[Q&A] Applying Labor discipline: Some key issues

During the enterprise’s operation, there is often a part of employees that do not comply with the enterprise’s labor internal regulations rules. For the purpose of creating favorable conditions for employers in managing the labor source and maintaining stability in enterprise business activities, current labor legislation allows employers to issue labor internal regulations and apply sanctions to their employees for violations of regulations. This is one of the fundamental rights of the employer in the labor relation. However, the application of these rights must be within legal framework and in case it contravenes the legal framework, the application of discipline on employees will be considered illegal. Q: What labor disciplinary measures can enterprises apply as per the current law? A: According to the current law, labor discipline is the regulations on compliance in respect of time, technology, production, and business management promulgated by the employers in the labor internal r

Issuing and registering internal labor regulations

Internal Labor Regulations (hereinafter referred to as “ILRs”) is a document issued by an employer, in which its provisions create grounds for employment relationships that employees must implement. According to the Labor Code 2019, ILRs have the following main characteristics: (i) having a form of a document or other forms depending on the number of the enterprise’s employees; (ii) having statutory essential contents and other contents do not breach the laws; (iii) the ILRs must be registered at a competent state authority; and (iv) being one of the grounds for the enterprise to take employees under disciplinary and material responsibilities during their employment. According to the regulations of the employment laws, it is mandatory for an employer has more than 10 employees to issue ILRs in writing and carry out the procedures for registration the same with a competent labor-specializing management agency of the Provincial People’s Committee for the  ILRs  to be valid. Employers who

Frequent legal compliance issues of enterprises in Vietnam

In the course of advising enterprises in Vietnam for their business and conducting legal due diligence on target companies in M&A transactions, we found some legal issues below that many enterprises in Vietnam are frequently involved in. These legal issues construe administrative violations by the Company which are subject to certain fines and sanctions under the relevant regulations. Not making capital contribution in full Under Law on Enterprise 2020, the owner/shareholders/members of a company (hereinafter collectively referred to as “shareholders”) are required to make a capital contribution in full as registered within 90 days from the date of issuance of the enterprise registration certificate. If the shareholders do not contribute capital on time, then the company shall register the actually contributed capital with the licensing authority within 30 days after the deadline of capital contribution. If the Company fails to register the change of capital, the Company shall be s

Taxes applied to share acquisition transaction in a joint-stock company in Vietnam

Acquiring shares in a Vietnam-owned company is one of the most-chosen forms of investment in Vietnam. In general, tax implications of the share acquisition are different from the one of newly set up a foreign-invested enterprise in Vietnam. Typically, a foreign investor (the “ Investor ”) may acquire shares in a joint-stock company in  Vietnam  (the “ Target Company ”) by either (i) purchasing shares from the existing shareholders (the “ Seller ”) of the Target Company or (ii) subscribing new shares that are privately issued and allotted by the Target Company to the Investor or (iii) the combination of the said methods. Subject to the type of the share acquisition transaction, the taxes applied may be diverse. Share transfer If the share acquisition transaction is conducted in the manner of transferring shares from the Seller to the Investor, the Investor is not required to pay any tax to Vietnamese authorities. Transferring shares in a joint-stock company is considered as a transfer o

Structural debt, bad debt and enterprise debt trading

1. State policy in promoting the settlement of bad debts According to the report of the Government and the State Bank of Vietnam submitted to the National Assembly at the 3rd Session, the 15th National Assembly, as of December 31, 2021, that is, after nearly 5 years of applying Resolution 42/2017/QH14, the total the number of bad debts that have been handled reached VND 380.2 trillion, equivalent to 47.9% of the bad debts at the time of issuing Resolution 42 on August 15, 2017. In which, 40% of the total bad debt, equivalent to VND 148 trillion has been resolved due to self-payment by clients and the remaining 60% has been resolved through the application of pilot solutions to handle bad debts specified in Decree No. 42, such as selling bad debts and security assets at market value, exercising the right to seize security assets, transferring security assets which are real estate projects... Thus, there are still about 52.1% of bad debts have not been completely resolved after nearly

Business areas prohibited under the laws of Vietnam?

"Enterprises are free to do business in any business areas that are not prohibited by law" is one of the rights of the enterprises recognized in the applicable Law on Enterprise. What are the prohibited business areas which the foreign investors should be aware of when they make plan to invest in Vietnam?  1. Prohibited bussiness areas  According to Article 6 of the applicable Law on Investment, there are 8 prohibited business areas, including:  Trade in the narcotic substances The prohibited narcotic substances are specified in Appendix I of the Law on Investment 2020, including 47 types, which can be followed by typical narcotics substances: Cetorphine, Acetyl-alpha- methylfenany, Alphacetylmethadol, Alpha-methylfentanyl, Beta-hydroxyfentanyl, Brolamphetamine, Cannabis and cannabis preparations, Heroine, opium and opium preparations…  Trade in the chemicals and minerals According to Appendix II of the Law on Investment 2020, there are 18 types of 

Businesses must digitally connect with the tax authorities

The Ministry of Finance has just published a draft circular guiding the implementation of the Law on Tax Administration and Decree No. 123/2020/ND-CP concerning invoices and records. One of the important contents in this draft circular is that cash registers of restaurants, cafes, hotels,… will digitally connect with the tax authorities from July 1, 2022. Specifically, organizations and individuals (excluding contracted households) perform activities in the fields of: commercial centers, supermarkets, restaurants, hotels, retail of modern medicines, entertainment services, retail agent of consumer goods, providing goods and services directly to the consumers... will use authenticated e-invoice generated from the cash register digitally connected with the tax authorities. Authenticated e-invoice means an e-invoice that is granted an authentication code by the tax authorities before it is sent to the buyer by the goods seller or service provider. The authentication code on an e-invoice i