to ensure normal and smooth operation of the Government authorities. In addition, the National Assembly delegates the provincial People’s Committee to be in charge of providing guidance for the transfer of assets to the succeeding authorities. Several issues may arise from these general provisions:

First, the succeeding authorities are only authorized to commence operation on 1 July 2025. Therefore, it is not clear how the succeeding authorities could receive the transfer of assets and documents by 30 June 2025.
Second, many provincial People’s Committees have been restructured themselves and may not be in the position to provide the necessary guidance. It would have been better if the Government and other central Government authorities who are not undergoing restructuring will provide an unified framework for the transfer of assets, works and documents from the discontinued authorities to their successors.
Third, the Law on Organisation of Local Government 2025 is silent on the transfer of contracts and liabilities of the discontinued authorities. Under the Civil Code 2015, if a legal entity ceases to exist then the contracts or liabilities of such legal entity may also cease to exist. Provincial people’s committees or district people’s committees including their departments could be parties to contracts (such as land lease contracts, BOT/BT contracts, local bonds, and other ordinary contracts) and could owe certain other entities or individuals. To protect the rights of the counterparties to such contracts, the National Assembly and the Government should clarify who will take over these contracts and liabilities.

No clear guidance on the validity of licences, permits and regulations issued by the discontinued authorities

The National Assembly and the Government do not make clear whether licences and permits issued by the discontinued authorities will continue to be effective. While this is a logical approach, a clear statement to this effect would be useful. Similarly, it is not clear if the regulations and rules issued by the discontinued authorities will continue to be effective or if they will be replaced by the same regulations and rules of the succeeding authorities (if any).

Conclusion

In conclusion, the ambition of Vietnam's governmental reform is clear, but the legal framework for its transition is not. The current gaps in defining boundaries of certain localities, succeeding assets and liabilities, and affirming permits may create a climate of uncertainty. Bridging these gaps with prompt and decisive government action is crucial to realizing the reform's objectives and ensuring continued operational stability for all stakeholders.

This post is written by Nguyen Quang Vu.

Vietnam Business Law