Since the Covid-19 pandemic was officially confirmed to have spread to Vietnam, the Vietnamese Government has implemented numerous containment measures in an attempt to tackle the complexity and unpredictability of the outbreak. Although such measures are undoubtedly necessary and have shown some success in controlling of spread of the virus, they have also been disruptive to the operations of businesses in the country. Thus, in an attempt to assist enterprises who are grappling with the impact of the Covid-19 pandemic, the Government and relevant government agents have issued several much welcomed legal documents. This Legal Update will focus on those relevant to employment and finance issues.

A. Labor  

1. Payment of social insurance (for retirement and survivorship) can be delayed until June or December 2020 without penalty:  

On 17 March 2020, the Director of Vietnam Social Security issued Official Letter No. 860/BHXH-BT allowing the delay of payment for retirement and survivorship.

According to this Official Letter, enterprises in the passenger transportation, tourism, accommodation, restaurants and other special industries are allowed to delay the payment of social insurance for retirement and survivorship if they meet either of the following descriptions. First, they are unable to arrange jobs for employees due to difficulties caused by the Covid-19 pandemic (“Difficulty”), and the number of furloughed employees is equal to or more than 50% of the total number of employees working in the enterprise before the Difficulty. Second, alternatively, the loss and damage the enterprise has incurred due to Covid-19 are more than 50% of its total assets (not including value of the land use right)(1).  Qualifying enterprises need to submit a request for delay of payment to the local Social Security Department.

In addition, no investigations on payment of social security will be carried out during this time unless there is clear evidence of violation.

2. Social Security pays during quarantine time (Official Letter No. 422/BHXH-CSXH dated 03 Feb 2020 of Vietnam Social Security to MOLISA & MOH)

Vietnam Social Security has sent Letter 422 to the Ministry of Labor, War Invalids and Social Affair (“MOLISA”) suggesting that employees who are required [by government] to stay in quarantine camp due to Covid-19 will be paid from the Social Security Fund under sick leave category. This payment will be applied regardless of whether the employee is sick or not.

3. Suspension of performance of labor contracts (Official Letter No. 1064/LDTBXH-QHLDTL dated 25 March 2020 issued by MOLISA)

Enterprises that cannot provide employment due to supply shortage or market reduction may temporarily re-assign their employees to other job positions in accordance with Article 31 of the Labor Code. In case such enterprises are not able to pay the employees due to prolonged work suspension, they could reach an agreement on suspension of the labor contracts in accordance with Article 32 of the Labor Code. In case the enterprises have to scale down its business, they shall implement labor re-arrangement in accordance with Article 38 or Article 44 of the Labor Code.

B. Finance  

1. Extension of repayment term - not exceeding 12 months from the last day of the loan or finance lease term (Circular 01/2020/TT-NHNN dated 13 March 2020, valid as of the same date)

Under this Circular, borrowers can apply for an extension to repay the principal and interests if the loans meet the following conditions:

 The obligation to repay principal and/ or interests arises between 23 January 2020 and the date after the 3-month anniversary of the Prime Minister announcing the end of the Covid-19 pandemic; and

 Borrowers are unable to repay because of the decrease in revenue due to the impact of Covid-19.

2. Exemption and reduction of interest and fees (Circular 01/2020/TT-NHNN dated 13 March 2020, valid as of the same date)

Banks may make decisions on exemption and reduction of interest and fees in accordance with their internal rules applicable to debts arising from credit extension activities (except for purchasing and investing in corporate bonds) where

 The obligation to repay principal and/ or interests arises between 23 January 2020 and the date after the 3-month anniversary of the Prime Minister announcing the end of the Covid-19 pandemic; and

 Borrowers are unable to repay because of the decrease in revenue due to the impact of Covid-19.

3. Retention of debt groups (Circular 01/2020/TT-NHNN dated 13 March 2020, valid as of the same date)

Banks shall retain the original debt groups as classified pursuant to the latest State Bank Regulations prior to 23 January 2020 applicable to the following outstanding debts:

 The outstanding loan balance is still within its term or is overdue up to ten days beyond the due date for payment or beyond the repayment term prescribed in the signed loan contract, loan agreement or finance leasing agreement;

 The outstanding loan balance is overdue (except for the case prescribed in the paragraph above) within the period from 23 January 2020 up until the date after the expiry of the fifteen-day period from the effective date of this Circular, i.e. 13 March 2020;

The outstanding loan balance mentioned above includes the outstanding balance for which restructuring, exemption or reduction of interest and adjustment of the debt group was implemented in accordance with the State Bank Regulations within the period from 23 January 2020 up until the date after the expiry of the fifteen-day period from the effective date of this Circular, i.e. 13 March 2020.

4. Other policies of the State Bank

 Reduced its refinance rate to 5% and the discount rate to 3.5% (Decision 418/QD-NHNN dated 16 March 2020, valid as of 17 March 2020).

 Reduced the overnight lending rate in the inter-bank market to 6% (Decision 418/QD-NHNN dated 16 March 2020, valid as of 17 March 2020).

 Asked the banks to lower the maximum VND lending interest rate for short-term loans to 5.5% (Decision 420/QD-NHNN dated 16 March 2020, valid as of 17 March 2020).

5. Extension of tax payment (Official Letter No. 897/TCT-QLN dated 03 March 2020 issued by the General Department of Taxation)

The General Department of Taxation has issued Official Letter No.897 providing guidelines to Tax Departments. In this letter, the General Department of Taxation explains the circumstances where enterprises are allowed to extend the term of tax payment as provided in Circular 156/2013/TT-BTC dated 6 November 2013, especially the definition of unforeseen accident.

The affected taxpayer must submit an application dossier to the local tax department for extension of tax payment.

6. Exemption from payment of interest from late payment of tax (Official Letter No. 897/TCT-QLN dated 03 March 2020 issued by the General Department of Taxation)

Taxpayers affected by the Covid-19 pandemic must submit an application dossier for exemption from payment of interest from late payment of tax to the local tax department.

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[1] To be defined under Art 88.1 of the Law on Social Security2014, Articles 16.1 – 16.4 of Decree 115/2015/ND-CP and Clause 28 of Circular59/2015/TT-BLDTBXH

This briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.