Vietnam Labour Law Update (September 2014)

• REGULATIONS ABOUT THE MANAGEMENT AND RECRUITMENT OF VIETNAMESE EMPLOYEES WORKING FOR FOREIGN INDIVIDUALS/ ORGANIZATIONS IN VIETNAM
• SOME CHANGES BASED ON CIRCULAR 119/2014/TT-BTC RELATED TO PERSONAL INCOME TAX DECLARATION AND FINALIZATION

I. REGULATIONS ABOUT THE MANAGEMENT AND RECRUITMENT OF VIETNAMESE EMPLOYEES WORKING FOR FOREIGN INDIVIDUALS/ ORGANIZATIONS IN VIETNAM 

On 28th July 2014, the Government issued Decree No. 75/2014 / ND-CP (“Decree No. 75”) detailing rules for implementation of some articles of the Labor Code regarding the recruitment and management of Vietnamese employees working for foreign organizations, or foreign individuals in Vietnam. This Decree replaces Decree No. 85/1998 / ND-CP of 20 October 1998 (“Decree No. 85”) and amending Decrees, it also supplements Decree 85 (Decree No. 75/2001 / ND CP of 19 October 2001, Decree No. 46/1999 / ND-CP of 01 July 1999, Decree No. 85/1998 / ND-CP).

The basic rules regarding the recruitment and management of Vietnamese employees working for foreign individuals/organizations in Vietnam under Decree No. 75 have not changed from those in Decree No. 85. In particular, the Representative Office of foreign organizations (“RO”) should follow these rules when there is a need to utilize Vietnamese labour:

– The RO must submit a written request to a competent Vietnamese recruitment and management organization to hire Vietnamese employees (currently in Ho Chi Minh City these are FOSCO and Ho Chi Minh City Job Center).

– Within 15 working days from receipt of the written request from the Representative Office, the competent Vietnam recruitment and management organization has the responsibility to recruit and introduce Vietnamese employees as proposed.

– If the competent Vietnamese recruitment and management organization cannot recruit and introduce Vietnamese employees within the specified timeline in line with the requirements of the RO, the RO will have the right to directly recruit Vietnamese employees.

–  Within 7 working days after the signing of labor contracts, the Representative Office must send written notice and a copy of the signed labor contracts with the Vietnamese employees to the competent Vietnamese recruitment and management organization.

– The RO must report to the competent Vietnamese recruitment and management organization on the recruitment status and utilization of Vietnamese employees bi-annually, annually or on a case by case basis if required.

Decree No. 75 will be in effect from 15 September 2014.

II. SOME CHANGES BASED ON CIRCULAR 119/2014/TT- BTC RELATED TO PERSONAL INCOME TAX (PIT) DECLARATION AND FINALIZATION

On 25th August 2014, the Ministry of Finance issued Circular 119/2014 / TT-BTC (“Circular 119”) to amend some articles of the recently issued Circular (which includes amendments to some articles of Circular 156/2013 / TT-BTC dated 06-Jan-2013 and Circular 111/2013 / TT-BTC dated 15-Aug-2013) to reform and simplify the administration of tax procedures.

In particular, business enterprises and taxpayers should note some important changes as follows:

1. Declaration of personal income tax for foreign individuals who are Vietnam residents and have not worked a full year

For foreign individuals who are citizens of countries and territories that have signed Treaties with Vietnam, where the personal income tax obligation is calculated from the first month the foreign individual traveled to Vietnam to the month when labor contracts ended and the individual left Vietnam (first month and last months should be calculated as whole months) there is no need to carry out the consular confirmation procedure to avoid paying double taxes in accordance with the Double Taxation Agreement between the two countries.

According to the above regulations, it is understood that expatriates who are citizens of countries that have signed agreements on avoidance of double taxation with Vietnam, and who are tax-resident individuals working in Vietnam since part way through the year, will only be obliged to declare and pay personal income tax starting from the month they came to Vietnam, not including the months they were not present in Vietnam as was the case previously. 

Up to now, over 60 countries have signed agreements on avoidance of double taxation with Vietnam, which includes Thailand, Singapore, Japan, Korea, India, China, Britain, France, Germany, Italy, Netherlands, … (not including the United States). Businesses and individuals can refer to the list of countries which have signed agreements on avoidance of double taxation with Vietnam on the website of the General Department of Taxation. 

2. PIT withholding documents

In cases where organizations do not issue income tax withholding certificates for individuals because the organizations have ceased to operate, the Tax Department will consider the settlement of tax finalization documents for individuals who are not required to have income tax withholding certificates on the basis of the tax industrial database.

Circular 119 will be in effect from 01 September 2014.