Continuing from Part 1 of this article, BLawyers Vietnam would like to present the following 16 FAQs about foreign contractors implementing construction investment projects in Vietnam (Part 2).
1. What the cases in which a construction operation license (“COL”) is revoked by the competent authorities?
The foreign contractor shall have their COL revoked in the following four cases:
- Forging documents in the application dossier for the COL; or
- Contents of the COL are corrected, erased or falsified; or
- The COL contains errors due to the issuing authority’s fault; or
- The COL was issued without proper authority.
2. Which agencies have the authority to revoke the foreign contractor’s COL?
The following agencies have the authority to revoke the foreign contractor’s COL :
- Department of Construction of the province where the foreign contractor is undertaking construction investment, or where the foreign contractor intends to establish its executive office if the construction investment projects spans two or more provinces; or
- If a COL was issued unlawfully and the competent Department of Construction does not carry out the revocation, the Ministry of Construction shall directly decide to revoke the COL.
3. What is the procedure for revoking a COL pursuant to Vietnamese laws?
The revocation of a COL is carried out in 03 steps as follows:
- Step 1: Within 10 days from the date of receiving the inspection conclusion from the construction authority, the competent authority shall issue a decision to revoke the COL. If the COL is not revoked, a written explanation shall be provided to the agency that makes the revocation proposal.
- Step 2: The competent authority sends the revocation decision to the foreign contractor; and forwards it to the investor and relevant agencies.
- Step 3: The foreign contractor whose COL is revoked shall return the original of such license to the authority that issued the revocation decision within 05 days from the receipt of the revocation decision.
4. What are the other procedures that a foreign contractor needs to carry out after obtaining a COL?
After obtaining a COL, the foreign contractor shall:
- Establish an executive office and register address, telephone, fax, email, seal, account and tax identification number of the executive office;
- Register and pay taxes, and conduct an accounting regime pursuant to Vietnamese law;
- Recruit and employ Vietnamese and foreign workers;
- Purchase insurance in respect of operation of the contractor; and
- Other procedures as prescribed by law.
5. What are the rights of the foreign contractor when implementing construction investment projects in Vietnam?
A foreign contractor has the following rights when implementing construction investment projects in Vietnam:
- Requesting guidelines from competent authorities on drafting applications for COL issuance and other related issues;
- Filing complaints and denunciations of violations committed by organizations or individuals prescribed by law; and
- Having legal rights protected when conducting business in Vietnam pursuant to the granted COL.
6. What are the responsibilities of investors and project owners to the foreign contractor implementing construction investment projects in Vietnam?
Investors and project owners have the following responsibilities to the foreign contractor implementing construction investment projects in Vietnam:
- Concluding the construction contract with the foreign contractor if the foreign contractor has been granted a COL;
- Instructing the foreign contractor to comply with relevant law provisions;
- Supporting the foreign contractor in preparing documents related to the construction work that the foreign contractor declares in the application for contractor permit and relevant procedures pursuant to Vietnamese law;
- Jointly registering with the foreign contractor for the export and import of materials, machinery and equipment related to the contract execution;
- Supervising the foreign contractor to ensure compliance with commitments outlined in joint venture contracts with Vietnamese contractors or in the use of Vietnamese subcontractors;
- Considering the availability of technical labor in Vietnam before agreeing with the foreign contractor on the list of foreign personnel;
- Confirming the statement of imported materials and equipment by the foreign contractor upon the construction completion; and
- Fulfilling other responsibilities as prescribed by law.
7. What taxes are applied to a foreign contractor when carrying out construction investment projects in Vietnam?
By law, a foreign contractor must fulfill their obligations regarding value-added tax (“VAT”), corporate income tax (“CIT”) or personal income tax (“PIT”), as well as other related taxes, fees and charges when engaging in investment and construction activities in Vietnam.
8. What are the cases in which a foreign contractor is not required to pay contractor tax pursuant to Vietnamese law?
A foreign contractor is not required to pay contractor tax in the following cases:
- Any foreign entity conducting business in Vietnam under the Laws of Investment, Petroleum, and Credit Institutions.
- Any foreign entity supplying commodities to Vietnamese entities without accompanying services, including delivery at both foreign and Vietnamese ports.
- Any foreign entity earning income from services provided and consumed outside of Vietnam.
- Any foreign entity providing services to a Vietnamese entity that are performed outside of Vietnam, including:
- Repairing of means of transport (including aircraft, aircraft engine, aircraft and ship parts), machinery and equipment (including submarine cables and transmission equipment), with or without spare parts; and
- Advertising and marketing (excluding advertising and marketing on the Internet).
- Any foreign entity using bonded warehouses or inland clearance depots (ICDs) as a warehouse serving international transportation, transit/ transshipment/ storage of goods to be processed by other companies.
9. What are the applicable tax rates for the tax obligations of the foreign contractor in Vietnam?
The foreign contractor in Vietnam has obligations with the following taxes:
- For VAT, the rate depends on the specific business sector and is either 2%, 3%, or 5%.
- For CIT, the rate depends on the specific business sector and ranges from 0.1% to 10%.
- For PIT:
- For the foreign contractors that are residents in Vietnam, the rate depends on the specific business activity and is either 0.5%, 2%, 1%, or 1.5%.
- For the foreign contractors that are non-residents in Vietnam, the rate depends on the specific business activity and is either 1%, 2%, or 5%.
10. Is the foreign contractor exempt from import tax on goods when implementing construction investment projects in Vietnam?
Yes, it is. If the construction project of the foreign contractor is eligible for investment incentives under the Law on Investment, the foreign contractor will be exempt from import tax on goods imported to create fixed assets, as well as raw materials, supplies, and components imported for production.
11. What are the regulations on the employment of labor by the foreign contractor when implementing construction investment projects in Vietnam?
The foreign contract must recruit and employ Vietnamese and/or foreign workers in accordance with Vietnamese labor law.
Note: The foreign contractor is only permitted to register the entry of foreign experts in economic management, technical management, and highly skilled workers when Vietnamese labor is insufficient to meet the requirements.
12. What are the regulations on insurance for the work of the foreign contractor?
The foreign contractor is obligated to purchase the following types of insurance for contractor work:
- Professional liability insurance for construction consultancy contractors;
- Cargo insurance for procurement contractors; and
- Various types of insurance for construction contractors and other insurance regimes as prescribed by Vietnamese law.
13. What are the regulations on the seal of the foreign contractor when implementing construction investment activities in Vietnam?
The foreign contractor is required to register, cancel the seal sample, and return the seal upon contract completion in accordance with the law. The foreign contractor may only use this seal for contract execution in Vietnam as stipulated in the COL.
14. Is the foreign contractor required to make payment and transfer money abroad through an Vietnamese bank account?
After obtaining the COL, the foreign contractor is obligated to open a payment account in Vietnam as guided by the Ministry of Finance and the State Bank of Vietnam to facilitate business activities.
Accordingly, the foreign contractor’s account in Vietnam will be used to receive foreign currency payments via bank transfer from the investor or main contractor for payments, disbursements, and transfers abroad.
15. Is the executive office of the foreign contractor implementing a construction investment project in Vietnam considered a representative office?
Pursuant to the law, the executive office of a foreign contractor implementing an construction investment project in Vietnam is not a representative office.
Specifically, the executive office is a dependent unit of the investor or contractor in a BCC contract, authorized to represent the interests of the enterprise, protect those interests, and conduct business activities within the scope of rights and obligations stipulated in the BCC and the Certificate of Registration for the establishment of the executive office.
In contrast, a representative office is a dependent unit of the enterprise, authorized to represent the interests of the enterprise and protect those interests, but does not have business functions.
16. How does the executive office of a foreign contractor implementing an construction investment project in Vietnam register and terminate its operations?
a. Procedures for establishing an executive office of a foreign contractor:
Step 1: The foreign contractor submits an application for establishing the executive office to the investment registration authority where the office is to be located.
The application consists of a number of main documents below:
- Application form for establishment of an executive office;
- Decision of the foreign investor to the BCC contract regarding establishment of an executive office;
- Decision appointing the head of the executive office; and
- Copy of the BCC contract.
Step 2: The investment registration authority issues the Certificate of registration for the executive office to the foreign contractor within 15 days from the date of receiving the application.
b. Procedures for terminating the operations of the executive office of the foreign contractor:
Step 1: The foreign contractor submits a dossier to the investment registration authority where the executive office is located within 07 working days from the date of the decision to terminate the operations of the executive office.
The dossier consists of a number of main documents below:
- Decision to terminate the execute office in the event that it is terminated ahead of schedule;
- List of creditors and amount of debts which have been paid;
- List of employees, and the resolution of their rights and interests;
- Confirmation from the tax authority regarding the completion of tax obligations; and
- Confirmation from the social insurance authority regarding the completion of social insurance obligations.
Step 2: The investment registration authority decides to revoke the Certificate of registration for the executive office within 15 days from the date of receiving the dossier.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. BLawyers Vietnam would love to hear from you.
Date: 14 November 2024
Writers: Chi Huynh & Thanh Huynh
