Legal updates by Dr. Oliver Massmann | May 2024

Our long-standing GBA board member Dr. Oliver Massmann, Partner at Duane Morris Vietnam LCC, is sharing the most relevant legal updates with you.

1. Incentive policy drafted to promote settlement of weak credit institutions
2. Vietnam streamlines banking regulations, promotes shareholder flexibility
3. E-ID cards to be issued nationwide
4. Tax and land rent payment deadlines to be extended
5. Prime Minister asks for more effective measures to stabilize market

1. Incentive policy drafted to promote settlement of weak credit institutions

Some highlines are as below:

• The State Bank of Vietnam (SBV) has proposed an incentive policy on the reserve requirement ratio for credit institutions (CI), which receives the compulsory transfer of specially controlled credit institutions, to promote the settlement of the weak credit institutions.
• Under a draft circular to amend Circular 30/2019/TT-NHNN, the SBV states credit institutions, which receive specially controlled credit institution transfers, will have their reserve requirement ratio reduced by 50 per cent.
• The move was made as the settlement progress of specially controlled credit institutions has been slow.
• According to the SAV’s report, the financial situation of the banks was still very difficult. Specifically, bad debts and mortgaged assets remained high; equity was negative; while accumulated losses continued to increase and failed to meet safety regulations in banking activities.

2. Vietnam streamlines banking regulations, promotes shareholder flexibility

Some highlines are as below:

• Vietnam’s government has announced a decision to ease its banking regulations, aimed at simplifying procedures and streamlining business activities within the financial sector.
• Deputy Prime Minister Tran Luu Quang on May 7 signed Decision No. 381/QD-TTg, which targets 12 administrative procedures across four key areas of the banking industry.
• This change saves time and money for investors, aligning with the revised Law on Credit Institutions in 2024 which already removed the previous need for State Bank of Vietnam clearance on these transactions.
• The decision further removes similar approval processes for major shareholders of non-bank credit institutions. Regulatory streamlining appears to be the driving factor behind these measures, fostering a business environment with less bureaucratic friction.
• The government’s move is intended to bolster the competitiveness of Vietnam’s banking sector on the regional and global stage. By removing layers of bureaucracy, officials hope to make it easier for banks and financial institutions to operate, innovate, and attract investment.

3. E-ID cards to be issued nationwide

Some highlines are as below:

• From the second quarter of this year, each Vietnamese citizen will be issued an electronic identity card which is expected to facilitate administrative transactions, according to the 2023 Law on Identity.
• As per the Law, an electronic identity card will be valid for proving the holder’s personal identification information and other information incorporated in the card when he carries out administrative procedures, using public services, conducting transactions or other activities as required.
• Noteworthily, electronic identity cards will be locked by the identity management agency of the Ministry of Public Security when their holders, proceeding-conducting bodies or other competent agencies so request or when their holders die or breach agreements on use of the national identification application.
• The Law also provides the issuance of identity cards to under-14 people and identity certificates to people of Vietnamese origin with unknown citizenship currently living in Vietnam.

4. Tax and land rent payment deadlines to be extended

Some highlines are as below:

• The Ministry of Finance has finalized a draft decree on the deadline extension.
• The MoF said that the move aims to help enterprises and people to overcome difficulties and sustain production and business activities while minimizing impact on the balance of the state budget.
• The scope of this policy is proposed to be the same as that in a similar decree last year. According to the MoF, the VAT to be paid by enterprises benefiting from the extension will be about VND52.4 trillion ($2.065 billion) , and the corporate income tax VND27.6 trillion ($1.085 billion).
• Meanwhile, the policy will cover about VND440 billion (nearly $17.3 million) in the VAT and personal income tax to be paid by households and individuals doing businesses, and land rent subject to the extended deadlines is valued at about VND3.2 trillion (over $125.4 million).

5. Prime Minister asks for more effective measures to stabilize market

Some highlines are as below:

• The Prime Minister has recently requested ministries, sectors and localities to continue promoting economic growth associated with macroeconomic stability, controlling inflation and ensuring major balances of the economy.
• Under Directive 12/CT-TTg dated April 21, the Government leader stresses the importance of firmly grasping the market reality, ensuring the supply and demand balance, and stabilizing commodity prices before devising appropriate and effective solutions to stabilize the market and prices, particularly for gasoline, oil, essential goods, housing and food.
• In light of this, the Prime Minister requests the Ministry of Finance to promote the healthy, safe and effective development of the financial, securities and corporate bond markets; and to promptly detect and strictly handle violations.
• The Ministry is also asked to urgently implement necessary measures to upgrade Vietnam’s securities market from a frontier market to an emerging market within this year.