Monthly Legal Update - May, 2010

The Government issued Decree No 50/2010/ND-CP on May 14, including regulations pursuant to the Law on Natural Resources Taxation. Under the decree, in those cases in which the quantity of assessable natural resources output cannot be determined under Vietnamese measurement standards, the quantity shall be set by a fixed estimation.

The new regulations also detail how to determine taxable prices in some specific instances. The taxable price of timber, for example, shall be the selling price at the timber yard or logging site. The taxable price of any exploited natural resources sold in Viet Nam shall be the price before VAT, and that of exported resources the free-on-board (FOB) export price.

The decree takes effect on July 1 and replaces Decree No 05/2009/ND-CP of January 19, 2009, providing detailed regulations and guidelines on the amended Ordinance on Natural Resources Taxation and its amending ordinance.

Stricter rules to guarantee contractor performance

Contractual matters in construction projects with 30 per cent or more of their budgets coming from State capital will be governed by new regulations set forth in Government Decree No 48/2010/ND-CP issued on May 7 and effective on July 1.

The new decree replaces Decree No 99/2007/ND-CP of June 2007 and governs all types of contracts, including: contracts for providing construction consulting service; contracts for providing construction of works; contracts for procurement; contracts for engineering and construction; contracts for engineering and procurement; contracts for procurement and construction; contracts for engineering, procurement and construction; and turn key contracts.

The decree also includes a number of regulations applicable to contractor performance under contracts. Specifically, the contractor is either compelled to buy insurance to ensure its performance as well as insure onsite construction and equipment for a period of at least 24 months, with premiums equal to 3-5 per cent of the value of the contract. The contractor must also provide a guaranty of 10 per cent of the contract price.

New decree on management and use of invoices

The Government issued the Decree No. 51/2010/ND-CP on 14 May 2010 which abrogates the former Decree No. 89/2002/ND-CP on management and use of invoices.

Decree 51 made some changes to Decree 89 that enterprises and organizations that are satisfied conditions as required by laws to make up its own specimen invoices. Decree 51 has also allowed to use "electric invoices" which are produced on computers of enterprises in accordance with legal provisions on electric transactions.

Companies that are not permitted to use their own specimen invoice or electric invoices must purchase invoices issued by the provincial Taxation Departments.

Under the Decree 51, a transaction having total payment less than VND 200,000 shall not be obliged to issue invoices if there is no request from its customer. However, at the end of the day, the company must then issue an invoice reflecting the total retailing payments and stating "retailing without invoices" on the position of customer's name.

The Decree 51 also stipulates administrative penalties in this field, with the minimum of VND 1,000,000 and maximum of VND 100,000,000 in addition to certain supplementary sanctions.

This Decree shall take effect from 01 January 2011.

Foreign contractors to pay tax on interest

The Ministry of Finance issued Circular No 64/2010/TT-BTC on April 22, amending Circular No 134/2008/TT-BTC of December 2008 on tax obligations of foreign organisations and individuals doing business as contractors in Viet Nam.

The new regulation makes bond interest and interest on certificates of deposit subject to corporate income tax. The tax is to be computed and paid when the bonds or certificates are sold or transferred.

The circular takes effect on June 6.

Employment termination of civil servants

The Government issued Decree No 46/2010/ND-CP on April 27, governing employment termination procedures for civil servants. Under the decree, two cases of civil servant may enjoy termination allowances. The first is termination by personal expectation subject to the consent of employer (i.e., retirement). The second is termination of employment when the civil servant has failed to fulfill his or her duties in two consecutive years prior to termination, in accordance with provisions of the Law on Civil Service.

Upon employment termination, civil servants enjoy an allowance equivalent to a half their current monthly salary plus severance pay of one month's salary for each year of employment. The period shall be the total number of years the civil servant has participated in social insurance.

The decree also provides for cases in which the civil servant is rotated, detached, disciplined or subject to criminal prosecution, as well as cases in which the civil servant has not fulfilled financial obligations to its employer. The retirement of a civil servant is from the first day after the last month they are entitled to retirement in accordance with provision of the law.

The Decree takes effect July 1 and replaces conflicting provisions in Decree No 54/2005/ND-CP of April 2005 and Decree No 143/2007/ND-CP.