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Question :: I am a member of the Supervisory Commission (the Commission) of a public company which is unlisted and termed from 2007 to 2010. Until now, my term is still valid. In 2009, I was [not] invited to attend any meeting of the company’s Commission. Recently, I also did not attend the Commission’s meeting to produce the Commission’s Report for submission to the General Shareholder’s Meeting (the Meeting) year 2010 on April 9. I was informed that this Commission’s Report was built by the Commissions’ Director (the another member of the Commission also did not attend). I would like to ask you whether the operation of the Commission like that is legal or not? Is the Report mentioned above legal? What should I do to comply with the rights, duties and obligations of a Commission’s member?
Question :: I am a president of the Management Board (“the Board”) of a public company. As per regulations, the term of the Board, Supervisory Commission (“the Commission”) is five (5) years. Therefore, the first term of the Board, Commission is due on November 2010. However, in order to facilitate the voting of the Board, the Commission in the second term, the Board would like to submit the General Shareholder’s Meeting (“the Meeting”) with the latest on April 19, 2010 for renewal of the first term of the Board, the Commission until April 2011. So, the question is that is the renewal true or not? If the shareholders are not taken opinions directly at the Meeting, can the Board collect opinions indirectly from shareholders in writing? If the Meeting does not pass the renewal, how can the voting of the Board, the Commission be taken in compliance with laws?
Question :: Our company registers shares at the Securities Depository Central (SDC), but cannot deposit, of which my 10.000 shares. So, can I transfer directly 2.000 shares to my brother and compliment 2.000 shares to my wife?

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PART VIII

TAXATION

Since the commencement of “Doi Moi” policy (1986), Vietnam taxation has been gradually adopted in line with promoting investment and with the international practices. The current tax policy, which is intended to follow the non-discrimination principle for taxing income regardless of whether the tax payer is a Vietnamese or foreign national, has been become more transparent.
Up to October 2009, Vietnam has concluded 58 Double Taxation Avoidance Agreements, 45 among which are in force. Accordingly, foreign individuals and enterprises are entitled to income tax exemption, reduction or refund subject to satisfaction of the conditions set forth in those agreements signed as well as the procedural requirements of Vietnam tax bureau.
Meanwhile, natural and legal entities, or goods and services as the case may be, from either the member countries of WTO or ASEAN Free Trade Area (AFTA) may enjoy tax incentives as provided in the schedules and regulations in the relevant treaties.
The current tax system of Vietnam includes the following key taxes:

1.Corporate Income Tax (“CIT”)

a. Scope of application

The current law governing corporate income tax is the Law on CIT adopted on 03 June 2008 which became effective on 01 January 2009. This Section addresses only the CIT imposed on enterprises established under the law of Vietnam (Vietnamese Enterprises). CIT on incomes derived from Vietnam by those companies incorporated in foreign jurisdictions (Foreign Enterprises) is discussed in Section 3-Foreign Contractor Tax. Taxable income of Vietnamese Enterprises consists of worldwide incomes from: Business activities; and̀ Capital assignment, real estate transfer; employment of ownership, use, transfer, lease and liquidation of properties; interest on deposit, loans, or sales of foreign currency, etc.

b. Tax calculation

CIT payable is equal to taxable income (minus the deductible expenses) multiplied by tax rate.

c. Tax rates

The standard tax rate has been reduced to 25% as of 1 January 2009. Businesses in the exploitation of petroleum and other certain rare resources shall be subject to the tax rates ranging from 32% to 50%.

d. Tax incentives

Below are tax incentives granted to investors in socio-economic difficult areas or in certain encouraged businesses: A preferential tax rate of 10% or 20% available in a given period or for goods; Tax exemption in a given period commencing upon the generation of profit and 50% tax reduction available for the following years. Additional tax reduction is provided if the enterprises employ: Employees from minorities; or A large number of female employees for the production, construction or transportation business.

e. Declaration and Payment

Every enterprise shall declare and pay its CIT in advance on a quarterly basis and finalize it at the end of the fiscal year.

2.Value Added Tax (“VAT”)

a. Scope of application

The new Law on VAT ratified on 03 June 2008 and effective on 01 January 2009 governs goods and services which are produced, traded or consumed in Vietnam. The VAT described in this section applies to Vietnamese Enterprises and resident individuals in Vietnam. With regard to Foreign Enterprises and non-resident individuals VAT shall be discussed in Section 3-Foreign Contractor Tax.*

b.Tax calculation

Tax amount shall be calculated based on deduction method, equivalent to the difference between the VAT output and input. The deduction is allowable upon the presence of adequate input VAT invoices and the bank transfer note of any payment of more than VND20,000,000.

c.Tax rate

There are 3 tax rates available for calculating output VAT on the selling price:- 0% on goods and services exported or deemed to be exported; 5% on goods and services crucial to public welfare and economic industries, namely education, health care, agriculture, sciences and technologies; 10% on the others.

d. Declaration and Payment

VAT shall be declared and paid on a monthly basis.

3.Foreign Contractor Tax

a.Scope of application

Foreign contractors are foreign enterprises and foreign individuals, either residents or non-residents. Foreign contractors are liable for Foreign Contractor Tax, including CIT and VAT, for provision of goods and/or services in Vietnam. Individual foreign contractor shall pay his/her Personal Income Tax (PIT)* instead of CIT under the Law on PIT

b. Tax calculation

Two methods are provided for Foreign Contractor Tax calculation. (i) CIT and VAT shall be calculated, declared and paid in the same manner introduced in Sections 1 and 2 in this Part if a foreign contractor:- maintains a permanent establishment/residence in Vietnam; executes the contract in Vietnam for 183 days or more; and adopts Vietnam accounting system. (ii) Otherwise, Foreign Contractor Tax shall be determined at fixed rate of the contractual price. Specifically, a VAT rate is set at either 3% or 5% of the price of a certain provided service. CIT rates are deemed from 0.1% to 10% of the price of the taxable goods and services respectively.

c. Declaration and Payment

The tax calculated under the second method shall be declared, withheld and paid by Vietnamese party to the contract on the contractor’s behalf.

4.Tax on transfer of capital and/or securities

The transfer of capital and/or securities is subject to tax stipulated in either the Law on PIT or the Law on CIT at the following tax rates:

a. Tax rate

Taxable payer	Tax rate
	Capital transfer	Securities transfer
Enterprises applying Vietnamese accounting system	25% net profit
Resident individuals applying Vietnamese accounting system	20% net profit	20% net profit; or 0.1% income
Others	0.1% income

b. Declaration and Payment

Individuals and enterprises maintaining Vietnamese accounting system shall conduct the tax declaration and payment upon each income gained. The tax of other individuals and entities will be declared, withheld and paid by the income payers on the former’s behalf in the same manner stipulated in laws on Foreign Contractor Tax and PIT.

5.Import – Export Duties

a. Scope of application

Cross-border purchase or sale of goods shall be imposed Import-Export Duties respectively.

b. Import Duty

Import Duty on each item is the multiplication of transaction price including freight and insurance costs at border gate and Import Duty rate. Import Duty rate is updated frequently and divided into three main categories as follows: Preferential tax rates available for goods from countries maintaining Most Favored Nation relations with Vietnam. Goods imported from WTO’s members shall be entitled to the preferential tax rate in accordance with WTO Commitments on goods upon accession of Vietnam. Special preferential rates available for goods from countries that have special preferential trade agreement with Vietnam, including ASEAN members, China, South Korea, Japan. Ordinary rates applicable to the rest, but not exceeding 70% of the preferential rate available to the same goods. The imported commodities are also subject to VAT and Special Sale Tax (if any).

c. Export Duty:

Taxable price is the contracted price exclusive of freight and insurance costs. Export tax rates vary from 0% to 45% levied on certain goods such as agricultural products, forest products, aqua product, mineral, etc.

d. Declaration and Payment

Upon each import-exportation, the importer or exporter is obliged to declare and pay tax unless the customs office permits the payment annually in a tax year.

6.Special Sales Tax (“SST’)

a. Scope of application

SST is imposed on special services and commodities including those imported as follows: Commodities: cigarettes, liquors, beer, automobiles with less than 24 seats, motorcycles with piton capacity of 125 cm3 or more, aero plane, boat, petrol, air-conditioners up to 90,000 BTU, playing cards, votive papers. Services: discotheque, massage, karaoke, casino, gambling jackpot, betting, golf clubs and lotteries.

b. Tax rate

SST is levied at different rates from 10% to 75% on each type of commodities and from 15% to 40% on services.

7.Natural Resources Tax

Businesses in exploitation of natural resources of petroleum, minerals, forests, fisheries and natural water are supposed to pay Natural Resources Tax. The tax rates vary depending on the type of resources and the capacity of exploitation, but are topped at 40%.

8.Personal Income Tax (“PIT”)

a. Scope of application

Determination of PIT payers regardless of their nationality is a crucial point of the new 2009 PIT Law. PIT is levied on the worldwide incomes of residents and Vietnam nationwide incomes of non-residents. A resident is: a person who is present in Vietnam for 183 days or more in a year or 12 consecutive months since arrival in Vietnam; or a person who has an permanent domicile in Vietnam, a registered permanent residence or a leased lodging with the lease term of 90 days or more in the tax year; A non-resident is any person who does not meet the above conditions.

b. Tax deductions

The following items shall be deducted from the taxable income: Contribution to Compulsory social and health insurance; Donation to charity funds legally formed in Vietnam; Tax allowances: VND4,000,000 per month for taxpayer and VND1,600,000 per month for each taxpayer’s eligible dependant.

c. Tax rate

Business and employment income of residents is subject to the marginal tariff with the rates varying from 5% - 35%. Non-residents shall find their business income taxed at a variety of rate, i.e. 1%, 2% or 5%, specified for certain type of businesses and employment income at flat rate of 20%. Please refer to the tables at Index I for specific PIT rates.

d. Declaration and Payment

PIT shall be declared and advanced upon each payment and finalized at the end of the same tax year.

9.License Tax

License Tax amounting to VND 1-3 million in proportion to the value of registered capital is payable annually by Vietnamese Enterprises.

10.Stamp Duty

Individuals and organizations shall be charged Registration Fee when registering the title of land use right or ownership of constructions, means of transportation (namely airplanes, boats, automobiles, motorcycles) and guns. The payable amount varies from 0.5% - 15% of the transaction price of the asset (in corresponding to the type thereof).

PREFACE

PART I. INVESTMENT LEGISLATION IN VIETNAM

PART II. ROADMAP OF OPENING VIETNAM SERVICE MARKET UNDER WTO COMMITMENTS

PART III. MERGER AND ACQUISITION IN VIETNAM

PART IV. INTELLECTUAL PROPERTY LAW AND TECHNOLOGY TRANSFER

PART V. LABOR

PART VI. BANKRUPTCY OF ENTERPRISE

PART VII. COMPETITION

PART VIII. TAXATION

PART IX. THE LAW ON LAND, REAL ESTATE AND CONSTRUCTION

PART X. FINANCIAL SERVICES

PART XI. DISPUTE RESOLUTION

PART XII. IMMIGRATION ISSUES

INDEX 1. DOUBLE TAX AVOIDANCE AGREEMENT ENTERED BY VIETNAM

INDEX 2. DOUBLE TAX AVOIDANCE AGREEMENT ENTERED BY VIETNAM

INDEX 3. FINANCIAL SERVICE MARKET

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Luat Viet

Advocates & Solicitors

“I don't need lawyers who win at all costs, I really need them to win, but calculate the costs.”

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