Some Noteworthy Provisions of a Draft Decree of the Government Detailing a Number of Articles of Law on Supporting Small and Medium-Sized Enterprises
October 15, 2017 Customs & Trade
The procedures for establishing small and medium-sized enterprises in Vietnam are relatively simple in practice and do not involve much time and expense. This is because of the uncomplicated organizational structures in Vietnam and the fact that most of the enterprises do business with lower levels of profit. However, because of the existence of this fact, the owners of such enterprises often lack managerial and operational skills. This leads such enterprises to become uncompetitive and operate only for a short time, which leads to a burden on economic development. As a result, the mechanisms for supporting small and medium-sized enterprises have been solidified and regulated in the Law on Supporting Small and Medium-Sized Enterprises No.04/2017/QH14 (“Law No.04/2017/QH14”). Law No.04/2017/QH14 was ratified at the 3rd meeting session of the 14th National Assembly and will enter into force on January 01, 2018. Accordingly, the Ministry of Planning and Investment (“MPI”) in coordination with other relevant Ministries are planning to make 04 draft decrees detailing Law No.04/2017/QH14, including: (i) A decree providing guidance for a number of articles of Law No.04/2017/QH14; (ii) A decree providing direction for innovative, creative investment for small and medium-sized enterprises; (iii) A decree providing a development fund for small and medium-sized enterprises; and (iv) A decree providing a bank guarantee fund for small and medium-sized enterprises.
On October 13, 2017, the Draft Decree providing guidance for a number of articles of Law No.04/2017/QH14 (“Draft Decree”) was published on the Government Portal and the MPI Portal for public comments.
Particularly, the Draft Decree details the following articles of Law No.04/2017/QH14: (i) Article 4: Criteria for identifying small and medium-sized enterprises; (ii) Article 14: Information, counseling and legal support; (iii) Article 15: Human resources development support; (iv) Article 16: Support for small and medium-sized enterprises transformed from business households; (v) Article 17: Support for innovative start-up small and medium-sized enterprises; and (vi) Article 19: Support for small and medium-sized enterprises that participate in clusters and value chains. Among that, there are some noteworthy points as follows:
• Criteria for identifying the small and medium-sized enterprises: the Draft Decree provides specific criteria to each type of small and medium-sized enterprises, including (i) micro-sized enterprises; (ii) small-sized enterprises; and (iii) medium-sized enterprises; which correspond to each sector, including (i) agriculture, forestry, fisheries; (ii) industry and construction, and (iii) commerce and services.
For example: To be considered as a micro-sized enterprise in the commerce and services sector, the enterprise shall have (i) an average of under 10 employees participating in social insurance during the preceding year, and (ii) the total capital amount shall not exceed 01 billion VND or the total revenue shall not exceed 10 billion VND.
The enterprises must identify and declare themselves as (i) micro-sized enterprises or (ii) small-sized enterprises or (iii) medium-sized enterprises. This declaration will become the basis for being entitled to support. Such enterprises shall be responsible for the veracity of the criteria they declare. Managing State authorities will verify this declaration only when necessary. Because they will not have to obtain a confirmation from authorities as before, it will assist the small and medium-sized enterprises in reducing administrative expenses.
However, in practice, there are still some situations in which the managing State authorities will request that enterprises provide documents proving that they should be considered as the small and medium-sized enterprises (i.e. which is the basis for granting some specific incentives such as Corporate Income Tax incentives). At the current time, the responsibility for confirmation and the mechanisims of collaboration among the managing State authorities are still not clear.
• Support for the small and medium-sized enterprises: The State authorities will provide information and legal support on the procedures for handling issues arising during the establishment and the operation of the enterprise.
Specifically, the Draft Decree details the support for innovative start-up small and medium-sized enterprises (or named otherwise as “start-ups”) and enterprises participating in clusters or value chains (i.e. (i) “cluster” means a form of linkage among the enterprises in the same industry and related enterprises and organizations for mutual cooperation and competition, and (ii) “value chain” means a linked network that adds value to a product or service, including consecutive stages from formation of an idea, designing, production to distribution of products to consumers). The support for such enterprises will be conducted based on projects made by the relevant Ministries or provincial People’s Committees in which the contents of support, the implementation period and corresponding expenses are provided (the detailed contents to be provided in Article 18 to Article 21 of the Draft Decree).
The MPI will soon report to the Government for ratifying the Draft Decree which will enter into force on January 01, 2018, concurrently with the effective date of Law No.04/2017/QH14.
– Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm
This insight is quoted from the Vietnam Customs & Trade Law Review (November 2017), you can download and read the full file of Vietnam Customs & Trade Law Review (November 2017) here.