Decree No. 09/2018/ND-CP (“Decree No. 09”), which is issued and came into force on 15 January 2018, superseded Decree No. 23/2007/ND-CP detailing the Commercial Law on international goods sale and purchase and related activities of foreign invested enterprises (“Decree No. 23”).
Below are some new features introduced by the Decree:
- Import, Export, and Wholesale Distribution Activities is no longer subject to Business Operation License
According to Decree 09, FIEs are now allowed to import and wholesale distribute the goods and products without obtaining the separate Business Operation License, provided that these goods and products are not in the list of products/goods prohibited from being imported and distributed in Vietnam. The exception of this regulation is importation and wholesale distribution of lubricant products, which will be granted with right to import/wholesale on a case by case basis and will be subject to a Business Operation License.
Additionally, for the right to export, foreign invested enterprises are not required to apply for a Business Operation License. Instead, foreign invested enterprises only need to amend their IRC and ERC.
- Expand the scope of Business Operation License
Decree No. 09 now clearly requires the application for Business Operation License for the following business activities:
- Retail Distribution;
- Import and Wholesale Distribution with respect to lubricants;
- Logistics services, except those as committed in applicable international treaties;
- Goods leasing (financial leasing not included), except leasing of construction equipment with operators;
- Trade promotion services, except advertising services;
- Trade intermediation services;
- E-commerce services; and
- Bidding organizing services for goods/services.
The above regulations introduce administrative burdens for investors engaging in trade promotion services, trade intermediation services and e-commerce services, when such services are now subject to a Business Operation License. For example, e-commerce platforms previously were not required to obtain sub-permits, other than the Investment Registration Certificate (“IRC”) and Enterprise Registration Certificate (“ERC”) and website registration with the MOIT. However, under Decree No. 09, enterprises hosting an e-commerce platform must obtain a Business Operation License.
In addition, together with “economic with foreign owned capital”, Decree No. 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 Business Operation License, Retail Outlet Establishment License 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 Business Operation License and Retail Outlet Establishment Licenses.
- Expand the list of goods to be distributed in Vietnam by foreign invested enterprises
Under its WTO commitments, Vietnam does not need to grant distribution rights to certain commodities to foreign invested enterprises. Under Decree No. 09, the Vietnamese government allows the granting of distribution rights of such commodities to certain foreign invested enterprises. Particularly, for lubricants, import rights and wholesale distribution rights, subject to appraisal, may be granted to foreign-invested enterprises who conduct manufacturing of lubricants in Vietnam,or manufacture/distribute machines/equipment which require the use of specialized lubricants.
Rice, sugar, media recordings, books, newspapers/magazines, foreign supermarkets, and convenience stores may receive retail distribution right, subject to appraisal.
- Expanding the Scope of Export Right
Besides goods purchased in Vietnam and goods legally imported into Vietnam, Decree No. 09 permits economic organizations with foreign owned capital to export goods which are processed in Vietnam under the order of such organization s, provided that certain conditions are satisfied.
- Delegation of the licensing authority with respect to Business Operation License to Department of Industry and Trade (“DOIT”)
The provincial DOITs shall be the authorities in charge of issuing, amending and revoking Business Operation Licenses and Retail Outlet Establishment Licenses, instead of the Department of Planning and Investment. The DOITs shall collect in-approvals of the Ministry of Industry and Trade (“MOIT”) and relevant authorities, if so required, for each application dossier.
- Having to apply for license to set up the first retail outlet. Economic Need Test (“ENT”) is still highly regulated
Under the Decree No. 09, the first retail store must be granted a separate Retail Outlet Establishment License, although the first retail store is not subject to ENT.
Then, ENT still applies to the second retail outlet onwards. Further, Decree No. 09 expands the scope of retail outlets subject to ENT by stating that ENT is only exempted if a proposed retail outlet is less than 500 m2 and located in a trading center, and is not mini-supermarket or convenience store. While the first 2 conditions are the similar to those in Decree No. 23 and its implementation guidance, the last condition is newly introduced in Decree No. 09, and will increase targeted regulation on many retail supply chains. Furthermore, the provincial people’s committees are empowered to administer the ENT via an ENT Committee.
- Changing Deadline for Reporting and Form of Report on Operation
According to Decree No. 09, before 31 January every year, FIEs must periodically make a report on the implementation status of the activity of sale and purchase of goods and directly related activities in accordance with one reporting form. Previously under Decree No. 23, deadline for reporting is 30 January and there are 3 separate reporting forms.
- Right to Temporarily Suspend Business
According to Article 44 of Decree No. 09, FIEs are entitled to temporarily suspend the activity of sale and purchase of goods and directly related activities 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.
- Our recommendation
At now, yet implementation and guidelines for this Decree No. 09 are issued by the competent authorities to resolve some unclear points as well as determine the co-opearation between relevant authorities such as Department of Planning and Investment and Department of Industry and Trade on issuance and contents of Business Operation License. We highly recommend our Clients to closely working with the advisor for keeping updated promptly.