March 2014 - Vietnam Laws

March 2014 edition
Further guidance on
electronic gaming for
foreign gamers
3
In brief: In this edition we cover a new circular on valuable
papers issued by credit institutions, as well as new
regulations on capital accounts for foreign indirect investment.
We also discuss further implementing regulations on
electronic gaming, as well as a recently issued circular on
foreign workers in Vietnam.
Capital accounts
becoming more
5
Visit www.vietnamlaws.com
contents
Issue of valuable
papers by credit
2
institutions
prominent for indirect
investors
Implementing details for
work permits for
foreigners
7
New legal instruments
9
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© 2014 Allens – Vietnam Laws
March 2014
1
Issue of valuable papers by credit institutions
Circular 34/2013/TT-NHNN dated 31 December 2013 on the regulation of the issue of promissory notes,
bills of exchange, deposit certificates and bonds of credit institutions (Circular 34)
Background
The State Bank of Vietnam (SBV) issued Circular 34/2013/TT-NHNN on the regulation
of the issue of promissory notes, bills of exchange, deposit certificates and bonds of
credit institutions on 31 December 2013 (Circular 34). Circular 34 replaces Decision
07/2008/QD-NHNN (Decision 07) on the regulation of the issuance of valuable papers
of credit institutions dated 24 March 2008 (as amended by Circular 19/2009/TT-NHNN
dated 11 August 2009). Circular 34 took effect on 14 February 2014.
What are Valuable Papers?
Under Circular 34, the types of valuable papers that may be issued by a credit institution
and a foreign bank branch include promissory notes, bills of exchange, deposit
certificates and bonds. These all share the common characteristic that they are a
certification of the debt repayment obligation from the credit institution to the holder of
the valuable paper over an agreed fixed term with conditions on interest payment and
other conditions.
Key Changes
While Circular 34 does not introduce many substantial changes to Decision 07, key
changes include:
•
Credit institutions and foreign bank branches can only issue valuable papers in
Vietnamese dong. Decision 07 previously permitted credit institutions to issue
valuable papers in foreign currency. That said, if a credit institution would like to
issue corporate bonds in foreign currency it may issue international bonds to the
international market pursuant to Decree 90/2011/ND-CP of the Government on
Enterprise Bonds dated 14 October 2011.
•
There is no formal distinction between short term valuable papers and long term
valuable papers. Under Decision 07, short term valuable papers with a term of
less than one year included promissory notes, short term deposit certificates
and bills of exchange. Therefore, under Circular 34 it would appear that a credit
institution can set the term of the different types of valuable papers. However,
bonds must still have a term of one year or more.
•
Circular 34 limits the participants that can purchase valuable papers in the
primary market. Credit institutions, foreign bank branches and subsidiaries of
credit institutions cannot participate in the primary market for the acquisition of
valuable papers issued by a credit institution or a foreign bank branch. Foreign
organisations and individuals as well as domestic organisations and individuals
may participate in the primary and secondary markets.
© 2014 Allens – Vietnam Laws
March 2014
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•
Reporting of the results of the issuance of valuable papers occurs every quarter.
Under Decision 07, credit institutions were obliged to provide the SBV with
advance notice prior to the issuance of short term valuable papers. This is not
required under Circular 34. However, SBV approval for the issue of bonds is still
required before the bonds are issued.
Further guidance on electronic gaming for foreign gamers
Circular 11/2014/TT-BTC dated 17 January 2014 guiding electronic game business devoted to foreign
gamers (Circular 11)
Following the issue of Decree 86/2013/ND-CP on electronic gaming for foreigners
(Decree 86), which was discussed in our August 2013 edition, the Ministry of Finance
recently issued Circular 11 to provide guidance on the operation of electronic gaming
businesses.
Number and type of gaming machines
As noted in our August 2013 issue, an enterprise which conducts the business of
electronic gaming must obtain a 'certificate of satisfaction of conditions for a gaming
business ' (in addition to an investment certificate) (SC Certificate). The SC Certificate
will reflect the type and number of gaming machines that an enterprise is permitted to
have. Circular 11 lists the following seven types of gaming machines which an
enterprise is permitted to operate:
1
coin slot machines;
2
roulette;
3
automatic baccarat;
4
electronic blackjack;
5
sic bo or tai xiu machines;
6
horse racing and mahjong; and
7
poker machines.
Items 2-7 above are expressed to be permitted only if they are completely automated
and do not require participation by members of staff.
The total number of gaming machines of the enterprise must not exceed the permitted
number stipulated in the SC Certificate. In addition, the number of gaming machines
belonging to each of categories 2-7 above must not exceed 15% of the total number of
gaming machines operated by the enterprise. No maximum percentage is applied to
coin slot machines.
Circular 11 also requires the enterprise to lodge a report to the Ministry of Finance, local
Department of Finance, local Department of Culture, Sport and Tourism and local
Department of Taxation, describing the total number and type of gaming machines,
including the ratio of each type, within 5 business days from the date of commencement
© 2014 Allens – Vietnam Laws
March 2014
3
of operation. Any variation in the number and type of each machine must also be
reported to each of these Departments and Ministries.
Origin and verification of gaming machines
Circular 11 introduces new and stricter requirements on the origin and verification of
gaming machines. These new measures require machines to be supplied by a licensed
producer/supplier of gaming machines, and independently verified by an independent
verification organisation. Each producer/supplier and independent verification
organisation must be licensed to operate in Macau, as announced by Macau's Gaming
Inspection and Coordination Bureau on its website from time to time. The Vietnamese
enterprise engaged in electronic gaming must keep all relevant documents of the
producer/supplier and the independent verification organisation verifying these
requirements, and must provide these for inspection by local authorities from time to
time.
Back-up equipment for gaming machines
Enterprises licensed with an SC Certificate are permitted to purchase back-up
equipment for gaming machines. The following items are permitted to be purchased for
replacement where necessary:
•
Screens;
•
Cash and token receipt systems;
•
Prize payment systems;
•
Archiving systems; and
•
Circuit boards.
All back-up equipment must be 100% new and cannot exceed 10% of the number of
gaming machines operated by the enterprise for which that item of back-up equipment
would be used.
Where back-up equipment is used by an enterprise to replace items in gaming
machines, that enterprise must keep detailed records specifying the type of gaming
machine, the type of equipment and the reason for replacement.
Procedures to obtain an SC Certificate
Circular 11 sets out detailed procedures on how to obtain a new SC Certificate, and how
to amend, re-issue or extend an SC Certificate.
Accounting system and reporting
Each enterprise operating electronic gaming equipment must conduct separate cost
accounting for revenue, expenses and profit of its gaming business, and must
separately monitor items related to the gaming business in its system of accounting
books and financial statements.
Circular 11 also requires an enterprise to submit to local bodies the following reports (in
addition to its financial statements) on a quarterly and annual basis:
© 2014 Allens – Vietnam Laws
March 2014
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•
Report on the number and type of gaming machines;
•
Report on the purchase, use, re-export or destruction of equipment of gaming
machines; and
•
Report on the status of operation of the gaming business of the enterprise.
Despite the lack of official recognition of casino businesses in Vietnam, at least in
respect of Vietnamese customers, Circular 11 indicates a potential increase in the
Vietnamese government's support of certain types of electronic gaming. However, these
regulations continue to apply only in respect of foreign players.
Circular 11 took effect on 15 March 2014.
Capital accounts becoming more prominent for indirect investors
Circular 05/2014/TT-NHNN dated 12 March 2014 guiding the opening and use of indirect investment capital
accounts for indirect investment activities in Vietnam (Circular 05)
As our regular readers would be aware, issues related to capital accounts have been
1
discussed in many of our previous editions of VLU. However, the regulation of capital
accounts is still a developing area of law, as can be seen in Circular 05, recently issued
by the State Bank of Vietnam.
A brief summary of Circular 05
Circular 05 provides that all transactions relating to indirect foreign investment in
Vietnam by foreign investors must be conducted in Vietnamese dong (VND) via one
indirect capital account held by the foreign investor at one authorised bank. Indirect
foreign investment as defined by Circular 05, inter alia, covers the activities of capital
contribution, purchase and sale of shareholding and capital contribution proportion in
Vietnamese company, without directly involving in management of such company.
Moreover, such definition also covers the purchase and sale of bonds and other types of
securities on the Vietnam security market.
Additionally, the balance of a foreign investor's indirect capital account is not permitted
to be converted into a term deposit or savings deposit at a credit institution. If an
investor wishes to remit overseas capital, profit and other lawful income gained from
indirect investment activities, it is entitled to use the VND in its capital account to
purchase foreign currency at an authorised credit institution and remit such foreign
currency amounts abroad.
Circular 05 also stipulates that, it is possible for a foreign investor to conduct direct and
indirect investment activities in parallel. In this case, if the direct investment also
requires the investor to have a capital account, the foreign investor then must maintain
both a direct and an indirect capital account and use each account as appropriate.
1
See June 2009, August 2009, October 2010 and October 2011.
© 2014 Allens – Vietnam Laws
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Circular 05 will take effect from 28 August 2014 and replace Circular 03/2004/TT-NHNN
(Circular 03). Within 90 days from the effective date, foreign investors must commence
use of an indirect capital account in order to conduct their indirect investment; otherwise,
they will not be allowed to continue their current activities.
Stricter requirements for capital accounts
There are restrictions in the foreign exchange regulations that are designed to ensure
tax is paid before moneys may be remitted off-shore; which is assisted by the
requirement that sale proceeds be paid via Vietnamese accounts. It should, therefore,
be expected that the Vietnamese government tends to support the idea of a capital
account as a compulsory condition of the purchase of shareholding by foreign investors.
As in other previous regulations, such as Decision 88/2009/QD-TTg of the Prime
Minister dated 18 June 2009 and Circular 131/2010/TT-BTC of the Ministry of Finance
dated 6 September 2010 on capital contribution and share acquisition of foreign
investors in Vietnamese enterprises, foreign investors must have a capital account at a
licensed bank in Vietnam before acquiring any shares or capital in Vietnamese
enterprises. However, these regulations do not clearly specify how such capital
accounts should be used by relevant parties in the process of share or capital
acquisition. Therefore, there had previously been situations in which foreign investors
opened various capital accounts at the same authorised bank or opened a capital
account at more than one authorised bank and then used such capital accounts in their
transactions. This situation has reduced the efficiency of control from the government
on the activities of foreign investors. Therefore, Circular 05 now clearly states that a
foreign investor must conduct its indirect investment via one capital account at one
authorised bank. Whilst in some cases, this requirement may make the indirect
investment process less convenient for foreign investors, it seems that the revision to
Circular 05 will be more likely to assist the government to maintain better control and
monitoring of the income and capital flow from the investments of foreign investors.
Possible actions for indirect foreign investors
As discussed above, a new point arising from Circular 05 is that it requires all
transactions relating to indirect foreign investment must be conducted via one capital
account only. Foreign investors, therefore, will need to begin making arrangements to
modify their current indirect investment activities, to the extent necessary, in order to
comply with the requirement to conduct all transactions via an indirect capital account
within 90 days of Circular 05 coming into effect.
Relevant regulations are silent on administrative penalties for failure to comply with the
requirement to use a capital account. However, although no administrative sanctions
are specified, investors should bear in mind that obstacles will likely nevertheless arise
when attempting to remit capital overseas, as the bank may require the evidence of
lawful indirect investment before it agrees to proceed with the overseas remittance. In
addition, under Decree 202/2004/ND-CP (as amended by Decree 95/2011/ND-CP) of
the Government dated 10 December 2004, which provides for Administrative Fines in
© 2014 Allens – Vietnam Laws
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the Sector of Financial and Banking Activities, a fine between VND50,000,000
(approximately USD2,380) to VND100,000,000 (approximately USD4,761) will be
imposed on a foreign investor for any remittance of foreign currency overseas or into
Vietnam contrary to the law.
Implementing details for work permits for foreigners
Circular 03/2014/TT-BLDTBXH dated 20 January 2014 detailing the implementation of Decree
102/2013/ND-CP on foreign employees working in Vietnam (Circular 03)
As outlined in our September 2013 issue, on 5 September 2013 the Government issued
Decree 102/2013/ND-CP on foreign employees working in Vietnam (Decree 102). In
January this year, the Ministry of Labour, War Invalids and Social Affairs issued Circular
03 which provides detailed guidance on the procedures for employing foreigners as well
as various relevant standard forms. The Circular, and its accompanying standard forms,
will be welcomed by companies that wish to employ foreigners but have been hampered
by the lack of detaileded guidance since the issuance of Decree 102. Circular 03 took
effect on 10 March 2014.
Procedures to obtain approval for use of foreign employees
As described in our September issue, Decree 102 requires that organisations or
individuals wishing to hire foreign employees, seek annual approval from the relevant
provincial People's Committee.
Circular 03 introduces requirements for non-contractor employers which are different
from those stipulated under Decree 102. Under Circular 03, approval must be sought at
least 30 days prior to the proposed recruitment date, and the approval is sought from
the Department of Labour, War Invalids and Social Affairs (DOLISA) of the province
where the employer is located. The employer must seek approval using the standard
form issued under Circular 03 which includes information on the working positions, the
number of people, the level of qualifications and experience, the salary level and the
duration of the jobs.
Any changes to the arrangements approved by DOLISA, for example recruitment of
foreigners to replace existing foreign employees, will be subject to further approval by
DOLISA.
It is not entirely clear how the requirement to report to DOLISA under Circular 03 fits
together with the requirement under Decree 102 for an employer to make a similar
report to the provincial people's committee. On the one hand, as DOLISA and the
people's committee are related authorities, it does not appear that approval from both
authorities should be required. However, other provisions of Circular 03 continue to refer
to letters of consent from the people's committee itself, as opposed to DOLISA,
supporting the possibility that an employer may need to obtain two separate approvals.
It may be that, in practice, a letter from DOLISA will be accepted in substitution of a
letter from the provincial people's committee. However, this remains to be seen.
© 2014 Allens – Vietnam Laws
March 2014
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Circular 03 also provides detailed implementing procedures to be followed by
contractors who wish to employ foreigners. These employers are subject to more
stringent requirements including providing advance notice of the requirement to recruit
workers.
Work permit details
In addition to providing a standard form application, Circular 03 provides further
clarification on the information required in an application for a work permit, including
specific information on the documents required to identify the necessary qualifications
for foreigners working in Vietnam.
The Circular also provides additional clarification on the duration of a work permit,
specifying that the duration shall not exceed the term defined in the initial approval from
the Chairman of the provincial People's Committee.
Re-issuance of work permit
Circular 03 sets out in more detail the circumstances and procedures for the re-issuance
of a work permit. One of these cases is where there is a change in the working location
of the foreign employee, which is defined in the Circular to mean that the foreign
employee is transferred, full-time, to a branch, representative office or other
establishment of the employer within the same province or city. Although not entirely
clear, it appears that if a foreign employee is transferred to a representative office or
branch of the employer in a different province to that stipulated in his work permit, the
employee will have to obtain an entirely new work permit.
Reporting obligations of employers
Circular 03 imposes two reporting obligations on employers. Firstly, within the first five
days of each quarter, the employer must submit a report on the status of foreign
employment in the previous quarter. The Circular provides a standard form for this
report.
Secondly, if a foreign employee is sent to work in another branch, representative office
or establishment of the employer, whether within or outside the province stipulated in
the work permit, for at least 10 days within one month or for a total of at least 30 days
within one year, the employer must report this to DOLISA.
© 2014 Allens – Vietnam Laws
March 2014
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Legal instruments recently uploaded on to the Vietnam Laws online
database
Vietnam Laws online database (available at www.vietnamlaws.com) is an online
searchable database containing English translations of more than 3,500 Vietnamese
laws. Legislation recently uploaded includes:
•
Circular 19 regulating purchase and sale of credit institutions' bad debts by
Vietnam Asset Management Company (VAMC), 6 September 2013
•
Joint Circular 44 regulating quality standards of domestically produced steel and
of imported steel, 31 December 2013
•
Decision 203 listing areas not subject to auction of mineral mining rights, 27
January 2014
•
Circular 16 dated 1 September 2010 on residential housing as amended by
Circular 03 (defining net use area of an apartment to calculate its purchase price,
and with a new Appendix 16 standard form contract for purchase and sale of an
apartment in a commercial development), 20 February 2014
•
Decision 366 approving the Plan on formation and development of the
Vietnamese derivative securities market, 11 March 2014
•
Circular 05 regulating opening and use of indirect investment capital accounts by
foreign investors, 12 March 2014
•
Circular 08 with general provisions on maximum interest rate for loans in certain
economic sectors, 17 March 2014
•
Decision 499 fixing maximum interest rate for loans in certain economic sectors
at 8%, 17 March 2014
•
Circular 07 with general provisions on maximum interest rate for raising VND
deposits, 17 March 2014
•
Decision 498 fixing maximum interest rate for raising VND deposits at 1% for oncall deposits and term deposits under one month, and 6% for term deposits of
one month to below 6 months, 17 March 2014
•
Circular 06 with general provisions on maximum interest rate for raising USD
deposits, 17 March 2014
•
Decision 497 fixing maximum interest rate for raising US deposits from
organizations at 0.25% and from individuals at 1%, 17 March 2014
•
Decision 496 fixing State Bank refinancing interest rate at 6.5%, discount interest
rate at 4.5%, and repo interest rate at 7.5%, 17 March 2014
•
Circular 02 dated 21 January 2013 regulating classification of debts and risk
provisioning by banks, as amended by Circular 09 dated 18 March 2014
© 2014 Allens – Vietnam Laws
March 2014
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•
Decision 24 on support and incentives for power generation projects using
biomass energy, 24 March 2014
•
Circular 12 regulating conditions for enterprises to borrow non-Government
guaranteed foreign loans, 31 March 2014
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March 2014
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