Decree No. 11/2016/ND-CP providing detailed regulations on foreign workers in Vietnam

On February 3, 2016, the Government issued Decree No.11/2016/ND-CP providing detailed guidance on a number of articles of Law No.10/2012/QH13 (“Labor Code”) regarding foreign workers in Vietnam. This Decree replaces Decree 102/2003/ND-CP dated September 5, 2013.

Cases in which foreign workers are exempt from work permits are defined and extended as follows:

  • Foreign workers who meet one of the criterias listed in Article 172 of Labor Code are exempted from work permits.
  • Certain foreign workers who are not listed in above mentioned Article 172 of Labor Code are also exempt from work permits. These exempted foreign workers include:
      • Workers who are internally reassigned within the companies that engage in one of the 11 service industries as defined in Vietnam’s WTO commitments on services. These 11 service industries are trading, communication, construction, distribution, education, environment, finance, health, tourism, culture and entertainment, and transportation;
      • Workers who obtained a license issued by the Ministry of Foreign Affairs to work in communication or journalism in Vietnam;
      • Unpaid foreign workers who have obtained a certification from a foreign diplomatic mission or an international organization in Vietnam;
      • Workers who enter Vietnam to hold a position as an expert, manager, chief executive officer or technician for a period of 30 days or less and the total working days in Vietnam is 90 days or less per year;

Foreign experts are defined as individuals holding a university degree or higher and with a minimum of 3 years of working experience. This experience requirement is reduced from 5 years to 3 years under this Decree.

In most cases, work permit exemption confirmation needs to be obtained at least 7 working days before commencement of work. The exemption confirmation is valid for 2 years.

Certain cases in which foreign workers are required to re-apply for a work permit include the following:

  • When a foreign worker who is a holder of an unexpired work permit wants to enter into an employment contract with another employer for a job position which is equivalent to the one defined in his/her unexpired work permit in accordance with the law.
  • When a foreign worker who is a holder of an unexpired work permit wants to hold another job position which is different from the one defined in his/her unexpired work permit, but under the same employer, in accordance with the law.
  • When a foreign worker whose work permit expires as regulated in Article 174 of the Labor Code wants to continue his/her employment at the job position which is the same of the one defined in his/her work permit in accordance with the law.

This Decree comes into force on April 1st, 2016.


Circular No.20/2016/TT-BTC providing guidelines on financial management regime on insurance

On February 3, 2016, Ministry of Finance issued Circular No. 20/2016/TT-BTC (Circular No. 20) guiding on financial management regime and management fee on social insurance, health insurance and unemployment insurance (SHUI).

According to Circular No. 20, interest on late payment is calculated using the following formula:

Interest = Accumulated late paid insurance balance by the end of 2 preceding months subject to calculation x Monthly interest rate

Monthly interest rate is the monthly average interest rate determined by Vietnamese Social Insurance which is published at the beginning of the year as regulated in Point c, Clause 3 of Article 6 in Decision No. 60/2015/QDD-TTG. The Company is subject to late payment interest starting 2 months after the incidence of late payment. The interest expense needs to be calculated each month thereafter and needs to be accumulated up to the actual payment date in order to calculate interest payable balance.

Circular No. 20/2016/TT-BTC comes into force on March 20th, 2016.


Guidance on corporate income tax incentives

According to Circular No. 21/2016/TT-BTC which becomes effective on April 1, 2016, an enterprise will enjoy CIT incentive retrospectively from January 1, 2015, if its income from manufacturing ancillary products meets all of the following conditions:

– The projects are subject to Law No.71/2014/QH13 (Law No. 71) and other supporting regulations of this Law No. 71.

– The Company obtained a confirmation of CIT incentive for ancillary products which allows the enterprise to apply CIT incentive to income from applicable ancillary product manufacturing projects.

The procedure how to obtain a confirmation of CIT incentives and how incentive post reviews are performed for ancillary products manufacturing projects follows Circular No. 55/2015/TT-BTC. In order to get a confirmation, the project needs to be proved to fall in one of the categories listed in the list of ancillary products regulated by Decree 111/2015/ND-CP dated November 3, 2015

The incentive rate, effective period of CIT incentive and timing for transition are determined in accordance with Laws on corporate income tax.

If an enterprise conducts business activities in many projects during the period it is allowed to take CIT incentives, the enterprise is required to separate income from ancillary product project from others in order to take CIT incentive only on applicable income from ancillary product production activities.