Vietnam Spotlight - Covid 19
An overview of latest business information and regulatory change in Vietnam due to Covid 19
- Vingroup to produce ventilators. The company has entered into a licence agreement with Medtronic for its PB560 ventilator production. It will also produce low-cost open-source ventilators designed by Massachusetts Institute of Technology. Source: Reuters
- Vinfast and Nissan Vietnam suspend operations. VinFast says it is unclear when the car assembly plant will resume its operation, depending on the developments of the epidemic in Vietnam as well as the implementation of the Government’s recent decree on social distancing. Meanwhile, Nissan Vietnam decided to cease its operation for 15 days, starting from April 5. The company’s statement says 25 of its dealers nationwide will also be closed from April 1-15. Source: Vietnam Times
- Vietnam Airlines seeks US$500m government support. Revenues of the national flag carrier in the first quarter fell 26 percent year-on-year to VND19.2 trillion ($819 million), according to a recent report by the Commission for Management of State Capital at Enterprises. Source: Vnexpress International
- Samsung Vietnam fears 11 percent drop in export. Samsung Vietnam expects exports to fall by $5.8 billion, or 11 percent, to $45.5 billion this year as a result of the coronavirus pandemic. The company attributed it to falling demand in the U.S. and the E.U. Source: Vnexpress International
- Local insurers cash in on pandemic. While the coronavirus pandemic has dealt a blow to key industries from services to trade and manufacturing, insurance continues to shine bright during the escalating crisis. Source: Vietnam Investment Review
- Vietnam promotes medical supply exports. The Prime Minister urged the Ministry of Industry and Trade to increase support and push up the export of several medical supplies to countries in need, particularly those in Europe and the United States. Source: Vietnam Investment Review
- Trade ministry proposes resuming rice exports. The Minister of Industry and Trade on April 6 sent an urgent official dispatch to Prime Minister Nguyen Xuan Phuc after collecting opinions from relevant ministries and agencies relating to rice export management. The MoIT proposed to allow rice exports but strictly control monthly quotas after careful consideration to ensure food security amid the COVID-19 pandemic. Source: Customs News
Vietnam regulatory changes update
Deferrals of VAT, CIT and land rental payments
The government issued Decree 41/2020/ND-CP dated 8 April 2020, with immediate effect, on deferral of VAT, CIT and land rental payments for businesses impacted by COVID-19. Enterprises entitled to payment deferrals include, among others, those operating in agriculture, forestry, fishery, food processing, textiles, construction, transportation, warehouses, real estate, hospitality and catering, tourism, education, medical services and entertainment. In addition, credit institutions and branches of foreign banks providing support to customers affected by the COVID-19 pandemic shall also be entitled to payment deferrals under this decree. In general, payment deferrals are as follows:
- For VAT: 5-month extension for payments in respect of the tax period of Mar-June 2020 for enterprises declaring VAT on monthly basis, or of the first and second quarters for enterprise declaring VAT on quarterly basis;
- For CIT: 5-month extension for payments in respect of CIT for 2019 and provisional CIT amounts for the first and second quarters of 2020; and
- For land rental: enterprises leasing land from the state and paying land rental on a bi-annual basis are entitled to a 5-month extension from 31 May 2020 in respect of the first payment for 2020.
Enterprises are required to submit an application to the tax authorities no later than 30 July 2020 in order to be entitled to such extensions.
Vietnam suspended rice export to ensure national food security.
Corporate – operations
In the light of Directive 16 of the PM dated 31 March on social distancing, many public companies have postponed annual general meetings of shareholders (AGM) due to the Covid-19 pandemic. At law, postponing an AGM may need to be notified to the competent government authorities such as the provincial Department of Planning and Investment or the SSC. Public companies that have appropriate digital technology to organise AGM online will not be affected by Directive 16 on social distancing.
Banking – loan restructuring
In Circular 01/2020/TT-NHNN dated 13 March 2020, the State Bank of Vietnam (SBV) instructed commercial banks to delay, extend, and reschedule debt payments as well as reduce interest rates and fees for customers impacted by Covid-19.
Banking – interest rates
The SBV adjusted certain interest rates starting from 17 March 2020. The reductions depend on how the loans are categorised.
Banking – operations
In Directive 02/CT-NHNN, the SBV requested credit institutions to follow the SBV's instructions and guidance to support customers affected by Covid-19, establish business plans in response to complicated developments of the epidemic. In addition, credit institutions are not allowed to pay cash dividends for the time being.
The Ministry of Finance issued Circular 14/2020/TT-BTC dated 18 March 2020 to exempt certain fees, such as fees for listing and registration, and to reduce certain other fees by 10%-50% for services such as securities custody, derivative transactions and position management. These exemptions and reductions are applicable until 31 August 2020.
Payment of wages and benefits for employees during work suspension due to Covid-19 pandemic.
Official Correspondence 1064 of the Ministry of Labour, War Invalids and Social Affairs. Because a number of enterprises have to suspend their operations or scale down, numerous employees have been suspended from work for various reasons. Payment for employees during work suspension is as follows:
Option 1: Suspension pay shall be determined in accordance with Article 98 of the Labor Code, with consideration taken of the causes of work suspension (at the employer’s or employee’s fault or for an objective reason).
Option 2: For employees who are suspended due to direct impacts of Covid-19 pandemic such as: (i) employees who are not allowed to return to work as requested by competent authorities; (ii) employees who are suspended from work during quarantine as requested by competent authorities; (iii) employees who are suspended from work because their employer is being quarantined or other employees in the same enterprise or department are being quarantined or not allowed to return to work, the suspension pay shall be in accordance with Clause 3 Article 98 of the Labor Code (the pay shall be agreed upon by both parties but must not be lower than the region-based minimum wages prescribed by the Government).
Option 3: Enterprises that cannot provide adequate employment due to supply shortages or market reductions may temporarily reassign the employees against their employment contracts in accordance with Article 31 of the Labor Code. In case an employer is not able to pay the suspended employees due to prolonged work suspension, they may reach an agreement on suspension of the employment contracts in accordance with Article 32 of the Labor Code. Employers that have to scale down can arrange employment in accordance with Article 38 or Article 44 of the Labor Code.
Visa/work permit suspension
Directive 18 of the Government Office dated 21 March 2020: Vietnam temporarily suspended the entry of all foreigners into Vietnam except for (i) certain foreign affairs personnel, (ii) experts, (iii) corporate managers and (iv) high-skilled workers. Foreign experts, corporate managers and high-skilled workers have to obtain COVID-19 negative certificates issued by their home country and approved by Vietnam prior to their arrival. They will be subject to tight quarantine at their place of residence while in Vietnam. In addition, the issuance of work permits for foreign employees has also been temporarily suspended.
Social insurance contributions
On 17 March 2020, the Social Security Authority issued Official Letter 860/BHXH-BT on the suspension of contributions to retirement and survivorship funds for enterprises in difficulty due to COVID-19. This suspension is applicable to enterprises in passenger transport, tourism, accommodation, restaurant and other special industries experiencing difficulties due to COVID-19, which fall under either of the following circumstances:
- Enterprises cannot provide work for employees, in which the number of employees who are subject to social insurance contribution but must be temporarily suspended from working is 50% or more of the total number of available employees before the business suspension; or
- Enterprises suffer losses greater than 50% of the total value of assets due to COVID-19 (excluding land use right value).
Such enterprises are eligible to suspend contributions until June 2020. If the COVID-19 pandemic has not been alleviated by the end of June 2020, the enterprises can continue suspending contributions until December 2020. After the suspension period, employers and employees still have to make payment for such period, but without having to pay interest on late payments.