NEW REGULATIONS ON TRADING ACTIVITIES OF ECONOMIC ORGANIZATIONS WITH FOREIGN OWNED CAPITAL

On 15 January 2018, the Government promulgated Decree No. 09/2018/ND-CP detailing Law on Commerce and Law on Foreign Trade Management on activity of sale and purchase of goods and activities directly related to the sale and purchase of goods of foreign investors, economic organizations with foreign owned capital in Vietnam (“Decree 09”). This new Decree took effect from the date of promulgation and replaced Decree No. 23/2007/ND-CP (“Decree 23”).

Below are some noteworthy regulations under Decree 09:

 

ABROGATING LICENSES FOR IMPLEMENTATION OF EXPORT RIGHT, IMPORT RIGHT AND WHOLESALE RIGHT

Except for cases of implementing import right, wholesale right of lubricating oils and greases as stipulated in point b, clause 4, Article 9 of Decree 09, the economic organizations with foreign owned capital are not obligated to obtain trading licenses when implementing the export right, import right and wholesale right.

EXPANDING SCOPE OF ORGANIZATIONS WHICH MUST APPLY FOR TRADING LICENSE AND LICENSE FOR SETTING UP A RETAIL OUTLET, SCOPE OF GOODS AND SERVICES SUBJECTING TO TRADING LICENSE

Decree 09 expands the scope of organizations which may apply for Trading License to include foreign investors not belonging to countries, territories participating in international treaties to which Vietnam is a member and the scope of goods, services subjecting to Trading License to include the ones on which Vietnam has no commitments. The foreign investors must satisfy certain conditions corresponding to each of the aforesaid circumstances. Business duration for these cases is 05 years.

In addition, together with “economic with foreign owned capital”, Decree 09 stipulates that the economic organizations mentioned in points b and c, clause 1, Article 23 of Investment Law 2014 also have to meet requirements and apply for Trading License, License for setting up a retail outlet in cases where these licenses are requested. Specifically, they are organizations of which:

  • 51% or more of chapter capital is held by an economic organization(s) prescribed in point a of Article 23 (i.e. organizations of which 51% or more of chapter capital is held by a foreign investor(s), or a partnership has a majority of partners being foreign individuals in respect of economic organizations being a partnership) (point b, clause 1, Article 23);
  • 51% or more of chapter capital is held by a foreign investor(s) and an economic organization(s) prescribed in point b of Article 23 (point c, clause 1, Article 23).

Economic organizations having retail outlets in Vietnam, which become economic organizations with foreign owned capital or economic organizations stipulated in points b and c, clause 1, Article 23 of the Investment Law as a result of capital contribution, must apply for the Trading License and License for setting up a retail outlet.

TRANSFERRING AUTHORITY FOR GRANTING THE LICENSES TO DEPARTMENT OF INDUSTRY AND TRADE (DOIT)

 According to Decree 09, the licensing authority is DOIT, instead of provincial People’s Committees as stipulated in Decree 23. For some cases of granting the Trading License, DOIT must consult the Ministry of Industry and Trade (MOIT) and other relevant Ministries in advance. In respect of License for setting up a retail outlet, in any case, DOIT must consult MOIT before issuing or amending this license.

EXPANDING THE SCOPE OF EXPORT RIGHT

 

Besides goods purchased in Vietnam and goods legally imported into Vietnam, Decree 09 permits economic organizations with foreign owned capital to export goods which are processed in Vietnam under the order of such organizations, provided that certain conditions are satisfied.

HAVING TO APPLY FOR LICENSE TO SET UP THE FIRST RETAIL OUTLET

Different from Decree 23, Decree 09 stipulates that even for the first retail outlet, the economic organizations with foreign owned capital must apply for the license to set up this outlet and satisfy certain conditions. If the first retail outlet is in the same province/city with the head offices, such organizations are entitled to apply for the Trading License and the License for setting up the retail outlet at the same time.

For outlets other than the first one, if satisfying the following conditions, these outlets shall not be subject to economic need test (ENT): having area of less than 500m2, being in shopping centers and not being in the form of convenience stores or mini supermarket.

CHANGING DEADLINE FOR REPORTING AND FORM OF REPORT ON OPERATION

According to Decree 09, before 31 January every year, economic organizations with foreign owned capital must periodically make a report on the implementation status of the activity of sale and purchase of goods and activities directly related to the sale and purchase of goods in accordance with Form 13 attached to this Decree (previously, deadline for reporting is 30 January and there are 3 separate reporting forms). 

SUPPLEMENTING RIGHT TO TEMPORARILY SUSPEND BUSINESS

According to Article 44 of Decree 09, economic organizations with foreign owned capital are entitled to temporarily suspend the activity of sale and purchase of goods and activities directly related to the sale and purchase of goods in a period of not exceeding 12 months, provided that they must comply with provisions on temporary suspension of business and within 10 working days from the date of Certification of temporary suspension of business/return to business issued by the enterprise registration authority, they must send a copy of this Certification to the DOIT./.  

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